______________________________________________________________________
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) November 18, 1997
SEQUOIA MORTGAGE FUNDING CORPORATION, (as depositor under
the Deposit Trust Agreement, dated as of October 1, 1997,
providing for the issuance of the Sequoia Mortgage Trust
2 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)
Registrant's telephone number, including area code (415) 381-1765
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_____________________________________________________________________
Item 5. Other Events.
- ---- ------------
Description of the Certificates and the Mortgage Pool
- -----------------------------------------------------
Sequoia Mortgage Trust 2 (the "Issuer") and Norwest Bank Minnesota, N.A.
(the "Bond Trustee") entered into an indenture, dated as of October 1, 1997
(the "Indenture"), pursuant to which the Sequoia Mortgage Trust 2
Collateralized Mortgage Bonds were issued. The Indenture, without Schedule
A, Exhibit I or Exhibit IV, is annexed hereto as Exhibit 99.1.
The Issuer, Norwest Bank Minnesota, N.A., as Bond Trustee and
administrator (in such capacity, the "Administrator"), and Redwood Trust,
Inc. ("Redwood") entered into an administration agreement, dated as of
October 1, 1997 (the "Administration Agreement"), pursuant to which the
Administrator will perform certain administrative duties on behalf of the
Bond Trustee with respect to the Sequoia Mortgage Trust 2 Collateralized
Mortgage Bonds. The Administration Agreement, without Schedules I or V, is
annexed hereto as Exhibit 99.2.
Redwood and Merrill Lynch Credit Corporation ("MLCC") entered into a
master servicing agreement, dated as of March 7, 1997 (the "Master Servicing
Agreement"), providing for the master servicing of the mortgage loans
originated by MLCC and granted by the Issuer to the Bond Trustee under the
Indenture as security for Sequoia Mortgage Trust 2 Collateralized Mortgage
Bonds. The Master Servicing Agreement, without Exhibit H, is annexed hereto
as Exhibit 99.3.
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 October 1, 1997, by and between the
Issuer and the Bond Trustee, without Schedule A, Exhibit I or
Exhibit IV.
99.2. The Administration Agreement, dated as of October 1, 1997,
among the Issuer, the Bond Trustee and Administrator and
Redwood, without Schedules I or V.
99.3. The Master Servicing Agreement, dated as of March 7, 1997,
between Redwood and MLCC, without Exhibit H.
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: November 18, 1997
Exhibit Index
-------------
Exhibits
- --------
99.1. The Indenture, dated as of October 1, 1997,
by and between the Issuer and the Bond
Trustee., without Schedule A, Exhibit I or Exhibit IV.
99.2. The Administration Agreement, dated as of October 1, 1997, among
the Issuer, the Bond Trustee and Administrator and Redwood, without
Schedules I or V.
99.3. The Master Servicing Agreement, dated as of March 7, 1997, between
Redwood and MLCC, without Exhibit H.
EXHIBIT 99.1
-------------
EXECUTION COPY
- ------------------------------------------------------------------------------
SEQUOIA MORTGAGE TRUST 2,
Issuer
and
NORWEST BANK MINNESOTA, N.A.,
Trustee
INDENTURE
Dated as of October 1, 1997
Relating to
SEQUOIA MORTGAGE TRUST 2
COLLATERALIZED MORTGAGE BONDS
- ------------------------------------------------------------------------------
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.
TIA Indenture Section
--- -----------------
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
(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
(a) ............................. 11.07
TABLE OF CONTENTS
Page
----
PARTIES
PRELIMINARY STATEMENT
GRANTING CLAUSE
ARTICLE I
DEFINITIONS
SECTION 1.01. General Definitions . . . . . . . . . . . . . . . . . I-1
"Accountant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
"Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
"Administration Agreement" . . . . . . . . . . . . . . . . . . . . . I-1
"Administrator" . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
"Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
"Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
"Appraised Value" . . . . . . . . . . . . . . . . . . . . . . . . . I-2
"Assignment and Assumption Agreement" . . . . . . . . . . . . . . . I-2
"Assignments" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-2
"Authenticating Agent" . . . . . . . . . . . . . . . . . . . . . . . I-2
"Authorized Officer" . . . . . . . . . . . . . . . . . . . . . . . . I-2
"Bank" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-2
"Bankruptcy Code" . . . . . . . . . . . . . . . . . . . . . . . . . I-2
"Beneficial Owner" . . . . . . . . . . . . . . . . . . . . . . . . . I-3
"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
"Book Entry Termination" . . . . . . . . . . . . . . . . . . . . . . I-3
"Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
"Class" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
"Commission" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4
"Converted Mortgage Loan" . . . . . . . . . . . . . . . . . . . . . I-4
"Convertible Mortgage" . . . . . . . . . . . . . . . . . . . . . . . I-4
"Corporate Trust Office" . . . . . . . . . . . . . . . . . . . . . . I-4
"Cut-Off Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4
"Debt Service Reduction" . . . . . . . . . . . . . . . . . . . . . . I-4
"Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4
"Defaulted Pledged Mortgage" . . . . . . . . . . . . . . . . . . . . I-4
"Deficient Valuation" . . . . . . . . . . . . . . . . . . . . . . . I-4
"Definitive Bonds" . . . . . . . . . . . . . . . . . . . . . . . . . I-4
"Deleted Pledged Mortgage" . . . . . . . . . . . . . . . . . . . . . I-4
"Denomination" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"Depositor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"Depository" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"Depository Participants" . . . . . . . . . . . . . . . . . . . . . I-5
"Deposit Trust Agreement" . . . . . . . . . . . . . . . . . . . . . I-5
"Distribution Account" . . . . . . . . . . . . . . . . . . . . . . . I-5
"Escrow Account" . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"Expense Fee Rate" . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"FDIC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"FHLMC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
"FIRREA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
"FNMA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
"Grant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
"Highest Lawful Rate" . . . . . . . . . . . . . . . . . . . . . . . I-6
"Holder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
"Indenture" or "this Indenture" . . . . . . . . . . . . . . . . . . I-6
"Independent" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
"Index" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
"Indirect Participant" . . . . . . . . . . . . . . . . . . . . . . . I-7
"Individual Bond" . . . . . . . . . . . . . . . . . . . . . . . . . I-7
"Insurance Agreement" . . . . . . . . . . . . . . . . . . . . . . . I-7
"Insurance Policy" . . . . . . . . . . . . . . . . . . . . . . . . . I-7
"Insurer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
"Insurer Default" . . . . . . . . . . . . . . . . . . . . . . . . . I-7
"Insurer's Policy" . . . . . . . . . . . . . . . . . . . . . . . . . I-8
"Insurer Payment Default" . . . . . . . . . . . . . . . . . . . . . I-8
"Investor Certificate" . . . . . . . . . . . . . . . . . . . . . . . I-8
"Issuer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
"Issuer Order" and "Issuer Request" . . . . . . . . . . . . . . . . I-8
"Letter Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . I-8
"Limited Purpose Surety Bond" . . . . . . . . . . . . . . . . . . . I-8
"Management Agreement" . . . . . . . . . . . . . . . . . . . . . . . I-8
"Margin" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
"Master Mortgage Loan Purchase Agreement" . . . . . . . . . . . . . I-8
"Master Servicer" . . . . . . . . . . . . . . . . . . . . . . . . . I-8
"Master Servicer Default" . . . . . . . . . . . . . . . . . . . . . I-9
"Master Servicing Account" . . . . . . . . . . . . . . . . . . . . . I-9
"Master Servicing Agreement" . . . . . . . . . . . . . . . . . . . . I-9
"Maturity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
"MLCC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
"Moody's" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
"Mortgage" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
"Mortgage 100/SM/ Loan" . . . . . . . . . . . . . . . . . . . . . . I-9
"Mortgage 100/SM/ Pledge Agreement" . . . . . . . . . . . . . . . . I-9
"Mortgage Note" . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
"Mortgage Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
"Mortgaged Property" . . . . . . . . . . . . . . . . . . . . . . . I-10
"Mortgagor" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
"Net Mortgage Rate" . . . . . . . . . . . . . . . . . . . . . . . I-10
"Officers' Certificate" . . . . . . . . . . . . . . . . . . . . . I-10
"Operative Agreements" . . . . . . . . . . . . . . . . . . . . . . I-10
"Opinion of Counsel" . . . . . . . . . . . . . . . . . . . . . . . I-10
"Original Class A-1 Principal Balance" . . . . . . . . . . . . . . I-10
"Original Class A-2 Principal Balance" . . . . . . . . . . . . . . I-10
"Original Pledged Mortgage" . . . . . . . . . . . . . . . . . . . I-10
"Original Pool Principal Balance" . . . . . . . . . . . . . . . . I-10
"OTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
"Outstanding" . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
"Outstanding Pledged Mortgage" . . . . . . . . . . . . . . . . . . I-11
"Owner Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . I-11
"ParentPower(Registered Trademark) Agreement" . . . . . . . . . . I-11
"ParentPower(Registered Trademark) Guaranty Agreement for Real
Estate" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
"ParentPower(Registered Trademark) Guaranty and Security Agreement
for Securities Account" . . . . . . . . . . . . . . . . . . . I-12
"ParentPower(Registered Trademark) Mortgage Loan" . . . . . . . . I-12
"Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
"Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
"Payment Date Statement" . . . . . . . . . . . . . . . . . . . . . I-12
"Permitted Encumbrance" . . . . . . . . . . . . . . . . . . . . . I-12
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-13
"Pledged Accounts" . . . . . . . . . . . . . . . . . . . . . . . . I-13
"Pledged Mortgages" . . . . . . . . . . . . . . . . . . . . . . . I-13
"Predecessor Bonds" . . . . . . . . . . . . . . . . . . . . . . . I-13
"Preference Claim" . . . . . . . . . . . . . . . . . . . . . . . . I-13
"Principal Amount" . . . . . . . . . . . . . . . . . . . . . . . . I-13
"Principal Prepayment" . . . . . . . . . . . . . . . . . . . . . . I-14
"Principal Prepayment in Full" . . . . . . . . . . . . . . . . . . I-14
"Proceeding" . . . . . . . . . . . . . . . . . . . . . . . . . . . I-14
"Prospectus Supplement" . . . . . . . . . . . . . . . . . . . . . I-14
"Rating Agency" . . . . . . . . . . . . . . . . . . . . . . . . . I-14
"Record Date" . . . . . . . . . . . . . . . . . . . . . . . . . . I-14
"Redemption Date" . . . . . . . . . . . . . . . . . . . . . . . . I-14
"Redemption Price" . . . . . . . . . . . . . . . . . . . . . . . . I-14
"Redwood" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-14
"Refinancing Pledged Mortgage" . . . . . . . . . . . . . . . . . . I-14
"Responsible Officer" . . . . . . . . . . . . . . . . . . . . . . I-14
"S&P" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"SAIF" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Sale" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Stated Maturity" . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Stated Principal Balance" . . . . . . . . . . . . . . . . . . . . I-15
"Swap Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Swap Provider" . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Trust Estate" . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Trust Indenture Act" or "TIA" . . . . . . . . . . . . . . . . . . I-15
"Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
"Voting Rights" . . . . . . . . . . . . . . . . . . . . . . . . . I-15
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; Principal and
Interest Rights Reserved . . . . . . . . . . . . . II-7
SECTION 2.10. Persons Deemed Owners . . . . . . . . . . . . . . . II-8
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-13
SECTION 2.14. Termination of Book Entry System . . . . . . . . . II-14
SECTION 2.15. Tax Treatment . . . . . . . . . . . . . . . . . . . II-15
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-5
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-8
SECTION 3.12. Limitation of Liability of Wilmington Trust Company III-8
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-4
SECTION 5.05. (Reserved) . . . . . . . . . . . . . . . . . . . . . V-5
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-8
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-2
SECTION 6.03. Rights of Trustee . . . . . . . . . . . . . . . . . VI-3
SECTION 6.04. Not Responsible for Recitals or Issuance of Bonds . VI-4
SECTION 6.05. May Hold Bonds . . . . . . . . . . . . . . . . . . VI-5
SECTION 6.06. Money Held in Trust . . . . . . . . . . . . . . . . VI-5
SECTION 6.07. Compensation and Reimbursement . . . . . . . . . . VI-6
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-8
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business of Trustee . . . . . . . . . . . . . . . . VI-9
SECTION 6.13. Preferential Collection of Claim Against Issuer . . VI-9
SECTION 6.14. Co-trustees and Separate Trustees . . . . . . . . . VI-9
SECTION 6.15. Authenticating Agents . . . . . . . . . . . . . . . VI-11
SECTION 6.16. Payment of Certain Insurance Premiums . . . . . . . VI-12
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, to the Insurer and to
the Swap Provider. . . . . . . . . . . . . . . . . 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-4
SECTION 8.06. Reports by Trustee to Bondholders . . . . . . . . VIII-4
SECTION 8.07. Reports by Trustee . . . . . . . . . . . . . . . VIII-4
SECTION 8.08. Trust Estate; Release and Delivery of Mortgage
Documents . . . . . . . . . . . . . . . . . . . . VIII-5
SECTION 8.09. (Reserved) . . . . . . . . . . . . . . . . . . . VIII-5
SECTION 8.10. Master Servicer as Agent and Bailees of Trustee . VIII-5
SECTION 8.11. Opinion of Counsel . . . . . . . . . . . . . . . VIII-6
SECTION 8.12. Release of Pledged Mortgages . . . . . . . . . . VIII-6
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-4
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
Administration 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
SECTION 10.04. Retention of Bonds by Issuer . . . . . . . . . . . . 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-2
SECTION 11.04. Notices, etc. to Trustee and Issuer . . . . . . . . XI-3
SECTION 11.05. Notices and Reports to Bondholders; Waiver of
Notices . . . . . . . . . . . . . . . . . . . . . . XI-4
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-5
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-6
SECTION 11.17. Inspection . . . . . . . . . . . . . . . . . . . . XI-7
SECTION 11.18. Usury . . . . . . . . . . . . . . . . . . . . . . . XI-7
SECTION 11.19. No Petition . . . . . . . . . . . . . . . . . . . . XI-7
ARTICLE XII
THE BOND INSURER
(SECTION 12.01. Certain Matters Regarding the Insurer and The
Insurer's 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
PARTIES
INDENTURE, dated as of October 1, 1997 (as amended or supplemented
from time to time as permitted hereby, the "Indenture"), between Sequoia
Mortgage Trust 2 (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 Norwest Bank Minnesota, N.A., 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, the Insurer and the Swap Provider. 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 the Insurer, 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 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 the Mortgage
Loan Purchase Agreement, the Management Agreement, the Administration
Agreement, the Swap Agreement, the Master Servicing Agreement, the Assignment
and Assumption Agreement, the Master Mortgage Loan Purchase Agreement, each
Mortgage 100/SM/ Pledge Agreement, each Parent Power(Registered Trademark)
Agreement and the Limited Purpose Surety Bond (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 the Insurer and the Swap Provider, 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, (iv) the payment of all amounts
due by the Issuer to the Insurer, including the obligations of the Issuer to
the Insurer under this Indenture, the Administration Agreement and the
Insurance Agreement, and (v) the payment of all amounts due by the Issuer to
the Swap Provider, including the obligations of the Issuer to the Swap
Provider under the Swap 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 the Insurer may be adequately and
effectively protected.
The Trustee agrees that it will hold the Insurer's Policy in trust
and that it will hold any proceeds of any claim made upon the Insurer's
Policy, solely for the use and benefit of the Bondholders in accordance with
the terms hereof and of the Insurer's Policy.
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 Administration 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.
"ADMINISTRATION AGREEMENT": The Administration Agreement dated as
of October 1, 1997 among the Issuer, Redwood, the Administrator and the
Trustee.
"ADMINISTRATOR": Norwest Bank Minnesota, N.A., in its capacity as
administrator under the Administration Agreement.
"ADVANCE": The payment of any principal or interest required to be
made by the Master Servicer with respect to any Payment Date pursuant to the
Master Servicing Agreement.
"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.
"ASSIGNMENT AND ASSUMPTION AGREEMENT": The Assignment, Assumption
and Recognition Agreement, dated as of November 6, 1997, among the Master
Servicer, Redwood and the Depositor pursuant to which Redwood's rights under
the Master Servicing Agreement are assigned to the Depositor.
"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.
"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 Administrator pursuant to the Administration Agreement
with a depository institution in the name and for the benefit of the Trustee
on behalf of Bondholders, the Insurer and the Swap Provider, and designated
"Bond Account in trust for the registered holders of Sequoia Mortgage Trust 2
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.
"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": November 6, 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 Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479, or at such other address as the Trustee may designate from
time to time by notice to the Bondholders, the Insurer, the Issuer and the
Swap Provider, or the principal corporate trust office of any successor
Trustee.
"CUT-OFF DATE": With respect to the Pledged Mortgages, October 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
Administration Agreement.
"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 October 1, 1997, between Wilmington Trust Company, as Owner Trustee, and
the Depositor, creating the Issuer, as 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 the Insurer and designated "Norwest
Bank Minnesota, N.A. 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 the Insurer for the uses and
purposes set forth in this Indenture.
"ESCROW ACCOUNT": The Eligible Account or Accounts established and
maintained pursuant to the Master 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 and any premium payable by
MLCC to a correspondent lender with respect to such Pledged Mortgage and the
per annum rate that represents such Pledged Mortgage's pro rata share, for
such month, of the sum of the Management Fee, the Insurer Premium and the
fees payable to the Owner Trustee and the Custodian.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": Freddie Mac, 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": Fannie Mae, 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
Administration Agreement, the Swap Agreement, the Mortgage Loan Purchase
Agreement, the Management Agreement, the Master Servicing Agreement, the
Assignment and Assumption Agreement, the Master Mortgage Loan Purchase
Agreement, a Mortgage 100/SM/ Pledge Agreement, a Parent Power(Registered
Trademark) Agreement, the Limited Purpose Surety Bond, 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.
"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 Bonds equal to the quotient obtained by
dividing such original principal amount by $1,000.
"INSURANCE AGREEMENT": The Insurance and Indemnity Agreement dated
as of November 6, 1997, by and among the Insurer, Redwood, the Depositor, the
Issuer, the Administrator and the Trustee.
"INSURANCE POLICY": 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 Policy (but shall not include the Insurer's Policy or the Limited
Purpose Surety Bond).
"INSURER": Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance company and any successor thereto.
"INSURER DEFAULT": The existence and continuance of any of the
following:
(a) an Insurer Payment Default; or
(b) the filing of any petition or commencement of any case or
proceeding by the Insurer under any state or federal law relating to
insolvency or bankruptcy or the consent of Insurer 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
the Insurer for the benefit of its creditors or the admission of the Insurer
in writing in its inability to pay its debts as they become due; or
(c) a court of competent jurisdiction or other competent
regulatory agency enters a final and nonappealable order, judgment or decree
which is unstayed and in effect for a period of 60 consecutive days under
any state or federal bankruptcy or insolvency law to appoint a custodian,
trustee, agent or receiver for the Insurer or for all or any material portion
of the Insurer's property or authorizing the taking of possession by a
custodian, trustee, agent or receiver of the Insurer or the taking of
possession of all or any material portion of the Insurer's property.
"INSURER'S POLICY": The financial guaranty insurance policy issued
by the Insurer covering the Bonds issued pursuant to the Insurance Agreement.
"INSURER PAYMENT DEFAULT": Failure and continued failure by the
Insurer to make an Insured Payment required under the Insurer's Policy in
accordance with its terms.
"INVESTOR CERTIFICATE": As defined in Section 1.01 of the Deposit
Trust Agreement.
"ISSUER": Sequoia Mortgage Trust 2 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.
"LIMITED PURPOSE SURETY BOND": The limited purpose Surety Bond,
dated February 28, 1996, issued by the Insurer in favor of MLCC.
"MANAGEMENT AGREEMENT": The Management Agreement, dated as of
October 1, 1997, between Redwood and the Issuer, under which Redwood provides
certain management services to the Issuer, as such agreement may be amended
or supplemented from time to time.
"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 MORTGAGE LOAN PURCHASE AGREEMENT": The Master Mortgage
Loan Purchase Agreement dated as of March 7, 1997, as amended, between
Redwood and MLCC, but only to the extent that such agreement relates to the
Pledged Mortgages.
"MASTER SERVICER": MLCC, and any Person succeeding MLCC as master
servicer under the Master Servicing Agreement.
"MASTER SERVICER DEFAULT": Any event of default under the Master
Servicing Agreement that subjects the Master Servicer to termination pursuant
to the terms thereof.
"MASTER SERVICING ACCOUNT": The account or accounts created and
maintained pursuant to the Master Servicing Agreement.
"MASTER SERVICING AGREEMENT": Collectively, the Master Servicing
Agreement dated as of March 7, 1997, as amended, between Redwood and MLCC and
the Pledged Asset Mortgage Servicing Agreement dated as of April 22, 1997
between Redwood and MLCC, but only to the extent that such agreements relate
to the master servicing of the Pledged Mortgages, including those Pledged
Mortgages that are Mortgage 100/SM/ Loans or ParentPower(Registered
Trademark) Mortgage Loans.
"MATURITY": With respect to any Bond, the date on which the entire
unpaid principal amount of such Bond becomes due and payable as therein or
herein provided, whether at the Stated Maturity of the final installment of
such principal or by declaration of acceleration, call for redemption or
otherwise.
"MLCC": Merrill Lynch Credit Corporation and its successors in
interest.
"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, the Trustee 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 100/SM/ LOAN": A Pledged Mortgage secured by additional
collateral in the form of a security interest in marketable securities.
"MORTGAGE 100/SM/ PLEDGE AGREEMENT": With respect to each Mortgage
100/SM/ Loan, the Mortgage 100/SM/ Pledge Agreement for Securities Account
between the Mortgagor under such Mortgage 100/SM/ Loan and MLCC, pursuant to
which such Mortgagor granted a security interest in various investment
securities.
"MORTGAGE NOTE": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor 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.
"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 the Insurer.
"ORIGINAL CLASS A-1 PRINCIPAL BALANCE": $592,560,000.
"ORIGINAL CLASS A-2 PRINCIPAL BALANCE": $156,600,000.
"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
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 the Insurer 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 (unless any Affiliate of the Issuer or such
other obligor holds 100% of the aggregate Principal Amount of the Outstanding
Bonds), 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 Insurer's Policy shall be deemed to
remain Outstanding for purposes of this Indenture until the Insurer has been
paid as subrogee under this Indenture, such payment to be evidenced by a
written notice from the Insurer to the Trustee, and the Insurer shall be
deemed to be the Holder thereof to the extent of any payments thereon made by
the Insurer; provided further that the Insurer 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 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.
"PARENTPOWER(REGISTERED TRADEMARK) AGREEMENT": With respect to
each ParentPower(Registered Trademark) Mortgage Loan, a
ParentPower(Registered Trademark) Guaranty and Security Agreement for
Securities Account or a ParentPower(Registered Trademark) Guaranty Agreement
for Real Estate.
"PARENTPOWER(REGISTERED TRADEMARK) GUARANTY AGREEMENT FOR REAL
ESTATE": With respect to a ParentPower(Registered Trademark) Mortgage Loan,
an agreement between MLCC and a guarantor on behalf of the Mortgagor under
such ParentPower(Registered Trademark) Mortgage Loan pursuant to which such
guarantor guarantees the payment of certain losses under such
ParentPower(Registered Trademark) Mortgage Loan, authorizes MLCC to draw on a
home equity credit line to fund such guaranty and has secured such guaranty
with a lien on residential real estate of the guarantor. For purposes of
this definition, the ParentPower(Registered Trademark) Guaranty Agreement for
Real Estate shall not include the rights of the mortgagee under the Equity
Access(Registered Trademark) Security Instrument referred to thereon, which
rights have been retained by MLCC.
"PARENTPOWER(REGISTERED TRADEMARK) GUARANTY AND SECURITY AGREEMENT
FOR SECURITIES ACCOUNT": With respect to a ParentPower(Registered Trademark)
Mortgage Loan, an agreement between MLCC and a guarantor on behalf of the
Mortgagor under such ParentPower(Registered Trademark) Mortgage Loan pursuant
to which such guarantor guarantees the payment of certain losses under such
ParentPower(Registered Trademark) Mortgage Loan and has granted a security
interest to MLCC in certain marketable securities to collateralize such
guaranty.
"PARENTPOWER(REGISTERED TRADEMARK) MORTGAGE LOAN": A Pledged
Mortgage supported by a ParentPower(Registered Trademark) Agreement.
"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 25th day of each calendar month after the initial issuance
of the Bonds and the Investor Certificate or, if such 25th day is not a
Business Day, the next succeeding Business Day, commencing in November 1997.
"PAYMENT DATE STATEMENT": The meaning specified in Section 3(e) of
the Administration 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 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 attached as
Schedule A to this Indenture, 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.
"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 October
24, 1997 relating to the Bonds.
"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.
"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
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 101% of the Principal Amount of the Class A-1 Bonds and 100%
of the Principal Amount of the Class A-2 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.
"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, the Trustee and the Master Servicer.
"SAIF": The Savings Association Insurance Fund, or any successor
thereto.
"SALE": The meaning specified in Section 5.18(a).
"SECURITIES ACT": The Securities Act of 1933, as amended.
"STATED MATURITY": With respect to any and all Bonds, October 25,
2024.
"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.
"SWAP AGREEMENT": The ISDA Master Agreement with an attached
Schedule and Confirmation, dated as of November 6, 1997, between the Issuer
and the Swap Provider.
"SWAP PROVIDER": Merrill Lynch Capital Services, Inc. and its
successors.
"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 the Insurer 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": Norwest Bank Minnesota, N.A., a national banking
association, and any Person succeeding as Trustee hereunder pursuant to
Section 6.12 or any other applicable provision hereof.
"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 rights shall be in the proportion borne by the
Principal Amount of such Bond to the aggregate Principal Amounts of the
Bonds.
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
By:
--------------------------
Authorized Signatory"
(d) The form of assignment is as follows:
"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 2, 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 2, "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.
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
$592,560,000 with respect to the Class A-1 Bonds and $156,600,000 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 Insurer's
Policy) from the Distribution Account and distribute such funds to the
Bondholders and the Insurer, as applicable, in the amounts and order of
priority set forth in Section 3(c)(vii) of the Administration Agreement, in
each case, to the extent of funds remaining.
Each Class of Bonds shall accrue interest at the related Bond
Interest Rate, and such interest shall be payable on each Payment Date as
provided in Section 2.09(a). All principal payments on each Class of Bonds
shall be made pro rata to the Holders of each Class of Bonds entitled thereto
in the proportion that the Principal Amount of each such Class bears to the
other Class.
SECTION 2.04. DENOMINATIONS.
-------------
Each Class of Book Entry Bonds shall be evidenced initially by one
or more Bonds 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.
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 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, 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 the Insurer to save the
Issuer and the Insurer 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 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 Administration
Agreement. In addition, in the circumstances specified in the Administration
Agreement, Bondholders' Interest Carryover may accrue with respect to the
Bonds which shall be payable as specified herein, in the forms of the Bonds
and in the Administration Agreement.
The principal of the Bonds shall be payable as specified herein, in
the forms of the Bonds and in the Administration 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, the Insurer 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, 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, the Insurer, the Trustee, any Agent and any other agent of the
Issuer, the Insurer, 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 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, the Insurer, 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;
(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 has been duly established and is validly
existing as a statutory business trust under the laws of the State
of Delaware;
(v) assuming due authorization, execution and delivery
thereof by the Trustee, this Indenture will be the legally valid
and binding obligation of the 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 the Administrator, the Administration Agreement
constitutes the legally valid and binding obligation of Redwood and
the Issuer, enforceable against Redwood 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 and pledged to the
Trustee to the extent contemplated by this Indenture, and, when the
Mortgage Notes have been delivered to the Custodian, this
Indenture, together with such assignment and pledge to the Trustee,
creates as security for the Bonds a fully perfected security
interest of first priority in such Mortgage Notes, except to the
extent limited in the event (A) the Custodian or Trustee
relinquishes possession of any such Mortgage Note, (B) the
Depositor, the Issuer, the Custodian or the Master 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 or the Master
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, the Master Servicer, the Custodian, the Administrator 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 Notes to the Custodian, (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, (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) or (D) with respect to the opinions immediately following
paragraph (viii)(C) above, the laws of any jurisdiction other than the
States of California and New York.
(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 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 Administration 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.
(g) A Trust Receipt evidencing the receipt and possession by the
Custodian of the Mortgage Documents for the Pledged Mortgages.
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 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 inconsistent if
they are made with respect to different Beneficial Owners; and (vi) the
Trustee and the Insurer 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 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.
SECTION 2.15. TAX TREATMENT.
-------------
The Issuer has entered into this Indenture, and the Bonds will be
issued, with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Bonds will qualify as indebtedness.
The Issuer, by entering into this Indenture, and each Bondholder, by its
acceptance of its Bond (and each Beneficial Owner by its acceptance of an
interest in the applicable Book Entry Bond), agree to treat the Bonds for
federal, state and local income, single business and franchise tax purposes
as indebtedness.
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 the Insurer 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 the Insurer 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 agency for payment of Bonds shall be subject to Section 3.03. The Issuer
will give prompt written notice to the Trustee and the Insurer of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 3.03. MONEY FOR 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 the Insurer's written consent, provided, that, no
Insurer Default shall have occurred and be continuing. The Trustee is hereby
appointed as the initial 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
(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).
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;
(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 the Insurer, 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 the Insurer shall
have first received an Opinion of Counsel to the effect that the lien and
security interest created by this Indenture with respect to such property
will continue to be maintained after giving effect to such action or actions.
SECTION 3.06. OPINIONS AS TO TRUST ESTATE.
---------------------------
On or before May 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 the Insurer an Opinion of Counsel
reasonably satisfactory in form and substance to the Trustee and the Insurer
either stating that, in the opinion of such counsel, such action has been
taken as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe all such
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 and the
Swap Agreement. The Issuer and the Trustee shall punctually perform and
observe all of their respective obligations and agreements contained in the
Administration 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, the Master Servicing
Agreement, the Administration Agreement or such Mortgage Document or other
instrument, or unless such action will not adversely affect the interests of
the Holders of the Bonds, the Swap Provider and the Insurer (unless an
Insurer Default has occurred and is continuing), and the Insurer (unless an
Insurer Default has occurred and is continuing) shall have consented in
writing thereto.
(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 Servicer duly and punctually to
perform all of its duties and obligations thereunder. Upon the occurrence of
a Master Servicer 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 the Insurer, and shall, subject to the prior
written consent of the Insurer so long as no Insurer Default has occurred and
is continuing, specify in such notice the action, if any, the Issuer is
taking in respect of such Master Servicer Default. So long as any such
Master Servicer Default shall be continuing and subject to the prior written
consent of the Insurer so long as no Insurer Default has occurred and is
continuing, 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 Servicer Default under the Master Servicing Agreement or take any
other action with respect to such Master Servicer 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 Trustee may
appoint itself as the successor Master Servicer and the rights and powers of
the Master Servicer with respect to the Pledged Mortgages shall vest in the
Trustee. Under such circumstances, the Trustee shall be the successor in all
respects to the Master Servicer with respect to the 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 the Insurer, provided, however, with respect to the
Insurer such consent shall not be required if an Insurer 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 Master
Servicer. The Trustee, at its option, may elect to continue to serve as
successor Master Servicer under the Master Servicing Agreement.
(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, the Insurer 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, or merge or consolidate with another entity, except
as expressly permitted by this Indenture or the Administration
Agreement, unless the Issuer and the Insurer have received an Opinion of
Counsel (and have delivered a copy thereof to the Trustee) to the effect
that such transaction will not (A) result in a "substantial
modification" of the Bonds under Treasury Regulation Section 1.1001-3,
or adversely affect the status of the Bonds as indebtedness for federal
income tax purposes, or (B) if 100% of the Investor Certificates are not
owned by the Depositor, cause the Trust Estate to be subject to an
entity level tax for federal income tax purposes;
(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 the obligation to pay certain amounts to the Swap
Provider pursuant to the Swap Agreement, 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 the Insurer (unless an
Insurer Default has occurred and is continuing) 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 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 the
Insurer, unless an Insurer 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.
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 Administration 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 Administration 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 2 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, the Insurer, and the
Bondholders and by any Person claiming by, through or under the
Trustee, the Insurer, 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.
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 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 the Insurer
(unless an Insurer 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 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.
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 Insurer Default has occurred and is continuing, to the
Insurer) after there shall have been given, by registered or certified
mail, to the Issuer and the Insurer by the Trustee, or to the Issuer and
the Trustee by the Insurer, or, during the existence of an Insurer
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;
(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 Insurer Default has occurred and is continuing, to the
Insurer) after there shall have been given, by registered or certified
mail, written notice thereof to the Issuer and the Insurer by the
Trustee, or to the Issuer and the Trustee by the Insurer, or, during
the existence of an Insurer 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 liquida-
tion of the affairs of the Issuer and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or
(6) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar
law, or the consent by the Issuer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any
substantial part of its property or the making by the Issuer of an
assignment for the benefit of creditors or the failure by the Issuer
generally to pay its debts as such debts become due or the taking of
corporate action by the Issuer in furtherance of any of the foregoing.
(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 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 an Insurer 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 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, the Insurer or, in the case of an Insurer 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 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 the Insurer (unless an Insurer Default shall have occurred and
be continuing), 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 the Insurer, or, in the case of an Insurer
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.
SECTION 5.04. REMEDIES.
--------
Subject to the rights of the Insurer 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, other
than the Issuer's rights to receive net amounts payable under the Swap
Agreement, or any portion of the Trust Estate or rights or interest in
the Trust Estate, 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 the Insurer 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 the Insurer
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 the Insurer
thereunder, and in case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, composition or other
judicial Proceeding relative to the Issuer or any other obligor upon any of
the Bonds or the property of the Issuer or of such other obligor or their
creditors, the 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.
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 the
-----
Master Servicer in respect of Nonrecoverable Advances made by the Master
Servicer pursuant to the Master Servicing Agreement;
Second: To the payment of any amounts then due and owing to the
------
Swap Provider pursuant to the Swap Agreement;
Third: 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) or otherwise due and owing to the Insurer; and
Fourth: 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 the Insurer (unless an Insurer 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 the Insurer (unless an Insurer Default has occurred and is
continuing), 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 the Insurer or the
Holders of Bonds representing more than 50% of the aggregate Principal
Amount of the Bonds in the case of an Insurer 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.
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, the Insurer 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, the Insurer or to such Bondholder, then
and in every such case the Issuer, the Trustee, the Insurer (unless an
Insurer Default has occurred and is continuing) 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, the Insurer 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, the Insurer 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.
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, the Insurer 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 the Insurer 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 the Insurer under Article XII hereof, the
Holders of Bonds representing more than 50% of the aggregate 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).
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)
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 or Redwood, as manager
under the Management Agreement, or the Insurer 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 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, the Insurer 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.
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 an Insurer 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 Insurer's 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;
(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 the Insurer.
(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 Servicer
Default or 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
Servicer 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 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 the
Insurer and the rights of Bondholders and the Insurer 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 furnish the Issuer and the Insurer with notice of
each such Default, and one Business Day thereafter shall transmit by mail to
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 to all Holders of Bonds 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 the Insurer;
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 the Insurer 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 the
Insurer and the Holders of the Bonds, the Trustee shall transmit by mail a
copy of such notice to the Rating Agencies.
SECTION 6.03. RIGHTS OF TRUSTEE.
-----------------
Except as otherwise provided in Section 6.01 hereof:
(a) the Trustee may request and rely upon 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 or to institute, conduct
or defend any litigation hereunder or in relation hereto at the request or
direction of any of the Bondholders or the Insurer pursuant to this
Indenture, unless such Bondholders or the Insurer 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 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 Servicer Default or a failure by the Master
Servicer thereunder which with notice and the passage of time will become a
Master Servicer 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
(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.
The Trustee shall at no time have any responsibility or liability
for or with respect to the legality, validity and enforceability of any
Pledged Mortgage, any Mortgage, any item of Additional Collateral and
Insurance Policy, or any other item of collateral under this Indenture or the
perfection and priority of any item of the Trust Estate or the maintenance of
any such perfection and priority or for or with respect to the sufficiency of
the Trust Estate or its ability to generate the payment to be distributed to
Bondholders under this Indenture, including, without limitation: the
existence, condition and ownership of any Mortgaged Property; the existence
and enforceability of any hazard insurance thereon; the validity of the
assignment of any Pledged Mortgage to the Trustee or of any intervening
assignment; the completeness of any Pledged Mortgage; the performance or
enforcement of any Pledged Mortgage, the compliance by the Issuer or the
Master Servicer with any warranty or representation made under this
Indenture, the Administrator Agreement, the Master Servicing Agreement or any
other agreement or in any related document or the accuracy of any such
warranty or representation; any investment of monies by or at the direction
of the Issuer or the Master Servicer or any loss resulting therefrom; the
acts or omissions of any of the Issuer, the Master Servicer, or any
Mortgagor; any action of the Master Servicer taken in the name of the
Trustee; the failure of the Master Servicer to act or perform any duties
required of it as agent of the Trustee hereunder; or any action by the
Trustee taken in good faith at the instruction of the Issuer, the Master
Servicer or the Insurer. The Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or
otherwise to perfect or maintain the perfection of any security interest or
lien granted to it hereunder.
SECTION 6.05. MAY HOLD 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 each of its
directors, officers, employee and agents for, and to hold them harmless
against, any loss, 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 an
Insurer Default exists, the Trustee shall notify the Insurer of such legal
action (provided that the failure to notify the Insurer 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 the Insurer to control the defense or settlement of any such
action and (ii) to allow the Insurer to direct the Trustee with respect
thereto; provided, further, that (a) if the Insurer 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 the Insurer assumes control of the
defense, (b) the Trustee along with the Insurer 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
the Insurer shall have the right to consent to any settlement if the amount
of such settlement is less than full indemnification or 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 directors,
officers, employees or 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 or the Trustee from the Bond
Account and paid to the Trustee, or its agents, at any time subject to a
maximum amount of $100,000 in any calendar year pursuant to Section
3(c)(iii)(D) of the Administration Agreement. Any such amounts due to the
Trustee, or its agents, in excess of $100,000 in such calendar year shall be
reimbursable to the Trustee pursuant to Section 3(c)(vii)(G) of the
Administration 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 Trustee in its capacity as such payable pursuant to
Section 3(c)(vii)(G) of the Administration 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.
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 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 the Insurer. 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) the Insurer or
(2) by Act of the Holders representing more than 662/3% of the aggregate
Principal Amount of the Bonds, with the prior written consent of the Insurer;
provided, however, the Insurer shall have no such right if an Insurer 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, the Insurer 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, the Insurer 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 the Insurer unless an Insurer 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
the Insurer unless an Insurer 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 the Insurer or by Act of the Holders
of Bonds representing more than 662/3% of the aggregate Principal Amount of
the Bonds and with the prior written consent of the Insurer unless an Insurer
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, the Insurer or Bondholders and shall
have accepted appointment in the manner hereinafter provided, the Insurer 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 the Insurer unless an Insurer 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 the
Insurer 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, the Insurer and the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee 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 the Insurer, unless an Insurer 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.
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 the Insurer 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.
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 Sections 6.08 and 6.09. No
Trustee, co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of any other 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.
(6) The Issuer and the Trustee may each at any time accept
the resignation of or remove any co-trustee or separate trustee, except that
following an Event of Default, the Trustee acting alone may accept the
resignation of or remove any co-trustee or separate trustee.
SECTION 6.15. AUTHENTICATING AGENTS.
---------------------
The Trustee may appoint an Authenticating Agent with power to act
on its behalf and subject to its direction in the authentication and delivery
of the Bonds and 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".
Any Authenticating Agent may 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, if applicable, of Bond Registrar or co-Bond
Registrar) 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.
Any Authenticating Agent shall be entitled to 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 the Insurer, that, should it fail to receive notice from the Master
Servicer, or the applicable insurers, within the time period required
pursuant to the Master 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 Master Servicer from amounts on deposit in any
related escrow account, or required to be advanced by the Master Servicer,
the Trustee shall proceed with diligence to make inquiries of the Master
Servicer, the Issuer and the applicable insurers as to whether such premiums
have been paid at the times set forth in the Master 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 in accordance with its obligations under the applicable
provisions of the Administration Agreement.
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 (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.
(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 the Insurer 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 the Insurer with
respect to which it has made advances any reports with respect to such
advances that are required by TIA Section 313(b)(2) and (iii) the Trustee
shall also mail to Holders of Bonds and the Insurer any reports required by
TIA Section 313(b)(1). For purposes of the information required to be
included in any such reports pursuant to TIA Sections 313(a)(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 the Insurer 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).
SECTION 7.05. NOTICE TO THE RATING AGENCIES, TO THE INSURER AND TO THE
--------------------------------------------------------
SWAP PROVIDER.
- ---- --------
The Issuer shall use its best efforts promptly to provide notice to
the Rating Agencies, the Insurer and the Swap Provider 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;
(f) any payment or claim made under the Insurer's Policy, and
(g) any Event of Default or Termination Event by, or with respect
to, the Swap Provider or any notice received by the Issuer
pursuant to the Swap Agreement that the Swap Provider
reasonably believes that it may not be able to make a
payment required to be made under the Swap Agreement.
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) (Reserved.)
(b) (Reserved.)
(c) The Trustee shall establish and maintain, on behalf of the
Bondholders and the Insurer, the Distribution Account. The Trustee shall,
promptly upon receipt, deposit in the Distribution Account and retain therein
the following:
(i) the aggregate amount remitted to the Trustee pursuant to
Section 3(c)(iv) of the Administration Agreement; and
(ii) any other amounts deposited hereunder which are required
to be deposited in the Distribution Account.
In the event that the Administrator shall remit any amount not
required to be remitted, it may withdraw such amount from the Distribution
Account, any provision herein to the contrary notwithstanding; provided that
the Administrator shall submit an explanation of such withdrawal to the
Issuer. All funds deposited in the Distribution Account shall be held by the
Trustee in trust for the Bondholders, the Insurer and the Swap Provider 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 Administrator.
(d) Subject to Sections 5.02, 5.08 and 6.16, 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, the Swap Agreement 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.
(b) All or a portion of the funds in the Pledged Accounts shall
be invested in Permitted Investments and reinvested by the Trustee subject to
the provisions of Section 3(c)(viii) of the Administration Agreement and, in
the case of the Bond Account, upon written direction of Redwood, so long as
no Default or Event of Default shall have occurred and be continuing. 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 Trustee as provided in Section 3(c)(viii) of the Administration
Agreement and shall be remitted monthly to Redwood or the Trustee, as
applicable, as provided in the Administration 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 Trustee, as
applicable, in the applicable Pledged Account.
(c) Subject to Sections 6.01(c) and 8.03(b), 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 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 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 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 Bond Account 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.
----------------------------------------
(a) If at any time the Issuer, the Insurer or the Trustee
discovers or is notified (i) that there has been a breach of any of Redwood's
representations and warranties with respect to Pledged Mortgages contained in
the Administration Agreement that materially and adversely affects the
interests of the Bondholders, the Insurer or the Swap Provider in any Pledged
Mortgage, or (ii) that any of the Mortgage Documents for a Pledged Mortgage
has not been properly executed by the Mortgagor or contains a material
defect, then the party discovering such defect or omission or receiving
notice thereof shall promptly notify the other parties.
(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, the Insurer or the Swap Provider, then Redwood,
on behalf of the Issuer shall, pursuant to the applicable provisions of the
Administration Agreement, either (i) cure any such defect, misrepresentation
or omission, (ii) 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 Administration
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 Administration 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 Administration 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) 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 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)(iii) of the Administration
Agreement; provided, however, that, prior to any such purchase by Redwood,
Redwood shall notify the Insurer of any such purchase proposed to be made by
Redwood and the Insurer shall have five Business Days to disapprove any such
purchase. Upon purchase of such Pledged Mortgage by Redwood, the
Administrator 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 for which the
Master Servicing Agreement requires the Master Servicer to purchase the
Converted Mortgage Loan, neither Redwood or the Issuer shall have any
obligation to purchase such a Converted Mortgage Loan should the Master
Servicer fail to do so. Any purchase of a Converted Mortgage Loan by the
Master Servicer or any other Person shall be at the price specified in the
Master Servicing Agreement, but in no event less than Purchase Price
therefor. Upon any such purchase of a Converted Mortgage Loan, the
Administrator 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)(iii) of the Administration 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.
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 the Insurer, within two Business Days after the
request of the Issuer or the Insurer, 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 the Insurer,
promptly transmit to the Issuer and the Insurer copies of all accountings of,
and information with respect to, collections furnished to it by the
Administrator and shall promptly notify the Issuer and the
Insurer 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 connection with a redemption of the Bonds as to which the
Trustee receives a notice from the Issuer pursuant to Section 10.01(b) that
the Redemption Amount will be deposited into the Distribution Account not
later than 10:00 a.m., New York City time, on the Redemption Date, the
Trustee is hereby authorized, if so directed by the Issuer in writing not
less than five (5) Business Days prior to the Redemption Date, to release
property from the lien of this Indenture on such Redemption Date against
receipt by the Trustee of immediately available funds in an amount not less
than the Redemption Amount.
(c) Upon request by the Master Servicer accompanied by a Request
for Release of Documents in the form of Exhibit Two to the 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 Master 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. (RESERVED)
SECTION 8.10. MASTER SERVICER AS AGENT AND BAILEES OF TRUSTEE.
-----------------------------------------------
In order to facilitate the servicing of the Pledged Mortgages by
the Master Servicer, the Master Servicer shall deposit in a Master Servicing
Account proceeds of the Pledged Mortgages in accordance with the provisions
of the Master Servicing Agreement and this Indenture, prior to the time they
are deposited into the Bond Account. In addition, the Master Servicer will
be required to remit to the Administrator for deposit in the Bond Account all
funds held in the related Master Servicing Account that are required to be
remitted to the Administrator in accordance with the terms of the Master
Servicing Agreement and the Administration Agreement. Solely for purposes of
perfection under Section 9-305 of the Uniform Commercial Code or similar
provision of law in the state in which such property is held by the Master
Servicer, the Trustee hereby designates the Master Servicer as its agent and
bailee to hold such funds with respect to the Pledged Mortgages until they
are deposited into the Bond Account as well as its agent and bailee in
holding any Mortgage Documents or other documents contained released to it by
the Custodian pursuant to the Custodial Agreement and any other items
constituting a part of the Trust Estate which from time to time come into
possession of the Master Servicer. It is intended that, by the Master
Servicer's acceptance of such agency pursuant to 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 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 or 8.08 if:
(i) the Master Servicer has complied with all requirements
imposed on it by Section 8.04 or 8.08 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 Master Servicer, 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.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.
------------------------------------------------------
Subject to the rights of the Insurer 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 the
Insurer, unless an Insurer Default has occurred and is continuing (any
such action shall be deemed not to adversely affect the interests of the
Bondholders and the Insurer 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 without taking into account the
Insurer's Policy);
(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 an Insurer 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 without taking into account the Insurer's Policy (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.
Prior to joining in the execution of any such supplemental
indenture, the Trustee may in its discretion obtain an Opinion of Counsel to
the effect that such transaction will not result in a "substantial
modification" of the Bonds under Treasury Regulation Section 1.1001-3, or
adversely affect the status of the Bonds as indebtedness for federal income
tax purposes.
The Trustee shall provide the Insurer, if any, with a copy of any
supplemental indenture executed pursuant to this Section, by first class mail
mailed to the Insurer 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 the
Insurer (except (i) in the case of clause (7) above or (ii) if an Insurer
Default has occurred and is continuing).
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.
---------------------------------------------------
Subject to the rights of the Insurer 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 the Insurer, 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 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 an Insurer Default has occurred and is
continuing, written consent of the Insurer shall be required unless such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Trustee and the Insurer adversely affect in any material respect the
interests of the Insurer. 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 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 the Insurer a copy of any supplemental
indenture executed pursuant to this Section, by first class mail, mailed to
the Insurer 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 the Insurer, unless an Insurer 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.
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 ADMINISTRATION
-------------------------------------------------------
AGREEMENT.
- ---------
Subject to the rights of the Insurer under Article XII hereof, the
Trustee shall, upon Issuer Request, consent to any proposed amendment to the
Deposit Trust Agreement or Administration Agreement, or an amendment to or
waiver of any provision of any other document relating to the Deposit Trust
Agreement or Administration 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 without
taking into account the Insurer's Policy; 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 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 Overcollateralization Amount and
Target Percentage (each of which is contained in the Administration
Agreement), may be made solely upon (i) the written consent of the Issuer
and, if no Insurer Default shall have occurred and be continuing, the Insurer
and with the advise of tax counsel to the Issuer, or (ii) the written consent
of the Issuer and the Trustee and with the advice of tax counsel to the
Issuer and without the consent of the Insurer if an Insurer Default shall
have occurred and be continuing.
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.
ARTICLE X
REDEMPTION OF BONDS
SECTION 10.01. REDEMPTION.
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(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) ten years after the Closing Date and (ii) the
Payment Date after which the Pool Principal Balance with respect to such
Payment Date, is 25% 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 the Insurer 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 the Insurer and either (a) deposit in the
Distribution Account the Redemption Price therefor plus all amounts due to
the Insurer pursuant to the Insurance Agreement and any amounts then due and
owing to the Swap Provider (collectively, the "Redemption Amount") or (b)
state in such notice that the Redemption Amount will be deposited in the
Distribution Account not later than 10:00 a.m., New York City time, on the
applicable Redemption Date.
(c) (Reserved)
(d) In effecting any redemption pursuant to subsection (b),
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 or any Affiliate of the Issuer elects to retain
the Bonds following any redemption pursuant to subsection (b) of this Section
10.01, the Issuer shall, as a condition precedent to such redemption without
retirement, consult with tax counsel to determine that such redemption
without retirement will not adversely affect the Insurer. Prior to a resale
of the Bonds following any such redemption without retirement, the Issuer
shall obtain an opinion of tax counsel confirming the status of the Bonds as
indebtedness for federal income tax purposes.
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 Amount with respect to the
Bonds to be redeemed pursuant to Section 10.01 has been deposited in the
Distribution Account or the date on which the notice of such deposit
referred to in Section 10.01 has been received by the Trustee)
to the Insurer 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 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.
The Trustee, if so directed by the Issuer in writing not less than
(5) Business Days prior to the Redemption Date, shall authenticate and
prepare for delivery on the Redemption Date new Bonds evidencing Book Entry
Bonds or Definitive Bonds (as directed by the Issuer) on the order of the
Issuer against receipt by the Trustee of immediately available funds in an
amount not less than the Redemption Amount.
Notwithstanding the foregoing, no redemption of any Bond shall be
permitted without retiring it and no sale of previously redeemed Bonds may be
made by the Issuer unless the Issuer shall have delivered to the Trustee and
the Insurer, provided an Insurer Default has not occurred and is continuing,
an Opinion of Counsel that such redemption without retirement or sale, as
the case may be, does not violate any provision of the TIA or other
applicable law.
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 and the Insurer 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.
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 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.
(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 with a copy to: Norwest Bank Minnesota, N.A., 11000 Broken
Land Parkway, Columbia, Maryland 21044, Attention: Securities
Administration (Sequoia Trust 2);
(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;
(3) any Rating Agency by the Trustee or the Issuer 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;
(4) the Insurer 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 the Insurer at Ambac Assurance
Corporation, One State Street Plaza, New York, New York 10004,
Attention: Howard Pfeffer (Sequoia Mortgage Trust 2/Collateralized
Mortgage Bonds, Class A-1 and Class A-2; or
(5) the Swap Provider by the Trustee or the Issuer shall be
sufficient for every purpose hereunder if in writing and mailed, first-
class, postage prepaid to the Swap Provider at Merrill Lynch Capital
Services, Inc., World Financial Center, North Tower, 22nd Floor, 250
Vesey Street, New York, New York 10281, Attention: Swap Group (Sequoia
Mortgage Trust 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.
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, 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.
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 the Insurer, 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 the
Insurer, as the case may be, and to discuss its affairs, finances and
accounts with its officers, employees and Independent Accountants (and by
this provision the 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 the Insurer of any rights
under this Section 11.17, but not in excess of $5,000 per year, shall be
borne by the Issuer.
SECTION 11.18. USURY.
-----
The amount of interest payable or paid on any Bond under the terms
of this Indenture shall be limited to an amount 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.
ARTICLE XII
THE BOND INSURER
(SECTION 12.01. CERTAIN MATTERS REGARDING THE INSURER AND THE
---------------------------------------------
INSURER'S POLICY.
- ----------------
(a) Rights of the Insurer to Exercise Certain Rights of
Bondholders. By accepting its Bond, each bondholder agrees that unless an
Insurer Default exists, the Insurer 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 Master Servicer Default;
(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;
(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 an Insurer Default exists, the Insurer's
consent will be required prior to, among other things, (i) the appointment of
any successor Trustee or Master Servicer or (ii) any amendment to the
Indenture; provided, however, that the Insurer shall not unreasonably
-------- -------
withhold, condition or delay its consent. Each Bondholder agrees that,
unless an Insurer Default exists, the rights specifically set forth above may
be exercised by the Bondholders only with the prior written consent of the
Insurer.
(b) Issuer to Act Solely with Consent of the Insurer. Unless an
Insurer 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 the Insurer.
Unless an Insurer 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 the Insurer.
(c) Trustee to Act Solely with Consent of the Insurer. Unless an
Insurer 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 Administration 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;
(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 Master Servicing Agreements;
without the prior written consent of the Insurer, which shall not be
unreasonably withheld; provided, however, during the existence and
continuation of an Insurer Default the Trustee shall not require the prior
written consent of the Insurer to exercise any of the rights enumerated
above.
(d) Trust Estate and Accounts Held for Benefit of the Insurer 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
an Insurer Default exists and is continuing, the Insurer, and all references
in this Indenture and in the Bonds to the benefit of Holders of the Bonds
shall, unless an Insurer Default exists and is continuing, be deemed to
include the Insurer. The Trustee shall, unless an Insurer Default exists and
is continuing, cooperate in all reasonable respects with any reasonable
request by the Insurer for action to preserve or enforce the Insurer's rights
or interests under this Indenture and the Bonds.
(e) Claims Upon the Insurer's Policy.
(i) The Trustee shall (A) receive as attorney-in-fact of each
Bondholder any Insured Payment from the Insurer or on behalf of the
Insurer 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 Insurer's 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 the Insurer
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 Insurer
Reimbursement Amount in respect thereof. The Trustee hereby agrees on
behalf of each Bondholder for the benefit of the Insurer that it
recognizes that to the extent the Insurer makes Insured Payments for the
benefit of the Bondholders, the Insurer will be entitled to receive the
related Insurer Reimbursement Amount in accordance with the priority of
distributions referenced in Section 2.03(b) hereof.
(ii) The Trustee shall promptly notify the Insurer 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 the Insurer in accordance with the terms of the Insurer's
Policy. Each Bondholder, by its purchase of Bonds, and the Trustee
hereby agree that, the Insurer (so long as no Insurer 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, the
Insurer 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 an Insurer Default exists and is
continuing, the Insurer 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.
(f) Trustee to Cooperate. Unless an Insurer Default exists and is
continuing, the Trustee shall cooperate in all respects with any reasonable
request by the Insurer for action to preserve or enforce the Insurer'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
Insurer's Policy to the Insurer for cancellation upon the expiration of the
term of the Insurer's Policy as provided in the Insurer's Policy.
(h) Reports to the Insurer. 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 the Insurer.
The Issuer and the Trustee shall make available to the Insurer their books
and records for the purpose of copying and inspection of any information
about the Bonds or the Bondholders.
(i) Third-Party Beneficiary. The Insurer shall be a third-party
beneficiary of this Indenture, entitled to enforce the provisions thereof as
if a party thereto.
(j) Costs and Expenses. The Insurer 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 Insurer's Policy.
(k) Survival of the Insurer'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 Insurer Reimbursement Amount. The Insurer's right
to receive the Insurer Reimbursement Amount shall survive the satisfaction
and discharge of this Indenture.
(l) Opinions of Counsel. While the Insurer's Policy is in effect,
each Opinion of Counsel rendered pursuant to the Indenture, the
Administration Agreement, the Deposit Trust Agreement, the Custodial
Agreement, the Master Servicing Agreement, the Master Mortgage Loan Purchase
Agreement or the Management Agreement also shall be addressed to the Insurer.
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 2
as Issuer
By: WILMINGTON TRUST
COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: /s/ James P. Lawler
-------------------------
Name: James P. Lawler
Title: Vice President
NORWEST BANK MINNESOTA, N.A.
as Trustee
By: /s/ Randall S. Reider
---------------------
Name: Randall S. Reider
Title: Officer
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE )
On the 4th day of November in the year one thousand nine hundred
and ninety-seven before me personally came James P. Lawler, to me known, who
being by me duly sworn did depose and say that he resides in Wilmington,
Delaware, that he is the Vice President of Wilmington Trust Company, the
corporation described in and which executed the above instrument and that he
signed his name thereto by authority of the Board of Directors of said
corporation.
(NOTARIAL SEAL)
/s/ Kathleen A. Pedelini
------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 6th day of November, 1997, before me, a notary public in and
for said State, personally appeared Randall S. Reider, known to me (or
proved to me on the basis of satisfactory evidence) to be an Officer of
Norwest Bank Minnesota N.A., 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)
/s/ Daniel F. Mulvihill
----------------------------------
Notary Public
SCHEDULE A
SCHEDULE OF PLEDGED MORTGAGES
EXHIBIT I
LETTER AGREEMENT WITH THE DEPOSITORY
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.
SEQUOIA MORTGAGE TRUST 2
a Delaware Statutory Business Trust
Collateralized Mortgage Bonds
CLASS A-1
STATED MATURITY: ___________ 25, 20__
ISSUE DATE: November _, 1997
Initial Principal
Amount of this Bond:
$___________ CUSIP NO. _________
CERTIFICATE NUMBER 1
Sequoia Mortgage Trust 2 (the "Issuer"), a statutory business trust
formed under a deposit trust agreement dated as of October 1, 1997 and
having Wilmington Trust Company, a Delaware banking corporation, as Owner
Trustee, for value received, hereby promises to pay to _____________________
or registered assigns, the principal sum of
___________________________________________________________ DOLLARS
($___________) in monthly installments on the twenty-fifth day of each month,
commencing on November 25, 1997 (each, a "Payment Date"), and ending on or
before October 25, 2024 (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 October 25, 1997) and
ending on the date immediately preceding such Payment Date, as set forth
herein and in the Indenture and the Administration 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 administration agreement dated as of
October 1, 1997 (the "Administration Agreement"), among the Issuer, the
Administrator and Trustee and Redwood Trust, Inc., 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 2 has caused this
instrument to be duly executed by its duly authorized officer.
Dated: November _, 1997 SEQUOIA MORTGAGE TRUST 2
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
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 October 1, 1997 between
the Issuer and Norwest Bank Minnesota, N.A. (the "Trustee", which term
includes any successor Trustee under the Indenture, and, pursuant to the
Administration Agreement, the "Administrator"), 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 Administration Agreement.
The interest rate for the Class A-1 Bonds (the "Class A-1 Interest
Rate") on each Payment Date after the first and second Payment Dates will be
equal to a per annum floating rate equal to the One-Year Treasury ARM Index
for the related Interest Accrual Period. The One-Year Treasury ARM Index
will be determined in the manner set forth in the Indenture and the
Administration Agreement. The Class A-1 Interest Rate for the first and
second Payment Dates will equal 6.50% 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 be equal to the Class A-
1 Interest Payment Amount and any Class A-1 Bondholders' Interest Carryover
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 Insurer 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 Insurer Default).
For any Payment Date on which interest accrues on the Class A-1
Bonds based on the Weighted Average Net Mortgage Rate, Class A-1 Bondholders'
Interest Carryover will accrue and be payable as provided in the
Administration 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 Administration
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 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 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.
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) ten 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 25% or less of the Original Pool Principal Balance, at a
redemption price equal to 101% of the unpaid Principal Balance for the Class
A-1 Bonds, plus accrued and unpaid interest thereon at the Class A-1 Interest
Rate.
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 Principal
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 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.
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.
SEQUOIA MORTGAGE TRUST 2
a Delaware Statutory Business Trust
Collateralized Mortgage Bonds
CLASS A-2
STATED MATURITY: October __, 20__
ISSUE DATE: November _, 1997
Initial Principal
Amount of this Bond:
$___________ CUSIP NO. _________
CERTIFICATE NUMBER 1
Sequoia Mortgage Trust 2 (the "Issuer"), a statutory business trust
formed under a deposit trust agreement dated as of October 1, 1997 and having
Wilmington Trust Company, a Delaware banking corporation, as Owner Trustee,
for value received, hereby promises to pay to ________________________ or
registered assigns, the principal sum of
___________________________________________________ DOLLARS ($___________) in
monthly installments on the twenty-fifth day of each month, commencing on
November 25, 1997 (each, a "Payment Date"), and ending on or before October
25, 2024 (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 October 25, 1997) 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 administration agreement dated as of
October 1, 1997 (the "Administration Agreement"), among the Issuer, the
Administrator and Trustee and Redwood Trust, Inc., 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 2 has caused this
instrument to be duly executed by its duly authorized officer.
Dated: November _, 1997 SEQUOIA MORTGAGE TRUST 2
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
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 October 1, 1997 between
the Issuer and Norwest Bank Minnesota, N.A. (the "Trustee", which term
includes any successor Trustee under the Indenture, and, pursuant to the
Administration Agreement, the "Administrator"), 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 Administration 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 will be equal to the
lesser of (i) a per annum floating rate equal to LIBOR, for the related
Interest Accrual Period plus, 0.34% and (ii) 10% per annum. The Class A-2
Interest Rate for the first Payment Date will equal 5.99625% 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 be equal to the Class A-
2 Interest Payment Amount and any Class A-2 Bondholders' Interest Carryover
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 Insurer 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 Insurer Default).
For any Payment Date on which interest accrues on the Class A-2
Bonds based on the Weighted Average Net Mortgage Rate, Class A-2 Bondholders'
Interest Carryover will accrue and be payable as provided in the
Administration 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 Administration
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 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 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.
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) ten 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 25% or less of the Original Pool Principal Balance, at a
redemption price equal to 100% of the unpaid Principal Amount for the Class
A-2 Bonds, plus accrued and unpaid interest thereon at the Class A-2 Interest
Rate.
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 Principal
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 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 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 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.
EXHIBIT IV
FORM OF BOND INSURANCE POLICY
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
Norwest Bank Minnesota, N.A.
____________________
____________________
____________________
Ladies and Gentlemen:
We have performed the procedures enumerated below, which were agreed to by
Redwood Trust, Inc. (the "Company") and Norwest Bank Minnesota, N.A., solely
to assist you in connection with the requirement of the Trust Indenture (the
"Indenture") dated October 1, 1997 between Sequoia Mortgage Trust 2 (the
"Issuer") and Norwest Bank Minnesota, N.A. (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 October 1, 1997" to the remittance 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 October 1, 1997" as the
difference between the amounts under the heading "Face Value of
Redwood's Mortgage Loans at October 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:
____________________________ and __.) 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 procedures and taken
responsibility for the sufficiency of the procedures for their purposes.
San Francisco, California
October __, 1997
EXHIBIT 99.2
------------
EXECUTION COPY
ADMINISTRATION AGREEMENT
Dated as of October 1, 1997
among
SEQUOIA MORTGAGE TRUST 2, Issuer,
and
REDWOOD TRUST, INC.
and
NORWEST BANK MINNESOTA, N.A., Administrator and Trustee
Relating to the Pledged Mortgages
Pledged as Collateral for the Issuer's
Collateralized Mortgage Bonds,
in the Aggregate Initial
Principal Amount of $749,160,000
TABLE OF CONTENTS
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Page
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PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Mortgage Documents . . . . . . . . . . . . . . . . . . . . 21
(a) Custodian to Retain Possession of Documents . . . . . . . . . . 21
(b) Custodian to Cooperate; Release of Trustee Mortgage Files. . . 24
(c) Representations, Warranties and Covenants of the Issuer and
Redwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3. Administrative and Servicing Obligations . . . . . . . . . 28
(a) Master Servicing Agreement . . . . . . . . . . . . . . . . . . 28
(b) Successor Master Servicer . . . . . . . . . . . . . . . . . . . 28
(c) Receipt of Pledged Mortgage Payments; Bond Account;
Distribution Account . . . . . . . . . . . . . . . . . . . . . 29
(d) Determination of LIBOR, the One-Year Treasury ARM Index and
Certain Other Amounts . . . . . . . . . . . . . . . . . . . . . 33
(e) Monthly Data. . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Tax Accounting Information . . . . . . . . . . . . . . . . . . 37
(g) Claims Upon the Insurer Policy . . . . . . . . . . . . . . . . 37
(h) Filing of Information Reports . . . . . . . . . . . . . . . . . 38
SECTION 4. Compensation and Expenses . . . . . . . . . . . . . . . . 38
(a) Administrator's Compensation. . . . . . . . . . . . . . . . . . 38
(b) Master Servicer Compensation. . . . . . . . . . . . . . . . . . 39
SECTION 5. Administrator . . . . . . . . . . . . . . . . . . . . . . 39
(a) Liabilities of the Administrator. . . . . . . . . . . . . . . . 39
(b) Merger or Consolidation of the Administrator. . . . . . . . . . 39
(c) Limitation on Liability of the Administrator and Others. . . . 40
(d) Limitation on Resignation of the Administrator. . . . . . . . . 41
SECTION 6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 41
(a) Term of this Agreement . . . . . . . . . . . . . . . . . . . . 41
(b) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 43
(h) Execution in Counterparts . . . . . . . . . . . . . . . . . . . 43
(i) Limitation of Liability of Wilmington Trust Company . . . . . . 44
(j) Nonpetition Covenants . . . . . . . . . . . . . . . . . . . . . 44
(k) Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . 44
SCHEDULE I Schedule of Pledged Mortgages . . . . . . . . . . . . . S-I-1
SCHEDULE II (Reserved) . . . . . . . . . . . . . . . . . . . . . . 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 Master Servicing Agreement . . . . . . . . . . . . . . . S-V-1
ADMINISTRATION AGREEMENT
------------------------
THIS ADMINISTRATION AGREEMENT is made and entered into as of
October 1, 1997, by and among Sequoia Mortgage Trust 2, a statutory business
trust formed under the laws of the State of Delaware (the "Issuer"), Redwood
Trust, Inc. ("Redwood") and Norwest Bank Minnesota, N.A. ("Norwest"), a
national banking association (the "Administrator" and 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 October 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 $749,160,000 (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, the
Pledged Mortgages, its rights under this Agreement, the Management Agreement,
the Master Servicing Agreement (but only with respect to the Pledged
Mortgages), the Assignment and Assumption Agreement, the Master Mortgage Loan
Purchase Agreement, the Limited Purpose Surety Bond, the Custodial Agreement,
the Mortgage Loan Purchase Agreement, the Swap Agreement, the Bond Account,
the Distribution Account and certain Insurance Policies (as each such term is
defined herein or in the Indenture).
The parties desire to enter into this Agreement to provide, among
other things, for certain administrative functions and calculations to be
performed by the Administrator.
Redwood and the Master Servicer (as defined herein) have previously
entered into the Master Servicing Agreement in which the Master Servicer
agrees to perform, as an independent contractor, master servicing functions
with respect to the Pledged Mortgages. For its services under the Master
Servicing Agreement, the Master 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.
SECTION 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.
"ADMINISTRATOR" means Norwest Bank Minnesota, N.A., a national
banking association, and its successors and assigns, in its capacity as
administrator hereunder.
"ADVANCE" means any advance of a payment of principal and interest
due on a Pledged Mortgage required to be made by the Master Servicer with
respect to any remittance date pursuant to the Master Servicing Agreement.
"AGREEMENT" means this Administration Agreement, as the same may be
amended or supplemented from time to time.
"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 payments and receipts on the Pledged Mortgages (including
any Advances and compensating interest paid by the Master Servicer if and to
the extent provided for by the Master Servicing Agreement) remitted by the
Master Servicer on or prior to such Payment Date (net of the related
Servicing Fee and any premium payable to a correspondent lender by MLCC),
pursuant to the Master Servicing Agreement, (ii) any net amount payable by
the Swap Counterparty to the Issuer pursuant to the terms and conditions of
the Swap Agreement (net of any amount payable to the Swap Counterparty by the
Issuer pursuant to the terms and conditions of the Swap Agreement); (iii) any
amounts payable by Redwood as reimbursement of principal losses on
investments made with funds on deposit in the Bond Account, (iv) any amounts
payable by the Trustee as reimbursement of any principal losses
on investments made with funds on deposit in the Distribution Account, and
(v) 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 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 Pledged Mortgage
by the Master Servicer pursuant to the Master Servicing Agreement.
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act of
1978, as amended.
"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 the Eligible Account or Accounts created and
maintained with the Trustee pursuant to Section 3(c)(ii), into which shall be
deposited from time to time the funds remitted to the Trustee by the Master
Servicer under the Master Servicing Agreement.
"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.
"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 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 an
Insurer 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
Insurer 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 an
Insurer 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 Insurer Default).
"CLASS A-1 INTEREST RATE" means (a) for the first and second
Payment Dates, 6.50% per annum and (b) for each Payment Date thereafter, the
per annum floating rate equal to the One-Year Treasury ARM Index for the
related Interest Accrual Period.
"CLASS A-2 INTEREST RATE" means (a) for the first Payment Date,
5.99625% per annum and (b) for each Payment Date after the first Payment
Date, the lesser of (i) a per annum floating rate equal to LIBOR, for the
related Interest Accrual Period, plus 0.34% and (ii) 10% per annum.
"CLOSING DATE" means November 6, 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 AGREEMENT" means the Custody Agreement, dated as of
October 1, 1997, among the Trustee, the Issuer and the Custodian.
"CUSTODIAN" means Bankers Trust Company of California, N.A., as
custodian under the Custodial Agreement.
"CUT-OFF DATE" means, with respect to the Pledged Mortgages,
October 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.
"DEFECTIVE PLEDGED MORTGAGE" means any Pledged Mortgage required to
be repurchased or substituted by Redwood pursuant to Section 2(a)(ii) or
2(c)(iii) 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 of the Bonds has been directed
or consented to by the Insurer pursuant to this Agreement or the Indenture,
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 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 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)(iii) 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 Deposit Trust Agreement, dated
as of October 1, 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, into which shall be deposited from time to time the funds
withdrawn by the Trustee from the Bond Account, as required hereunder and
under the Indenture.
"DUE DATE" means, with respect to each Payment Date, the first day
of the month of such Payment Date.
"DUE PERIOD" means, with respect to any Payment Date, the calendar
month preceding the month of such Payment Date.
"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 the Insurer, having
capital and surplus not less than $100,000,000 or (iii) any other account
acceptable to each Rating Agency and the Insurer. Eligible Accounts may bear
interest, and may include, if otherwise qualified under this definition,
accounts maintained with the Trustee.
"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.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC" means Freddie Mac, 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.
"FNMA" means Fannie Mae, 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.
"INSURANCE AGREEMENT" means the insurance and indemnity agreement,
dated as of November 6, 1997, between the Issuer, the Insurer, Redwood,
Sequoia, the Administrator 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 Insurer's 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 Master Servicing
Agreement.
"INSURED PAYMENT" has the meaning set forth in the Insurer's
Policy.
"INSURER" means Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance company and any successors thereto.
"INSURER'S POLICY" means the irrevocable financial guaranty
insurance policy (Policy No. AB0130BE) issued by the Insurer with respect to
the Bonds.
"INSURER PREMIUM" means with respect to each Payment Date, the
premium payable to the Insurer in accordance with the Insurer's Policy.
"INSURER PREMIUM RATE" means the rate per annum set forth in the
Insurance Agreement.
"INSURER REIMBURSEMENT AMOUNT" means, as of any Payment Date, the
sum of (i) all amounts previously paid by the Insurer under the Insurer's
Policy which have not previously been reimbursed, (ii) all other amounts due
to the Insurer 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 October 25, 1997) and ending on the date
immediately preceding such Payment Date.
"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(d)(ii) 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-2
Bonds.
"LIQUIDATED PLEDGED MORTGAGE" means with respect to any Payment
Date, a defaulted Pledged Mortgage (including any REO Property) which was
liquidated in the calendar month preceding the month of such Payment Date and
as to which the Master Servicer has certified (in accordance with the Master
Servicing Agreement) that it has received all amounts it expects to receive
in 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 Servicing Fees,
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
October 1, 1997 between the Issuer and Redwood, as Manager.
"MANAGEMENT FEE" means the fee of $1,000 per month payable to
Redwood as a portion of its compensation under the Management Agreement.
"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.
"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.
"MINIMUM RATE" means as to any Pledged Mortgage, the minimum rate,
if any, set forth on the related Mortgage Note at which interest can accrue
on such Pledged Mortgage.
"MLCC" means Merrill Lynch Credit Corporation.
"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 6(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.
"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 Custodian pursuant to the
Custodial Agreement.
"MORTGAGE LOAN PURCHASE AGREEMENT" means the mortgage loan purchase
agreement dated as of October 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, the Insurer Premium, the
fee payable to the Owner Trustee pursuant to the Deposit Trust Agreement and
the remaining amount, if any, payable to the Swap Provider pursuant to Section
3(c)(vii)(B).
"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.
"NONRECOVERABLE ADVANCE" means any portion of a Servicing Advance
previously made or proposed to be made by the Master Servicer that, in the
good faith judgment of the Master 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 the Insurer as required by this Agreement.
"ONE-YEAR CONSTANT MATURITY TREASURY INDEX" means the average of
the published yield for each Business Day during the specified one full week
of the yield on United States Treasury securities adjusted to a constant
maturity of one year as published by the Federal Reserve in its Statistical
Release No. H.15(519).
"ONE-YEAR TREASURY ARM INDEX" has the meaning set forth in Section
3(d)(i) of this Agreement.
"ONE-YEAR TREASURY ARM INDEX DETERMINATION DATE" means the tenth
Business Day prior to the commencement of each Interest Accrual Period after
the first two Interest Accrual Periods for the Class A-1 Bonds.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Master Servicer, Redwood or the Issuer, as applicable,
including, in-house counsel, reasonably acceptable to the Trustee and the
Insurer.
"ORIGINAL CLASS A-1 PRINCIPAL AMOUNT" means $592,560,000.
"ORIGINAL CLASS A-2 PRINCIPAL AMOUNT" means $156,600,000.
"ORIGINAL POOL PRINCIPAL BALANCE" means the Pool Principal Balance
as of the Cut-off Date which is equal to $756,727,490.
"OUTSTANDING" shall have the meaning ascribed thereto in the
Indenture.
"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 25th day of each calendar month after the initial issuance
of the Bonds and the Investor Certificate or, if such 25th day is not a
Business Day, the next succeeding Business Day, commencing in November 1997.
"PERIODIC RATE CAP" means, as to any Pledged Mortgage and any
Adjustment Date, any 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 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 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 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 the
Issuer, the Insurer and to each applicable Rating Agency as will
not result in a change in the rating (without regard to the
existence of the Insurer's 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 Administrator or any
affiliate of the Administrator or any fund to which the
Administrator or any affiliate of the Administrator 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 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 of such
Payment Date.
"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 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 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 Master
Servicer or any other Person purchasing such loan, in each case
paid during the preceding calendar month and deposited in the Bond
Account prior to such Payment Date; and
(iii)the principal portion of all other unscheduled
collections received during the 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
October 24, 1997 relating to the Bonds.
"PUD" means Planned Unit Development.
"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 in which the Purchase Price is to be distributed to Bondholders.
"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 the Insurer, 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 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 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 origi-
nated in connection with the refinancing of an existing mortgage loan.
"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 or
Mortgages 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 Custodial Agreement, (i) have an aggregate 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)
have a weighted average Loan-to-Value Ratio not higher than that of the
Deleted Pledged Mortgage; (iii) have a weighted average Mortgage Rate not
lower than, and not more than 1.0% per annum higher than that of the Deleted
Pledged Mortgage; (iv) have a weighted average remaining term to maturity not
greater than (and not more than 36 months less than that of the Deleted
Pledged Mortgage; and (v) comply with each representation and warranty set
forth in Schedule III hereto as of the date of substitution.
"REQUEST FOR RELEASE" means the Request for Release submitted by
the Master Servicer to the Custodian, substantially in one of the forms
attached to the Custodial Agreement.
"REQUIRED INSURANCE POLICY" means with respect to any Pledged Mort-
gage, any insurance policy that is required to be maintained from time to
time under the Master 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 6(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: Mortgage Surveillance Monitoring, or such other address as S&P
may hereafter furnish to the Issuer and the Administrator.
"SCHEDULE OF PLEDGED MORTGAGES" means the schedule attached hereto
as Schedule I listing the Pledged Mortgages serviced by the Master Servicer
pursuant to the Master Servicing 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 Margin;
(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;
(xi) the Mortgage Rate in effect as of the Cut-off Date;
(xii)the Servicing Fee Rate;
(xiii) the Maximum Rate and any Minimum Rate;
(xiv)the Periodic Rate Cap, if any;
(xv) the Adjustment Date;
(xvi)the type of documentation program pursuant to which the
Pledged Mortgage was originated; and
(xvii) the purpose for the Pledged Mortgage.
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.
"SERVICING ADVANCES" means all customary, reasonable and necessary
"out of pocket" costs and expenses incurred in the performance by the Master
Servicer of its servicing obligations, including, but not limited to, the
cost of (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 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
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 the Insurer by the Master
Servicer on the Closing Date, 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 such
calendar month, the percentage equivalent of a fraction, the numerator of
which is the sum of the aggregate principal balances (without duplication) as
of the Due Date in such calendar month 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 (exclusive of any REO Properties which
have been liquidated as of such Due Date), and the denominator of which is
the Pool Principal Balance as of the Due Date in such calendar month.
"SPECIFIED OVERCOLLATERALIZATION AMOUNT" means:
(a) For any Payment Date upon which the Pool Principal Balance is
greater than or equal to one-half of the Original Pool Principal Balance, the
Specified Overcollateralization Amount means an amount equal to 1% of the
Original Pool Principal Balance;
(b) For any Payment Date upon which the Pool Principal Balance is less
than one-half of the Original Pool Principal Balance, the Specified
Overcollateralization Amount means the greater of:
(i) 2% of the Pool Principal Balance for such Payment Date; and
(ii) an amount equal to 0.50% of the Original Pool Principal
Balance;
Notwithstanding any provision to the contrary in clause (b) above, if on any
Payment Date the Specified Overcollateralization Amount calculated as
provided above would be less than 50% of the product of (x) Serious
Delinquencies and (y) the Pool Principal Balance for such
Payment Date, then the Specified Overcollateralization Amount for such
Payment Date shall be the lesser of :
(i) the greater of the Specified Overcollateralization Amount for
the immediately preceding Payment Date and 3% of the Pool
Principal Balance for such Payment Date; and
(ii) 50% of the product of (x) Serious Delinquencies and (y) the
Pool Principal Balance for such Payment Date.
"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 Insurer's 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)(iii).
"SWAP AGREEMENT" means the ISDA Master Agreement with an attached
Schedule and Confirmation, dated as of November 6, 1997, between Issuer and
Merrill Lynch Capital Services, Inc., as such agreement may be amended or
supplemented from time to time in accordance with its terms.
"TARGETED PRINCIPAL BALANCE" means for any Payment Date the Bond
Principal Amount 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 the Custodial Agreement or the Final
Trust Receipt in the form of Exhibit One-B to the Custodial Agreement.
"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 Custodian pursuant to the
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.
SECTION 2. Mortgage Documents.
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(a) Custodian to Retain Possession of Documents.
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(i) Concurrently with the execution and delivery hereof, the
Issuer has pledged, transferred and assigned to the Trustee for the benefit
of the Bondholders, the Insurer and the Swap Provider, as collateral for,
among other things, 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
Custodian, with respect to each Pledged Mortgage all originals of the
Mortgage Documents and any other instruments relating thereto specified in
the Custodial Agreement, 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
Agreement, concurrently with the execution and delivery hereof, the Issuer
shall promptly deliver to the Custodian, in accordance with the terms and
conditions of the Custodial Agreement, (x) in the case of each such original
Mortgage or each such interim recorded assignment, as the case may be, a copy
thereof, with evidence of recording indicated thereon, upon receipt thereof
from the public recording office and, if appropriate, certified by the public
recording office, but in no event shall any such delivery of the original
recorded Mortgage and each such interim recorded assignment or a certified
copy thereof be made later than one year following the Closing Date or (y) in
the case of each such title policy, 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 dates each such Mortgage and each such interim
assignment by reason of the fact that any such documents have not been
returned by the appropriate public recording office, the Issuer shall deliver
such documents to the Custodian as promptly as possible upon receipt thereof
from the appropriate public recording offices. The Issuer shall forward or
cause to be forwarded to the 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 the 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 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 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 the Insurer 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 the Insurer'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 the Insurer, (ii) the occurrence of a default 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 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(c)(ii).
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 the
Custodial Agreement.
(ii) On the Closing Date, the Issuer shall cause the Custodian to
execute and deliver to the Trustee a Trust Receipt, whereby the Custodian
acknowledges receipt of the documents identified in 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 the exclusive use and benefit of the Trustee. As provided in
the Custodial Agreement, the Custodian will maintain possession of the
Mortgage Notes in the State(s) provided in the Custodial Agreement, unless
otherwise permitted by the Issuer, the Trustee, the Rating Agencies and the
Insurer.
On the Closing Date, the Issuer shall cause the Custodian, pursuant
to the Custodial Agreement, to execute and deliver to the Issuer, the Insurer
and the Trustee a Trust Receipt constituting an Initial Certification in the
form attached to the Custodial Agreement. Based on its review and
examination required by and in accordance with the Custodial Agreement, and
only as to the documents identified in such Initial Certification, the
Custodian will acknowledge that such documents appear regular on their face
and relate to such Pledged Mortgage; provided that the 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 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 Issuer shall
cause the Custodian to 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, the Custodian finds any document
constituting a part of a Trustee Mortgage File which does not meet the
requirements of the Custodial Agreement, the Custodian shall list such as an
exception in its final certification; provided, however, that the 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 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 one or more
Replacement Pledged Mortgages, which substitution shall be accomplished in
the manner and subject to the conditions set forth in Section 2(c)(iii), 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
Business Day preceding the Payment Date in the month following the month
of purchase and, upon receipt of such deposit and the related Request for
Release, the 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.
The Custodian will retain possession and custody of each Trustee
Mortgage File in accordance with and subject to the terms and conditions set
forth in the Custodial Agreement. The Issuer or the Trustee shall promptly
deliver to the 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 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 Custodial Agreement shall constitute the sole
remedy respecting such defect available to the Trustee and any Bondholder
against Redwood.
(b) Custodian to Cooperate; Release of Trustee Mortgage Files.
---------------------------------------------------------
Upon the payment in full of any Pledged Mortgage, or the receipt by
the Master 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 Master Servicer
will immediately deliver to the Custodian a Request for Release, all in
accordance with the terms of the Custodial Agreement. Upon receipt of such
request, the Custodian will release the related Trustee Mortgage File or
documents to the Master Servicer in accordance with the terms of the
Custodial Agreement. The Master Servicer will furnish copies of such
requests to the Administrator in accordance with the terms of the Master
Servicing Agreement. Subject to the further limitations set forth below, the
Master Servicer will cause the Trustee Mortgage File or documents so released
to be returned to the Custodian when the need therefor by the Master Servicer
no longer exists, unless the Pledged Mortgage is liquidated and the proceeds
thereof are deposited in the Bond Account, in which case the Master Servicer
will deliver to the Custodian a Request for Release, signed by a Servicing
Officer of the Master Servicer, all in accordance with the terms of the
Master Servicing Agreement and the Custodial Agreement.
In accordance with the terms of the Master Servicing Agreement, if
the Master Servicer at any time seeks to initiate a foreclosure proceeding in
respect of any Mortgaged Property as authorized by the Master Servicing
Agreement, the Master 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 and
-----------------------------------------------------------
Redwood.
- -------
(i) 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, the Insurer and the Trustee, are
true and correct as of the Closing Date, or if so
specified therein, as of the Cut-off 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.
(ii) The Issuer hereby makes the representations and warranties set
forth in Schedule IV hereto, and by this reference incorporated herein,
to the Trustee, as of the Closing Date.
(iii)Upon discovery by any of the parties hereto or the Insurer, 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)(i) that materially and adversely affects the
value of any Pledged Mortgage or the interests of the Bondholders, the
Insurer or the Swap Provider in any Pledged Mortgage, the party
discovering such breach shall give prompt notice thereof to the other
parties and the Insurer. 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)(i) which materially and adversely affects
the value of any Pledged Mortgage or the interests of the Bondholders or
the Insurer, in any Pledged Mortgage, it shall cure such breach in all
material respects, and if such breach is not so cured, shall, either (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 Custodian of a Request for Release and the
Trustee Mortgage File for any such Replacement Pledged Mortgage.
Redwood shall promptly reimburse the Trustee or the Insurer for any
expenses reasonably incurred by the Trustee or the Insurer 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
Mortgage, the interests of the Bondholders, the Insurer or the Swap
Provider 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 Bondhol-
ders, the Insurer and the Swap Provider, the Mortgage Note, the
Mortgage, the related assignment of the Mortgage, and such other
documents and agreements as are required by the Custodial Agreement with
the Mortgage Note endorsed and the Mortgage assigned as required by the
Custodial Agreement. 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. For the Payment Date
following the month of substitution, Available Funds will include the
monthly payment due on any Deleted Pledged Mortgage on the Due Date for
such Payment Date 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 the Insurer 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 the Insurer.
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)(i) 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 Custodian for the
benefit of the Bondholders, the Insurer and the Swap Provider 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 Business Day preceding the Payment Date in the month
succeeding the 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(c)(ii) and in compliance with the
provisions of Section 8.04 of the Indenture before the related
Calculation 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
Custodial Agreement, the Trustee shall cause the release of the related
Trustee Mortgage File held by the Custodian for the benefit of the
Bondholders, the Insurer and the Swap Provider 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 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)(iii) shall survive delivery of the respective Trustee Mort-
gage Files to the Custodian for the benefit of the Bondholders, the
Insurer and the Swap Provider, provided, however, that those made
-------- -------
pursuant to Section 2(c)(i)(A) shall not be assignable by the Trustee
without Redwood's express written permission.
SECTION 3. Administrative and Servicing Obligations.
----------------------------------------
(a) Master Servicing Agreement.
--------------------------
Redwood has previously entered into the Master Servicing Agreement,
and on the Closing Date it assigned all of its rights, title and
interest in and to the Master Servicing Agreement (but only with respect
to the Pledged Mortgages) 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 Master Servicer in accordance with the terms and provisions of the
Master Servicing Agreement. Redwood has (i) provided to the Master
Servicer notice of the assignment of the Master Servicing Agreement to
the Issuer, in accordance with the provisions of the Master Servicing
Agreement, and has instructed the Master Servicer to remit all amounts
required to be paid to the owner of the Pledged Mortgages under the
Master Servicing Agreement to the Trustee, and (ii) has received from
the Master Servicer acknowledgement of such assignment and the Master
Servicer's agreement to remit all such amounts to the Trustee.
(b) Successor Master Servicer.
-------------------------
(i) The Issuer as owner of the Pledged Mortgages and the Trustee
as lienholder with respect thereto, pursuant to the Master Servicing
Agreement, hereby authorize and appoint the Administrator 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 Master Servicing Agreement, including, without limitation,
the power to terminate the Master Servicing Agreement and the Master
Servicer according to the terms and conditions of the Master Servicing
Agreement, without any limitation by virtue of this Agreement; provided,
however, that in the event of termination of the Master Servicing
Agreement by the Administrator, the Administrator shall either become
successor Master Servicer in accordance with the terms of the
Master Servicing Agreement (with such modifications as
described in this Agreement) or enter into the Master Servicing
Agreement with a successor Master Servicer acceptable to the Insurer and
Redwood which will be bound by the terms of the Master Servicing
Agreement in accordance with the terms thereof (with such modifications
as described in this Agreement). If the Administrator or any Affiliate
of the Administrator elects to become successor Master Servicer, it will
not assume liability for the representations and warranties of the
Master Servicer which it replaces.
(ii) Notwithstanding the provisions of this Section 3 or of the
Master Servicing Agreement, the Administrator shall be under no
obligation, either as Administrator or as successor Master Servicer
under the Master Servicing Agreement, to purchase any Pledged Mortgage
including any Converted Pledged Mortgages.
(c) Receipt of Pledged Mortgage Payments; Bond Account; Distribution
----------------------------------------------------------------
Account.
- -------
(i) The Issuer may, but is not obligated to, enforce the
obligations of the Master Servicer under the Master Servicing Agreement,
including the obligation of the Master Servicer to make all payments
called for under the terms and provisions of the Master Servicing
Agreement.
(ii) The Bond Trustee shall establish and maintain a Bond
Account, which shall be an Eligible Account, into which the
Administrator shall deposit or cause to be deposited on the day of
receipt any payments and collections remitted by the Master Servicer or
received by it in respect of Pledged Mortgages subsequent to the Cut-off
Date (other than in respect of principal and interest due on the Pledged
Mortgages on or before the Cut-off Date) and any net amounts paid by the
Swap Provider pursuant to the terms and conditions of the Swap
Agreement. All funds deposited in the Bond Account (exclusive of any
earnings on investments made with funds deposited in the Bond Account)
shall be held in trust for the Bondholders, the Insurer and the Swap
Provider until withdrawn in accordance with clauses (iii), (iv) and (v)
below.
(iii)The Bond Trustee and the Administrator may from time to
time make permitted withdrawals from the Bond Account for the following
purposes:
(A) to reimburse the Master Servicer for unreimbursed 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 Servicing Advance was made;
(B) to reimburse the Master Servicer for any Nonrecoverable
Advance previously made;
(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) or 2(c)(iii), all
amounts received thereon after the date of such purchase;
(D) to reimburse the Administrator for expenses incurred and
reimbursable pursuant to Section 5(c) up to an amount not to
exceed $100,000 per annum in any calendar year and to pay to
the Trustee amounts due to it pursuant to Section 6.07 of the
Indenture up to an amount not to exceed $100,000 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 and pay to Redwood all investment earnings on
funds on deposit in the Bond Account;
(G) on the Business Day prior to each Payment Date, to withdraw
the Available Funds for such Payment Date, to the extent on
deposit, and remit such amount to the Distribution Account;
(H) on the Business Day prior to each Payment Date, to pay the
Swap Provider the net amount, if any, payable under the terms
of the Swap Agreement; and
(I) to clear and terminate the Bond Account upon termination of
this Agreement pursuant to Section 6(a).
The Administrator shall maintain adequate records with respect to all
withdrawals made pursuant to this Section 3(c)(iii). Prior to making any
withdrawal from the Bond Account pursuant to subclause (B), the
Administrator shall deliver to the Trustee an Officer's Certificate of a
Servicing Officer indicating the amount of any previous Advances or
Servicing Advance determined by the Master Servicer to be a
Nonrecoverable Advance and identifying the related Pledged Mortgage(s).
(iv) On the Business Day immediately preceding each Payment
Date, after payment of any amounts described in Section 3(c)(iii) (other
than clause (G) thereof), the Administrator 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(c)(viii)), and will deposit such amount in the Distribution Account.
(v) On the Business Day immediately preceding each Payment
Date, the Administrator shall withdraw from the Bond Account and pay to
the Swap Provider the net amount, if any, payable to the Swap Provider
under the terms and conditions of the Swap Agreement.
(vi) On the Business Day immediately preceding each Payment
Date, the Trustee will deposit into the Distribution Account the amount
of any investment losses in such account which have not been previously
deposited.
(vii)On each Payment Date beginning in November, 1997, the
Administrator 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 Insurer 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 Insurer Premium plus any unpaid Insurer Premium for
prior months to the Insurer, second, the Management Fee to the
Manager, and third, the fee payable to the Owner Trustee as
specified in the Deposit Trust Agreement;
(B) the remaining amount, if any, payable to Swap Provider under
the Swap Agreement with respect to such Payment Date that was
not paid from funds on deposit in the Bond Account pursuant to
Section 3(c)(v);
(C) 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 such
Classes on a pro rata basis (based on the ratio of each such
amount to the total of such amounts);
(D) 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 the Class A-2 Bondholders,
respectively, with any shortfall in such amounts to be
allocated between such Classes on a pro rata basis (based on
the ratio of each such amount to the total of such amounts);
(E) the Basic Principal 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;
(F) the aggregate amount of previously unreimbursed Insurer
Reimbursement Amounts to the Insurer;
(G) 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;
(H) to reimburse the Administrator for expenses incurred by it and
reimbursable pursuant to Section 5(c), to the extent that any
amounts exceed $100,000 in any calendar year and only that
portion of such amounts in excess of $100,000 incurred during
such calendar year, to pay to the Trustee amounts due to it
pursuant to Section 6.07 of the Indenture, to the extent that
any amounts exceed $100,000 in any calendar year and only that
portion of such amounts in excess of $100,000 incurred during
such calendar year, 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 to pay to the
Manager any amounts then due and owing to the Manager under
the Management Agreement other than the Management Fee; and
(I) the remaining amount of Available Funds on deposit in the
Distribution Account, if any, for such Payment Date, to the
Certificate Paying Agent 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 Administrator 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 (I)
above.
(viii) The 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 Administrator, respectively, in
Permitted Investments, which shall mature not later than the Business
Day next preceding the related Payment Date (except that if the
Distribution Account is held at the Trustee, any Permitted Investment in
the Distribution Account may 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 Administrator, for the benefit of the Bondholders, the Insurer and
the Swap Provider. Except for any income or gain realized from the
deposit of funds in the Distribution Account pursuant to Section
10.01(b) of the Indenture in connection with an optional redemption of
the Bonds, 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
Trustee, respectively, and shall be remitted to each of them monthly
as provided herein. The amount set forth in the preceding sentence
with respect to the Bond Account shall be a portion of the compensation
payable to Redwood as manager of the Trust under the Management
Agreement, in addition to the Management Fee; and the amount
set forth in the preceding sentence with respect to the
Distribution Account shall be the "Administrator's 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 Administrator in the Distribution Account, as
applicable. Except as otherwise set forth in the preceding sentence, 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(c). Any income or gain realized from the
deposit of funds in the Distribution Account pursuant to Section
10.01(b) of the Indenture in connection with an optional redemption of
the Bonds shall be for the benefit of, and payable to, Redwood.
(ix) The Administrator shall give notice to the Trustee, the
Issuer, the Swap Provider, the Insurer 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.
(d) Determination of LIBOR, the One-Year Treasury ARM Index and
-----------------------------------------------------------
Certain Other Amounts.
---------------------
(i) With respect to the Class A-1 Bonds, the One-Year Treasury ARM
Index shall be determined as follow:
On the One-Year Treasury ARM Index Determination Date, the Administrator
shall determine the One-Year Treasury ARM Index equal to the arithmetic
average of twelve rates (each, a "Reference Rate") determined by the
Administrator after giving effect to the determination of the Reference Rate
for that month. Each month the Administrator shall determine one of the
twelve Reference Rates and the rate so determined will remain fixed for the
following twelve months. Only one Reference Rate will be set each month by
the Administrator; the other eleven Reference Rates will be the rates
determined during the immediately preceding eleven months. The Reference Rate
determined each month by the Administrator shall be set to a level equal to
the One-Year Constant Maturity Treasury Index in effect for the week ending
on Friday of the first full week (including the first Monday of the month) of
the prior month plus a margin of 1.10%, subject, however, to (i) a maximum
increase not to exceed the sum of the Reference Rate for such month
determined in the immediately preceding year plus 2% and (ii) a maximum rate
of 10%.
The initial Reference Rates will be as follows:
Initial
Reference Initial Reference
Rate No. Month Period Rate
-------- ----- ------ ----
1 January (1/25/97 - 1/24/98) 6.50%
2 February (2/25/97 - 2/24/98) 6.50%
3 March (3/25/97 - 3/24/98) 6.50%
4 April (4/25/97 - 4/24/98) 6.50%
5 May (5/25/97 - 5/24/98) 6.50%
6 June (6/25/97 - 6/24/98) 6.50%
7 July (7/25/97 - 7/24/98) 6.50%
8 August (8/25/97 - 8/24/98) 6.50%
9 September (9/25/97 - 9/24/98) 6.50%
10 October (10/25/97 - 10/24/98) 6.50%
11 November (11/25/97 - 11/24/98) 6.50%
12 December (12/25/96 - 12/24/97) 6.50%
The Class A-1 Interest Rate for the first and second Payment Dates in
November 1997 and December 1997 will be 6.50% per annum.
The establishment of the One-Year Constant Maturity Treasury Index and
the Reference Rate for each month by the Administrator and the
Administrator's subsequent calculation of the Bond Interest Rate on the Class
A-1 Bonds for any Interest Accrual Period shall (in the absence of wilful
misconduct, bad faith or manifest error) be final and binding.
(ii) With respect to the Class A-2 Bonds, LIBOR will be determined as
follows:
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 Administrator 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 on 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 Administrator 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 Administrator, 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 Administrator and
engaged in transactions in Eurodollar deposits in the international
Eurocurrency market.
The Class A-2 Interest Rate for the First Payment Date will equal
5.99625% per annum.
The establishment of LIBOR by the Administrator and the Administrator's
subsequent calculation of the Bond Interest Rate on the Class A-2 Bonds for
the Interest Accrual Period, in the absence of willful misconduct, bad faith
or manifest error, will be final and binding.
(e) Monthly Data.
------------
Not later than noon California time on the fifteenth day of each
month, the Master Servicer will 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(e). Not later than each Payment Date, the
Trustee, based in part on such information, shall prepare and forward to the
Insurer, 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) of the Indenture 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 Master Servicer 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 Reference Rate determined by the Administrator
for that month and the Reference Rate for each of the eleven months
preceding that month;
(ix) the amount of Advances and Servicing Advances included in
the distribution on such Payment Date and the aggregate amount of
Advances and Servicing Advances outstanding as of the close of business
on such Payment Date;
(x) 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
calendar month preceding such Payment Date;
(xi) 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 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;
(xii)with respect to any Pledged Mortgage that became a REO
Property during the 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;
(xiii) 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;
(xiv)the aggregate amount of Realized Losses incurred during
the second preceding calendar month;
(xv) the amount available for distribution to the Holder of
the Investor Certificate, pursuant to Section 3(c)(vii)(I) of this
Agreement;
(xvi)any amount payable under the Bond Insurance Policy; and
(xvii) the Specified Overcollateralization Amount and the
amount of the Serious Delinquencies.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Bondholder and has requested such information and to the
Insurer, a statement containing the information set forth in subclauses (i),
(ii) and (vi) of this Section 3(e) aggregated for such calendar year or
applicable portion thereof during which such Person was a Bondholder. Such
obligation of the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Trustee pursuant to any requirements of the Code as from time to time in
effect.
The Trustee, as required by law and as agent for the Issuer, 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 Trustee),
if any, paid or accrued with respect to Bonds held by such Bondholder.
(f) Tax Accounting Information.
--------------------------
As required by the Code or the Treasury regulations thereunder, the
Trustee, as agent for the Issuer, 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.
(g) Claims Upon the Insurer Policy.
------------------------------
(i) By noon, New York City time, on the Calculation Date, the
Administrator shall confirm to the Trustee whether a Deficiency Amount
will exist on the related Payment Date. If a Deficiency Amount will
exist, the Administrator shall determine the amount of such Deficiency
Amount and shall complete on behalf of the Trustee a notice in the form
of Exhibit A to the Insurer Policy (a "Notice") and submit such Notice
to the Insurer (with a copy to the Trustee), as set forth in the Insurer
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
Insurer Policy), the Insurer shall pay any Insured Payment that is a
Preference Amount on the next Payment Date following receipt on a
Business Day by the Insurer of the items listed below. The
Administrator, as agent of Trustee, shall provide to the Insurer upon
the request of the Insurer:
(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 the Insurer, and
upon which the Insurer 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 the Insurer all rights and claims
of the Administrator, the Trustee and any Bondholder relating to or
arising under the Indenture or this Agreement 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 the Insurer.
(iii)The Administrator shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Bonds from
moneys received under the Insurer Policy. The Insurer 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 Administrator.
(h) Filing of Information Reports
-----------------------------
As required by the Securities Exchange Act of 1934, as amended, and
the rules and regulation of the Securities and Exchange Commission issued
thereunder, the Administrator shall assist the Manager in the preparation and
filing with the Securities and Exchange Commission on behalf of the Issuer
such reports or forms as are necessary to satisfy the information reporting
requirements of said Act.
SECTION 4. Compensation and Expenses.
-------------------------
(a) Administrator's Compensation.
----------------------------
As compensation for its activities hereunder, the Administrator
shall be entitled to be paid the Administrator's Fee in the amount and at the
time specified in Section 3(c)(viii).
The Administrator shall be required to pay all expenses incurred by
it in connection with its administration activities hereunder and shall not
be entitled to reimbursement therefor except as specifically provided in this
Agreement.
(b) Master Servicer Compensation.
----------------------------
As compensation for its activities under the Master Servicing
Agreement, the Master 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 Servicing Fee Rate on the Stated Principal Balance
of the related Pledged Mortgage for the period covered by such interest
payment, all in accordance with the terms of the Master Servicing Agreement.
Additional servicing compensation in the form of prepayment
penalties, assumption fees and late payment charges shall be retained by the
Master Servicer if and to the extent provided in the Master Servicing
Agreement. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities under the Master
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 the Master Servicing Agreement) and shall not
be entitled to reimbursement therefor except as specifically provided in the
Master Servicing Agreement and not inconsistent with this Agreement.
SECTION 5. Administrator.
-------------
(a) Liabilities of the Administrator.
--------------------------------
The Administrator shall be liable in accordance herewith only to
the extent of the obligations specifically imposed upon and undertaken by it
herein. The Administrator need perform only those duties that are
specifically set forth herein and no others and no implied covenants or
obligations on the part of the Administrator shall be read into this
Agreement
(b) Merger or Consolidation of the Administrator.
--------------------------------------------
Any Person into which the Administrator may be merged or
consolidated, or any Person resulting from any merger or consolidation to
which the Administrator shall be a party, or any person succeeding to the
business of the Administrator, shall be the successor of the Administrator
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 Administrator shall be qualified to perform the obligations of the
Administrator under this Agreement and, so long as no Insurer Default has
occurred and is continuing, be reasonably acceptable to the Insurer.
(c) Limitation on Liability of the Administrator and Others.
-------------------------------------------------------
Neither the Administrator nor any of the directors, officers,
employees or agents of the Administrator 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 Administrator or any such Person against any
breach of representations or warranties made by it herein or protect the
Administrator or any such Person from any liability which would otherwise be
imposed by reasons of the Administrator'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 Administrator and any director,
officer, employee or agent of the Administrator 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 Administrator and any director,
officer, employee or agent of the Administrator 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 Administrator'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 Administrator 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 Administrator 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 result-
ing therefrom shall be expenses, costs and liabilities of the Issuer, and the
Administrator shall be entitled to be reimbursed therefor out of the Bond
Account; provided, however, that unless an Insurer Default exists, the
Administrator shall notify the Insurer of such legal action (provided that
the failure to notify the Insurer shall not waive the rights of the
Administrator to indemnification) and such indemnification by the Issuer out
of the Bond Account shall be preconditioned on the Administrator's duty (i)
to allow the Insurer to control the defense or settlement of any such action
and (ii) to allow the Insurer to direct the Administrator with respect
thereto; provided, further, that (a) if the Insurer does not assume control
of the defense of any such action within a reasonable period of time after
the filing of such action, the Administrator shall have the right to act on
its own in defending the action until such time as the Insurer assumes
control of the defense, (b) the Administrator along with the Insurer shall
have the right to consent to any counsel hired to defend the Administrator
(which consent of the Administrator shall not be unreasonably withheld) and
(c) the Administrator along with the Insurer shall have the right to consent
to any settlement if the amount of such settlement is less than full
indemnification and the Administrator would not be fully released from
liability with respect to such action as a result of such settlement. Any
amounts payable to the Administrator, or any director, officer, employee or
agent of the Administrator, in respect of indemnification provided by this
paragraph (c), or pursuant to any other right of reimbursement from the Bond
Account that the Administrator, or any director, officer, employee or agent
of the Administrator, may have hereunder in its capacity as such, may be
withdrawn by the Administrator from the Bond Account at any time subject to a
maximum amount of $100,000 in any calendar year pursuant to Section
3(c)(iii)(D) of this Agreement. Any such amounts due to the Administrator,
or any director, officer, employee or agent of the Administrator, in excess
of $100,000 in such calendar year shall be reimbursable pursuant to
Section 3(c)(vii)(H).
(d) Limitation on Resignation of the Administrator.
----------------------------------------------
The Administrator shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor administrator
reasonably acceptable to the Insurer 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 Insurer Policy) and with the prior written consent of the Insurer, 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
Administrator shall be evidenced by an Opinion of Counsel at the expense of
the Administrator to such effect delivered to the Trustee and the Insurer
which opinion of counsel shall be reasonably acceptable to the Trustee and
the Insurer. No such resignation shall become effective until the Trustee or
a successor administrator reasonably acceptable to the Insurer (unless an
Insurer Default shall have occurred and be continuing) shall have assumed the
Administrator's responsibilities, duties, liabilities and obligations
hereunder.
SECTION 6. Miscellaneous.
-------------
(a) Term of this Agreement.
----------------------
The obligations to be performed by the Administrator under this
Agreement shall commence on and as of the date on which the Issuer issues the
Bonds and shall terminate as to each Pledged Mortgage upon the later of (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, and (ii) 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 5(b), this Agreement may not be assigned by the
Administrator without the prior written consent of the Trustee and the
Insurer 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:
Administrator
-------------
and the Trustee: Norwest Bank Minnesota, N.A.
----------------
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Securities Administration
(Sequoia 2)
Facsimile No: (410) 884-2360
The Issuer: Sequoia Mortgage Trust 2
----------
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
With a copy to:
Sequoia Mortgage Funding Corporation
591 Redwood Highway, Suite 3120
Mill Valley, California 94941
Attention: Sequoia Mortgage
Trust 2 Officer
Redwood: Redwood Trust, Inc.
------- 591 Redwood Highway, Suite 3100
Mill Valley, CA 94941
Attention: Sequoia Mortgage
Trust 2 Officer
Ambac: Ambac Assurance Corporation
----- One State Street
New York, NY 10004
Attention: Howard Pfeffer,
Managing Director
Telecopy No.: (212) 668-0340
Confirmation: (212) 363-1459
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 6(c).
(d) 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.
(e) 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 the Insurer, provided, however, amendments to the
definitions of Specified Overcollateralization Amount or Serious
Delinquencies, may be made solely upon an opinion of tax counsel to the
Issuer and (i) by agreement of the Issuer and, if no default shall have
occurred and be continuing under the Insurer's Policy, the Insurer, or (ii)
by the Issuer with the consent of the Bond Trustee and, if a default shall
have occurred and be continuing under the Insurer's Policy, without the
consent of the Insurer, without regard to Section 8.09 of the Indenture.
(f) 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.
(g) No Joint Venture.
----------------
The Administrator 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.
(h) 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.
(i) 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 2 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, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement or the other
Operative Agreements.
(j) Nonpetition Covenants.
---------------------
Notwithstanding any prior termination of this Agreement, the
Administrator 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.
(k) Third Party Beneficiary.
-----------------------
The Insurer shall be a third party beneficiary of this Agreement
and shall be entitled to enforce the provisions hereof as if a party hereto.
IN WITNESS WHEREOF, each party has caused this Administration
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
SEQUOIA MORTGAGE TRUST 2,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ James P. Lawler
--------------------------------
Its: Vice President
--------------------------------
REDWOOD TRUST, INC.
By: /s/ Douglas B. Hansen
-------------------------------
Its: President
-------------------------------
NORWEST BANK MINNESOTA, N.A.,
as Administrator and Trustee
By: /s/ Randall S. Reider
------------------------------
Its: Officer
------------------------------
SCHEDULE I
Schedule of Pledged Mortgages
SCHEDULE II
SEQUOIA MORTGAGE TRUST 2
Collateralized Mortgage Bonds
(Reserved)
SCHEDULE III
SEQUOIA MORTGAGE TRUST 2
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 Mortgage Loan Purchase Agreement, dated as of March 7,
1997, between the Seller and MLCC.
(i) The information set forth in the Mortgage Loan Schedule
is true and correct in all material respects;
(ii) As of the Closing Date, the Mortgage Loan is not
delinquent in payment more than 59 days and the Mortgage Loan has not
been dishonored; the Mortgage Loan has never been delinquent in payment
for more than 59 days and has not more than once during the twelve
months preceding the Cut-Off Date been delinquent in payment for more
than 30 days; there are no material defaults under the terms of the
Mortgage Loan; the Seller has not advanced funds, or induced, solicited
or knowingly received any advance of funds from a party other than the
owner of the Mortgaged Property subject to the Mortgage, directly or
indirectly, for the payment of any amount required by the Mortgage Loan;
(iii) To the best of the Seller's knowledge, there are no
delinquent taxes or other outstanding charges affecting the related
Mortgaged Property which would permit a taxing authority to initiate
foreclosure proceedings against the Mortgaged Property;
(iv) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by
written instruments contained in the Mortgage File, the substance of
which waiver, alteration or modification is reflected on the Mortgage
Loan Schedule. No Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which assumption
agreement is part of the Mortgage File and the terms of which are
reflected in the Mortgage Loan Schedule;
(v) The Mortgagor has not asserted that the Mortgage Note and
the Mortgage are subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the Mortgage Note and the Mortgage, or
the exercise of any right thereunder, render the Mortgage unenforceable,
in whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury and to the
best of the Seller's knowledge, no such right of rescission, set-off,
counterclaim or defense has been asserted by any Person other than
the obligor with respect thereto;
(vi) Pursuant to the terms of the Mortgage, all buildings or
other improvements upon the Mortgaged Property are insured by a
generally acceptable insurer against loss by fire, hazards of extended
coverage and such other hazards as are customary in the area where the
Mortgaged Property is located. If required by the Flood Disaster
Protection Act of 1973, as amended, the Mortgage Loan is covered by a
flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration. All individual
insurance policies contain a standard mortgagee clause naming the Seller
and its successors and assigns as mortgagee, and all premiums thereon
have been paid. The Mortgage obligates the Mortgagor thereunder to
maintain the hazard insurance policy at the Mortgagor's cost and
expense, and on the Mortgagor's failure to do so, authorizes the holder
of the Mortgage to obtain and maintain such insurance at such
Mortgagor's cost and expense, and to seek reimbursement therefor from
the Mortgagor. Where required by state law or regulation, the Mortgagor
has been given an opportunity to choose the carrier of the required
hazard insurance, provided the policy is not a "master" or "blanket"
hazard insurance policy covering a condominium or any hazard insurance
policy covering the common facilities of a planned unit development. To
the best of the Seller's knowledge the hazard insurance policy is the
valid and binding obligation of the insurer, is in full force and
effect, and will be in full force and effect and insure to the benefit
of the Purchaser upon the consummation of the transactions contemplated
by this Agreement. The Seller has not engaged in, and has no knowledge
of the Mortgagor's having engaged in, any act or omission which would
impair the coverage of any such policy, the benefits of the endorsement
provided for herein, or the validity and binding effect of either
including, without limitation, no unlawful fee, commission, kickback or
other unlawful compensation or value of any kind has been or will be
received, retained or realized by any attorney, firm or other person or
entity, and no such unlawful items have been received, retained or
realized by the Seller.
(vii) At the time of origination of such Mortgage Loan and
thereafter, all requirements of any federal, state or local law
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws required to be complied with by the
Seller as the originator of the Mortgage Loan and applicable to the
Mortgage Loan have been complied with in all material respects;
(viii) The Mortgage has not been satisfied as of the Closing
Date, canceled or subordinated, in whole, or rescinded, and the
Mortgaged Property has not been released from the lien of the Mortgage,
in whole or in part (except for a release that does not materially
impair the security of the Mortgage Loan or a release the effect of
which is reflected in the Loan-to-Value Ratio for the Mortgage
Loan as set forth in the Mortgage Loan Schedule), nor to
the best of the Seller's knowledge has any instrument been executed that
would effect any such release, cancellation, subordination or
rescission;
(ix) Ownership of the Mortgaged Property is held in fee simple
(except for Mortgage Loans as to which the related land is held in a
leasehold which extends at least five years beyond the maturity date of
the Mortgage Loan). Except as permitted by the fourth sentence of this
paragraph (ix), the Mortgage is a valid, subsisting and enforceable
first lien on the Mortgaged Property, including all buildings on the
Mortgaged Property and all installations and mechanical, electrical,
plumbing, heating and air conditioning systems affixed to such
buildings, and all additions, alterations and replacements made at any
time with respect to the foregoing securing the Mortgage Note's original
principal balance. The Mortgage and the Mortgage Note do not contain
any evidence on their face of any security interest or other interest or
right thereto. Such lien is free and clear of all adverse claims, liens
and encumbrances having priority over the first lien of the Mortgage
subject only to (1) the lien of non-delinquent current real property
taxes and assessments not yet due and payable, (2) covenants, conditions
and restrictions, rights of way, easements and other matters of the
public record as of the date of recording which are acceptable to
mortgage lending institutions generally, or which are specifically
referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and either (A) which are referred to or
otherwise considered in the appraisal made for the originator of the
Mortgage Loan, or (B) which do not in the aggregate adversely affect the
appraised value of the Mortgaged Property as set forth in such
appraisal, and (3) other matters to which like properties are commonly
subject which do not in the aggregate materially interfere with the
benefits of the security intended to be provided by the Mortgage or the
use, enjoyment, value or marketability of the related Mortgaged
Property. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting and enforceable first lien
and first priority security interest on the properly described therein;
(x) The Mortgage Note is not subject to a third party's
security interest or other rights or interest therein;
(xi) The Mortgage Note and the Mortgage and any other
agreement executed and delivered by a Mortgagor in connection with a
Mortgage Loan are genuine, and each is the legal, valid and binding
obligation of the maker thereof enforceable in accordance with its
terms. All parties to the Mortgage Note, the Mortgage and any other
such related agreement had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note, the Mortgage and any
such agreement, and the Mortgage Note, the Mortgage and any other such
related agreement have been duly and properly executed by other such
related parties. No fraud, error, omission, misrepresentation, or
negligence with respect to a Mortgage Loan has taken place on the part
of any Person, including without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved
in the origination of the Mortgage Loan. The Mortgage Loan has
been closed and the proceeds of the Mortgage Loan have
been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements
as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing the Mortgage Loan
and the recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the Mortgage
Note or Mortgage.
(xii) Immediately prior to the transfer and assignment to the
Purchaser, the Mortgage Note and the Mortgage were not subject to an
assignment or pledge, and the Seller had good title to and was the sole
owner thereof and had full right to transfer and sell the Mortgage Loan
free and clear of any encumbrance, equity, lien, pledge, charge, claim
or security interest, including, to the best knowledge of the Seller,
any lien, claim or other interest arising by operation of law;
(xiii) The Mortgage Loan is covered by either (i) an attorney's
opinion of title and abstract of title, the form and substance of which
is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an
ALTA lender's title insurance policy or other generally acceptable form
of policy or insurance acceptable to FNMA or FHLMC and each such title
insurance policy is issued by a title insurer acceptable to FNMA or
FHLMC and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Seller, its successors and
assigns, as to the first priority lien of the Mortgage in the original
principal amount of the Mortgage Loan, subject only to the exception
contained in clauses (1), (2) and (3) of paragraph (ix) above, and in
the case of adjustable rate Mortgage Loans, against any loss by reason
of the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the Mortgage
Interest Rate and Monthly Payment. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the
carrier of the required mortgage title insurance. Additionally, such
lender's title insurance policy insures against encroachments by or upon
the Mortgaged Property. The Seller, its successor and assigns, are the
sole insured of such lender's title insurance policy, and such lender's
title insurance policy is valid and remains in full force and effect and
will be in force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such
lender's title insurance policy, and to the best of Seller's knowledge
no prior holder of the related Mortgage, including the Seller, has done,
by act or omission, anything which would impair the coverage of such
lender's title insurance policy, including without limitation, no
unlawful fee, commission, kickback or other unlawful compensation or
value of any kind has been or will be received, retained or realized
by any attorney, firm or other person or entity, and no such unlawful
items have been received, retained or realized by the Seller.
(xiv) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Mortgage Note
and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach, violation or event permitting acceleration, except for any
Mortgage Loan payment which is not late by more than 30 days, and the
Seller has not waived any default, breach, violation or event permitting
acceleration;
(xv) As of the date of origination or purchase of the Mortgage
Loans by the Seller there were no mechanics' or similar liens or claims
which had been filed for work, labor or material (and, to the best of
the Seller's knowledge, no rights are outstanding that under law could
give rise to such lien) affecting the related Mortgaged Property which
are or may be liens prior to, or equal or coordinate with, the lien of
the related Mortgage;
(xvi) All improvements subject to the Mortgage lay wholly
within the boundaries and building restriction lines of the Mortgaged
Property (and wholly within the project with respect to a condominium
unit) and no improvements on adjoining properties encroach upon the
Mortgaged Property except those which are insured against by the title
insurance policy referred to in paragraph (xiii) above and all
improvements on the property comply with all applicable zoning and
subdivision laws and ordinances;
(xvii) Each Mortgage Loan (except for the Mortgage Loans
referred to in the next sentence) was originated by MLCC, and at the
time of each such origination MLCC was a mortgagee approved by the
Secretary of Housing and Urban Development (the "Secretary") pursuant to
Sections 203 and 211 of the National Housing Act. Each Mortgage Loan
was underwritten in accordance with the Underwriting Guide as in effect
at the time of origination, except to the extent MLCC believed at such
time that a variance from such Underwriting Guide was warranted by
compensating factors with respect to such Mortgage Loan. The Mortgage
contains the usual and customary provision of MLCC at the time of
origination for the acceleration of the payment of the unpaid principal
balance of the Mortgage Loan if the related Mortgaged Property is sold
without the prior consent of the mortgagee thereunder;
(xviii) The Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado, or other
casualty which damage is not fully insured against by a current and
active insurance policy (or at least insured up to the outstanding
principal balance of the Mortgage Loan) and, to the best of Seller's
knowledge is in good repair. There have not been any
condemnation proceedings with respect to the Mortgaged Property and
there are no pending proceedings.
(xix) The related Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of
the benefits of the security provided thereby, including, (1) in the
case of a Mortgage designated as a deed of trust, by trustee's sale or
judicial foreclosure, and (2) otherwise by judicial foreclosure. The
Seller has no knowledge of any homestead or other exemption available to
the Mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage;
(xx) If the Mortgage constitutes a deed of trust, a trustee,
duly qualified if required under applicable law to act as such, has been
property designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable to the
trustee under the deed of trust, except in connection with a trustee's
sale or attempted sale after default by the Mortgagor;
(xxi) The Mortgage File contains an appraisal of the related
Mortgage Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, duly appointed by the Seller, who
had no interest, direct or indirect in the Mortgaged Property or in any
loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of the Mortgage Loan, and the
appraisal and appraiser both satisfy the requirements of FNMA or FHLMC
and any applicable requirement of Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan
was originated;
(xxii) No Mortgage Loan contains "subsidized buydown" or
"graduated payment" features; and
(xxiii) The Mortgaged Property is a single-family (one- to
four-unit) dwelling residence erected thereon, or an individual
condominium unit in a condominium, a cooperative, or an individual unit
in a planned unit development or in a de minimis planned unit
development. No such residence is a mobile home or a manufactured
dwelling which is not permanently attached to the land.
(xxiv) Any and all requirements of any federal, state or local
law including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity and disclosure laws applicable to the Mortgage Loan have
been complied with, the consummation of the transactions contemplated
hereby will not involve the violation of any such laws or regulations,
and the Seller shall maintain in its possession, available for the
Purchaser's inspection, and shall deliver to the Purchaser upon demand,
evidence of compliance with all such requirements; the Mortgagor has
received all disclosure materials required by Section 226 19(b) of the
Federal Reserve Board's Regulation Z and otherwise required by
applicable law with respect to the making of adjustable rate mortgage
loans.
(xxv) There are no circumstances or conditions with respect to
the Mortgage, the Mortgaged Property, the Mortgage File, or, to the best
of Seller's knowledge, the Mortgagor or the Mortgagor's credit standing
that can reasonably be expected to cause private institutional investors
to regard the Mortgage Loan as an unacceptable investment, cause the
Mortgage to become delinquent, or adversely affect the value or
marketability of the Mortgage Loan.
(xxvi) 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).
SCHEDULE IV
SEQUOIA MORTGAGE TRUST 2
Collateralized Mortgage Bonds
Representations and Warranties of the Issuer
--------------------------------------------
Sequoia Mortgage Trust 2 (the "Issuer") hereby makes the representations
and warranties set forth in this Schedule IV to the Insurer 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
Administration Agreement (the "Administration Agreement") relating to the
above-referenced Series, among Redwood Trust, Inc., Norwest Bank Minnesota,
N.A., as Administrator and Trustee and Sequoia Mortgage Trust 2.
(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 Administration 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 Administration
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
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 Administration 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
Administration 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.
SCHEDULE V
SEQUOIA MORTGAGE TRUST 2
Collateralized Mortgage Bonds
Master Servicing Agreement
--------------------------
EXHIBIT 99.3
------------
- --------------------------------------------------------------------------
REDWOOD TRUST, INC.
Owner
and
MERRILL LYNCH CREDIT CORPORATION
Company
MASTER SERVICING AGREEMENT
Dated as of March 7th, 1997
Conventional Fixed and Adjustable Rate Mortgage Loans
MLCC1997-2 Flow Delivery Program
- --------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
BOOKS AND RECORDS:
TRANSFER OF MORTGAGE LOANS
Section 2.01 Books and Records . . . . . . . . . . . . . . . . . . 13
Section 2.02 Transfer of Mortgage Loans . . . . . . . . . . . . . 13
Section 2.03 Cooperation of Company as Servicer . . . . . . . . . 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01 Representations and Warranties of the Company . . . . 14
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 4.01 Company to Act as Servicer . . . . . . . . . . . . . 17
Section 4.02 Collection of Mortgage Loan Payments . . . . . . . . 17
Section 4.03 Realization Upon Defaulted Mortgage Loans . . . . . . 18
Section 4.04 Establishment of Custodial Accounts; Deposits in
Custodial Accounts . . . . . . . . . . . . . . . . . 19
Section 4.05 Permitted Withdrawals From the Custodial Account . . 20
Section 4.06 Establishment of Escrow Accounts; Deposits in Escrow
Accounts . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.07 Permitted Withdrawals From Escrow Account . . . . . . 22
Section 4.08 Payment of Taxes, Insurance and Other Charges;
Maintenance of Primary Insurance Policies; Collections
Thereunder . . . . . . . . . . . . . . . . . . . . . 22
Section 4.09. Transfer of Accounts . . . . . . . . . . . . . . . . 24
Section 4.10. Maintenance of Hazard Insurance. . . . . . . . . . . 24
Section 4.11. Maintenance of Mortgage Impairment Insurance Policy . 25
Section 4.12. Fidelity Bond, Errors and Omissions Insurance . . . . 25
Section 4.13. Title, Management and Disposition of REO Property . . 26
Section 4.14. Adjustments to Mortgage Interest Rates . . . . . . . 27
Section 4.15. Subservicing Agreements Between the Company and
Subservicers . . . . . . . . . . . . . . . . . . . . 27
Section 4.16. Successor Subservicers . . . . . . . . . . . . . . . 28
Section 4.17. Liability of the Company . . . . . . . . . . . . . . 28
Section 4.18. No Contractual Relationship Between Subservicers and the
Owner . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.19. Assumption or Termination of Subservicing Agreements 28
Section 4.20. Subservicing Accounts . . . . . . . . . . . . . . . . 29
Section 4.21. Permitted Investments . . . . . . . . . . . . . . . . 29
ARTICLE V
PAYMENTS TO THE OWNER
Section 5.01. Distributions . . . . . . . . . . . . . . . . . . . . 29
Section 5.02. Statements to the Owner . . . . . . . . . . . . . . . 30
Section 5.03. Monthly Advances by the Company . . . . . . . . . . . 30
Section 5.04. Compensating Interest . . . . . . . . . . . . . . . . 31
ARTICLE VI
GENERAL SERVICING PROCEDURE
Section 6.01. Assumption Agreements . . . . . . . . . . . . . . . . 31
Section 6.02. Satisfaction of Mortgages and Release of Mortgage
Files . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.03. Servicing Compensation . . . . . . . . . . . . . . . 32
Section 6.04. Annual Statement as to Compliance . . . . . . . . . . 33
Section 6.05. Annual Independent Certified Public Accountants'
Servicing Report . . . . . . . . . . . . . . . . . . 33
Section 6.06. Owner's Right to Examine Company Records . . . . . . 33
ARTICLE VII
REPORTS TO BE PREPARED BY COMPANY
Section 7.01. Company Shall Provide Information as Reasonably Required
34
ARTICLE VIII
THE COMPANY
Section 8.01. Indemnification; Third Party Claims . . . . . . . . . 34
Section 8.02. Merger or Consolidation of the Company . . . . . . . 34
Section 8.03. Limitation on Liability of the Company and Others . . 35
Section 8.04. Company Not to Resign . . . . . . . . . . . . . . . . 35
Section 8.05. No Transfer of Servicing . . . . . . . . . . . . . . 36
ARTICLE IX
DEFAULT
Section 9.01. Events of Default . . . . . . . . . . . . . . . . . . 36
Section 9.02. Waiver of Defaults . . . . . . . . . . . . . . . . . 37
ARTICLE X
TERMINATION
Section 10.01. Termination . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Successor to the Company . . . . . . . . . . . . . . . . . 38
Section 11.02. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.03. Assignments of Mortgage . . . . . . . . . . . . . . . . . 40
Section 11.04. Assignment of Servicing Rights . . . . . . . . . . . . . . 40
Section 11.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . 40
Section 11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 11.07. Severability Provisions . . . . . . . . . . . . . . . . . 40
Section 11.08. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.09. General Interpretive Principles . . . . . . . . . . . . . 41
Section 11.10. Reproduction of Documents . . . . . . . . . . . . . . . . 41
Section 11.11. Successors and Assigns . . . . . . . . . . . . . . . . . . 42
Section 11.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 42
EXHIBITS
A Form of Power of Attorney
B Form of Custodial Account Certification
C Form of Custodial Account Letter Agreement
D Form of Escrow Account Certification
E Form of Escrow Account Letter Agreement
F Form of REO Account Certification
G Form of REO Account Letter Agreement
H Form of Monthly Remittance Advice
I (Reserved.)
J Form of Assignment, Assumption and Recognition Agreement
This is a MASTER SERVICING AGREEMENT (this "Agreement"), dated and
effective as of March 7th, 1997 and is executed between REDWOOD TRUST, INC.
as Owner (the "Owner"), and MERRILL LYNCH CREDIT CORPORATION, as seller and
servicer (the "Company").
PRELIMINARY STATEMENTS
Pursuant to a Master Mortgage Loan Purchase Agreement of even date
herewith between the Owner and the Company (the "Master Mortgage Loan
Purchase Agreement"), the Owner may purchase from the Company from time to
time certain residential, first mortgage loans. In order to facilitate the
servicing of such mortgage loans by the Company, the Company and the Owner
have executed this Agreement.
In consideration of the premises and the mutual agreements hereinafter
set forth, the Owner and the Company agree as follows:
ARTICLE I.
DEFINITIONS
-----------
Section 1.01. Defined Terms.
-------------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meaning specified in
this Article (capitalized terms used and not otherwise defined herein shall
have the meanings specified in the Master Mortgage Loan Purchase Agreement):
"Additional Collateral": (i) With respect to any Mortgage 100/sm/ Loan,
the marketable securities subject to a security interest pursuant to the
related Mortgage 100/sm/ Pledge Agreement, or (ii) with respect to any
ParentPower(Registered Trademark) Mortgage Loan, the related
ParentPower(Registered Trademark) Agreement.
"Additional Collateral Mortgage Loan": Each Mortgage Loan that is either
a Mortgage 100/sm/ Loan or ParentPower(Registered Trademark) Mortgage Loan as
to which the Additional Collateral is still required to be provided.
"Adjustable Rate Mortgage Loan": A Mortgage Loan that provides for the
adjustment of the Mortgage Interest Rate payable with respect thereto in
accordance with the terms of the related Mortgage Note.
"Affiliate": With respect to any specified Person, any other Person
controlling, controlled by or under common control with such specified
Person.
"Agreement": This Master Servicing Agreement and all exhibits hereto,
amendments hereof and supplements hereto.
"Appraised Value": With respect to any Mortgage Loan, the value of the
related Mortgaged Property based upon the lesser of (i) the appraisal made
for the originator at the time of origination of the Mortgage Loan, and (ii)
if applicable, the sales price of the Mortgaged Property at such time of
origination.
"Assignment": An assignment of the Mortgage, notice of transfer or
equivalent instrument, sufficient under the laws of the jurisdiction wherein
the related Mortgaged Property is located to reflect of record the sale or
transfer of the Mortgage Loan, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages securing Mortgaged Properties located in the same county,
if permitted by applicable law and acceptable for recording by the applicable
recording office.
"Balloon Mortgage Loan": Any Mortgage Loan for which the related Monthly
Payments, other than the Monthly Payment due on the maturity date thereof,
are computed on the basis of a period to full amortization ending on a date
that is later than such maturity date.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking or savings associations in the State of Florida are
authorized or obligated by law or executive order to be closed.
"Closing Date": For each Transaction, the date on which the Company
actually sells to the Owner, and the Owner actually purchases from the
Company, the Mortgage Loans listed on the Mortgage Loan Schedule attached to
the respective Warranty Bill of Sale.
"Company": MLCC or any successor under this Agreement appointed as
herein provided.
"Condemnation Proceeds": All awards or settlements in respect of a
taking of a partial or an entire Mortgaged Property by exercise of the power
of eminent domain or condemnation.
"Custodial Account": The separate trust account or accounts created and
maintained pursuant to Section 4.04 which shall be entitled "Merrill Lynch
Credit Corporation, in trust for the Owner," or such other title as is
requested by the Owner.
"Custody Agreement": That certain Custody Agreement dated as of December
30, 1996 by and, among the Redwood Trust, Inc. as "Seller", Merrill Lynch
Mortgage Capital, Inc. as "Purchaser" and Bankers Trust Company of
California, N.A. as "Custodian" for the retention of each Mortgage Note,
Mortgage, Assignment and certain other portions of each Mortgage File
attached hereto as Exhibit 3 and including that certain letter agreement
dated March 27, 1997 by and among the "Seller", "Purchaser" and "Custodian",
substantially in the form attached to the Custody Agreement ("Custodial
Letter Agreement").
"Custodian": The custodian under the Custody Agreement, or its
successor.
"Cut-off Date": With respect to each Mortgage Loan, the first day of the
month in which the related Closing Date occurs.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by a
Qualified Substitute Mortgage Loan.
"Determination Date": The 15th day of the month of the related
Remittance Date or if such 15th day is not a Business Day, the Business Day
immediately following such 15th day.
"Due Date": The day of the month of the related Remittance Date on which
each Monthly Payment is due on a Mortgage Loan, exclusive of any days of
grace.
"Eligible Account": An account or accounts acceptable to FNMA or FHLMC.
"Equity Refinanced Mortgage Loan": A Refinanced Mortgage Loan in which
the Mortgagor used less than the entire amount of the proceeds (net of any
closing costs, including discount and origination fees and prepaid items) to
refinance an existing mortgage loan and any junior lien that existed on the
related Mortgaged Property for at least one year prior to origination of the
Refinanced Mortgage Loan.
"Escrow Account": The separate trust account or accounts created and
maintained pursuant to Section 4.06 which shall be entitled "Merrill Lynch
Credit Corporation, in trust for the Owner and various Mortgagors," or such
other title as is requested by the Owner.
"Escrow Payments": The amounts constituting ground rents, taxes,
assessments, water charges, sewer rents, mortgage insurance premiums, fire
and hazard insurance premiums and other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to any Mortgage Loan.
"Event of Default": Any one of the conditions or circumstances
enumerated in Section 9.01.
"FHLMC": The Federal Home Loan Mortgage Corporation or any successor
organization.
"Fidelity Bond": A fidelity bond to be maintained by the Company
pursuant to Section 4.12.
"FNMA": The Federal National Mortgage Association or any successor
organization.
"Gross Margin": With respect to each Adjustable Rate Mortgage Loan, the
fixed number of basis points set forth in the Mortgage Loan Schedule that is
added to the Index on each Interest Rate Adjustment Date in accordance with
the terms of the related Mortgage Note to determine the Mortgage Interest
Rate for such Mortgage Loan, subject to any applicable Periodic Rate Cap and
Lifetime Rate Cap.
"Index": With respect to each Adjustable Rate Mortgage Loan and each
Interest Rate Adjustment Date, the index used to determine the Mortgage
Interest Rate on such Adjustable Rate Mortgage Loan, as specified in the
related Mortgage Note, which index may be (i) the average of the London
Interbank Offered Rates for one- or six-month U.S. dollar deposits, as
published in the "Money Rates" table of The Wall Street Journal or elsewhere
(as specified in the related Mortgage Note) on the date or dates specified in
such Mortgage Note for the determination of such rate, (ii) the weekly
average of the closing market bid yields on actively traded U.S. Treasury
securities adjusted to a constant maturity of one year, (iii) the weekly
average or the monthly average of weekly average auction rates
on U.S. Treasury bills with a maturity of six months, as
published by the Board of Governors of the Federal Reserve System in Federal
Reserve Statistical Release H.15. (519), (iv) the weekly average of the
closing market bid yields on U.S. Treasury securities adjusted to a constant
maturity of one (1) year, as published by the Board of Governors of the
Federal Reserve System in Federal Reserve Statistical Release H.15. (519), as
available the number of days prior to the Interest Rate Adjustment Date set
forth in the related Mortgage Note, (v) the weekly average of the closing
market bid yields on U.S. Treasury securities adjusted to a constant maturity
of five (5) years, as published by the Board of Governors of the Federal
Reserve System in Federal Reserve Statistical Release H. 15. (519), as
available the number of days prior to the Interest Rate Adjustment Date set
forth in the related Mortgage Note, (vi) the prime rate specified in the
related Mortgage Note, as published in the "Money Rates" table of The Wall
Street Journal, or elsewhere (as specified in such Mortgage Note) and
available the number of days prior to the Interest Rate Adjustment Date set
forth in the related Mortgage Note, (vii) the monthly weighted average cost
of funds of members of the Federal Home Loan Bank of San Francisco, (viii)
such other standard for determining the change in the interest rate as may be
set forth in the related Mortgage Note, as such rate may be available the
number of days prior to the Interest Rate Adjustment Date set forth in the
related Mortgage Note, or (ix) if such index is not so published or is
otherwise unavailable, such comparable alternative index selected by the
Company in accordance with the terms of the Mortgage Notes and in
consultation with the Owner.
"Insurance Proceeds": Proceeds of any Primary Insurance Policy, title
policy, hazard policy or other insurance policy covering a Mortgage Loan, if
any, to the extent such proceeds are not to be applied to the restoration of
the related Mortgaged Property or released to the Mortgagor in accordance
with the procedures that the Company would follow in servicing mortgage loans
held for its own account.
"Interest Rate Adjustment Date": With respect to each Adjustable Rate
Mortgage Loan, the date on which the Mortgage Interest Rate is adjusted in
accordance with the terms of the related Mortgage Note.
"Lifetime Rate Cap": With respect to each Adjustable Rate Mortgage Loan,
the maximum Mortgage Interest Rate that may be borne thereby, as set forth in
the related Mortgage Note.
"Limited Documentation Mortgage Loan": A Mortgage Loan that was
originated pursuant to a "limited documentation" or "easy qualifier"
underwriting program.
"Liquidation Proceeds": Amounts, other than Insurance Proceeds and
Condemnation Proceeds, received by the Company in connection with the
liquidation of a defaulted Mortgage Loan through trustee's sale, foreclosure
sale or otherwise (including, but not limited to, amounts received with
respect to a ParentPower(Registered Trademark) Agreement or a Mortgage
100/sm/ Pledge Agreement), other than amounts received following the
acquisition of an REO Property pursuant to Section 4.13.
"Loan-to-Value Ratio" or "LTV": With respect to any Mortgage Loan, as of
any date on which a determination thereof is made, the ratio on such date of
the outstanding principal balance of such Mortgage Loan to the Appraised
Value of the related Mortgaged Property.
"MLCC": Merrill Lynch Credit Corporation and its successors in interest.
"Monthly Advance": The aggregate of the advances made by the Company on
any Remittance Date pursuant to Section 5.03.
"Monthly Payment": The scheduled monthly payment of principal and
interest on a Mortgage Loan which is payable by a Mortgagor from time to time
under the related Mortgage Note on every Due Date.
"Moody's": Moody's Investors Service, Inc. or its successor in interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on real property securing the Mortgage Note.
"Mortgage 100/sm/ Loan": A Mortgage Loan having at the time of
origination a Loan-to-Value Ratio generally in excess of MLCC's maximum
acceptable Loan-to-Value Ratio for such Mortgage Loan, which Mortgage Loan is
secured by additional collateral in the form of a security interest in
marketable securities having a market value, as of the date of such loan's
origination, of in most cases at least equal to the Original Additional
Collateral Requirement.
"Mortgage 100/sm/ Pledge Agreement": With respect to each Mortgage
100/sm/ Loan, the Mortgage 100/sm/ Pledge Agreement for Securities Account
between the Mortgagor under such Mortgage 100/sm/ Loan and MLCC, pursuant to
which such Mortgagor granted a security interest in various investment
securities.
"Mortgage File": The mortgage documents, including but not limited to
all paper, computer generated and microfiche records, pertaining to a
particular Mortgage Loan which are specified in Exhibit 1 to the Master
Mortgage Loan Purchase Agreement and any additional documents required to be
added to the Mortgage File pursuant to the Program Documents.
"Mortgage Interest Rate": The annual rate at which interest accrues on
any Mortgage Loan, net of any premium on any related Primary Insurance
Policy, and with respect to any Adjustable Rate Mortgage Loan, as such annual
rate may be adjusted on any Interest Rate Adjustment Date and subject to the
limitations on such interest rate imposed by the Periodic Rate Cap and the
Lifetime Rate Cap.
"Mortgage Loan": An individual Mortgage Loan, including but not limited
to all documents included in the Mortgage File, Monthly Payments, Principal
Prepayments, Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds,
proceeds from REO Dispositions and any and all rights, benefits, proceeds and
obligations arising therefrom or in connection therewith, and which is the
subject of this Agreement. Each Mortgage Loan set forth on the Mortgage Loan
Schedule attached to a Warranty Bill of Sale initially will be subject to
this Agreement, commencing on the respective Closing Date for the related
Transaction.
"Mortgage Loan Remittance Rate": With respect to each Mortgage Loan, the
related Mortgage Interest Rate minus the Servicing Fee Rate.
"Mortgage Loan Schedule": The list of Mortgage Loans purchased by the
Owner from the Company from time to time that are subject to this Agreement,
which list shall set forth the following information with respect to each
Mortgage Loan:
(i) the loan number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property, including
city, state and zip code;
(iv) the Mortgage Interest Rate at origination;
(v) for each Adjustable Rate Mortgage Loan, the first Interest
Rate Adjustment Date and the first Payment Adjustment Date;
(vi) for each Adjustable Rate Mortgage Loan, the Gross Margin;
(vii) for each Adjustable Rate Mortgage Loan, the Lifetime Rate
Cap;
(viii) for each Adjustable Rate Mortgage Loan, the Periodic Rate
Cap;
(ix) the original term to maturity;
(x) the original principal balance;
(xi) the first payment date;
(xii) the maturity date;
(xiii) the Monthly Payment in effect as of the related Cut-off
Date;
(xiv) the principal balance as of the related Cut-off Date,
after giving effect to all payments of principal due on
or before such date, whether or not received;
(xv) the Loan-to-Value Ratio as of the date of origination;
(xvi) a code indicating whether the Mortgaged Property is
occupied by owner;
(xvii) a code indicating the type of residential dwelling;
(xviii) a code indicating whether the Mortgage Loan is a
Refinanced Mortgage Loan and, if so, whether it is an
Equity Refinanced Mortgage Loan;
(xix) a code indicating whether the Mortgage Loan is covered by
a Primary Insurance Policy;
(xx) a code indicating whether the Mortgage Loan is a Limited
Documentation Mortgage Loan;
(xxi) a code indicating whether the Mortgage Loan is an
Additional Collateral Mortgage Loan;
(xxii) for each Adjustable Rate Mortgage Loan, a code indicating
the type of Index;
(xxiii) a code indicating whether the Mortgage Loan is a Balloon
Mortgage Loan; and
(xxiv) the Servicing Fee Rate applicable to such Mortgage Loan,
and if such Mortgage Loan is an Adjustable Rate Mortgage
Loan whose first Interest Rate Adjustment has not
occurred, the Servicing Fee Rate (if different) prior to
the first Interest Rate Adjustment Date.
Such schedule shall also set forth the weighted average of the amounts set
forth in (iv) and (xi) above and the total of the amounts described under
(xiii) above for all of the Mortgage Loans. Such list may be in the form of
more than one list, collectively setting forth all of the information
required.
"Mortgage Note": The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
"Mortgaged Property": The underlying real property securing repayment of
a Mortgage Note, consisting of a fee simple or leasehold interest in a single
parcel of real property improved by a residential dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Senior Vice
President, a Vice President, or an Assistant Vice President and by the
Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Company, and delivered to the Owner as required by this
Agreement.
"Opinion of Counsel": A written opinion of counsel, who may be counsel
for the Company, reasonably acceptable to the Owner.
"Original Additional Collateral Requirement": With respect to any
Additional Collateral Mortgage Loan, 30 percent (or, in the case of an
Additional Collateral Mortgage Loan with an
original principal balance of $1,000,000 or less and a Loan-to-Value Ratio
less than 100%, such lower percent specified by the Master Servicer in
originating such Additional Collateral Mortgage Loan) of the original
principal balance of such Mortgage Loan.
"Owner": Redwood Trust, Inc. and any successor or assignee of Redwood
Trust, Inc.
"ParentPower(Registered Trademark) Agreement:" With respect to each
ParentPower(Registered Trademark) Mortgage Loan, a ParentPower(Registered
Trademark)49 Guaranty and Security Agreement for Securities Account or a
ParentPower(Registered Trademark) Guaranty Agreement for Real Estate.
"ParentPower(Registered Trademark) Guaranty Agreement for Real Estate:"
With respect to a ParentPower(Registered Trademark) Mortgage Loan, an
agreement between MLCC and a guarantor on behalf of the Mortgagor under such
ParentPower(Registered Trademark) Mortgage Loan pursuant to which such
guarantor guarantees the payment of certain losses under such
ParentPower(Registered Trademark) Mortgage Loan, authorizes MLCC to draw on a
home equity credit line to fund such guaranty and has secured such guaranty
with a lien on residential real estate of the guarantor. The required amount
of the collateral supporting such guaranty is at least equal to the Original
Additional Collateral Requirement for such ParentPower(Registered Trademark)
Mortgage Loan. For purposes of this definition, the ParentPower(Registered
Trademark) Guaranty Agreement For Real Estate shall not include the rights of
the mortgagee under the Equity Access(Registered Trademark) Security
Instrument referred to therein, which rights have been retained by MLCC.
"ParentPower(Registered Trademark) Guaranty and Security Agreement for
Securities Account": With respect to a ParentPower(Registered Trademark)
Mortgage Loan, an agreement between MLCC and a guarantor on behalf of the
Mortgagor under such ParentPower(Registered Trademark) Mortgage Loan pursuant
to which such guarantor guarantees the payment of certain losses under such
ParentPower(Registered Trademark) Mortgage Loan and has granted a security
interest to MLCC in certain marketable securities to collateralize such
guaranty. The required amount of such collateral is at
least equal to the Original Additional Collateral Requirement for such
ParentPower(Registered Trademark) Mortgage Loan.
"ParentPower(Registered Trademark) Mortgage Loan": A Mortgage Loan
having at the time of origination a Loan-to-Value Ratio generally in excess
of MLCC's maximum acceptable Loan-to-Value Ratio for such Mortgage Loan,
which Mortgage Loan is supported by a ParentPower(Registered Trademark)
Agreement.
"Payment Adjustment Date": With respect to each Adjustable Rate Mortgage
Loan, the first Payment Adjustment Date, as set forth in the Mortgage Loan
Schedule and in the related Mortgage Note, and each anniversary thereof, on
which the amount of the Monthly Payment on an Adjustable Rate Mortgage Loan
may adjust.
"Periodic Rate Cap": With respect to each Adjustable Rate Mortgage Loan
as to which the related Mortgage Loan Schedule indicates the existence of a
Periodic Rate Cap, the provision of the related Mortgage Note that provides
for a maximum amount by which the Mortgage Interest Rate may increase (or, if
so indicated on such Mortgage Loan Schedule, decrease) on an Interest Rate
Adjustment Date above the Mortgage Interest Rate immediately prior to such
Interest Rate Adjustment Date.
"Permitted Investment": Any one or more of the following:
(i) direct obligations of, or obligations fully guaranteed as to
principal and interest by, the United States or any agency or
instrumentality thereof, provided such obligations are backed by the
full faith and credit of the United States;
(ii) repurchase obligations (the collateral for which is held by a
third party) with respect to any security described in clause (i) above,
provided that the long-term unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated by each of the
Rating Agencies in one of its two highest long-term rating categories;
(iii) Certificates of deposit, time deposits, demand deposits
and bankers' acceptances of any bank or trust company incorporated under
the laws of the United States or any state thereof or the District of
Columbia, provided that the short-term commercial paper of such bank or
trust company at the date of acquisition thereof has been rated by each
of the Rating Agencies in its highest short-term rating;
(iv) money market funds rated by each of the Rating Agencies in its
highest short-term debt rating category;
(v) commercial paper (having original maturities of not more than
nine months) of any corporation incorporated under the laws of the
United States or any state thereof or the District of Columbia which on
the date of acquisition has been rated by each of the Rating Agencies
in its highest short-term rating; and
(vi) any other obligation or security acceptable to each of the
Rating Agencies (as certified by a letter from each of the Rating
Agencies to the Purchaser) in respect of mortgage pass-through
certificates rated in one of its two highest rating categories;
provided, that no such instrument shall be a Permitted Investment if such
instrument evidences either (a) the right to receive interest only payments
with respect to the obligations underlying such instrument or (b) both
principal and interest payments derived from obligations underlying such
instrument where the principal and interest payments with respect to such
instrument provide a yield to maturity exceeding 120% of the yield to
maturity at par of such underlying obligation.
"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.
"Prepayment Interest Shortfall": With respect to any Remittance Date and
any Mortgage Loan that was the subject of a Principal Prepayment during the
related Principal Prepayment Period, an amount equal to one month's interest
at the Mortgage Loan Remittance Rate on the amount of such Principal
Prepayment, less the amount of interest (adjusted to the Mortgage Loan
Remittance Rate) paid by the Mortgagor in respect of such Principal
Prepayment.
"Primary Insurance Policy": With respect to each Mortgage Loan, the
policy of primary mortgage insurance, if any, in effect as indicated on the
Mortgage Loan Schedule, or any replacement policy therefor obtained by the
Company pursuant to Section 4.08.
"Principal Prepayment": Any payment or other recovery of principal on a
Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon, which is not accompanied
by an amount of interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
"Principal Prepayment Period": As to any Remittance Date, the calendar
month preceding the month of distribution.
"Program Documents": With respect to each Transaction, the related
Purchase Price and Terms Letter, the related Warranty Bill of Sale, the
Master Mortgage Loan Purchase Agreement, the Custody Agreement, this
Agreement and each other document or instrument executed or delivered by MLCC
in connection with any of the foregoing.
"Purchase Price and Terms Letter": With respect to each Transaction, the
letter agreement or agreements setting forth the general terms and conditions
of the Transaction to be consummated as provided in the Master Mortgage Loan
Purchase Agreement.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted by the
Company for a Deleted Mortgage Loan which must, on the date of such
substitution (i) have an outstanding principal balance, after deduction of
all scheduled payments due in the month of substitution (or in the case of a
substitution of more than one mortgage loan for a Deleted Mortgage Loan, an
aggregate principal balance), not in excess of the outstanding principal
balance of the Deleted Mortgage Loan (the amount of any shortfall to be
deposited into the Custodial Account by the Company in the month of
substitution pursuant to Section 4.04(vii)), (ii) have a Mortgage Interest
Rate not less than, and not more than 1% greater than the Mortgage Interest
Rate of the Deleted Mortgage Loan, (iii) have a remaining term to maturity
not greater than (and not more than one year less than) that of the Deleted
Mortgage Loan, and (iv) comply with each representation and warranty set
forth in Section 5(b) of the Master Mortgage Loan Purchase Agreement.
"Rating Agency": Either of Standard & Poor's and Moody's.
"Record Date": The close of business of the last Business Day of the
month preceding the month of the related Remittance Date.
"Refinanced Mortgage Loan": A Mortgage Loan that was made to a Mortgagor
who owned the Mortgaged Property prior to the origination of such Mortgage
Loan and the proceeds of which (net of any closing costs, including discount
and origination fees and prepaid items) were used in whole or part to satisfy
an existing mortgage.
"Remittance Date": The 18th day of any month or, if such 18th day is not
a Business Day, the first Business Day immediately following such 18th day.
"REO Account": The separate trust account or accounts created and
maintained pursuant to Section 4.13 which shall be entitled "Merrill Lynch
Credit Corporation, in trust for the Owner," or such other title as is
requested by the Owner.
"REO Disposition": The final sale by the Company of any REO Property.
"REO Property": A Mortgaged Property acquired by the Company on behalf
of the Owner as described in Section 4.13.
"Servicing Advances": All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Company of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures and
bankruptcies, (iii) the management and liquidation of the REO Property and
(iv) compliance with the obligations under Section 4.08.
"Servicing Fee": With respect to any Mortgage Loan and any Remittance
Date, the fee payable monthly to the Company pursuant to Section 6.03.
"Servicing Fee Rate": With respect to each Mortgage Loan, the rate per
annum set forth in the related Warranty Bill of Sale as the "Servicing Fee
Rate".
"Servicing Officer": Any officer of the Company involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Company to the
Owner upon request, as such list may from time to time be amended.
"Standard & Poor's": Standard & Poor's Ratings Services or its successor
in interest.
"Subservicer": Any Person with which the Company has entered into a
Subservicing Agreement and which meets the qualifications of a Subservicer
pursuant to Section 4.15.
"Subservicing Account": An account established by a Subservicer which
meets the requirements set forth in Section 4.20 and is otherwise acceptable
to the Company, and which must be an Eligible Account.
"Subservicing Agreement": The written agreement between the Company and
a Subservicer relating to the servicing and administration of the Mortgage
Loans as provided in Section 4.15.
"Transaction": The sale by the Company to the Owner, and the purchase by
the Owner from the Company, of one or more Mortgage Loans on a Closing Date,
as evidenced by the execution and delivery by the Company to Redwood Trust,
Inc. as the initial Owner, of the Warranty Bill of Sale.
"Warranty Bill of Sale": The warranty bill of sale executed and
delivered by the Company to the Purchaser on a Closing Date, evidencing the
sale of the related Mortgage Loans by the Company to the Purchaser and
setting forth certain representations and warranties of the Company with
respect thereto, in the form attached to the Master Mortgage Loan Purchase
Agreement as Exhibit 10.
ARTICLE II.
BOOKS AND RECORDS:
------------------
TRANSFER OF MORTGAGE LOANS
--------------------------
Section 2.01. Books and Records.
-----------------
The Company shall be responsible for maintaining, and shall maintain, a
complete set of books and records for the Mortgage Loans, which shall be
appropriately identified in the Company's books and records to clearly
reflect the ownership of the Mortgage Loans by the Owner, and subsequent
assignments and transfers of the Mortgage Loans pursuant to Section 2.02
hereof. At the request of the Owner of one or more Mortgage Loans from time
to time, the Company shall promptly deliver to such Owner a Mortgage Loan
Schedule setting forth all Mortgage Loans that the Company then services and
administers for the Owner under this Agreement; provided,
--------
however, that the information contained on such Mortgage Loan Schedule may
- -------
be as of the Closing Date for each respective Mortgage Loan and may consist
of the Mortgage Loan Schedule(s) attached to the Warranty Bill(s) of Sale for
such Mortgage Loans, with manual deletions or additions thereto or other
revisions thereof.
Section 2.02. Transfer of Mortgage Loans.
--------------------------
The Company acknowledges that the Owner shall have the right, without
the consent of Company, to assign, any or all of the Mortgage Loans, and any
such assignee shall, upon such assignment, exercise any rights of the Owner
hereunder, and shall accede to the rights and obligations hereunder of the
Owner with respect to such assigned Mortgage Loans and the Company shall
recognize such assignee as the owner of such Mortgage Loans and shall service
such Mortgage Loans for the assignee as if the assignee and the Company had
entered into a separate servicing agreement in the form of this Agreement.
All references to the Owner shall be deemed to include its assignee. Upon the
request of the Owner, the Company shall provide copies of any one or more of
the Mortgage Files at the expense of the requesting party. Pursuant to
Section 2.03 herein, the Company shall keep at its servicing office books and
records in which, subject to such reasonable regulations as it may prescribe,
the Company shall note assignments and transfers of Mortgage Loans. Upon
receipt of an Assignment, Assumption and Recognition Agreement, substantially
in the form of Exhibit J hereto, the Company shall (a) amend its books and
records to reflect the ownership of the assigned Mortgage Loans of such
assignee, and the previous Owner shall be released from its obligations
hereunder with respect to each such assigned Mortgage Loans and (b) execute
each such Assignment, Assumption and Recognition Agreement in as many
counterparts as are necessary to enable each party to the Assignment,
Assumption and Recognition Agreement to receive an original of such
Assignment, Assumption and Recognition Agreement.
Section 2.03. Cooperation of Company as Servicer.
----------------------------------
Company understands that Owner may securitize the Mortgage Loans in the
future. With respect to the Mortgage Loans sold to Owner under the Master
Mortgage Loan Purchase Agreement Company agrees to reasonably cooperate with
Owner during the securitization process, including but not limited to any
dealings between Owner and the Rating Agencies.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Section 3.01. Representations and Warranties of the Company.
---------------------------------------------
The Company represents, warrants and covenants to the Owner, as of the
date of this Agreement and as of each Closing Date or as of such other date
specified below, that:
(i) The Company (a) is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, (b)
has all licenses necessary to carry on its business as now being conducted,
(c) is licensed, qualified and in good standing under the laws of each state
where a Mortgaged Property is located unless not required under applicable
law to effect such qualification (with no demand for such qualification
having been made upon the Company by any such state), and (d) in compliance
with the laws of any such state to the extent necessary to insure the
enforceability of each Mortgage Loan and to permit the servicing of the
Mortgage Loans in accordance with the terms of this Agreement.
(ii) The Company has the full power and authority to hold each
Mortgage Loan, to service each Mortgage Loan, to execute and deliver this
Agreement, and to enter into and consummate all transactions contemplated by
this Agreement. The Company has duly authorized the execution, delivery and
performance of this Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due authorization, execution and
delivery by the Owner and the enforceability against the Owner, constitutes a
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, liquidation, moratorium, reorganization or
other similar laws affecting the rights of creditors generally or by general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law.
(iii) The consummation of the transactions contemplated by this
Agreement is in the ordinary course of the Company's business and will not
conflict with or result in a breach of any of the terms, conditions or
provisions of the Company's certificate of incorporation or by-laws or any
legal restriction or any agreement or instrument to which the
Company is now a party or by which it is bound, or constitute a material
default or result in an acceleration under any of the foregoing, or result in
the violation of any law, rule, regulation, order, judgment or decree to
which the Company or its property is subject.
(iv) The Company is an approved seller/servicer for FNMA or FHLMC
in good standing and is a mortgagee approved by the Secretary of Housing and
Urban Development pursuant to Section 203 of the National Housing Act. No
event has occurred that would render the Company unable to comply with FNMA
or FHLMC eligibility requirements or that would require notification to
either FNMA or FHLMC.
(v) The Company has no reason or cause to believe that it cannot
perform each covenant contained in this Agreement.
(vi) There is no action, suit, proceeding or investigation pending
or, to the Company's knowledge, threatened, against the Company that, in the
Company's judgment, if determined adversely to the Company, would materially
and adversely affect the validity or enforceability of this Agreement or the
ability of the Company to perform its obligations hereunder in accordance
with the terms hereof.
(vii) No consent, approval, authorization or order of any court
or governmental authority is required for the execution and delivery of this
Agreement by the Company or for the performance by the Company of its
obligations hereunder, other than such consent, approval, authorization or
order as has been obtained prior to the Closing Date.
(viii) The Mortgage Note, the Mortgage, the Assignment of
Mortgage and any other documents required to be delivered under the Custody
Agreement for each Mortgage Loan have been delivered to the Custodian. The
Company is in possession of a complete, true and accurate Mortgage File in
compliance with Exhibit 1 "Contents of the Mortgage File" hereto in all
material respects (other than documents required to be delivered to the
Custodian hereunder or under the Custody Agreement which shall be complete,
true and accurate in all respects), except for such documents the originals
of which have been delivered to the Custodian.
(ix) The origination, collection and other servicing practices used
by the Company and/or the Company's servicer with respect to the Mortgage
Loan have been in all material respects in compliance with Company's
procedures, accepted servicing practices, applicable laws and regulations,
and have been in all material respects legal and proper. All Mortgage
Interest Rate adjustments have been made in strict compliance with applicable
state and federal law and the terms of the related Mortgage Note.
(x) With respect to those Mortgage Loans with Escrow Accounts, all
escrow deposits and Escrow Payments, are in the possession of, or under the
control of, the Company and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not
been made. All Escrow Payments have been collected in full compliance with
applicable state and federal law. An escrow of funds is not prohibited by
applicable law and has been established in an amount sufficient to pay for
every item that remains unpaid and has been assessed but is not yet due
and payable. No escrow deposits or Escrow Payments or other charges or
payments due the Company have been capitalized under the Mortgage or the
Mortgage Note. Any interest required to be paid pursuant to applicable
state, federal and local law has been properly paid and credited.
The Company shall indemnify the Owner and hold it harmless against any
losses, damages, penalties, fines, forfeitures, legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach
of the Company's representations and warranties contained in this Section
3.01. It is understood and agreed that the obligations of the Company set
forth in this Section 3.01 to indemnify the Owner as provided above
constitute the sole remedies of the Owner respecting a breach of the
foregoing representations and warranties.
ARTICLE IV.
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
----------------------------------------------
Section 4.01. Company to Act as Servicer.
--------------------------
The Company, as independent contract servicer, shall service and
administer the Mortgage Loans in accordance with this Agreement and the
normal and usual standards of practice of prudent mortgage lenders, and shall
have full power and authority, acting alone, to do or cause to be done any
and all things in connection with such servicing and administration that the
Company may deem necessary or desirable and consistent with the terms of this
Agreement.
Consistent with the terms of this Agreement, the Company may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to
any Mortgagor if in the Company's reasonable and prudent determination such
waiver, modification, postponement or indulgence is not materially adverse to
the Owner; provided. however. that the Company shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Interest Rate, forgive the payment of any principal or interest payments,
make future advances or extend the final maturity date on such Mortgage Loan.
Without limiting the generality of the foregoing, the Company shall continue,
and is hereby authorized and empowered, to execute and deliver on behalf of
itself, and the Owner, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the Mortgaged Property. The
Owner shall promptly furnish the Company with such powers of attorney (a form
of which is attached hereto as Exhibit A) as are necessary and appropriate
and with such other documents as are necessary or appropriate to enable the
Company to carry out its servicing and administrative duties under this
Agreement.
In servicing and administering the Mortgage Loans, the Company shall
employ procedures including collection procedures and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account giving due consideration to accepted
mortgage servicing practices of prudent lending institutions and the Owner's
reliance on the Company.
Section 4.02. Collection of Mortgage Loan Payments.
------------------------------------
Continuously from the date hereof until the principal and interest on
all Mortgage Loans are paid in full, the Company shall proceed diligently to
collect all payments due under each Mortgage Loan when the same shall become
due and payable and shall, to the extent such procedures shall be consistent
with this Agreement and the terms and provisions of any related Primary
Insurance Policy, follow such collection procedures as it follows with
respect to mortgage loans comparable to the Mortgage Loans and held for its
own account. Further, the Company will take special care in ascertaining and
estimating annual ground rents, taxes, assessments, water rates, fire and
hazard insurance premiums, mortgage insurance premiums, and all other charges
that, as provided in the Mortgage, will become due and payable to the end
that the installments payable by the Mortgagors will be sufficient to pay
such charges as and when they become due and payable.
Section 4.03. Realization Upon Defaulted Mortgage Loans.
-----------------------------------------
The Company shall use its best efforts, consistent with the procedures
that the Company would use in servicing loans for its own account, to
foreclose upon or otherwise comparably convert the ownership of such
Mortgaged Properties as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 4.01. In addition, if an Additional Collateral Mortgage
Loan becomes a defaulted Mortgage Loan, the Company (or, if MLCC is no longer
the Company hereunder, MLCC, a Subservicer, at the direction of the Company)
shall make all reasonable efforts to realize upon the related Additional
Collateral, and any proceeds from the realization thereof, and not such
Additional Collateral itself, shall be included in the related Liquidation
Proceeds and deposited in the Custodial Account, net of any related Servicing
Advances. The Company shall use its best efforts to realize upon defaulted
Mortgage Loans in such a manner as will maximize the receipt of principal and
interest by the Owner, taking into account, among other things, the timing of
foreclosure proceedings and any proceedings with respect to Additional
Collateral. The foregoing is subject to the provisions that, in any case in
which Mortgaged Property shall have suffered damage, the Company shall not be
required to expend its own funds toward the restoration of such property in
excess of an aggregate of $2,000 during the life of the Mortgage Loan, unless
it shall determine in its discretion (i) that such restoration will increase
the proceeds of liquidation of the related Mortgage Loan to Owner after
reimbursement to itself for such expenses, and (ii) that such expenses will
be recoverable by the Company through Insurance Proceeds or Liquidation
Proceeds from the related Mortgaged Property, as contemplated in Section
4.05. In the event that any payment due under any Mortgage Loan is not paid
when the same becomes due and payable, or in the event the Mortgagor fails to
perform any other covenant or obligation under the Mortgage Loan and such
failure continues beyond any applicable grace period, the Company shall take
such action as it shall deem to be in the best interest of the Owner. In the
event that any payment due under any Mortgage Loan remains delinquent for a
period of 90 days or more and, in the judgment of the Company, the related
Mortgagor is not likely to become current within a reasonable period of time,
the Company shall commence foreclosure proceedings. In connection with such
foreclosure proceedings, the Company shall be responsible for all costs and
expenses incurred by it in any such proceedings; provided, however,
-------- -------
that it shall be entitled to reimbursement thereof from the related property,
as contemplated in Section 4.05.
Section 4.04. Establishment of Custodial Accounts: Deposits in
------------------------------------------------
Custodial Accounts.
- ------------------
The Company shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan separate and apart from any of its own funds
and general assets and shall establish and maintain one or more Custodial
Accounts, in the form of time deposit or demand accounts, each of which shall
be an Eligible Account. The creation of any Custodial Account shall be
evidenced by (i) a certification in the form shown in Exhibit B hereto, in
the case of an account established with the Company, or (ii) a letter
agreement in the form shown in Exhibit C hereto, in the case of an account
held by a depository other than the Company. In either case, a copy of such
certification or letter agreement shall be furnished to an Owner upon
request.
The Company shall deposit in the Custodial Account on a daily basis, and
retain therein the following payments and collections received or made by it
subsequent to the Cut-off Date, or received by it prior to the Cut-off Date
but allocable to a period subsequent thereto, other than in respect of
principal and interest on the Mortgage Loans due on or before the Cut-off
Date:
(i) All payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) All payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Loan Remittance Rate;
(iii) All Liquidation Proceeds;
(iv) All Insurance Proceeds including amounts required to be
deposited pursuant to Sections 4.08, 4.10 and 4.11, other than proceeds to be
held in the Escrow Account and applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with the
Company's normal servicing procedures, the loan documents or applicable law;
(v) All Condemnation Proceeds affecting any Mortgaged Property
that are not released to the Mortgagor in accordance with the Company's
normal servicing procedures, the loan documents or applicable law;
(vi) Any Monthly Advances;
(vii) All proceeds of any Mortgage Loan repurchased in
accordance with Section 5(c) or (d) of the Master Mortgage Loan Purchase
Agreement, and all amounts required to be deposited by the Company in
connection with shortfalls in principal amount of Qualified Substitute
Mortgage Loans pursuant to Section 5(c) of the Master Mortgage Loan Purchase
Agreement.
(viii) Any amounts required to be deposited by the Company
pursuant to Section 4.11 in connection with the deductible amount of any
blanket hazard insurance policy;
(ix) Any amounts required to be deposited by the Company pursuant
to Section 5.04 in connection with the Prepayment Interest Shortfalls, if
any, for the month of distribution;
(x) Any amounts in respect of Permitted Investments required to be
deposited pursuant to Section 4.21;
(xi) Any amounts required to be deposited by the Company in
connection with any REO Property pursuant to Section 4.13;
(xii) Any amounts required to be deposited into the Custodial
Account pursuant to Section 6.01 or 6.02; and
(xiii) Any amounts required to be deposited by the Company
pursuant to Section 4.14 in connection with errors in adjustments to Mortgage
Interest Rates or Monthly Payments.
The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges
and assumption fees, to the extent permitted by Section 6.01, need not be
deposited by the Company in the Custodial Account. Any interest paid on funds
deposited into the Custodial Account by the depository institution shall
accrue to the benefit of the Company and the Company shall be entitled to
retain and withdraw such interest from the Custodial Account pursuant to
Section 4.05(iv). In addition, funds in the Custodial Account may be invested
in Permitted Investments in accordance with the provisions set forth in
Section 4.21.
Section 4.05. Permitted Withdrawals From the Custodial Account.
------------------------------------------------
The Company may, from time to time, withdraw from the Custodial Account
for the following purposes:
(i) To make payments to the Owner in the amounts and in the manner
provided for in Section 5.01;
(ii) To reimburse itself for unreimbursed Monthly Advances with
respect to any Mortgage Loan, provided that the Company's right to such
--------
reimbursement shall be limited to amounts received with respect to such
related Mortgage Loan that represent late payments of principal and interest;
(iii) To reimburse itself for unreimbursed Servicing Advances
and for unreimbursed Monthly Advances, provided that with respect
--------
to any Mortgage Loan the Company's right to such reimbursement shall be
limited, subject to Section 4.13, to the related Liquidation Proceeds,
Condemnation Proceeds and Insurance Proceeds as may be collected by the
Company from the Mortgagor or any Person. The Company's right to the
reimbursement set forth in the preceding sentence shall be prior to the
rights of the Owner to such proceeds and amounts, except that where the
Company is required to repurchase a Mortgage Loan pursuant to Section 5(c) or
(d) of the Master Mortgage Loan Purchase Agreement, the Company's right to
such reimbursement shall be subsequent to the rights of the Owner to receive
payment from the Custodial Account representing the repurchase price set
forth in Section 5(c) or (d) of the Master Mortgage Loan Purchase Agreement,
as applicable, and representing all other amounts required to be paid to the
Owner with respect to such repurchased Mortgage Loan;
(iv) To pay to itself as servicing compensation any interest or
investment income earned on funds in the Custodial Account (all such interest
and investment income to be withdrawn monthly not later than each Remittance
Date);
(v) To pay to itself with respect to each Mortgage Loan that has
been repurchased pursuant to Section 5(c) or (d) of the Master Mortgage Loan
Purchase Agreement all related Monthly Payments and such other amounts as may
be collected by the Company from the Mortgagor or otherwise relating to such
Mortgage Loan, provided that such Monthly
--------
Payments or other amounts have not been distributed as of the date on which
the related repurchase price is determined;
(vi) To refund to the Company any amount deposited in the Custodial
Account and not required to be deposited therein; and
(vii) To clear and terminate the Custodial Account upon the
termination of this Agreement.
Section 4.06. Establishment of Escrow Accounts; Deposits in Escrow
----------------------------------------------------
Accounts.
- --------
The Company shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan which constitute Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts, in the form of time deposit or demand
accounts. Each Escrow Account shall be an Eligible Account. The creation of
any Escrow Account shall be evidenced by (i) a certification in the form
shown in Exhibit D hereto, in the case of an account established with the
Company, or (ii) a letter agreement in the form shown in Exhibit E hereto, in
the case of an account held by a depository other than the Company. In either
case, a copy of such certification or letter agreement shall be furnished to
the then Owner upon request.
The Company shall deposit in the Escrow Account or Accounts on a daily
basis, and retain therein, (i) all Escrow Payments collected on account of
the Mortgage Loans, for the purpose of effecting timely payment of any such
items as required under the terms of this Agreement, and (ii) all Insurance
Proceeds which are to be applied to the restoration or repair of any
Mortgaged Property. The Company shall make withdrawals therefrom only to
effect such payments as are required under this Agreement, and for such other
purposes as shall be as set forth or in accordance with Section 4.07. The
Company shall be entitled to retain any interest paid on funds deposited into
the Escrow Account by the depository institution other than interest on
escrowed funds required by law to be paid to the Mortgagor and, to the extent
required by law, the Company shall pay interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account is non-interest bearing or
that interest paid funds therein is insufficient for such purposes.
Section 4.07. Permitted Withdrawals From Escrow Account.
-----------------------------------------
Withdrawals from the Escrow Account may be made by the Company (i) to
effect timely payments of ground rents, taxes, assessments, water rates,
hazard insurance premiums, Primary Insurance Policy premiums, if applicable,
and comparable items, (ii) to reimburse the Company for any Servicing Advance
made by Company with respect to an Escrow Payment, but only from amounts
received on the related Mortgage Loan which represent late payments or
collections of Escrow Payments thereunder, and only to the extent permitted
by applicable law, (iii) to refund to the Mortgagor any funds as may be
determined to be overages, (iv) for transfer to the Custodial Account in
accordance with the terms of this Agreement, (v) for application to
restoration or repair of the Mortgaged Property, (vi) to pay to the Company,
or to the Mortgagor to the extent required by law, any interest paid on the
funds deposited into the Escrow Account, (vii) to refund to the Company any
amount deposited in the Escrow Account and not required to be deposited
therein or (viii) to clear and terminate the Escrow Account on the
termination of this Agreement. As part of its servicing duties, the Company
shall pay to the Mortgagors interest on funds in the Escrow Account, to the
extent required by law, and to the extent that interest earned on funds in
the Escrow Account is insufficient, shall pay such interest from its own
funds, without any reimbursement therefor.
Section 4.08. Payment of Taxes, Insurance and Other Charges;
----------------------------------------------
Maintenance of Primary Insurance Policies; Collections Thereunder.
- -----------------------------------------------------------------
With respect to each Mortgage Loan, the Company shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water
rates and other charges which are or may become a lien upon the Mortgaged
Property and the status of Primary Insurance Policy premiums and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for
the payment of such charges, including renewal premiums and shall effect
payment thereof to ensure the lien of the Mortgage remains in full force and
effect by applying deposits of the Mortgagor in the Escrow Account, where
such an account is maintained in connection with a Mortgage Loan, to the
extent permitted under the terms of the Mortgage and applicable law. In
the event the Company is prohibited by law from enforcing the
escrow requirements under a Mortgage and does not require a
Mortgagor to make deposits into the Escrow Account, the Company
shall ensure that all ground rents, taxes, assessments, water rates, and any
other charges which are or may become a lien upon the Mortgaged Property are
paid and the lien of the Mortgage remains in full force and effect, and shall
advance its own funds, if necessary, to effect payment of the same.
The Company shall maintain or cause to be maintained accurate records
reflecting the status of hazard insurance policy premiums, and shall effect
payment thereof by applying deposits of the Mortgagor in the Escrow Account,
where such an account is maintained in connection with a Mortgage Loan, to
the extent permitted under the terms of the Mortgage and applicable law. In
the event the Company does not or is prohibited by law from enforcing the
escrow requirements under a Mortgage and does not require a Mortgagor to make
deposits into the Escrow Account, the Company shall ensure that at all times
each Mortgaged Property affected thereby is insured by hazard insurance to
the extent required under Section 4.10 of this Agreement, and shall advance
its own funds to effect payment of the same, if necessary.
The Company shall maintain in full force and effect a Primary Insurance
Policy with respect to each Mortgage Loan as to which a Primary Insurance
Policy was in effect on the related Closing Date, which Primary Insurance
Policy shall be the same as or conform in all material respects to such
Primary Insurance Policy in effect on the related Closing Date and shall be
issued by an insurer whose claims-paying ability is satisfactory to FNMA and
FHLMC and that is licensed to do business in the state in which the related
Mortgaged Property is located. Such coverage shall be maintained until the
Loan-to-Value Ratio of the related Mortgage Loan is reduced to 80% or less.
The Company will not cancel or refuse to renew any Primary Insurance Policy
in effect on the Closing Date that is required to be kept in force under this
Agreement unless a replacement Primary Insurance Policy for such canceled or
non-renewed policy is obtained from and maintained with an insurer that
satisfies the standards set forth above. The Company shall not take any
action that would result in non-coverage under any applicable Primary
Insurance Policy of any loss which, but for the actions of the Company, would
have been covered thereunder. In connection with any assumption or
substitution of liability agreement entered into or to be entered into
pursuant to Section 6.01, the Company shall promptly notify the insurer under
the related Primary Insurance Policy, if any, of such assumption or
substitution of liability in accordance with the terms of such policy and
shall take all actions that may be required by such insurer as a condition to
the continuation of coverage under the Primary Insurance Policy. If such
Primary Insurance Policy is terminated as a result of such assumption or
substitution of liability, the Company shall obtain a replacement Primary
Insurance Policy as provided above.
In connection with its activities as servicer, the Company agrees to
prepare and present, on behalf of itself, and the Owner, claims to the
insurer under any Primary Insurance Policy in a timely fashion in accordance
with the terms of such policies and, in this regard, to take such action as
shall be necessary to permit recovery under any Primary Insurance Policy
respecting a defaulted Mortgage Loan. Pursuant to Section 4.04, any
amounts collected by the Company under any Primary Insurance Policy
shall be deposited into the Custodial Account, subject to withdrawal
pursuant to Section 4.05.
Section 4.09. Transfer of Accounts.
--------------------
The Company may transfer the Custodial Account or the Escrow Account to
a different depository institution from time to time. The Company shall
promptly notify the Owner upon making any such transfer. In any case, the
Custodial Account and Escrow Account shall be Eligible Accounts.
Section 4.10. Maintenance of Hazard Insurance.
-------------------------------
The Company shall cause to be maintained for each Mortgage Loan fire and
hazard insurance with extended coverage as is customary in the area where the
Mortgaged Property is located in an amount which is at least equal to the
lesser of (i) the amount necessary to fully compensate for any damage or loss
to the improvements which are a part of such property on a replacement cost
basis or (ii) the outstanding principal balance of the Mortgage Loan in each
case in an amount not less than such amount as is necessary to prevent the
Mortgagor and/or the Mortgagee from becoming a co-insurer; provided, however,
that coverage under such fire and hazard insurance policy shall in no event
exceed the maximum amount, if any, set forth in any document in the Mortgage
File or as required by applicable law. With respect to each Mortgage Loan,
the Company shall maintain or cause to be maintained such policy of flood
insurance as is required to be maintained pursuant to the Flood Disaster
Protection Act of 1973, as amended, to the extent available. The Company
shall also maintain on any REO Property, fire, hazard and liability insurance
with extended coverage in an amount which is at least equal to the lesser of
(i) the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage
Loan at the time it became an REO Property plus accrued interest at the
Mortgage Interest Rate and related Servicing Advances, liability insurance
and, to the extent required and available under the Flood Disaster Protection
Act of 1973, as amended, flood insurance in an amount as provided above.
Pursuant to Section 4.04, any amounts collected by the Company under any such
policies other than amounts to be deposited into the Escrow Account and
applied to the restoration or repair of the Mortgaged Property or REO
Property, or released to the Mortgagor in accordance with the Company's
normal servicing procedures, shall be deposited into the Custodial Account,
subject to withdrawal pursuant to Section 4.05. Any cost incurred by the
Company in maintaining any such insurance shall not, for the purpose of
calculating distributions to the Owner, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or
other additional insurance need be required by the Company of the Mortgagor
or maintained on property acquired in respect of the Mortgage Loan, other
than pursuant to such applicable laws and regulations as shall at any time be
in force and as shall require such additional insurance. All such policies
shall be endorsed with standard mortgagee clauses with loss payable to the
Company, and shall provide for at least thirty days prior written notice of
any cancellation, reduction in the amount of, or material change in, coverage
to the Company. The Company shall not interfere with the Mortgagor's
freedom of choice in selecting either his insurance carrier or agent;
provided. however. that the Company shall not accept or maintain any such
insurance policy from an insurance company that does not then meet the
standards for hazard insurance carriers established by FNMA or FHLMC.
Section 4.11. Maintenance of Mortgage Impairment Insurance Policy.
---------------------------------------------------
If the Company shall obtain and maintain a blanket insurance policy
insuring against hazard losses on all of the Mortgage Loans, then, to the
extent such policy provides coverage in an amount equal to the amount
required pursuant to Section 4.10 and otherwise complies with all other
requirements of Section 4.10, it shall conclusively be deemed to have
satisfied its obligations as set forth in Section 4.10, it being understood
and agreed that such policy may contain a deductible clause, in which case
the Company shall, in the event that there shall not have been maintained on
the related Mortgaged Property or REO Property a policy complying with
Section 4.10, and there shall have been one or more losses which would have
been covered by such policy, deposit in the Custodial Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
In connection with its activities as servicer of the Mortgage Loans, the
Company agrees to prepare and present, on behalf of the Owner, claims under
any such blanket policy in a timely fashion in accordance with the terms of
such policy. Upon request of Owner, the Company shall cause to be delivered
to the Owner a certified true copy of such policy and shall use reasonable
efforts to obtain a statement from the insurer thereunder that such policy
shall in no event be terminated or materially modified without thirty (30)
days prior written notice to the Owner.
Section 4.12. Fidelity Bond, Errors and Omissions Insurance.
---------------------------------------------
The Company shall maintain, at its own expense, a blanket fidelity bond
and an errors and omissions insurance policy, with broad coverage with
responsible companies that would meet the requirements of FNMA or FHLMC on
all officers, employees or other persons acting in any capacity with regard
to the Mortgage Loan to handle funds, money, documents and papers relating to
the Mortgage Loan. The Fidelity Bond and errors and omissions insurance shall
be in the form of the Mortgage Banker's Blanket Bond and shall protect and
insure the Company against losses, including forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts of such persons. Such Fidelity
Bond shall also protect and insure the Company against losses in connection
with the failure to maintain any insurance policies required pursuant to this
Agreement and the release or satisfaction of a Mortgage Loan without having
obtained payment in full of the indebtedness secured thereby. No provision of
this Section 4.12 requiring the Fidelity Bond and errors and omissions
insurance shall diminish or relieve the Company from its duties and
obligations as set forth in this Agreement. The minimum coverage under any
such bond and insurance policy shall be at least equal to the corresponding
amounts required by FNMA in the FNMA Sellers' and Servicers' Guide or by
FHLMC in the FHLMC Sellers' and Servicers' Guide. Upon request of any Owner,
the Company shall cause to be delivered to such Owner a certified true
copy of the Fidelity Bond and insurance policy and shall use reasonable
efforts to obtain a statement from the surety and the insurer that such
Fidelity Bond or insurance policy shall in no event be terminated or
materially modified without thirty (30) days prior written notice to
the Owner.
Section 4.13. Title, Management and Disposition of REO Property.
-------------------------------------------------
If title to a Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be taken in the
name of the Owner.
The Company shall either itself or through an agent selected by the
Company, manage, conserve, protect and operate each REO Property (and may
temporarily rent the same) in the same manner that it manages, conserves,
protects and operates other foreclosed property for its own account, and in
the same manner that similar property in the same locality as the REO
Property is managed. The Company shall cause each REO Property to be
inspected promptly upon the acquisition of title thereto and shall cause each
REO Property to be inspected at least annually thereafter. The Company shall
make or cause to be made a written report of each such inspection. Such
reports shall be retained in the Mortgage File and copies thereof shall be
forwarded by the Company to the Owner upon request. The Company shall use its
best efforts to dispose of the REO Property as soon as possible.
The Company shall segregate and hold all funds collected and received in
connection with the operation of REO Properties separate and apart from its
own funds or general assets in an REO Account, which shall be an Eligible
Account. The creation of the REO Account shall be evidenced by (i) a
certification in the form shown in Exhibit F hereto, in the case of an
account established with the Company, or (ii) a letter agreement in the form
shown in Exhibit G hereto, in the case of an account held by a depository
other than the Company. In either case, an original of such certification or
letter agreement shall be furnished to the Owner upon request. The Company
shall maintain accurate records reflecting the origin of all funds collected
and deposited into the REO Account.
The Company shall deposit or cause to be deposited, on a daily basis in
the REO Account all revenues received with respect to each REO Property and
shall withdraw therefrom funds necessary for the proper operation, management
and maintenance of the REO Property with respect to which a deposit into the
REO Account was made, including the cost of maintaining any hazard insurance
pursuant to Section 4.10 hereof and the fees of any managing agent acting on
behalf of the Company. On or before each Determination Date, the Company
shall withdraw from the REO Account and deposit into the Custodial Account
the net income from each REO Property on deposit in the REO Account.
The Company shall notify the Owner of its receipt of a bona fide offer
for any REO Property. Each REO Disposition shall be carried out by the
Company at such price and upon such terms and conditions as the Owner shall
approve. The proceeds from the REO Disposition, net of any related
unreimbursed Servicing Advances and Monthly Advances to the Company, shall be
deposited into the REO Account and shall be transferred to the Custodial
Account on the Determination Date in the month following receipt thereof for
distribution on the succeeding Remittance Date in accordance with Section
5.01. If the proceeds from an REO Disposition are insufficient to reimburse
the Company for any related unreimbursed Servicing Advances and Monthly
Advances, the Company shall be entitled to withdraw any such deficiency from
amounts on deposit in the Custodial Account.
Section 4.14. Adjustments to Mortgage Interest Rates.
--------------------------------------
The Company shall make interest rate adjustments and payment amount
adjustments for each Adjustable Rate Mortgage Loan in accordance with the
terms of the related Mortgage Note, and will deliver to the related Mortgagor
written notice of such adjustments in accordance with the terms of such
Mortgage Note and the requirements of applicable law.
Section 4.15. Subservicing Agreements Between the Company and
-----------------------------------------------
Subservicers.
- ------------
(a) Notwithstanding Section 8.05, the Company may enter into
Subservicing Agreements with Subservicers for the servicing and
administration of the Mortgage Loans. The terms of any Subservicing Agreement
shall not be inconsistent with any of the provisions of this Agreement. Each
Subservicer shall be (i) authorized to transact business in the state or
states in which the Mortgaged Properties related to the Mortgage Loans it is
to service are situated, if and to the extent required by applicable law to
enable the Subservicer to perform its obligations hereunder and under the
Subservicing Agreement, and (ii) a FHLMC- or FNMA- approved mortgage
servicer. Each Subservicing Agreement must impose on the Subservicer
requirements conforming to the provisions set forth in Section 4.20 and
provide for servicing of the Mortgage Loans consistent with the terms of this
Agreement.
(b) As part of its servicing activities hereunder, the Company, for the
benefit of the Owner, shall enforce the obligations of each Subservicer under
the related Subservicing Agreement, including without limitation, any
obligation to make advances in respect of delinquent payments as required by
a Subservicing Agreement. Such enforcement, including without limitation, the
legal prosecution of claims, termination of Subservicing 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 Company, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Company shall pay the costs of such enforcement at its own expense and shall
be reimbursed therefor only (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 Mortgage Loans, or (ii) from a specific
recovery of costs, expenses or attorneys' fees against the party against whom
such enforcement is directed.
Section 4.16. Successor Subservicers.
----------------------
The Company shall be entitled to terminate any Subservicing Agreement
and the rights and obligations of any Subservicer pursuant to any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement. In the event of termination of any Subservicer, the
Company either shall directly service the related Mortgage Loans or shall
enter into a Subservicing Agreement with a successor Subservicer which
qualifies under section 4.15.
Section 4.17. Liability of the Company.
------------------------
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Company and
a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Company shall remain obligated and primarily liable to the
Owner for the servicing and administering of the Mortgage Loans in accordance
with the provisions of Section 4.01 without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by
virtue of indemnification from the Subservicer and to the same extent and
under the same terms and conditions as if the Company alone were servicing
and administering the Mortgage Loans. The Company shall be entitled to enter
into any agreement with a Subservicer for indemnification of the Company by
such Subservicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
Section 4.18. No Contractual Relationship Between Subservicers and
----------------------------------------------------
the Owner.
- ---------
Any Subservicing Agreement that may be entered into and any transactions
or services relating to the Mortgage Loans involving a Subservicer in its
capacity as such shall be deemed to be between such Subservicer and the
Company alone, and the Owner shall not be deemed a party thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to
the Subservicer.
Section 4.19. Assumption or Termination of Subservicing Agreements.
----------------------------------------------------
In the event that MLCC shall for any reason no longer be the Company,
the Owner or its designee may, if the Company does not terminate any
Subservicing Agreement in accordance with its terms, thereupon assume all of
the rights and obligations of the Company under such Subservicing Agreement.
Upon such assumption, the Owner or its designee shall be deemed to have
assumed all of the Company's interest therein and to have replaced the
Company as a party to each Subservicing Agreement to the same extent as if
the Subservicing Agreements had been assigned to the assuming party, except
that the Company shall not thereby be relieved of any liability or
obligations under the Subservicing Agreements, and the Company shall continue
to be entitled to any rights or benefits which arose prior to its termination
as servicer.
The Company at its expense shall, upon the request of the Owner, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of the Subservicing Agreements to the
assuming party.
Section 4.20. Subservicing Accounts.
---------------------
In those cases where a Subservicer is servicing a Mortgage Loan pursuant
to a Subservicing Agreement, the Subservicer shall be required to establish
and maintain a Subservicing Account which shall be an Eligible Account. The
Subservicer shall be required to deposit into the Subservicing Account not
later than the first Business Day after receipt all proceeds of Mortgage
Loans received by the Subservicer, less its subservicing compensation to the
extent permitted by the Subservicing Agreement, and to remit such proceeds to
the Company for deposit in the Custodial Account not later than the tenth day
of each month or, if such tenth day is not a Business Day, the immediately
succeeding Business Day. For purposes of this Agreement, the Company shall be
deemed to have received payments on the Mortgage Loans when the Subservicer
has received such payments pursuant to the Subservicing Agreement.
Section 4.21. Permitted Investments.
---------------------
The Company may invest the funds in the Custodial Account in Permitted
Investments, each of which shall mature not later than the Business Day
immediately preceding the Remittance Date next following the date of such
investment (except that if such Permitted Investment is an obligation of the
institution that maintains such account, then such Permitted Investment shall
mature not later than such Remittance Date) and shall not be sold or disposed
of prior to its maturity. All such Permitted Investments shall be registered
in the name of the Company (in its capacity as such) or its nominee. All
income and gain realized from any such investment as well as any interest
earned on deposits in the Custodial Account shall be for the benefit of the
Company, and shall be withdrawn by the Company on the related Remittance
Date. The Company shall deposit in the Custodial Account (with respect to
investments made hereunder of funds held therein) an amount equal to the
amount of any loss incurred in respect of any such investment immediately
upon realization of such loss without right of reimbursement.
ARTICLE V.
PAYMENTS TO THE OWNER
---------------------
Section 5.01. Distributions.
-------------
On each Remittance Date, the Company shall distribute to the Owner (i)
all amounts credited to the Custodial Account as of the close of business on
the preceding Determination Date, net of charges against or withdrawals from
the Custodial Account pursuant to clauses (ii) through (vi) of Section 4.05,
(ii) plus all Monthly Advances, if any, which the Company is obligated to
deposit into the Custodial Account pursuant to Section 5.03, (iii) minus (a)
any amounts attributable to Principal Prepayments received after the
Principal Prepayment Period, and (b) any amounts attributable to Monthly
Payments collected but due on a Due Date or Due Dates subsequent to the
preceding Determination Date.
All distributions made to the Owner on each Remittance Date will be made
to the Owner of record on the preceding Record Date, and shall be based on
the Mortgage Loans owned and held by the Owner, and shall be made by wire
transfer of immediately available funds to the account of the Owner at a bank
or other entity having appropriate facilities therefor, or if the Owner shall
have so notified the Company, by check mailed to the address of the Owner as
provided for in Section 11.05.
With respect to any remittance received by the Owner on or after the
second Business Day following the Business Day on which such payment was due,
the Company shall pay to the Owner interest on any such late payment at an
annual rate equal to the rate of interest as is publicly announced from time
to time at its principal office by Chemical Bank, New York, New York as its
prime lending rate, adjusted as of the date of each change, plus one (1)
percentage point, but in no event greater than the maximum amount permitted
by applicable law. Such interest shall be paid by the Company to the Owner on
the date such late payment is made and shall cover the period commencing with
the day following such second Business Day and ending with the Business Day
on which such payment is made, both inclusive. Such interest shall be
remitted along with such late payment. The payment by the Company of any such
interest shall not be deemed an extension of time for payment or a waiver of
any Event of Default by the Company.
Section 5.02. Statements to the Owner.
-----------------------
Not later than the tenth (10th) day of each month, the Company will
furnish to the Owner a Monthly Remittance Advice in a format substantially
similar to FNMA Form 2010 attached hereto as Exhibit H, which Monthly
Remittance Advice will be generated as of the expiration of the preceding
month.
The Company shall provide the Owner with such information concerning the
Mortgage Loans as is necessary for such Owner to prepare its federal income
tax return as any Owner may reasonably request from time to time.
Section 5.03. Monthly Advances by the Company.
-------------------------------
Not later than the close of business on the Business Day preceding each
Remittance Date, the Company shall deposit in the Custodial Account an amount
equal to all Monthly Payments, not previously advanced by the Company (with
interest adjusted to the Mortgage Loan Remittance Rate), which were due on a
Mortgage Loan and delinquent at the dose of business on the related
Determination Date.
The Company's obligation to make Monthly Advances as to any Mortgage
Loan shall continue through the Remittance Date following the earlier to
occur of (a) the repurchase of the Mortgage Loan by the Company, if
applicable, and (b) the acquisition or disposition of title to the related
Mortgaged Property through foreclosure or receipt of a deed in lieu of
foreclosure; provided, however, that the Company shall not be required to
-------- -------
make a Monthly Advance if the Company determines, in its reasonable judgment,
that such Monthly Advance would not be recoverable from Liquidation Proceeds
and other payments or recoveries (including Insurance Proceeds or
Condemnation Proceeds) on the related Mortgage Loan and delivers to the Owner
an Officer's Certificate setting forth the basis for such determination;
provided, further, that the Company shall not be required to make a Monthly
Advance with respect to the principal portion of the Monthly Payment for any
Balloon Mortgage Loan due on the maturity date of such Balloon Mortgage Loan.
Section 5.04. Compensating Interest.
---------------------
Not later than the close of business on the Business Day preceding each
Remittance Date, the Company shall from its own funds deposit in the
Custodial Account an amount equal to the lesser of (i) the aggregate of the
Prepayment Interest Shortfalls, if any, that exist in respect of the related
Principal Prepayment Period and (ii) the aggregate of the Servicing Fees for
the most recently ended calendar month.
ARTICLE VI.
GENERAL SERVICING PROCEDURE
---------------------------
Section 6.01. Assumption Agreements.
---------------------
If the Company acquires actual knowledge that a Mortgagor has
transferred or proposes to transfer the related Mortgaged Property, the
Company shall enforce any related "due-on-sale" clause consistent with its
practices for mortgage loans it services for its own account. If the Company
elects not to enforce such due-on-sale clause, the Company may enter into an
assumption agreement with the party to whom such Mortgaged Property is to be
or has been conveyed. If any assumption fee is collected by the Company for
entering into an assumption agreement, the Company shall be entitled to
retain a portion of such fee up to an amount equal to 1% of the outstanding
principal balance of the related Mortgage Loan as additional servicing
compensation, and shall deposit into the Custodial Account any portion
thereof that exceeds 1% of such outstanding principal balance.
Section 6.02. Satisfaction of Mortgages and Release of Mortgage
-------------------------------------------------
Files.
- -----
Upon the payment in full of any Mortgage Loan, the Company shall request
execution of any document necessary to satisfy the Mortgage Loan and delivery
to it of the portion of the Mortgage File held by the Owner or the Custodian.
Upon receipt of such request, the related mortgage documents promptly shall
be released to the Company and the Company shall prepare and process any
satisfaction or release. No expense incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Custodial Account or the Owner.
From time to time and as appropriate for the servicing or foreclosure of
the Mortgage Loan, including for this purpose collection under any Primary
Insurance Policy, the Owner shall, upon request of the Company and delivery
to the Owner of a servicing receipt signed by a Servicing Officer, release
the requested portion of the Mortgage File held by the Owner to the Company.
Such servicing receipt shall obligate the Company to return the related
Mortgage documents to the Owner when the need therefor by the Company no
longer exists, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited into
the Custodial Account or the Mortgage File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially
or nonjudicially. Upon receipt of a certificate of a Servicing Officer
stating that such Mortgage Loan was liquidated, the servicing receipt shall
be released by the Owner to the Company.
Section 6.03. Servicing Compensation.
----------------------
As compensation for its services hereunder, the Company shall be
entitled to a Servicing Fee payable with respect to each Mortgage Loan. As to
each Mortgage Loan, the Servicing Fee shall be payable monthly from payments
of interest on such Mortgage Loan prior to the deposit of such payments into
the Custodial Account, shall accrue at the applicable Servicing Fee Rate, and
shall be computed on the basis of the same principal amount and for the same
period respecting which such interest payment was computed. The Company shall
be entitled to recover accrued but unpaid Servicing Fees in respect of any
Mortgage Loan to the extent permitted by Section 4.05. The Company's right to
the Servicing Fee shall not be transferred in whole or in part except in
connection with the transfer of all the Company's obligations under this
Agreement. Servicing compensation in addition to the Servicing Fee, in the
form of assumption fees as provided in Section 6.01, default interest in
excess of the Mortgage Interest Rate and late payment charges, in each case
to the extent collected, shall be retained by the Company and shall not be
required to be deposited into the Custodial Account. The Company shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder and shall not be entitled to reimbursement therefor
except as specifically provided for herein.
Section 6.04. Annual Statement as to Compliance.
---------------------------------
The Company will deliver to the Owner on or before April 1 of each year,
beginning with April 1 of the calendar year after the year in which the first
Closing Date occurs, an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Company during the
preceding calendar year and of performance under this Agreement has been made
under such officers' supervision, and (ii) to the best of such officers'
knowledge, based on such review, the Company has fulfilled all of its
material obligations under this Agreement throughout such year in all
material respects, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof.
Section 6.05. Annual Independent Certified Public Accountants'
------------------------------------------------
Servicing Report.
- ----------------
On or before April 1 of each year, beginning with April 1 of the
calendar year after the year in which the first Closing Date occurs, the
Company at its expense shall cause a firm of independent public accountants
(which may also render other services to the Company) to furnish a report to
the Owner to the effect that all Mortgage Loans serviced by the Company under
this Agreement were included in the total population or mortgage loans
subject to selection for testing in such firm's examination of certain
documents and records, that such examination was conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers
and that such examination disclosed no items of material noncompliance with
the provisions of the Uniform Single Attestation Program for Mortgage
Bankers, except for such items of noncompliance as shall be set forth in such
report.
Section 6.06. Owner's Right to Examine Company Records.
----------------------------------------
The Owner shall have the right to examine and audit, during business
hours or at such other times as might be reasonable under applicable
circumstances, any and all of the books, records, documentation or other
information of the Company, or held by another for the Company or on its
behalf or otherwise, which may be relevant to the performance or observance
by the Company of the terms, covenants or conditions of this Agreement.
The Company shall provide to the Owner and any supervisory agents or
examiners which may relate to the Owner access to any documentation regarding
the Mortgage Loans which may be required by any applicable regulations. Such
access shall be afforded without charge, upon reasonable request, during
normal business hours and at the offices of the Company.
ARTICLE VII.
REPORTS TO BE PREPARED BY COMPANY
---------------------------------
Section 7.01. Company Shall Provide Information as Reasonably
-----------------------------------------------
Required.
- --------
The Company shall furnish to the Owner during the term of this
Agreement, such periodic, special or other reports, information or
documentation, whether or not provided for herein, as shall be necessary,
reasonable or appropriate in respect to Owner, or otherwise in respect to the
purposes of this Agreement, including any reports, information or
documentation reasonably required to comply with any regulations regarding
any supervisory agents or examiners of the Owner, all such reports or
information to be as provided by and in accordance with such applicable
instructions and directions as the Owner may reasonably request. The Company
agrees to execute and deliver all such instruments and take all such action
as the Owner, from time to time, may reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement.
ARTICLE VIII.
THE COMPANY
-----------
Section 8.01. Indemnification; Third Party Claims.
-----------------------------------
(a) The Company agrees to indemnify the Owner and hold it harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that any
Owner may sustain in any way related to the failure of the Company to perform
its duties and service the Mortgage Loans substantially in accordance with
the terms of this Agreement.
(b) The Company shall promptly notify the Owner if a material claim is
made by a third party with respect to this Agreement or the Mortgage Loans,
assume the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy
any judgment or decree which may be entered against it or the Owner in
respect of such claim. The Company shall follow any written instructions
received from the Owner in connection with such claim. The Owner shall
promptly reimburse the Company for all amounts advanced by it pursuant to the
preceding sentence except when the claim in any way relates to the Company's
indemnification pursuant to Section 3.01 or to the failure of the Company to
service and administer the Mortgages substantially in accordance with the
terms of this Agreement.
Section 8.02. Merger or Consolidation of the Company.
--------------------------------------
The Company will keep in full effect its existence, rights and
franchises as a corporation under the laws of the state of its incorporation,
and will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, or
any of the Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Company may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Company shall be a party, or any Person succeeding to the business of the
Company, shall be the successor of the Company 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.
Section 8.03. Limitation on Liability of the Company and Others.
-------------------------------------------------
Neither the Company nor any of the officers, employees or agents of the
Company shall be under any liability to any Owner 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 Company or any such person against any breach
of warranties or representations made herein, or failure to perform its
obligations substantially in accordance with any standard of care set forth
in this Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Agreement. The
Company and any officer, employee or agent of the Company 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 Company shall not
be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may involve it in any
expenses or liability; provided, however,
-------- -------
that the Company may, with the consent of the Owner, undertake any such
action which it may deem necessary or desirable in respect to this Agreement
and the rights and duties of the parties hereto. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall
be expenses, costs and liabilities for which the Owner will be liable. The
Company shall be entitled to be reimbursed therefor from the Owner upon
written demand.
Section 8.04. Company Not to Resign.
---------------------
The Company not to resign from the obligations and duties hereby imposed
on it except by mutual consent of the Company and the Owner or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Company. Any such
determination permitting the resignation of the Company shall be evidenced by
an Opinion of Counsel to such effect delivered to the Owner. No such
resignation shall become effective until a successor shall have assumed the
Company's responsibilities and obligations hereunder in the manner provided
in Section 11.01.
Section 8.05. No Transfer of Servicing.
------------------------
Subject to Sections 4.15 and 11.04 hereof, with respect to the retention
of the Company to service the Mortgage Loans hereunder, the Company
acknowledges that the Owner has acted in reliance upon the Company's
independent status, the adequacy of its servicing facilities, plant,
personnel, records and procedures, its integrity, reputation and financial
standing and the continuance thereof. Without in any way limiting the
generality of this Section, the Company will neither assign this Agreement or
the servicing hereunder nor delegate its rights or duties hereunder or any
portion thereof, or sell or otherwise dispose of all or substantially all of
its property or assets, without the prior written approval of the Owner,
which approval shall not be unreasonably withheld.
ARTICLE IX.
DEFAULT
-------
Section 9.01. Events of Default.
-----------------
In case one or more of the following Events of Default by the Company
shall occur and be continuing, that is to say:
(i) any failure by the Company to remit to the Owner any payment
required to be made under the terms of this Agreement which continues
unremedied for a period of three (3) Business Days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Company by the Owner; or
(ii) failure on the part of the Company duly to observe or perform in
any material respect any other of the covenants or agreements on the part of
the Company set forth in this Agreement which continues unremedied for a
period of thirty (30) days (except that such number of days shall be fifteen
(15) in the case of a failure to pay any premium for any insurance policy
required to be maintained under this Agreement) after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Company by the Owner; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator, receiver
or liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or liquidation
of its affairs, shall have been entered against the Company and such decree
or order shall have remained in force undischarged or unstayed for a period
of sixty (60) days; or
(iv) the Company shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Company
or of or relating to all or substantially all of its property; or
(v) the Company shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations;
or
(vi) the Company ceases to be eligible to sell Mortgage Loans to and
service Mortgage Loans for FNMA and FHLMC, and continues to be ineligible to
sell Mortgage Loans to and service Mortgage Loans for FNMA and FHLMC for a
period of sixty (60) days after the date on which written notice of such
ineligibility shall have been given to the Company by FNMA and FHLMC;
then, and in each and every such case, so long as an Event of Default shall
not have been remedied, the Owner, by notice in writing to the Company, in
addition to whatever rights the Owner may have at law or in equity to
damages, including injunctive relief and specific performance, terminate all
the rights and obligations of under this Agreement and in and to the Mortgage
Loans and the proceeds there respect to any Addition Collateral Mortgage
Loan, the obligation to administer the related ParentPower(Registered
Trademark) Agreement or | Mortgage 100 Pledge Agreement. On or after the
receipt by the Company of such written notice, all authority and power of the
Company under this Agreement, whether with resp Mortgage Loans or otherwise,
shall pass to and be vested in the successor appointed pursuant to Section
11.01, except with respect to any related ParentPower(Registered Trademark)
Agreement or Mortgage 100 Pledge Agreement. Upon written request from the
Owner, the Company shall prepare, execute and deliver, any and all documents
and other instruments, deliver to the successor all Mortgage Files, and do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise, at the Company's sole expense. The Company agrees to cooperate
with the Owner and such successor in effecting the termination of the
Company's responsibilities and rights hereunder as provided above, including,
without limitation, the transfer to such successor for administration by it
of all cash amounts which shall at the time be credited by the Company to the
Custodial Account, REO Account or Escrow Account or thereafter received with
respect to the Mortgage Loans.
Section 9.02. Waiver of Defaults.
------------------
The Owner may waive any default by the Company in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly so
waived.
ARTICLE X.
TERMINATION
-----------
Section 10.01. Termination.
-----------
The respective obligations and responsibilities of the Company shall
terminate upon: (i) the later of the final payment or other liquidation (or
any advance with respect thereto) of the last Mortgage Loan or the
disposition of all REO Property and the remittance of all funds due
hereunder; (ii) by mutual consent of the Company and the Owner in writing, or
(iii) the repurchase by the Company of all Mortgage Loans and all REO
Property at a price equal to 100% of the outstanding principal balance of
each Mortgage Loan on the day of repurchase, plus accrued interest thereon at
the Mortgage Loan Remittance Rate to the first day of the month following
repurchase, plus the appraised value of any such REO Property determined at
the expense of the Company by an appraiser mutually agreed upon by the
Company and the Owner.
The right of the Company to repurchase all Mortgage Loans and REO
Property pursuant to the preceding paragraph shall be conditioned upon the
aggregate outstanding principal balance of such Mortgage Loans at the time of
repurchase equaling One Million Dollars ($1,000,000) or less, or at such
other time with such outstanding principal balance as the parties may agree.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
------------------------
Section 11.01. Successor to the Company.
------------------------
Prior to termination of Company's responsibilities and duties under this
Agreement pursuant to Sections 8.04, 9.01, 10.01 or 11.04, the Owner shall
(i) succeed to and assume all of the Company's responsibilities, rights,
duties and obligations under this Agreement, or (ii) appoint a successor who
is a FNMA/ FHLMC approved Seller/Servicer, having a net worth of not less
than $15,000,000 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Company under this Agreement
prior to the termination of Company's responsibilities, duties and
liabilities under this Agreement. In connection with such appointment and
assumption, the Owner may make such arrangements for the compensation of such
successor out of payments on Mortgage Loans as it and such successor shall
agree. In the event that the Company's duties, responsibilities and
liabilities under this Agreement should be terminated pursuant to the
aforementioned Sections, the Company shall discharge such duties and
responsibilities during the period from the date it
acquires knowledge of such termination until the effective date thereof with
the same degree of diligence and prudence which it is obligated to exercise
under this Agreement, and shall take no action whatsoever that might impair
or prejudice the rights or financial condition of its successor. The
resignation or removal of Company pursuant to the aforementioned Sections
shall not become effective until a successor shall be appointed pursuant to
this Section and shall in no event relieve the Company of the representations
and warranties made pursuant to Section 3.01 hereof or Section 5 of the
Master Mortgage Loan Purchase Agreement and the remedies available to the
Owner hereunder and thereunder, it being understood and agreed that the
provisions of Section 3.01 hereof and Section 5 of the Master Mortgage Loan
Purchase Agreement shall be applicable to the Company notwithstanding any
such resignation or termination of the Company, or the termination of this
Agreement.
Any successor appointed as provided in this Section 11.01 shall execute,
acknowledge and deliver to the Company and to the Owner an instrument
accepting such appointment, whereupon such successor shall become fully
vested with all the rights, powers, duties, responsibilities, obligations and
liabilities of the Company, with like effect as if originally named as a
party to this Agreement. Any termination or resignation of the Company or
termination of this Agreement pursuant to Section 8.04, 9.01, 10.01, or 11.04
shall not affect any claims that the Owner may have against the Company
arising prior to any such termination or resignation.
The Company shall in a timely and reasonable manner deliver to the
successor the funds in the Custodial Account, REO Account and the Escrow
Account and the Mortgage Files and related documents and statements held by
it hereunder and the Company shall account for all funds. The Company shall
execute and deliver such instruments and do such other things all as may
reasonably be required to more fully and definitely vest and confirm in the
successor all such rights, powers, duties, responsibilities, obligations and
liabilities of the Company. The successor shall make arrangements as it may
deem appropriate to reimburse the Company for amounts the Company actually
expended pursuant to this Agreement which the successor is entitled to retain
hereunder and which would otherwise have been reimbursable to the Company
pursuant to this Agreement but for the appointment of the successor servicer.
Upon a successor's acceptance of appointment as such, the Company shall
notify the Owner by mail of such appointment.
Section 11.02. Amendment.
---------
This Agreement may be amended from time to time by the Company and the
Owner only by written agreement signed by the Company and the Owner.
Section 11.03. Assignments of Mortgage.
-----------------------
The Assignments of Mortgage shall not be recorded for so long as MLCC
shall be the Company hereunder. However, in the event that MLCC shall for any
reason no longer be the Company, then, at the Owner's request, the
Assignments of Mortgage shall be recorded in the name of the Owner or in the
name of a Person designated by the Owner in all appropriate public offices
for real property records. All recording fees related to such recordation
shall be paid by MLCC.
Section 11.04. Assignment of Servicing Rights.
------------------------------
Notwithstanding any inconsistent or contrary provision of this
Agreement, the Company may assign the servicing rights with respect to the
Mortgage Loans in accordance with Section 11.01 hereof to an entity that
meets the eligibility requirements set forth in Section 11.01 hereof.
Section 11.05. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida except to the extent preempted by Federal law.
Section 11.06. Notices.
-------
Any notices or other communications permitted or required hereunder
shall be in writing and shall be deemed conclusively to have been given if
personally delivered at or mailed by registered mail, postage prepaid, and
return receipt requested or transmitted by telex, telegraph or facsimile
transmission and by a similar mailed writing, to (i) in the case of the
Company, Merrill Lynch Credit Corporation, 4802 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, Attention: General Counsel, with a copy to
Senior Vice President, Loan Administration at the same address, or such other
address as may be furnished to the Owner in writing by the Company and (ii)
in the case of the Owner, Redwood Trust, Inc. 591 Redwood Highway, Suite 3100
Mill Valley, California 94941, Attention: Frederick H. Borden or such other
address as may be furnished to the Company in writing by the Owner.
Section 11.07. Severability Provisions.
-----------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, the
invalidity of any such covenant, agreement, provision or term of this
Agreement shall in no way affect the validity or enforceability of the other
provisions of this Agreement; provided however, that if the
-------- -------
invalidity of any covenant, agreement or provision shall deprive any party of
the economic benefit intended to be conferred by this Agreement, the parties
shall negotiate in good faith to develop a structure the economic effect of
which is as nearly as possible the same as the economic effect of this
Agreement.
Section 11.08. Exhibits.
--------
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
Section 11.09. General Interpretive Principles.
-------------------------------
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(i) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the singular, and
the use of any gender herein shall be deemed to include the other gender;
(ii) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(iii) references herein to "Articles", "Sections", "Subsections",
"Paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions
of this Agreement;
(iv) a reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which
the reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(v) the words "herein", "hereof', "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; and
(vi) the term "include" or "including" shall mean without limitation by
reason of enumeration.
Section 11.10. Reproduction of Documents.
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (i) consents, waivers and modifications which may hereafter be
executed, (ii) documents received by any party at the closing, and (iii)
financial statements, certificates and other information previously or
hereafter furnished, may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such reproduction was
made by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
Section 11.11. Successors and Assigns.
----------------------
The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.
Section 11.12. Counterparts.
------------
This Agreement may be executed in several counterparts, each of which
shall constitute an original, but all of which together shall constitute one
instrument notwithstanding that all parties are not signatories to the same
counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this Master
Servicing Agreement as of this 7th day of March, 1997.
REDWOOD TRUST, INC.
By: /s/ Douglas B. Hansen
--------------------------
Name: Douglas B. Hansen
Title: President
MERRILL LYNCH CREDIT CORPORATION
By: /s/ John M. Wheeler
-------------------------
Name: John M. Wheeler
Title: Senior Vice President
EXHIBIT A
FORM OF POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that _______________________
_____________ ("Owner") having its principal place of business at
_________________________ hereby constitutes and appoints Merrill Lynch
Credit Corporation ("MLCCN), a Delaware corporation having its principal
place of business at 4802 Deer Lake Drive East, Jacksonville, Florida 32246,
by and through any of its Vice Presidents or more senior officers, its true
and lawful Attorney-in-Fact, in its name, place and stead and for its
benefit, in connection with all mortgage loans serviced by MLCC for Owner for
the purposes of performing all acts and executing all documents in the name
of the Owner necessary and incidental to servicing said loans, including but
not limited to:
(1) Foreclosing delinquent loans or discontinuing such foreclosure
proceedings;
(2) Selling, transferring or otherwise disposing of real property
acquired through foreclosure or otherwise, including but not limited to
executing all contracts, agreements, deeds, assignments or other instruments
necessary to effect such sale, transfer or disposition, and receiving
proceeds and endorsing checks made payable to the order of Owner from such
proceedings;
(3) Preparing, executing and delivering satisfactions,
cancellations, discharges, or full or partial releases of lien, subordination
agreements, modification agreements, assumption agreements, and substitutions
of trustees under deeds of trust;
(4) Endorsing promissory notes and executing assignments of
mortgages, deeds of trust, deeds to secure debt and other security
instruments securing said promissory notes in connection with loans for which
MLCC has received full payment of all outstanding amounts due; and
(5) Any and all such other acts of any kind and nature whatsoever
that are necessary and prudent to service the loans.
Owner further grants to MLCC full power and authority to do and perform
all acts necessary for MLCC to carry into effect the power or powers granted
by or under this Limited Power of Attorney as fully as the Owner might or
could do with the same validity as if all and every such act had been herein
particularly stated, expressed and especially provided for, and hereby
ratifies and confirms all that MLCC shall lawfully have done, do, or cause to
be done by virtue of the powers and authority granted and contemplated
hereby. This Limited Power of Attorney shall be effective as of 199_.
Third parties without actual notice may rely upon the exercise of the
power granted under this Limited Power of Attorney, and may be satisfied that
this Limited Power of Attorney shall continue in full force and effect until
revoked in writing by the Owner.
(Print Name of Owner)
By:_________________________
Name:
Title:
ATTEST
_________________________
Name:
Title:
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of ___________, 199_ before me, the undersigned, a
Notary Public in and for said county and state, personally appeared
_________________________ and _________________________, personally known to
me to be the persons who executed the within instrument as
_________________________ and _________________________, respectively, on
behalf of the corporation therein named, and they duly severally acknowledged
that they reside at _________________________ and that said instrument is the
act and deed of said corporation, and that they, being authorized to do so,
executed and delivered said instrument and affixed the corporate seal thereto
for the purposes therein contained.
Witness my hand and official seal.
_________________________________
Notary Public State of __________
My Commission Expires:___________
EXHIBIT B
CUSTODIAL ACCOUNT CERTIFICATION
(Month) _______, (Year)
Merrill Lynch Credit Corporation (the "Company"), hereby certifies that
it has established the account described below as a Custodial Account
pursuant to Section 4.04 of the Master Servicing Agreement, dated as of
(Month) 1, (Year).
Title of Account: "Merrill Lynch Credit Corporation, in trust for
the Owner."
Account Number:_________________________
Address of office or branch of the Company at which Account is
maintained:
__________________________________________________
__________________________________________________
MERRILL LYNCH CREDIT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
EXHIBIT C
CUSTODIAL ACCOUNT LETTER AGREEMENT
(Month) ____, (Year)
To: _________________________
_________________________
_________________________
(the "Depository")
As "Company" under the Master Servicing Agreement, dated as of (Month)
1, (Year), (the "Agreement"), we hereby authorize and request you to
establish an account, as a Custodial Account pursuant to Section 4.04 of the
Agreement, to be designated as "Merrill Lynch Credit Corporation, in trust
for the Owner." All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Company. You may refuse any deposit which
would result in violation of the requirement that the account be fully
insured as described below. This letter is submitted to you in duplicate.
Please execute and return one original to us.
MERRILL LYNCH CREDIT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number ___________, at
the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above. The full amount deposited at any time in
the account will be insured by the Federal Deposit Insurance Corporation or
the National Credit Union Administration.
_________________________
(Name of Depository)
By:_____________________________
Name:___________________________
Title:__________________________
EXHIBIT D
ESCROW ACCOUNT CERTIFICATION
(Month) ____, (Year)
Merrill Lynch Credit Corporation (the "Company"), hereby certifies that
it has established the account described below as an Escrow Account pursuant
to Section 4.06 of the Master Servicing Agreement, dated as of (Month) 1,
(Year).
Title of Account: "Merrill Lynch Credit Corporation, in trust for
the Owner and various Mortgagors."
Account Number:_________________________
Address of office or branch of the Company at which Account is
maintained:
__________________________________________________
__________________________________________________
MERRILL LYNCH CREDIT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
EXHIBIT E
ESCROW ACCOUNT LETTER AGREEMENT
(Month)____, (Year)
To: _________________________
_________________________
_________________________
(the "Depository")
As "Company" under the Master Servicing Agreement, dated as of (Month)
l, (Year), (the "Agreement"), we hereby authorize and request you to
establish an account, as an Escrow Account pursuant to Section 4.06 of the
Agreement, to be designated as "Merrill Lynch Credit Corporation, in trust
for the Owner and various Mortgagors." All deposits in the account shall be
subject to withdrawal therefrom by order signed by the Company. You may
refuse any deposit which would result in violation of the requirement that
the account be fully insured as described below. This letter is submitted to
you in duplicate. Please execute and return one original to us.
___________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number ____________, at
the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above. The full amount deposited at any time in
the account will be insured by the Federal Deposit Insurance Corporation or
the National Credit Union Administration.
_________________________
(name of Depository)
By:_________________________
Name:_______________________
Title:______________________
EXHIBIT F
FORM OF REO ACCOUNT CERTIFICATION
(date)
Merrill Lynch Credit Corporation (the "Company) hereby certifies that it
has established the account described below as an REO Account pursuant to
Section 4.13 of the Master Servicing Agreement, dated as of (Month) 1,
(Year).
Title of Account: "Merrill Lynch Credit Corporation, in trust for
the Owner."
Account Number:_________________________
Address of office or branch of the Company at which Account is
maintained:
__________________________________________________
__________________________________________________
MERRILL LYNCH CREDIT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
EXHIBIT G
FORM OF REO ACCOUNT LETTER AGREEMENT
(date)
To: _________________________
_________________________
_________________________
(the "Depository")
As "Company" under the Master Servicing Agreement, dated as of (Month)
1, (Year) (the "Agreement"), we hereby authorize and request you to establish
an account, as an REO Account pursuant to Section 4.13 of the Agreement, to
be designated as "Merrill Lynch Credit Corporation, in trust for the Owner."
All deposits in the account shall be subject to withdrawal therefrom by order
signed by the Company. You may refuse any deposit which would result in
violation of the requirement that the account be fully insured as described
below. This letter is submitted to you in duplicate. Please execute and
return one original to us.
MERRILL LYNCH CREDIT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number _____, at the
office of the depository indicated above, and agrees to honor withdrawals on
such account as provided above. The full amount deposited at any time in the
account will be insured by the Federal Deposit Insurance Corporation or the
National Credit Union Administration.
_________________________
(name of Depository)
By:_________________________
Name:_______________________
Title:______________________
EXHIBIT H
FORM OF MONTHLY REMITTANCE ADVICE
(INFORMATION IN FNMA FORM 2010)
EXHIBIT I
(Reserved.)
EXHIBIT J
ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
------------------------------------------------
This is an Assignment, Assumption and Recognition Agreement made this _ day
of , 199 , among Redwood Trust, Inc. (the "Seller"), (the
----------- --
"Subsequent Purchaser") and Merrill Lynch Credit Corporation (the "Company").
In consideration of the mutual promises contained herein the parties
hereto agree that the mortgage loans listed on Exhibit One annexed hereto
(the "Exhibit One Mortgage Loans") now serviced by the Company for Seller
pursuant to the Master Servicing Agreement, dated as of March 7, 1997 (the
"Servicing Agreement"), between the Seller and the Company, annexed hereto as
Exhibit Two shall be subject to the terms of this Agreement.
Warranties
----------
1. The Seller and the Company warrant and represent that attached
hereto as Exhibit Two is a true, accurate and complete copy of the Servicing
Agreement with respect to the Exhibit One Mortgage Loans, which Servicing
Agreement is in full force and effect as of the date hereof and which has not
been amended or modified in any respect nor has any notice of termination
been given thereunder.
Assignment and Assumption
-------------------------
2. The Seller hereby assigns to the Subsequent Purchaser all of its
right, title and interest in and to the Servicing Agreement as the "Owner"
thereunder and to the extent of the Exhibit One Mortgage Loans, and the
Subsequent Purchaser hereby assumes all of the Seller's obligations under the
Servicing Agreement as the "Owner" thereunder and with respect to the Exhibit
One Mortgage Loans from and after the date hereof, and the Seller shall be
relieved and released of all of its obligations under the Servicing Agreement
to the extent of the Exhibit One Mortgage Loans from and after the date
hereof.
Recognition of the Subsequent Purchaser
---------------------------------------
3. From and after the date hereof, the Company shall recognize the
Subsequent Purchaser as the owner of the Exhibit One Mortgage Loans and will
service the Exhibit One Mortgage Loans for the Subsequent Purchaser as if the
Subsequent Purchaser and the Company had entered into a separate servicing
agreement for the servicing of the Exhibit One Mortgage Loans in the form of
the Servicing Agreement with the Subsequent Purchaser and the "Owner"
thereunder, the terms of which Servicing Agreement are incorporated herein by
reference. It is the intention of the Seller, the Company and the Subsequent
Purchaser that this Agreement will be a separate and distinct servicing
agreement, and the entire agreement, between the Company and the Subsequent
Purchaser to the extent of the Exhibit One Mortgage Loans and shall be binding
upon and for the benefit of the respective successors and assigns of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment,
Assumption and Recognition Agreement by their duly authorized officers as of
the day and year first above written.
REDWOOD TRUST, INC.
By:_________________________
Name:
Title:
(SUBSEQUENT PURCHASER)
By:_________________________
Name:
Title:
MERRILL LYNCH CREDIT CORPORATION
By:_____________________________
Name:
Title:
