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: October 30, 1997
(Date of earliest event reported)
Commission File No. 333-35653
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV (as depositor under the Sale and
Servicing Agreement, dated as of October 1, 1997, relating to the DiTech Home
Loan Owner Trust 1997-1, Home Loan Asset Backed Notes, Series 1997-1)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
Delaware 06-1204982
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(State of Incorporation) (I.R.S. Employer Identification No.)
1285 Avenue of the Americas
New York, New York 10019
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Address of principal executive offices (Zip Code)
(212) 713-2000
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Registrant's Telephone Number, including area code
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(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
ITEM 5. Other Events
On October 30, 1997, DiTech Home Loan Owner Trust 1997-1 (the "Trust")
issued Home Loan Asset Backed Notes, Series 1997-1, Class A-1, Class A-2, Class
A-3, Class A-4, Class M-1 and Class M-2 (the "Offered Notes"), having an
aggregate original principal balance of $111,000,000. The Offered Notes were
issued pursuant to an Indenture, dated as of October 1, 1997 (the "Indenture")
between DiTech Home Loan Owner Trust 1997-1 (the "Trust") and The Bank of New
York ("BNY", in such capacity, the "Indenture Trustee"), a copy of which is
filed as an exhibit hereto. Home Loan Asset Backed Notes, Series 1997-1, Class
B-1 and Class B-2 having an aggregate initial principal balance of $9,000,000
(collectively, the "Private Notes" and, together with the Offered Certificates,
the "Notes"), were also issued pursuant to the Indenture. The Trust was formed
by PaineWebber Mortgage Acceptance Corporation IV, a Delaware corporation (the
"Registrant"), pursuant to a Trust Agreement, dated as of October 1, 1997 (the
"Trust Agreement") among the Registrant, DiTech Funding Corporation (the
"Transferor"), Bankers Trust (Delaware) (the "Owner Trustee") and BNY (in such
capacity, the "Paying Agent"), a copy of which is filed as an exhibit hereto.
The Notes are secured by the assets of the Trust, consisting principally of a
pool of closed-end, fixed-rate home loans (the "Loans") which are secured
primarily by junior-lien mortgages, deeds of trust or other similar security
instruments. The Loans were transferred to the Issuer by the Registrant pursuant
to a Sale and Servicing Agreement, dated as of October 1, 1997 (the "Sale and
Servicing Agreement") among the Trust, the Registrant, the Transferor and BNY, a
copy of which is filed as an exhibit hereto.
In addition, the Trust, the Transferor and BNY, as administrator of the
Trust have entered into an Administration Agreement, dated as of October 1, 1997
(the "Administration Agreement"), a copy of which is filed as an exhibit hereto.
Interest on the Offered Notes will be distributed on each Distribution Date
(as defined in the Sale and Servicing Agreement). Monthly distributions in
reduction of the principal balance of the Offered Notes will be allocated to the
Offered Notes in accordance with the priorities set forth in the Sale and
Servicing Agreement.
<PAGE>
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
- ----------- -----------
(EX-4.1) Indenture, dated as of October 1, 1997, between
DiTech Home Loan Owner Trust 1997-1 and The Bank
of New York.
(EX-4.2) Sale and Servicing Agreement, dated as of October
1, 1997, among PaineWebber Mortgage Acceptance
Corporation IV, DiTech Home Loan Owner Trust
1997-1, DiTech Funding Corporation and The Bank of
New York.
(EX-99.1) Administration Agreement, dated as of October 1,
1997, among DiTech Home Loan Owner Trust 1997-1,
DiTech Funding Corporation and The Bank of New
York.
(EX-99.2) Trust Agreement, dated as of October 1, 1997,
among PaineWebber Mortgage Acceptance Corporation
IV, DiTech Funding Corporation, Bankers Trust
Delaware and The Bank of New York.
<PAGE>
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.
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
October 30, 1997
By: /s/ Barbara J. Dawson
---------------------
Barbara J. Dawson
Senior Vice President
<PAGE>
INDEX TO EXHIBITS
Paper (P) or
Exhibit No. Description lectronic(E)
- ----------- ----------- ------------
(EX-4.1) Indenture, dated as of October 1, 1997, E
between DiTech Home Loan Owner
Trust 1997-1 and The Bank of New York.
(EX-4.2) Sale and Servicing Agreement, E
dated as of October 1, 1997, among
PaineWebber Mortgage Acceptance
Corporation IV, DiTech Home Loan
Owner Trust 1997-1, DiTech Funding
Corporation and The Bank of New York.
(EX-99.1) Administration Agreement, dated as of E
October 1, 1997, among DiTech Home Loan
Owner Trust 1997-1, DiTech Funding
Corporation and The Bank of New York.
(EX-99.2) Trust Agreement, dated as of October 1, E
1997, among PaineWebber Mortgage
Acceptance Corporation IV, DiTech Funding
Corporation, Bankers Trust Delaware and The
Bank of New York.
================================================================================
INDENTURE
between
DITECH HOME LOAN OWNER TRUST 1997-1,
as Issuer
and
THE BANK OF NEW YORK,
as Indenture Trustee
Dated as of October 1, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
Home Loan Asset Backed Notes,
Series 1997-1
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions
Section 1.02. Incorporation by Reference of Trust Indenture Act
Section 1.03. Rules of Construction
ARTICLE II
THE NOTES
Section 2.01. Form
Section 2.02. Execution, Authentication, Delivery and Dating
Section 2.03. Registration; Registration of Transfer and Exchange
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes
Section 2.05. Persons Deemed Note Owners
Section 2.06. Payment of Principal and Interest; Defaulted Interest
Section 2.07. Cancellation
Section 2.08. Conditions Precedent to the Authentication of the Notes
Section 2.09. Release of Collateral
Section 2.10. Book-Entry Notes
Section 2.11. Notices to Clearing Agency
Section 2.12. Definitive Notes
Section 2.13. Tax Treatment
Section 2.14. Limitations on Transfer of the Class B-2 Notes
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest
Section 3.02. Maintenance of Office or Agency
Section 3.03. Money for Payments to Be Held in Trust
Section 3.04. Existence
Section 3.05. Protection of Collateral
Section 3.06. Annual Opinions as to Collateral
Section 3.07. Performance of Obligations; Servicing of Home Loans
Section 3.08. Negative Covenants
Section 3.09. Annual Statement as to Compliance
Section 3.10. Covenants of the Issuer
Section 3.11. Servicer's Obligations
Section 3.12. Restricted Payments
Section 3.13. Treatment of Notes as Debt for Tax Purposes
Section 3.14. Notice of Events of Default
Section 3.15. Further Instruments and Acts
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture
Section 4.02. Application of Trust Money
Section 4.03. Repayment of Moneys Held by Paying Agent
ARTICLE V
REMEDIES
Section 5.01. Events of Default
Section 5.02. Acceleration of Maturity; Rescission and Annulment
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture
Trustee
Section 5.04. Remedies; Priorities
Section 5.05. Optional Preservation of the Collateral
Section 5.06. Limitation of Suits
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and
Interest
Section 5.08. Restoration of Rights and Remedies
Section 5.09. Rights and Remedies Cumulative
Section 5.10. Delay or Omission Not a Waiver
Section 5.11. Control by Noteholders
Section 5.12. Waiver of Past Defaults
Section 5.13. Undertaking for Costs
Section 5.14. Waiver of Stay or Extension Laws
Section 5.15. Action on Notes
Section 5.16. Performance and Enforcement of Certain Obligations
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee
Section 6.02. Rights of Indenture Trustee
Section 6.03. Individual Rights of Indenture Trustee
Section 6.04. Indenture Trustee's Disclaimer
Section 6.05. Notices of Default
Section 6.06. Reports by Indenture Trustee to Holders
Section 6.07. Compensation and Indemnity
Section 6.08. Replacement of Indenture Trustee
Section 6.09. Successor Indenture Trustee by Merger
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee
Section 6.11. Eligibility; Disqualification
Section 6.12. Preferential Collection of Claims Against Issuer
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders
Section 7.02. Preservation of Information; Communications to Noteholders
Section 7.03. Reports by Issuer
Section 7.04. Reports by Indenture Trustee
Section 7.05. 144A Information
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money
Section 8.02. Trust Accounts; Distributions
Section 8.03. General Provisions Regarding Accounts
Section 8.04. Servicer's Monthly Statements
Section 8.05. Release of Collateral
Section 8.06. Opinion of Counsel
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders
Section 9.02. Supplemental Indentures with Consent of Noteholders
Section 9.03. Execution of Supplemental Indentures
Section 9.04. Effect of Supplemental Indentures
Section 9.05. Conformity with Trust Indenture Act
Section 9.06. Reference in Notes to Supplemental Indentures
Section 9.07. Amendments to Trust Agreement
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption
Section 10.02. Form of Redemption Notice
Section 10.03. Notes Payable on Redemption Date; Provision for Payment of
Indenture Trustee
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc
Section 11.02. Form of Documents Delivered to Indenture Trustee
Section 11.03. Acts of Noteholders
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies
Section 11.05. Notices to Noteholders; Waiver
Section 11.06. Conflict with Trust Indenture Act
Section 11.07. Effect of Headings and Table of Contents
Section 11.08. Successors and Assigns
Section 11.09. Separability
Section 11.10. Benefits of Indenture
Section 11.11. Legal Holidays
Section 11.12. Governing Law
Section 11.13. Counterparts
Section 11.14. Recording of Indenture
Section 11.15. Trust Obligation
Section 11.16. No Petition
Section 11.17. Inspection
EXHIBITS
EXHIBIT A - Forms of Notes
EXHIBIT B-1 - Form of Transferor Affidavit (144A)
EXHIBIT B-2 - Form of Transferee Affidavit (Accredited Investor)
EXHIBIT B-3 - Form of Transfer Affidavit
EXHIBIT C - Form of Securities Legend
<PAGE>
This Indenture entered into effective October 1, 1997, between DITECH HOME
LOAN OWNER TRUST 1997-1, a Delaware business trust, as Issuer (the "Issuer"),
and THE BANK OF NEW YORK, as Indenture Trustee (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual covenants herein contained, the Issuer and
the Indenture Trustee hereby agree as follows for the benefit of each of them
and for the equal and ratable benefit of the holders of the Issuer's Class A-1
Floating Rate Home Loan Asset Backed Notes (the "Class A-1 Notes"), Class A-2
6.59% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3 6.71% Home
Loan Asset Backed Notes (the "Class A-3 Notes"), Class A-4 7.36% Home Loan Asset
Backed Notes (the "Class A-4 Notes"), Class M-1 7.25% Home Loan Asset Backed
Notes (the "Class M-1 Notes"), Class M-2 7.35% Home Loan Asset Backed Notes (the
"Class M-2 Notes"), Class B-1 7.69% Home Loan Asset Backed Notes (the "Class B-1
Notes") and Class B-2 8.85% Home Loan Asset Backed Notes (the "Class B-2 Notes"
and, together with the Class A-1, Class A-2, Class A-3, Class A-4, Class M-1
Notes, Class M-2 Notes and Class B-1 Notes, the "Notes"):
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants on the
Closing Date, to the Indenture Trustee, as Indenture Trustee for the benefit of
the Holders of the Notes, all of the Issuer's right, title and interest in and
to: (i) the Trust Estate (as defined in the Sale and Servicing Agreement); (ii)
all right, title and interest of the Issuer in and to the Sale and Servicing
Agreement (including the Issuer's right to cause the Transferor to repurchase
Home Loans from the Issuer under certain circumstances described therein); (iii)
all present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing; (iv) all funds on deposit from time to time in
the Trust Accounts (including the Certificate Distribution Account); and (v) all
other property of the Trust from time to time (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trusts hereunder and agrees to
perform its duties required in this Indenture to the best of its ability to the
end that the interests of the Holders of the Notes may adequately and
effectively be protected. The Indenture Trustee agrees and acknowledges that the
Indenture Trustee's Home Loan Files will be held by the Custodian for the
benefit of the Indenture Trustee in Los Angeles, California. The Indenture
Trustee further agrees and acknowledges that each other item of Collateral that
is physically delivered to the Indenture Trustee will be held by the Indenture
Trustee in Los Angeles, California.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) Except as otherwise specified herein or
as the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a) hereof.
"Administration Agreement" means the Administration Agreement dated as of
October 1, 1997, among the Administrator, the Issuer and the Company.
"Administrator" means The Bank of New York, a New York banking corporation,
or any successor Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee or any agent acting under a power of attorney who is authorized to
act for the Owner Trustee in matters relating to the Issuer and who is
identified on the list of Authorized Officers delivered by the Owner Trustee to
the Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter) and, so long as the Administration
Agreement is in effect, any Vice President or more senior officer of the
Administrator who is authorized to act for the Administrator in matters relating
to the Issuer and to be acted upon by the Administrator pursuant to the
Administration Agreement and who is identified on the list of Authorized
Officers delivered by the Administrator to the Indenture Trustee on the Closing
Date (as such list may be modified or supplemented from time to time
thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement, this
Indenture, the Sale and Servicing Agreement, the Administration Agreement, the
Custodial Agreement, the Note Depository Agreement and other documents and
certificates delivered in connection herewith or therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1, Class A-2,
Class A-3, Class A-4, Class M-1, Class M-2, Class B-1 or Class B-2 Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 hereof.
"Business Day" means any day other than (i) a Saturday or a Sunday, or (ii)
a day on which banking institutions in The City of New York or the city in which
the corporate trust office of the Indenture Trustee is located are authorized or
obligated by law or executive order to be closed.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit C to the Trust Agreement.
"Class A-1 Notes", "Class A-2 Notes", "Class A-3 Notes", "Class A-4 Notes",
"Class B-1 Notes", "Class B-2 Notes", "Class M-1 Notes" and "Class M- 2 Notes"
shall each have the meaning assigned thereto in the "WITNESSETH THAT" Clause of
this Indenture.
"Class B Notes" means the Class B-1 Notes and the Class B-2 Notes.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for which from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means October 29, 1997.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Commission" means the Securities and Exchange Commission.
"Company" means DiTech Funding Corporation, a California corporation, or
any successor in interest thereto.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at 101 Barclay Street, 12th Floor East, New York, New York 10826; Attention:
Corporate Trust-MBS Administration, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders and the Issuer.
"DCR" means Duff & Phelps Credit Rating Co. or any successor thereto.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12 hereof.
"Depositor" shall mean PaineWebber Mortgage Acceptance Corporation IV, a
Delaware corporation, in its capacity as depositor under the Sale and Servicing
Agreement, or any successor in interest thereto.
"Depository Institution" means any depository institution or trust company,
including the Indenture Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations that
are rated A-1 by Standard & Poor's, DCR and Fitch (or comparable ratings if
Standard & Poor's, DCR and Fitch are not the Rating Agencies).
"Distribution Date" means the 15th day of any month or if such 15th day is
not a Business Day, the first Business Day immediately following such day,
commencing in November 1997.
"Due Period" means, with respect to any Distribution Date and any Class of
Notes, the calendar month immediately preceding the month of such Distribution
Date.
"Event of Default" has the meaning specified in Section 5.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Highest Priority Class Notes" means, until the Class Principal Balances of
all Classes of Class A Notes are reduced to zero and all sums payable to the
Holders of the Class A Notes have been paid in full, the Class A Notes; when the
Class Principal Balances of all Classes of Class A Notes have been reduced to
zero and all amounts payable to the Holders of the Class A Notes have been paid
in full, the Class M-1 Notes; when the Class Principal Balances of all Classes
of Class A Notes and Class M-1 Notes have been reduced to zero and all sums
payable to the Holders of the Class A Notes and Class M-1 Notes have been paid
in full, the Class M-2 Notes; when the Class Principal Balances of all Classes
of Class A Notes, Class M-1 Notes and Class M-2 Notes have been reduced to zero
and all sums payable to the Holders of the Class A Notes, Class M-1 Notes and
Class M-2 Notes have been paid in full, the Class B-1 Notes; when the Class
Principal Balances of all Classes of Class A Notes, Class M-1 Notes, Class M-2
Notes and Class B-1 Notes have been reduced to zero and all sums payable to the
Holders of the Class A Notes, Class M-1 Notes, Class M-2 Notes and Class B-1
Notes have been paid in full, the Class B-2 Notes.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means The Bank of New York, a New York banking
corporation, as Indenture Trustee under this Indenture, or any successor
Indenture Trustee hereunder.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Transferor and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Transferor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Transferor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 hereof, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Issuer" means DiTech Home Loan Owner Trust 1997-1 until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" mean a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Majority Highest Priority Class Noteholders" means on any date, Holders of
Highest Priority Class Notes representing more than 50% of the Voting Interests
of the Highest Priority Class Notes then Outstanding.
"Maturity Date" means, with respect to each Class of Notes, the applicable
maturity date set forth below:
Class Maturity Date
A-1 April 15, 2009
A-2 April 15, 2013
A-3 August 15, 2018
A-4 January 15, 2024
M-1 January 15, 2024
M-2 January 15, 2024
B-1 January 15, 2024
B-2 January 15, 2024
"Note" means a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4
Note, Class M-1 Note, Class M-2 Note, Class B-1 Note or Class B-2 Note, as
applicable.
"Note Depository Agreement" means the agreement to be entered into among
the Issuer, the Administrator, the Indenture Trustee and The Depository Trust
Company, as the initial Clearing Agency, relating to the Book-Entry Notes.
"Note Interest Rate" means, with respect to any Class of Notes, the
applicable rate per annum specified below (computed on the basis of a 360-day
year assumed to consist of twelve 30-day months except that with respect to the
Class A-1 Notes, calculations of accrued interest shall be made on the basis of
a 360-day year and actual number of days elapsed in each Accrual Period):
Class A-1: (1)
Class A-2: 6.59%
Class A-3: 6.71%
Class A-4: 7.36%; provided, however, that commencing
on the first day of the month in which the
Clean-up Call Date occurs, the Note Interest
Rate for the Class A-4 Notes shall be 7.86%
Class M-1: 7.25%
Class M-2: 7.35%
Class B-1: 7.69%
Class B-2: 8.85%
- ------------------------------
(1) Interest will accrue on the Class A-1 Notes during each Accrual Period at
a per annum interest rate equal to LIBOR for the related LIBOR
Determination Date plus 0.10%, subject to a maximum rate equal to the Net
Weighted Average Rate. The Note Interest Rate applicable to the Class A-1
Notes for the initial Accrual Period will be 7.65625% per annum.
"Note Owner" means, with respect to a Book-Entry Note, the Person that is
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.03 hereof.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer or the Administrator, under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.01
hereof, and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer or the Administrator.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be an employee of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee, as
Indenture Trustee, and shall comply with any applicable requirements of Section
11.01 hereof and shall be in form and substance satisfactory to the Indenture
Trustee.
"Outstanding" means, with respect to any Note and as of the date of
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has theretofore been deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision for such notice
satisfactory to the Indenture Trustee has been made);
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser; provided, however, that in determining
whether the Holders of the requisite Voting Interests of the Outstanding
Notes have given any request, demand, authorization, direction, notice,
consent or waiver hereunder or under any Basic Document, Notes owned by the
Issuer, any other obligor upon the Notes, the Transferor or any Affiliate
of any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that the Indenture Trustee
knows to be owned in such manner shall be disregarded. Notes owned in such
manner that have been pledged in good faith may be regarded as Outstanding
if the pledgee establishes to the satisfaction of the Indenture Trustee
that the pledgee has the right so to act with respect to such Notes and
that the pledgee is not the Issuer, any other obligor upon the Notes, the
Transferor or any Affiliate of any of the foregoing Persons; and
(iv) Notes for which the related Maturity Date has occurred.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Bankers Trust (Delaware), not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
hereof and is authorized by the Issuer to make payments to and distributions
from the Note Distribution Account, including payment of principal of or
interest on the Notes on behalf of the Issuer.
"Payment Date" means any Distribution Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, limited liability company, limited
liability partnership or government or any agency or political subdivision
thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.04 hereof in lieu of a mutilated,
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency" means any of (i) Standard & Poor's; (ii) DCR or (iii)
Fitch. If no such organization or successor thereto is any longer in existence,
"Rating Agency" shall be a nationally recognized statistical rating organization
or other comparable Person rating the Notes.
"Rating Agency Condition" means, with respect to any applicable action,
that each Rating Agency shall have been given 10 days' prior notice thereof (or
such shorter period as is acceptable to each Rating Agency) and that each of the
Rating Agencies shall have notified the Depositor, the Servicer and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes.
"Record Date" means, as to each Distribution Date, the last Business Day of
the month immediately preceding the month in which such Distribution Date
occurs.
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01 hereof, the Distribution Date specified by the Servicer or the
Issuer pursuant to such Section 10.01.
"Registered Holder" means the Person in the name of which a Note is
registered on the Note Register on the applicable Record Date.
"Residual Interest Certificate" has the meaning assigned to such term in
Section 1.1 of the Trust Agreement.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement dated
as of October 1, 1997, among the Issuer, PaineWebber Mortgage Acceptance
Corporation IV, as Depositor, and DiTech Funding Corporation, as Transferor and
Servicer, and The Bank of New York, as Indenture Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" shall mean DiTech Funding Corporation, in its capacity as
servicer under the Sale and Servicing Agreement, and any Successor Servicer
thereunder.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies or any successor thereto.
"State" means any one of the States of the United States of America or the
District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e) hereof.
"Trust Agreement" means the Trust Agreement dated as of October 1, 1997,
among PaineWebber Mortgage Acceptance Corporation IV, as Depositor, DiTech
Funding Corporation, as the Company, Bankers Trust (Delaware), as Owner Trustee,
and The Bank of New York, as Paying Agent.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code as in effect in the relevant jurisdiction, as amended from time to time.
"Voting Interests" means with respect to any Class of Notes, the percentage
equal to a fraction, the numerator of which is equal to the Class Principal
Balance of such Class of Notes and the denominator of which is equal to the
aggregate Class Principal Balances of all Classes of Notes Outstanding.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
Section 1.02. Incorporation by Reference of Trust Indenture Act. (a)
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
(b) All other TIA terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by rule of the Securities
and Exchange Commission have the respective meanings assigned to them by such
definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect in the United States from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented (as provided in such agreements) and includes (in
the case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; references to a Person are
also to its permitted successors and assigns.
ARTICLE II
THE NOTES
Section 2.01. Form. The Notes shall be designated as the "DiTech Home
Loan Owner Trust 1997-1 Asset Backed Notes, Series 1997-1". Each Class of Notes
shall be in substantially the form set forth in Exhibit A hereto, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution thereof. Any portion of the text of any Note may
be set forth on the reverse thereof, with an appropriate reference thereto on
the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes are set forth in Exhibit A hereto. The terms of each Class of Notes are
part of the terms of this Indenture.
Section 2.02. Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee. The signature of any such Authorized Officer on the Notes may be manual
or facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Owner Trustee shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in Section 2.08
hereof, the Indenture Trustee shall upon Issuer Order authenticate and deliver
the eight Classes of Notes for original issue in the following principal
amounts: Class A-1, $24,636,000; Class A-2, $22,945,000; Class A-3, $24,897,000;
Class A-4, $13,622,000; Class M-1, $17,700,000; Class M-2, $7,200,000; Class
B-1, $6,300,000; Class B-2, $2,700,000. The aggregate principal amounts of such
Classes of Notes outstanding at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture Trustee to
or upon the order of the Issuer on the Closing Date shall be dated October __,
1997. All other Notes that are authenticated after the Closing Date for any
other purpose under the Indenture shall be dated the date of their
authentication. The Notes shall be issuable as registered Notes in the minimum
denomination of $25,000 and integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
Section 2.03. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee initially shall be the "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02 hereof, the
Issuer shall execute, and the Indenture Trustee shall authenticate and the
Noteholder shall obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes of the same Class in
any authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of the
same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, the Notes which the Noteholder making the exchange
is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agents' Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 9.06 hereof not involving any transfer.
The preceding provisions of this Section 2.03 notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may reasonably be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, an Authorized Officer of the Owner Trustee or the
Administrator on behalf of the Issuer shall execute, and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a replacement Note of the
same Class; provided, however, that if any such destroyed, lost or stolen Note,
but not a mutilated Note, shall have become or within seven days shall be due
and payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Indenture Trustee shall be
entitled to recover such replacement Note (or such payment) from the Person to
which it was delivered or any Person taking such replacement Note from such
Person to which such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section 2.04, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 2.04 in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 2.04 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.05. Persons Deemed Note Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in the name of
which any Note is registered (as of the day of determination) as the Note Owner
for the purpose of receiving payments of principal of and interest, if any, on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 2.06. Payment of Principal and Interest; Defaulted Interest. (a)
Each Class of Notes shall accrue interest at the related Note Interest Rate, and
such interest shall be payable on each Distribution Date as specified in Exhibit
A hereto, subject to Section 3.01 hereof. With respect to the Class A-1 Notes,
the Indenture Trustee shall determine LIBOR for each applicable Accrual Period
on the second LIBOR Business Day prior thereto. Any installment of interest or
principal, if any, payable on any Note that is punctually paid or duly provided
for by the Issuer on the applicable Distribution Date shall be paid to the
Person in the name of which such Note (or one or more Predecessor Notes) is
registered on the Record Date by check mailed first-class postage prepaid to
such Person's address as it appears on the Note Register on such Record Date,
except that, unless Definitive Notes have been issued pursuant to Section 2.12
hereof, with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payment will be made by wire transfer in immediately available funds to the
account designated by such nominee and except for the final installment of
principal payable with respect to such Note on a Distribution Date or on the
applicable Maturity Date for such Class of Notes (and except for the Termination
Price for any Note called for redemption pursuant to Section 10.01) hereof,
which shall be payable as provided in Section 2.06(b) below. The funds
represented by any such checks returned undelivered shall be held in accordance
with Section 3.03 hereof.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit A
hereto. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes together with any amount of Loss Reimbursement Deficiency in respect
thereof of a Class of Notes shall be due and payable, if not previously paid, on
the earlier of (i) the applicable Maturity Date of such Class, (ii) the
Redemption Date or (iii) the date on which an Event of Default shall have
occurred and be continuing, if the Indenture Trustee or the Majority Highest
Class Noteholders shall have declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 hereof.
All principal payments on each Class of Notes shall be made pro rata to the
Noteholders of such Class entitled thereto. The Indenture Trustee shall notify
the Person in the name of which a Note is registered at the close of business on
the Record Date preceding the Distribution Date on which the Issuer expects that
the final installment of principal of and interest on such Note will be paid.
Such notice shall be mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.02 hereof.
Section 2.07. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall
promptly be cancelled by the Indenture Trustee. The Issuer may at any time
deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall promptly be cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section 2.07, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be returned to it.
Section 2.08. Conditions Precedent to the Authentication of the Notes. The
Notes may be authenticated by the Indenture Trustee, upon Issuer Request and
upon receipt by the Indenture Trustee of the following:
(a) An Issuer Order authorizing the execution and authentication of
such Notes by the Issuer.
(b) All of the items of Collateral which shall be delivered to the
Indenture Trustee or its designee.
(c) An executed counterpart of the Trust Agreement.
(d) An Opinion of Counsel addressed to the Indenture Trustee to the
effect that:
(i) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with;
(ii) the Owner Trustee has the power and authority to execute,
deliver and perform their obligations under the Trust Agreement;
(iii) the Issuer has been duly formed, is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C.
Section 3801 et seq., and has power, authority and legal right to
execute and deliver this Indenture, the Administration Agreement and
the Sale and Servicing Agreement;
(iv) assuming due authorization, execution and delivery hereof by
the Indenture Trustee, the Indenture is the valid, legal and binding
obligation of the Issuer, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent or preferential conveyance and other similar
laws of general application affecting the rights of creditors
generally and to general principles of equity (regardless of whether
such enforcement is considered in a Proceeding in equity or at law);
(v) the Notes, when executed and authenticated as provided herein
and delivered against payment therefor, will be the valid, legal and
binding obligations of the Issuer pursuant to the terms of this
Indenture, entitled to the benefits of this Indenture, and will be
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent or
preferential conveyance and other similar laws of general application
affecting the rights of creditors generally and to general principles
of equity (regardless of whether such enforcement is considered in a
Proceeding in equity or at law);
(vi) the Trust Agreement authorizes the Issuer to Grant the
Collateral to the Indenture Trustee as security for the Notes;
(vii) this Indenture has been duly qualified under the Trust
Indenture Act;
(viii) no authorization, approval or consent of any governmental
body having jurisdiction in the premises which has not been obtained
by the Issuer is required to be obtained by the Issuer for the valid
issuance and delivery of the Notes, except that no opinion need be
expressed with respect to any such authorizations, approvals or
consents as may be required under any state securities or "blue sky"
laws; and
(ix) any other matters as the Indenture Trustee may reasonably
request.
(e) An Officer's Certificate complying with the requirements of
Section 11.01 hereof and stating that:
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes applied for will not result in any breach of any
of the terms, conditions or provisions of, or constitute a default
under, the Trust Agreement, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Issuer is a party or by
which it is bound, or any order of any court or administrative agency
entered in any Proceeding to which the Issuer is a party or by which
it may be bound or to which it may be subject, and that all conditions
precedent provided in this Indenture relating to the authentication
and delivery of the Notes applied for have been complied with;
(ii) the Issuer is the owner of all of the Home Loans, has not
assigned any interest or participation in the Home Loans (or, if any
such interest or participation has been assigned, it has been
released) and has the right to Grant all of the Home Loans to the
Indenture Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in and to the Collateral, and has delivered
or caused the same to be delivered to the Indenture Trustee;
(iv) attached thereto are true and correct copies of letters
signed by Standard & Poor's, DCR and Fitch confirming that the Class
A-1, Class A-2, Class A-3 and Class A-4 Notes have been rated "AAA"
and letters signed by Standard & Poor's, DCR and Fitch confirming that
the Class M-1 Notes have been rated "AA", the Class M-2 Notes have
been rated "A-", the Class B-1 Notes have been rated "BBB" and the
Class B-2 Notes have been rated "BB"; and
(v) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with.
Section 2.09. Release of Collateral. (a) Except as otherwise provided in
subsections (b) and (c) of this Section 2.09, Section 11.01 hereof and the terms
of the Basic Documents, the Indenture Trustee shall release property from the
lien of this Indenture only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion of Counsel in
lieu of such Independent Certificates to the effect that the TIA does not
require any such Independent Certificates.
(b) The Servicer, on behalf of the Issuer, shall be entitled to obtain
a release from the lien of this Indenture for any Home Loan and the related
Mortgaged Property at any time (i) after a payment by the Transferor or the
Issuer of the Purchase Price of the Home Loan, (ii) after a Qualified
Substitute Home Loan is substituted for such Home Loan and payment of the
Substitution Adjustment, if any, (iii) after liquidation of the Home Loan
in accordance with Section 4.11 of the Sale and Servicing Agreement and the
deposit of all Recoveries thereon in the Collection Account, or (iv) upon
the termination of a Home Loan (due to, among other causes, a prepayment in
full of the Home Loan and sale or other disposition of the related
Mortgaged Property), if the Issuer delivers to the Indenture Trustee an
Issuer Request (A) identifying the Home Loan and the related Mortgaged
Property to be released, (B) requesting the release thereof, (C) setting
forth the amount deposited in the Collection Account with respect thereto,
and (D) certifying that the amount deposited in the Collection Account (x)
equals the Purchase Price of the Home Loan, in the event a Home Loan and
the related Mortgaged Property are being released from the lien of this
Indenture pursuant to item (i) above, (y) equals the Substitution
Adjustment related to the Qualified Substitute Home Loan and the Deleted
Home Loan released from the lien of the Indenture pursuant to item (ii)
above, or (z) equals the entire amount of Recoveries received with respect
to such Home Loan and the related Mortgaged property in the event of a
release from the lien of this Indenture pursuant to items (iii) or (iv)
above.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian temporarily to release to the
Servicer the Indenture Trustee's Home Loan File pursuant to the provisions
of Section 7.02 of the Sale and Servicing Agreement upon compliance by the
Servicer with the provisions thereof; provided, however, that the Indenture
Trustee's Home Loan File shall have been stamped to signify the Issuer's
pledge to the Indenture Trustee under the Indenture.
Section 2.10. Book-Entry Notes. The Notes, when authorized by an Issuer
Order, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by or on behalf of the Issuer. The Book-Entry Notes shall be
registered initially on the Note Register in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Note Owner will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12 hereof. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12 hereof:
(i) the provisions of this Section 2.10 shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole Holder of the Notes, and
shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section 2.10 conflict
with any other provisions of this Indenture, the provisions of this Section
2.10 shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12
hereof, the initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12 hereof, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency and shall have no obligation to such Note Owners.
Section 2.12. Definitive Notes. (a) If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, Owners of the Book-Entry Notes
representing beneficial interests aggregating at least a majority of the Voting
Interests of the Outstanding Notes advise the Clearing Agency in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and each of them
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall
recognize the Holders of the Definitive Notes as Noteholders.
(b) Notwithstanding the foregoing, (i) Holders of the Class B Notes held as
Book-Entry Notes, may transfer such Class B Notes to transferees who will hold
such Class B Notes as Definitive Notes and (ii) Holders of the Class B Notes
held as Definitive Notes, may transfer the Class B Notes to transferees who will
hold such Class B Notes as Book-Entry Notes, if the conditions set forth in this
Section 2.12 are satisfied.
Any and all transfers from a Holder of a Class B Book-Entry Note to a
transferee wishing to take delivery in the form of a Definitive Note will
require the transferee to take delivery subject to the restrictions on the
transfer of such Definitive Note described in the legend set forth on the face
of the Class B Note substantially in the form of Exhibit C as attached hereto
(the "Legend"), and such transferee agrees that it will transfer such a Class B
Note only as provided therein and herein. No such transfer shall be made and the
Indenture Trustee shall not register any such transfer unless such transfer is
made in accordance with Section 2.12(b) and Section 2.14.
Upon acceptance for exchange or transfer of a beneficial interest in a
Class B Book-Entry Note for a Definitive Note as provided herein, the Indenture
Trustee shall endorse on (or cause the endorsement of) the schedule affixed to
the related Book-Entry Note (or on a continuation of such schedule affixed to
the such Book-Entry Note and made a part thereof) an appropriate notation
evidencing the date of such exchange or transfer and a decrease in the principal
balance of such Book-Entry Note equal to the principal balance of such
Definitive Note issued in exchange therefor or upon transfer thereof. Unless
determined otherwise by the Indenture Trustee in accordance with applicable law,
a Definitive Note issued upon transfer of or exchange for a beneficial interest
in a Class B Book-Entry Note shall bear the Legend.
If a Holder of a Class B Definitive Note wishes at any time to transfer
such Definitive Note to a Person who wishes to take delivery thereof in the form
of a beneficial interest in the Book-Entry Note, such transfer may be effected
only in accordance with the applicable procedures of the Depository Institution,
and Section 2.12(b) and Section 2.14. Upon receipt by the Indenture Trustee at
the Corporate Trust Office of (1) the Class B Definitive Note to be transferred
with an assignment and transfer, (2) written instructions given in accordance
with the applicable procedures from a participant directing the Indenture
Trustee to credit or cause to be credited to another specified participant's
account a beneficial interest in the Book-Entry Note, in an amount equal to the
principal balance of such Definitive Note to be so transferred, (3) a written
order given in accordance with the applicable procedures containing information
regarding the account of the participant to be credited with such beneficial
interest, and (4) transfer documentation received for a "Qualified Institutional
Buyer" pursuant to Section 2.14, the Trustee shall cancel such Definitive Note,
execute and deliver a new Definitive Note for the principal balance of the
Definitive Note not so transferred, registered in the name of the Holder or the
Holder's transferee (as instructed by the Holder), and the Indenture Trustee
shall instruct the Depository Institution to increase the principal balance of
the Book-Entry Note, by the principal balance of the Definitive Note to be so
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions a corresponding principal balance of the
Book-Entry Note.
Under no circumstances may an institutional "accredited investor" within
Regulation D of the Securities Act take delivery in the form of a beneficial
interest in a Class B Book-Entry Note if such purchaser is not a "qualified
institutional buyer" as defined under Rule 144A under the Securities Act.
An exchange of a beneficial interest in a Class B Book-Entry Note for a
Definitive Note or Notes, an exchange of a Class B Definitive Note or Notes for
a beneficial interest in the Book-Entry Note and exchange of a Class B
Definitive Note or Notes for another Definitive Note or Notes (in each case,
whether or not such exchange is made in anticipation of subsequent transfer, and
in the case of the Book-Entry Note, so long as the Book-Entry Note remains
outstanding and is held by or on behalf of the Depository Institution), may be
made only in accordance with Section 2.12(b) and Section 2.14 and in accordance
with the rules of the Depository Institution.
Section 2.13. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that for all purposes,
including federal, state and local income, single business and franchise tax
purposes, the Notes will qualify as indebtedness secured by the Collateral. The
Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of a Note (and each Note Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for all purposes,
including federal, state and local income, single business and franchise tax
purposes, as indebtedness secured by the Collateral.
Section 2.14. Limitations on Transfer of the Class B Notes. The Class B
Notes have not been and will not be registered under the Securities Act and will
not be listed on any exchange. No transfer of a Class B Definitive Note or
exchange of a Class B Definitive Note for a Class B Book-Entry Note (or vice
versa) shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under the
Securities Act and such state securities laws. In the event that a transfer of
Class B Note in Definitive Note form is to be made in reliance upon an exemption
from the Securities Act and state securities laws, in order to assure compliance
with the Securities Act and such laws, the prospective transferee shall (A) in
the event that the transfer is made in reliance upon Rule 144A under the
Securities Act, the Indenture Trustee shall require that the transferor deliver
a certification substantially in the form of Exhibit B-1 hereto, or (B) in the
event that the transfer is made to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act that is not a "qualified institutional buyer," the Indenture
Trustee shall require that the transferee deliver a certification substantially
in the form of Exhibit B-2 hereto. In the event of a transfer of a Class B Note
pursuant to clause (A) or (B) in the immediately preceding sentence, the
Indenture Trustee shall require that the transferee deliver a certification
substantially in the form of Exhibit B-3 hereto.
Section 2.15. CUSIP Numbers. The Issuer in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Issuer will
promptly notify the Indenture Trustee of any change in the "CUSIP" numbers.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay (or will cause to be paid duly and punctually) the principal of
and interest on the Notes in accordance with the terms of the Notes and this
Indenture. Without limiting the foregoing, subject to and in accordance with
Section 8.02(c) hereof, the Issuer will cause to be distributed all amounts on
deposit in the Note Distribution Account on each Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class
A-2 Notes, to the Class A-2 Noteholders, (iii) for the benefit of the Class A-3
Notes, to the Class A-3 Noteholders, (iv) for the benefit of the Class A-4
Notes, to the Class A-4 Noteholders, (v) for the benefit of the Class M-1 Notes,
to the Class M-1 Noteholders, (vi) for the benefit of the Class M-2 Notes, to
the Class M-2 Noteholders, (x) for the benefit of the Class B-1 Notes, to the
Class B-1 Noteholders and (vii) for the benefit of the Class B Notes, to the
Class B Noteholders. Amounts properly withheld under the Code by any Person from
a payment to any Noteholder of interest and principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture. The Notes shall be non-recourse obligations of the Issuer and shall
be limited in right of payment to amounts available from the Collateral, as
provided in this Indenture. The Issuer shall not otherwise be liable for
payments on the Notes. If any other provision of this Indenture shall be deemed
to conflict with the provisions of this Section 3.01, the provisions of this
Section 3.01 shall control.
Section 3.02. Maintenance of Office or Agency. The Issuer will or will
cause the Administrator to maintain in the Borough of Manhattan in The City of
New York an office or agency where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served. The Issuer hereby
initially appoints the Administrator to serve as its agent for the foregoing
purposes and to serve as Paying Agent with respect to the Notes and the
Certificates. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments to Be Held in Trust. As provided in
Section 8.02(a) and (b) hereof, all payments of amounts due and payable with
respect to any Notes that are to be made from amounts withdrawn from the
Collection Account and the Note Distribution Account pursuant to Section 8.02(c)
hereof shall be made on behalf of the Issuer by the Indenture Trustee or by the
Paying Agent, and no amounts so withdrawn from the Collection Account and the
Note Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section 3.03.
On or before the Business Day preceding each Distribution Date and the
Redemption Date, the Paying Agent shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the amounts due on
such Distribution Date or the Redemption Date under the Notes, such sum to be
held in trust for the benefit of the Persons entitled thereto, and (unless the
Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written notice
thereof to the Indenture Trustee. Any Paying Agent appointed by the Issuer shall
be a Person which would be eligible to be Indenture Trustee hereunder as
provided in Section 6.11 hereof. The Issuer shall not appoint any Paying Agent
(other than the Indenture Trustee) which is not, at the time of such
appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer
(or any other obligor upon the Notes) of which it has actual knowledge in
the making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith; provided, however, that
with respect to withholding and reporting requirements applicable to
original issue discount (if any) on the Notes, the Issuer shall have first
provided the calculations pertaining thereto to the Indenture Trustee.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds or abandoned
property, any money held by the Indenture Trustee or any Paying Agent in trust
for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request; and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Indenture Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided, however,
that the Indenture Trustee or such Paying Agent, before being required to make
any such repayment, shall at the expense and direction of the Issuer cause to be
published, once in a newspaper of general circulation in The City of New York
customarily published in the English language on each Business Day, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).
Section 3.04. Existence. (a) Subject to subparagraph (b) of this Section
3.04, the Issuer will keep in full effect its existence, rights and franchises
as a business trust under the laws of the State of Delaware (unless it becomes,
or any successor Issuer hereunder is or becomes, organized under the laws of any
other State or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes and the Collateral.
(b) Any successor to the Owner Trustee appointed pursuant to Section 10.2
of the Trust Agreement shall be the successor Owner Trustee under this Indenture
without the execution or filing of any paper, instrument or further act to be
done on the part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to the Owner
Trustee, the Person succeeding to the Owner Trustee under the Trust Agreement
may exercise every right and power of the Owner Trustee under this Indenture
with the same effect as if such Person had been named as the Owner Trustee
herein.
Section 3.05. Protection of Collateral. The Issuer will from time to time
execute and deliver all such reasonable supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) provide further assurance with respect to the Grant of all or any
portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iv) enforce any rights with respect to the Collateral; or
(v) preserve and defend title to the Collateral and the rights of the
Indenture Trustee and the Noteholders in such Collateral against the claims
of all persons and parties.
The Issuer hereby designates the Administrator, its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
Section 3.06. Annual Opinions as to Collateral. On or before March 15th in
each calendar year, beginning in 1998, the Issuer shall furnish to the Indenture
Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until March 15th of
the following calendar year.
Section 3.07. Performance of Obligations; Servicing of Home Loans. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Collateral or that would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such instrument or agreement, except as expressly provided
in this Indenture, the Sale and Servicing Agreement or such other instrument or
agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer and the Administrator to assist the Issuer in performing its duties
under this Indenture. The Administrator must at all times be the same Person as
the Indenture Trustee.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, in the Basic Documents and in the
instruments and agreements included in the Collateral, including but not limited
to (i) filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement and (ii) recording or causing to be recorded
all Mortgages, Assignments of Mortgage, all intervening Assignments of Mortgage
and all assumption and modification agreements required to be recorded by the
terms of the Sale and Servicing Agreement, in accordance with and within the
time periods provided for in this Indenture and/or the Sale and Servicing
Agreement, as applicable. Except as otherwise expressly provided therein, the
Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Indenture Trustee
and the Holders of at least a majority of the Voting Interests of the
Outstanding Notes.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Default under the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect to such default. If
such an Event of Default shall arise from the failure of the Servicer to perform
any of its duties or obligations under the Sale and Servicing Agreement with
respect to the Home Loans, the Issuer shall take all reasonable steps available
to it to remedy such failure.
(e) As promptly as possible after the giving of notice to the Servicer of
the termination of the Servicer's rights and powers pursuant to Section 10.01 of
the Sale and Servicing Agreement, the Indenture Trustee shall appoint a
successor servicer (the "Successor Servicer"), and such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Indenture Trustee. In the event that a Successor Servicer shall not have been
appointed and accepted its appointment at the time when the Servicer ceases to
act as Servicer, the Indenture Trustee without further action shall
automatically be appointed the Successor Servicer. The Indenture Trustee may
resign as the Servicer by giving written notice of such resignation to the
Issuer and in such event will be released from such duties and obligations, such
release not to be effective until the date a new servicer enters into a
servicing agreement with the Issuer as provided below. Upon delivery of any such
notice to the Issuer, the Issuer shall obtain a new servicer as the Successor
Servicer under the Sale and Servicing Agreement. Any Successor Servicer other
than the Indenture Trustee shall (i) satisfy the criteria specified in Section
4.07 of the Sale and Servicing Agreement and (ii) enter into a servicing
agreement with the Issuer having substantially the same provisions as the
provisions of the Sale and Servicing Agreement applicable to the Servicer. If
within 30 days after the delivery of the notice referred to above, the Issuer
shall not have obtained such new servicer, the Indenture Trustee may appoint, or
may petition a court of competent jurisdiction to appoint, a Successor Servicer.
In connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, subject to the limitations set forth below and in the Sale and
Servicing Agreement, and in accordance with Section 10.02 of the Sale and
Servicing Agreement, the Issuer shall enter into an agreement with such
successor for the servicing of the Home Loans (such agreement to be in form and
substance satisfactory to the Indenture Trustee). The servicing fee paid to any
Successor Servicer shall not be in excess of the Servicing Fee being paid to the
initial Servicer. If the Indenture Trustee shall succeed to the Servicer's
duties as servicer of the Home Loans as provided herein, it shall do so in its
individual capacity and not in its capacity as Indenture Trustee and,
accordingly, the provisions of Article VI hereof shall be inapplicable to the
Indenture Trustee in its duties as Successor Servicer and the servicing of the
Home Loans. In case the Indenture Trustee shall become Successor Servicer under
the Sale and Servicing Agreement, the Indenture Trustee shall be entitled to
appoint as Servicer any one of its Affiliates, provided that it shall be fully
liable for the actions and omissions of such Affiliate in such capacity as
Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee. As soon as a Successor Servicer is appointed, the Indenture Trustee
shall notify the Issuer of such appointment, specifying in such notice the name
and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees (i) that it will not, without the prior
written consent of the Indenture Trustee, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral (except to the
extent otherwise provided in the Sale and Servicing Agreement) or the Basic
Documents, or waive timely performance or observance by the Servicer or the
Depositor under the Sale and Servicing Agreement; and (ii) that any such
amendment shall not (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the
Notes that is required to consent to any such amendment, without the consent of
the Holders of the Voting Interests of all Outstanding Notes. If any such
amendment, modification, supplement or waiver shall so be consented to by the
Indenture Trustee, the Issuer agrees, promptly following a request by the
Indenture Trustee to do so, to execute and deliver, in its own name and at its
own expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale and
Servicing Agreement, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in the
Collateral, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Noteholder by reason of the payment of the taxes levied
or assessed upon any part of the Collateral;
(iii) engage in any business or activity other than as permitted by
the Trust Agreement or other than in connection with, or relating to, the
issuance of Notes pursuant to this Indenture, or amend the Trust Agreement
as in effect on the Closing Date other than in accordance with Section 11.1
thereof;
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any indebtedness of
any Person, except for such indebtedness as may be incurred by the Issuer
in connection with the issuance of the Notes pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part or merge or consolidate
with any other Person;
(vii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations with respect to the Notes under this
Indenture except as may expressly be permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Collateral or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens that arise by operation of law, in each case on any
of the Mortgaged Properties and arising solely as a result of an action or
omission of the related Obligors) or (C) permit the lien of this Indenture
not to constitute a valid first priority (other than with respect to any
such tax, mechanics' or other lien) security interest in the Collateral;
(viii) remove the Administrator without cause unless the Rating Agency
Condition shall have been satisfied in connection with such removal; or
(ix) take any other action or fail to take any action which may cause
the Issuer to be taxable as (a) an association pursuant to Section 7701 of
the Code and the corresponding regulations or (b) as a taxable mortgage
pool pursuant to Section 7701(i) of the Code and the corresponding
regulations.
Section 3.09. Annual Statement as to Compliance. The Issuer will deliver to
the Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing in the fiscal year 1998), an Officer's Certificate stating,
as to the Authorized Officer signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
Section 3.10. Covenants of the Issuer. All covenants of the Issuer in this
Indenture are covenants of the Issuer and are not covenants of the Owner
Trustee. The Owner Trustee is, and any successor Owner Trustee under the Trust
Agreement will be, entering into this Indenture solely as Owner Trustee under
the Trust Agreement and not in its respective individual capacity, and in no
case whatsoever shall the Owner Trustee or any such successor Owner Trustee be
personally liable on, or for any loss in respect of, any of the statements,
representations, warranties or obligations of the Issuer hereunder, as to all of
which the parties hereto agree to look solely to the property of the Issuer.
Section 3.11. Servicer's Obligations. The Issuer shall cause the Servicer
to comply with the Sale and Servicing Agreement.
Section 3.12. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, (x)
distributions to the Servicer, the Indenture Trustee, the Owner Trustee, the
Noteholders and the holders of the Residual Interest Certificate as contemplated
by, and to the extent funds are available for such purpose under, the Sale and
Servicing Agreement or the Trust Agreement and (y) payments to the Indenture
Trustee pursuant to Section 1(a)(ii) of the Administration Agreement. The Issuer
will not, directly or indirectly, make or cause to be made payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.13. Treatment of Notes as Debt for Tax Purposes. The Issuer
shall, and shall cause the Administrator to, treat the Notes as indebtedness for
all purposes.
Section 3.14. Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder, each default on the part of the Servicer or the Transferor of
its obligations under the Sale and Servicing Agreement and each default on the
part of the Transferor of its obligations under the Home Loan Purchase
Agreement.
Section 3.15. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.16. Statement by Officer as to Default. The Issuer shall deliver
to the Indenture Trustee, as soon as possible and in any event within five days
after the Issuer becomes aware of the occurrence of any Event of Default or an
event which, with notice or the lapse of time or both, would constitute an Event
of Default, an Officers' Certificate setting forth the details of such Event of
Default or default and the action which the Issuer proposes to take with respect
thereto.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes (except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08
and 3.10 hereof, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 hereof and the obligations of the Indenture Trustee under Section 4.02
hereof) and (vi) the rights of Noteholders as beneficiaries hereof with respect
to the property so deposited with the Indenture Trustee payable to all or any of
them), and the Indenture Trustee, on demand of and at the expense of the Issuer,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to the Notes, when all of the following have
occurred:
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i) Notes
that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.04 hereof and (ii) Notes for the payment of
which money has theretofore been deposited in trust or segregated and held
in trust by the Issuer and thereafter repaid to the Issuer or discharged
from such trust, as provided in Section 3.03 hereof) shall have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. shall have become due and payable, or
b. will become due and payable within one year following the Maturity
Date applicable to the Class B Notes, or
c. are to be called for redemption within one year under arrangements
satisfactory to the Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and at the expense,
of the Issuer,
d. and the Issuer, in the case of clause a., b. or c. above, has
irrevocably deposited or caused irrevocably to be deposited with the
Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature prior to
the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Indenture Trustee for
cancellation when due to the applicable Maturity Date of such Class of
Notes or the Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.01 hereof), as the case may be; and
(B) the latest of (a) 18 months after payment in full of all outstanding
obligations under the Notes, (b) the payment in full of all unpaid Trust Fees
and Expenses and (c) the date on which the Issuer has paid or caused to be paid
all other sums payable hereunder by the Issuer; and
(C) the Issuer shall have delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.01(a) hereof and, subject
to Section 11.02 hereof, each stating that all conditions precedent herein
provided for, relating to the satisfaction and discharge of this Indenture with
respect to the Notes, have been complied with.
Section 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal
and/or interest; but such moneys need not be segregated from other funds except
to the extent required herein or in the Sale and Servicing Agreement or required
by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.03 hereof and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.01. Events of Default.
(a) "Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) subject to Section 5.01(b) and notwithstanding that there may be
insufficient sums in the Note Distribution Account for payment thereof on
the related Distribution Date, default in the payment of any interest on
any Note when the same becomes due and payable, and continuance of such
default for a period of five (5) days; or
(ii) subject to Section 5.01(b) and notwithstanding that there may be
insufficient sums in the Note Distribution Account for payment thereof on
the related Distribution Date, default in the payment of the principal of
or any installment of the principal of any Note (a) when the same becomes
due and payable or (b) on the Maturity Date; or
(iii) the existence of an unpaid Loss Reimbursement Deficiency in
respect of any Highest Priority Classes Notes; or
(iv) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture, the Sale and Servicing Agreement or
in any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material respect
as of the time when the same shall have been made, and such default shall
continue or not be cured, or the circumstance or condition in respect of
which such misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Issuer by the
Indenture Trustee, or to the Issuer and the Indenture Trustee by the
Holders of at least 25% of the Voting Interests of the Outstanding Notes, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
notice of Default hereunder; or
(v) default in the observance or performance of any covenant or
agreement of the Company made in the Trust Agreement or any representation
or warranty of the Company made in the Trust Agreement, proving to have
been incorrect in any material respect as of the time when the same shall
have been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee, or to the Issuer
and the Indenture Trustee by the Holders of at least 25% of the Voting
Interests of the Outstanding Notes, a written notice specifying such
Default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a notice of Default hereunder; or
(vi) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Collateral in an involuntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part
of the Collateral, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(vii) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Collateral, or the making
by the Issuer of any general assignment for the benefit of creditors, or
the failure by the Issuer generally to pay its debts as such debts become
due, or the taking of any action by the Issuer in furtherance of any of the
foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after
the occurrence thereof, written notice in the form of an Officer's Certificate
of any event which with the giving of notice and the lapse of time would become
an Event of Default under clauses (iv) and (v) above, the status of such event
and what action the Issuer is taking or proposes to take with respect thereto.
(b) Neither (i) the failure to pay the full amount of interest payable
pursuant to Section 5.01(d) of the Sale and Servicing Agreement to Holders of
any Non-Priority Class, nor (ii) an application of Allocable Loss Amounts
pursuant to Section 5.04 of the Sale and Servicing Agreement to a Non-Priority
Class, shall constitute an Event of Default under Section 5.01(i).
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee, at the direction or upon the prior written consent of the
Majority Highest Priority Class Noteholders may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the moneys due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Majority Highest Priority Class Noteholders, by written notice to the Issuer and
the Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
1. all payments of principal of and interest on all Notes and all other
amounts that would then be due hereunder or upon such Notes if the
Event of Default giving rise to such acceleration had not occurred;
and
2. all sums paid or advanced by the Indenture Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel; and
(b) all Events of Default, other than the nonpayment of the principal of
the Notes that has become due solely by such acceleration, have been cured or
waived as provided in Section 5.12 hereof. No such rescission shall affect any
subsequent default or impair any right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the Indenture
Trustee, pay to the Indenture Trustee, for the benefit of the Holders of the
Notes, the whole amount then due and payable on such Notes for principal and
interest, with interest upon the overdue principal and, to the extent payment at
such rate of interest shall be legally enforceable, upon overdue installments of
interest at the rate borne by the Notes and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee may, and shall at the direction of the majority of
the Holders of the Notes, institute a Proceeding for the collection of the sums
so due and unpaid, and may prosecute such Proceeding to judgment or final
decree, and may enforce the same against the Issuer or other obligor upon such
Notes and collect in the manner provided by law out of the property of the
Issuer or other obligor upon such Notes, wherever situated, the moneys adjudged
or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, in its discretion, and shall at the direction of the majority of the
Holders of the Notes, as more particularly provided in Section 5.04 hereof,
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Collateral, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee, and its agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and the Indenture Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property; and any trustee,
receiver, liquidator, custodian or other similar official in any such
Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such
Noteholders, to pay to the Indenture Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred and all advances
made by the Indenture Trustee and each predecessor Indenture Trustee except
as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel, shall be
for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities.
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee may, and at the direction of a majority of the Holders of the
Notes shall, do one or more of the following (subject to Section 5.05 hereof):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee or the Noteholders; and
(iv) sell the Collateral or any portion thereof or rights or interest
therein in a commercially reasonable manner, at one or more public or
private sales called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral following an Event of Default, unless (A) the
Holders of 100% of the Voting Interests of the Outstanding Notes consent
thereto, (B) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts then due and
unpaid upon such Notes for principal and interest or (C) the Indenture
Trustee determines that the Collateral will not continue to provide
sufficient funds for the payment of principal of and interest on the Notes
as they would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of Holders of
66-2/3% of the Voting Interests of the Outstanding Notes. In determining
such sufficiency or insufficiency with respect to clause (B) and (C) of
this subsection (a)(iv), the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action
and as to the sufficiency of the Collateral for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee then due
and any costs or expenses incurred by it in connection with the enforcement
of the remedies provided for in this Article V and to the Owner Trustee for
the Owner Trustee Fee then due;
SECOND: to the Servicer for the Servicing Fee then due and unpaid;
THIRD: to the Custodian for the Custodian Fee then due and unpaid;
FOURTH: to the Servicer for any amounts then due and payable as the
Servicing Advance Reimbursement Amount under the Sale and Servicing
Agreement;
FIFTH: to the Noteholders for amounts due and unpaid on the Notes for
interest, pro rata according to the amounts due and payable on the Notes
for interest;
SIXTH: to the Noteholders for amounts due and unpaid on the Notes for
principal, pro rata among the Holders of each Class of Notes, according to
the amounts due and payable and in the order and priorities set forth in
Sections 5.01(d) and (e) of the Sale and Servicing Agreement, until the
Class Principal Balance of each such Class is reduced to zero; and
SEVENTH: to the Owner Trustee for any amounts to be distributed pro
rata to the holders of the Residual Interest Certificate pursuant to the
Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15 days
before such record date, the Indenture Trustee shall mail to each Noteholder and
the Issuer a notice that states the record date, the payment date and the amount
to be paid.
Section 5.05. Optional Preservation of the Collateral. If the Notes have
been declared to be due and payable under Section 5.02 hereof following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Collateral. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the
Collateral. In determining whether to maintain possession of the Collateral, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Voting Interests of the
Outstanding Highest Priority Class Notes have made written request to the
Indenture Trustee to institute such Proceeding in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for 30 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceeding; and
(e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 30-day period by Majority Highest
Priority Class Notes.
It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a Majority Priority Highest Class Noteholders , the
Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
applicable Maturity Date thereof expressed in such Note or in this Indenture
(or, in the case of redemption, on or after the Redemption Date) and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Majority Priority Highest Class
Notes shall have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee with respect to
the Notes or exercising any trust or power conferred on the Indenture Trustee;
provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) subject to the express terms of Section 5.04 hereof, any direction
to the Indenture Trustee to sell or liquidate the Collateral shall be by
Holders of Notes representing not less than 100% of the Voting Interests of
all the Classes of Notes Outstanding;
(c) if the conditions set forth in Section 5.05 hereof have been
satisfied and the Indenture Trustee elects to retain the Collateral
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Voting Interests of all
the Classes of Notes Outstanding to sell or liquidate the Collateral shall
be of no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in this Section
5.11, subject to Section 6.01 hereof, the Indenture Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. The Holders of Notes representing
not less than a Majority Priority Highest Class Notes may waive any past Default
or Event of Default and its consequences, except a Default (a) in the payment of
principal of or interest on any of the Notes or (b) in respect of a covenant or
provision hereof that cannot be modified or amended without the consent of the
Holder of each Note. In the case of any such waiver, the Issuer, the Indenture
Trustee and the Holders of the Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Voting
Interests of the Outstanding Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
Section 5.15. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Collateral or upon any of
the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b) hereof.
Section 5.16. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to do so and at
the Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Transferor and the Servicer, as applicable, of each of their obligations
to the Issuer under or in connection with the Sale and Servicing Agreement, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of the Transferor
or the Servicer thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Transferor or the
Servicer of each of their obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone, confirmed in writing promptly thereafter) of the Holders of 66-2/3%
of the Highest Priority Class Notes Outstanding shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Transferor or
the Servicer under or in connection with the Sale and Servicing Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Transferor or the Servicer, as the case may be, of each of
their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension, or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; provided, however, that the Indenture
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11 hereof.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section
6.01.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee shall be segregated from
other funds except to the extent permitted by law or the terms of this Indenture
or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it; provided, however, that the Indenture Trustee shall
not refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of its normal fees and expenses and provided, further, that nothing
in this Section 6.01(g) shall be construed to limit the exercise by the
Indenture Trustee of any right or remedy permitted under this Indenture or
otherwise in the event of the Issuer's failure to pay the Indenture Trustee's
fees and expenses pursuant to Section 6.07 hereof. In determining that such
repayment or indemnity is not reasonably assured to it, the Indenture Trustee
must consider not only the likelihood of repayment or indemnity by or on behalf
of the Issuer but also the likelihood of repayment or indemnity from amounts
payable to it from the Collateral pursuant to Section 6.07 hereof.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) The Indenture Trustee shall not be required to take notice or be deemed
to have notice or knowledge of any Event of Default (other than an Event of
Default pursuant to Section 5.01(i) or (ii) hereof) unless a Responsible Officer
of the Indenture Trustee shall have received written notice thereof or otherwise
shall have actual knowledge thereof. In the absence of receipt of notice or such
knowledge, the Indenture Trustee may conclusively assume that there is no Event
of Default.
Section 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for (i) any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that such action or omission by the
Indenture Trustee does not constitute willful misconduct, negligence or bad
faith; or (ii) any willful misconduct or gross negligence on the part of the
Custodian.
(e) The Indenture Trustee may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Indenture Trustee shall be under no obligations to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Indenture Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(g) The Indenture Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Indenture Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Indenture Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the Issuer,
personally or by agent or attorney at the sole cost of the Issuer and shall
incur no liability or additional liability of any kind by reason of such inquiry
or investigation;
Section 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Sections 6.11 and 6.12 hereof.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement of
the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
Section 6.05. Notices of Default. If a Default occurs and is continuing and
if it is known to a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall mail to each Noteholder notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Holder from time to time or upon the request of
such Holder such information as may be required to enable such Holder to prepare
its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. As compensation for its services
hereunder, the Indenture Trustee shall be entitled to receive, on each
Distribution Date, the Indenture Trustee's Fee pursuant to Section 8.02(c)
hereof (which compensation shall not be limited by any law on compensation of a
trustee of an express trust) and shall be entitled to reimbursement by the
Servicer for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer agrees to cause the Transferor to indemnify
the Indenture Trustee against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder. The Indenture Trustee shall
notify the Issuer and the Servicer promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee so to notify the Issuer and the
Servicer shall not relieve the Issuer of its obligations hereunder. The Issuer
shall or shall cause the Servicer to defend any such claim, and the Indenture
Trustee may have separate counsel reasonably acceptable to the Servicer and the
Issuer shall or shall cause the Servicer to pay the reasonable fees and expenses
of such counsel. Neither the Issuer nor the Servicer need reimburse any expense
or indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
To the extent that the Indenture Trustee is unable to recover amounts owing
to it pursuant to this Section 6.07 from the Transferor, the Indenture Trustee
shall be entitled to receive, on each Distribution Date, such amounts pursuant
to Section 5.02(b) of the Sale and Servicing Agreement.
For purposes of receiving indemnity under this Section 6.07, the term
Indenture Trustee shall include the Indenture Trustee acting as Administrator
under the Administration Agreement. The Issuer's payment obligations to the
Indenture Trustee pursuant to this Section 6.07 shall survive the discharge of
this Indenture. When the Indenture Trustee incurs expenses after the occurrence
of a Default specified in Section 5.01(vi) or (vii) hereof with respect to the
Issuer, the expenses are intended to constitute expenses of administration under
Title 11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority of the
Voting Interests of the Outstanding Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee.
The Issuer shall remove the Indenture Trustee if:
(a) the Indenture Trustee fails to comply with Section 6.11 hereof;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority of the Voting Interests of the
Outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section 6.08, the Issuer's and the Administrator's obligations under Section
6.07 hereof shall continue for the benefit of the retiring Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided,
however, that such corporation or banking association shall otherwise be
qualified and eligible under Section 6.11 hereof. The Indenture Trustee shall
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Collateral may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Collateral, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 hereof and no notice to Noteholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Collateral or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, jointly with the Indenture
Trustee, subject to all the provisions of this Indenture, specifically including
every provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every such
instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. The Indenture Trustee
shall comply with TIA Section 310(b), including the optional provision permitted
by the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee which has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
Section 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 hereof and the names and addresses of Holders of Notes received
by the Indenture Trustee in its capacity as Note Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01
upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) that the Issuer may be required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with the rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA Section 313(c)) such
summaries of any information, documents and reports required to be filed by
the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by
rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each March 1, beginning with March 1, 1998, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each securities exchange,
if any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any securities exchange.
Section 7.05. 144A Information. The Indenture Trustee shall provide to any
Holder of a Class B Note and any prospective transferee designated by any such
Holder information regarding the Class B Notes and the Home Loans and such other
information as shall be necessary to satisfy the condition to eligibility set
forth in Rule 144A(d)(4) under the Securities Act for transfer of any such Note
without registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A under the Securities Act. Each
Holder of a Class B Note desiring to effect such a transfer shall, and does
hereby agree to, indemnify the Issuer, the Owner Trustee, the Indenture Trustee
and the Depositor against any liability that may result if the transfer is not
so exempt or is not made in accordance with federal and state securities laws.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money.
General. Except as otherwise expressly provided herein, the Indenture
Trustee may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply
all such money received by it as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Collateral, the Indenture Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in Article V hereof.
Section 8.02. Trust Accounts; Distributions. (a) On or prior to the Closing
Date, the Issuer shall cause the Servicer to establish and maintain, in the name
of the Indenture Trustee for the benefit of the Noteholders, or on behalf of the
Owner Trustee for the benefit of the Securityholders, the Trust Accounts as
provided in Article V of the Sale and Servicing Agreement. The Indenture Trustee
shall deposit amounts into each of the Trust Accounts in accordance with the
terms hereof, the Sale and Servicing Agreement and the Servicer's Monthly
Remittance Report.
(b) On the second Business Day prior to each Distribution Date, the
Indenture Trustee shall withdraw from the Collection Account, pursuant to
Section 5.01(b)(2) of the Sale and Servicing Agreement, the Available Collection
Amount and shall deposit such amount into the Note Distribution Account. On each
Distribution Date, to the extent funds are available in the Note Distribution
Account, the Indenture Trustee shall either retain funds in the Note
Distribution Account for distribution on such day or make the withdrawals from
the Note Distribution Account and deposits into the Certificate Distribution
Account for distribution on such Distribution Date as required pursuant to
Section 5.01(c) of the Sale and Servicing Agreement.
(c) On each Distribution Date and Redemption Date, to the extent funds are
available in the Note Distribution Account, the Indenture Trustee shall make the
following distributions from the amounts on deposit in the Note Distribution
Account in the following order of priority (except as otherwise provided in
Section 5.04(c) hereof):
(i) (A) to the Servicer, an amount equal (i) to the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to Section 5.01(b)(1) of the Sale and Servicing
Agreement) and all unpaid Servicing Compensation from prior Distribution
Dates and (ii) all Nonrecoverable Servicing Advances not previously
reimbursed, (B) to the Indenture Trustee, an amount equal to the Indenture
Trustee Fee and all unpaid Indenture Trustee Fees from prior Distribution
Dates, (C) to the Servicer, in trust for the Owner Trustee, an amount equal
to the Owner Trustee Fee and all unpaid Owner Trustee Fees from prior Due
Periods, and (D) to the Custodian, an amount equal to the Custodian Fee, if
any, and all unpaid Custodian Fees from prior Distribution Dates; and
(ii) to the Noteholders, the amounts set forth in Sections 5.01(d) and
(e) of the Sale and Servicing Agreement.
(d) On each Distribution Date and each Redemption Date, to the extent of
the interest of the Indenture Trustee in the Certificate Distribution Account
(as described in Section 5.03(a) of the Sale and Servicing Agreement), the
Indenture Trustee hereby authorizes the Owner Trustee or the Paying Agent, as
applicable, to make the distributions from the Certificate Distribution Account
as required pursuant to Sections 5.01(d) and (e) of the Sale and Servicing
Agreement.
Section 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in Permitted
Investments and reinvested by the Indenture Trustee at the direction of the
Servicer in accordance with the provisions of Article V of the Sale and
Servicing Agreement. All income or other gain from investments of moneys
deposited in the Trust Accounts shall be deposited by the Indenture Trustee into
the Note Distribution Account, and any loss resulting from such investments
shall be charged to such account. The Issuer will not direct the Indenture
Trustee to make any investment of any funds or to sell any investment held in
any of the Trust Accounts unless the security interest Granted and perfected in
such account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c) hereof, the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m. Eastern Time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable pursuant to Section 5.02 hereof or
(iii) if such Notes shall have been declared due and payable following an Event
of Default, amounts collected or receivable from the Collateral are being
applied in accordance with Section 5.05 hereof as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
Section 8.04. Servicer's Monthly Statements. On each Distribution Date, the
Indenture Trustee shall deliver the Servicer's Monthly Remittance Report (as
defined in the Sale and Servicing Agreement) with respect to such Distribution
Date to DTC and the Rating Agencies.
Section 8.05. Release of Collateral. (a) Subject to the payment of its fees
and expenses pursuant to Section 6.07 hereof, the Indenture Trustee may, and
when required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due to the Certificateholders pursuant to Section
5.02(b) of the Sale and Servicing Agreement, to the Servicer pursuant to Section
8.02(c)(i)(A) hereof, to the Indenture Trustee pursuant to Section 8.02(c)(i)(B)
hereof, to the Owner Trustee pursuant to Section 8.02(c)(i)(C) hereof and to the
Custodian pursuant to Section 8.02(c)(i)(D) hereof have been paid, release any
remaining portion of the Collateral that secured the Notes from the lien of this
Indenture and release to the Issuer or any other Person entitled thereto any
funds then on deposit in the Trust Accounts. The Indenture Trustee shall release
property from the lien of this Indenture pursuant to this Subsection (b) only
upon receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.01 hereof.
Section 8.06. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days' prior notice when requested by the Issuer to take any action
pursuant to Section 8.05(a) hereof, accompanied by copies of any instruments
involved, and the Indenture Trustee may also require, as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Collateral. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided, however, that such
action shall not adversely affect the interests of the Holders of the
Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI hereof; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior consent of the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by (i) an
Opinion of Counsel or (ii) satisfaction of the Rating Agency Condition,
adversely affect in any material respect the interests of any Noteholder.
Section 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior consent of the Rating Agencies, and with the consent of the Holders
of not less than a majority of the Voting Interests of the Outstanding Notes, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest rate
thereon or the Termination Price with respect thereto, change the provisions of
this Indenture relating to the application of collections on, or the proceeds of
the sale of, the Collateral to payment of principal of or interest on the Notes,
or change any place of payment where, or the coin or currency in which, any Note
or the interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the application of
funds available therefor, as provided in Article V hereof, to the payment of any
such amount due on the Notes on or after the respective due dates thereof (or,
in the case of redemption, on or after the Redemption Date);
(b) reduce the percentage of the Voting Interests of the Outstanding Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the definition of the
term "Outstanding" or "Voting Interests";
(d) reduce the percentage of the Voting Interests of the Notes required to
direct the Indenture Trustee to direct the Issuer to sell or liquidate the
Collateral pursuant to Section 5.04 hereof;
(e) modify any provision of this Section except to increase any percentage
specified herein or to provide that certain additional provisions of this
Indenture or the Basic Documents cannot be modified or waived without the
consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as to
affect the calculation of the amount of any payment of interest or principal due
on any Note on any Distribution Date (including the calculation of any of the
individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a parity with
the lien of this Indenture with respect to any part of the Collateral or, except
as otherwise permitted or contemplated herein, terminate the lien of this
Indenture on any property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant to
this Section 9.02, the Indenture Trustee shall mail to the Holders of the Notes
to which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. It shall not be
necessary for any Act of Noteholders under this Section 9.02 to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02 hereof, shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Indenture Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Trust Agreement.
Subject to Section 11.1 of the Trust Agreement, the Indenture Trustee
shall, upon Issuer Order, consent to any proposed amendment to the Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Trust Agreement, such consent to be given without the necessity
of obtaining the consent of the Holders of any Notes upon satisfaction of the
requirements under Section 11.1 of the Trust Agreement. Nothing in this Section
shall be construed to require that any Person obtain the consent of the
Indenture Trustee to any amendment or waiver or any provision of any document
where the making of such amendment or the giving of such waiver without
obtaining the consent of the Indenture Trustee is not prohibited by this
Indenture or by the terms of the document that is the subject of the proposed
amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
The Majority Residual Interestholders (as defined in the Trust Agreement)
may, at their option, effect an early redemption of the Notes on any
Distribution Date on or after the Distribution Date on which the Pool Principal
Balance declines to 10% or less of the Original Pool Principal Balance. The
Majority Residual Interestholders shall effect such early termination in the
manner specified in and subject to the provisions of Section 11.02(b) of the
Sale and Servicing Agreement.
The Servicer or the Issuer shall furnish the Rating Agencies notice of any
such redemption in accordance with Section 10.02 hereof.
Section 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 hereof shall be given by the Indenture Trustee by first-class
mail, postage prepaid, or by facsimile mailed or transmitted not later than 10
days prior to the applicable Redemption Date to each Holder of Notes, as of the
close of business on the Record Date preceding the applicable Redemption Date,
at such Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) that on the Redemption Date Noteholders shall receive the Note
Redemption Amount;
(iii) the place where such Notes are to be surrendered for payment of
the Termination Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02 hereof); and
(iv) the CUSIP number, if any.
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name of the Issuer and at the expense of the Servicer. Failure to give to
any Holder of any Note notice of redemption, or any defect therein, shall not
impair or affect the validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date; Provision for Payment of
Indenture Trustee. The Notes to be redeemed shall, following notice of
redemption as required by Section 10.02 hereof (in the case of redemption
pursuant to Section 10.01) hereof, on the Redemption Date become due and payable
at the Note Redemption Amount and (unless the Issuer shall default in the
payment of the Note Redemption Amount) no interest shall accrue thereon for any
period after the date to which accrued interest is calculated for purposes of
calculating the Note Redemption Amount. The Issuer may not redeem the Notes
unless (i) all outstanding obligations under the Notes have been paid in full
and (ii) the Indenture Trustee has been paid all amounts to which it is entitled
hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture (except with respect to the Servicer's
servicing activity in the ordinary course of its business), the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary
to enable such signatory to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory, such
condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property or securities
with the Indenture Trustee that is to be made the basis for the release of any
property or securities subject to the lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 11.01(a) hereof or elsewhere in
this Indenture, furnish to the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such deposit) to the Issuer of the Collateral
or other property or securities to be so deposited.
(c) Whenever the Issuer is required to furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of any signer thereof as
to the matters described in subsection (b) above, the Issuer shall also deliver
to the Indenture Trustee an Independent Certificate as to the same matters, if
the fair value to the Issuer of the securities to be so deposited and of all
other such securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to subsection (b) above and this subsection (c),
is 10% or more of the Outstanding Amount of the Notes, but such a certificate
need not be furnished with respect to any securities so deposited, if the fair
value thereof to the Issuer as set forth in the related Officer's Certificate is
less than $25,000 or less than one percent of the Outstanding Amount of the
Notes.
(d) Whenever any property or securities are to be released from the lien of
this Indenture, the Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the opinion
of such person the proposed release will not impair the security under this
Indenture in contravention of the provisions hereof.
(e) Whenever the Issuer is required to furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of any signer thereof as
to the matters described in subsection (d) above, the Issuer shall also furnish
to the Indenture Trustee an Independent Certificate as to the same matters if
the fair value of the property or securities and of all other property, other
than securities released from the lien of this Indenture since the commencement
of the then-current calendar year, as set forth in the certificates required by
subsection (d) above and this subsection (e), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be furnished in
the case of any release of property or securities if the fair value thereof as
set forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the then Outstanding Amount of the Notes.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Transferor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Transferor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI hereof.
Section 11.03. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01
hereof) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section 11.03.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Indenture Trustee at its Corporate Trust Office,
or
(ii) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and made, given,
furnished or filed with the Issuer addressed to: DiTech Home Loan Owner
Trust 1997-1, in care of Bankers Trust (Delaware), 1011 Centre Road, Suite
200, Wilmington, DE 19805-1266, Attention: DiTech Home Loan Owner Trust
1997-1, with a copy to Bankers Trust Company, 3 Park Plaza, 16th floor,
Irvine, California 92614, Attention: Mary Bellissimo. or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
Standard & Poor's, at the following address: Standard & Poor's, 26 Broadway
(15th Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department; (ii) if to Fitch, One State Street Plaza, New York, New York 10004,
Attention: [____________] and (iii) if to Duff & Phelps, 55 East Monroe Street,
38th Floor, Chicago, Illinois 60603, Attention: MBS Monitoring or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have duly been given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
Section 11.06. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.07. 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 11.08. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-trustees and agents.
Section 11.09. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.13. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 11.14. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 11.15. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or, except as expressly provided for in
Article VI hereof, under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Indenture Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may expressly have agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
Section 11.16. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Transferor, the Servicer or
the Issuer, or join in any institution against the Transferor, the Servicer or
the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law, in connection with any obligations relating to
the Notes, this Indenture or any of the Basic Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may reasonably be requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
DITECH HOME LOAN
OWNER TRUST 1997-1
By: Bankers Trust (Delaware)
not in its individual capacity but
solely as Owner Trustee
By:___________________________________________
Name:
Title:
THE BANK OF NEW YORK, as Indenture Trustee
By:___________________________________________
Name:
Title:
<PAGE>
STATE OF __________
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ___________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of the
said BANKERS TRUST (DELAWARE), not in its individual capacity, but solely as
Owner Trustee on behalf of DITECH HOME LOAN OWNER TRUST 1997-1, a Delaware
business trust, and that such person executed the same as the act of said
business trust for the purpose and consideration therein expressed, and in the
capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
October, 1997.
- - ______________________________________________
Notary Public in and for the State of New York
My commission expires:
____________________________
<PAGE>
STATE OF __________
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared __________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of THE
BANK OF NEW YORK, a New York banking corporation, and that such person executed
the same as the act of said corporation for the purpose and consideration
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of October, 1997.
______________________________________________
Notary Public in and for the State of New York
(Seal)
My commission expires:
_______________________________
<PAGE>
EXHIBIT A
CLASS A-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$24,636,000.00
No. A-1-1 CUSIP NO. 25500P AA 4
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS A-1 Floating Rate ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-Four Million Six hundred and
Thirty-Six Thousand Dollars ($24,636,000.00) payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class A-1 Note and
the denominator of which is the aggregate principal amount of all Class A-1
Notes by (ii) the aggregate amount, if any payable from the Note Distribution
Account in respect of principal on the Class A-1 Notes pursuant to Section
5.01(d) and (e) of the Sale and Servicing Agreement dated as of October 1, 1997;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of (i) the applicable Maturity Date, (ii) the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement or (iii) the date on which an Event of Default shall have occurred and
be continuing, if the Indenture Trustee at the direction of or with the prior
written consent of the Majority Highest Priority Class Noteholders has declared
the Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. Capitalized terms used but not defined herein are defined
in Article I of the Indenture (the "Indenture") dated as of October 1, 1997
between the Issuer and The Bank of New York, a New York banking corporation,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at a rate per annum equal to
LIBOR for the related LIBOR Determination Date plus 0.10%, subject to a maximum
rate equal to the NET Weighted Average Rate on each Distribution Date until the
principal of this Note is paid or made available for payment in full, on the
principal amount of this Note outstanding on the preceding Distribution Date
(after giving effect to all payments of principal made on the preceding
Distribution Date). "LIBOR" means, with respect to each Accrual Period (other
than the initial Accrual Period), the rate for United States dollar deposits for
one month that appears on the Telerate Screen Page 3750 as of 11:00 a.m., London
time, on the related LIBOR Determination Date. If such rate does not appear on
such page (or such other page as may replace that page on that service, or if
such service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be reasonably selected by the Indenture Trustee), LIBOR
for the applicable Accrual Period will be the Reference Bank Rate. If no such
quotations can be obtained by the Indenture Trustee and no Reference Bank Rate
is available, LIBOR will be LIBOR applicable to the preceding Accrual Period.
Interest on this Note will accrue for each Distribution Date during the period
beginning on the Distribution Date in the calendar month preceding the month in
which the related Distribution Date occurs (or, in the case of the first
Distribution Date, October 30, 1997) and ending on the day preceding the related
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year and the actual number of days elapsed in each Accrual
Period. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 Floating Rate Asset Backed Notes (herein called the
"Class A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Class Noteholders, has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class A-1 Notes shall be made pro rata to the holders of the Class A-1 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: __________________
____________________________
Signature Guaranteed:
_____________________
<PAGE>
CLASS A-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$22,945,000.00
No. A-2-1 CUSIP NO. 25500P AB 2
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS A-2 6.59% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-Two Million Nine Hundred
Forty-Five Thousand Dollars ($22,945,000.00) payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class A-2 Note and
the denominator of which is the aggregate principal amount of all Class A-2
Notes by (ii) the aggregate amount, if any payable from the Note Distribution
Account in respect of principal on the Class A-2 Notes pursuant to Section
5.01(d) and (e) of the Sale and Servicing Agreement dated as of October 1, 1997;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of (i) the applicable Maturity Date, (ii) the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement or (iii) the date on which an Event of Default shall have occurred and
be continuing, if the Indenture Trustee at the direction of or with the prior
written consent of the Majority Highest Priority Class Noteholders has declared
the Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. Capitalized terms used but not defined herein are defined
in Article I of the Indenture (the "Indenture") dated as of October 1, 1997
between the Issuer and The Bank of New York, a New York banking corporation,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 6.59% Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-2 Notes
shall be made pro rata to the holders of the Class A-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-2 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________________________
______________________________
Signature Guaranteed:
___________________
<PAGE>
CLASS A-3 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$24,897,000.00
No. A-3-1 CUSIP NO. 25500P AC 0
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS A-3 6.71% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-Four Million Eight Hundred
Ninety-Seven Thousand Dollars ($24,897,000.00) payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class A-3 Note and
the denominator of which is the aggregate principal amount of all Class A-3
Notes by (ii) the aggregate amount, if any payable from the Note Distribution
Account in respect of principal on the Class A-3 Notes pursuant to Section
5.01(d) and (e) of the Sale and Servicing Agreement dated as of October 1, 1997;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of (i) the applicable Maturity Date, (ii) the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement or (iii) the date on which an Event of Default shall have occurred and
be continuing, if the Indenture Trustee at the direction of or with the prior
written consent of the Majority Highest Priority Class Noteholders has declared
the Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. Capitalized terms used but not defined herein are defined
in Article I of the Indenture (the "Indenture") dated as of October 1, 1997
between the Issuer and The Bank of New York, a New York banking corporation,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 6.71% Asset Backed Notes (herein called the "Class
A-3 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-3 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-3 Notes
shall be made pro rata to the holders of the Class A-3 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-3 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________________
___________________________
Signature Guaranteed:
_________________________
<PAGE>
CLASS A-4 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$13,622,000.00
No. A-4-1 CUSIP NO. 25500P AD 8
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS A-4 7.36% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Thirteen Million Six Hundred Twenty-Two
Thousand Dollars ($13,622,000.000) payable on each Distribution Date in an
amount equal to the result obtained by multiplying (i) a fraction the numerator
of which is the initial principal amount of this Class A-4 Note and the
denominator of which is the aggregate principal amount of all Class A-4 Notes by
(ii) the aggregate amount, if any payable from the Note Distribution Account in
respect of principal on the Class A-4 Notes pursuant to Section 5.01(d) and (e)
of the Sale and Servicing Agreement dated as of October 1, 1997; provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the earlier of (i) the applicable Maturity Date, (ii) the Termination
Date, if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or
(iii) the date on which an Event of Default shall have occurred and be
continuing, if the Indenture Trustee at the direction of or with the prior
written consent of the Majority Highest Priority Class Noteholders has declared
the Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. Capitalized terms used but not defined herein are defined
in Article I of the Indenture (the "Indenture") dated as of October 1, 1997
between the Issuer and The Bank of New York, a New York banking corporation,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 7.36% Asset Backed Notes (herein called the "Class
A-4 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-4 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-4 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-4 Notes
shall be made pro rata to the holders of the Class A-4 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-4 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: _____________________
_____________________________
Signature Guaranteed:
_____________________________
<PAGE>
CLASS M-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$17,700,000.00
No. M-1-1 CUSIP NO. 25500P AE 6
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS M-1 7.25% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Seventeen Million Seven Hundred
Thousand Dollars ($17,700,000.00) payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is the initial principal amount of this Class M-1 Note and the denominator
of which is the aggregate principal amount of all Class M-1 Notes by (ii) the
aggregate amount, if any payable from the Note Distribution Account in respect
of principal on the Class M-1 Notes pursuant to Section 5.01(d) and (e) of the
Sale and Servicing Agreement dated as of October 1, 1997; provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of (i) the applicable Maturity Date, (ii) the Termination Date, if
any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii) the
date on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee at the direction of or with the prior written consent of the
Majority Highest Priority Class Noteholders has declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of October 1, 1997 between the
Issuer and The Bank of New York, a New York banking corporation, which also
contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-1 7.25% Asset Backed Notes (herein called the "Class
M-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class M-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class M-1 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class M-1 Notes
shall be made pro rata to the holders of the Class M-1 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class M-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ___________________________
___________________________
Signature Guaranteed:
___________________________________
<PAGE>
CLASS M-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$7,200,000.00
No. M-2-1 CUSIP NO. 25500P AF 3
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS M-2 7.35% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Seven Million Two Hundred Thousand
Dollars ($7,200,000.00) payable on each Distribution Date in an amount equal to
the result obtained by multiplying (i) a fraction the numerator of which is the
initial principal amount of this Class M-2 Note and the denominator of which is
the aggregate principal amount of all Class M-2 Notes by (ii) the aggregate
amount, if any payable from the Note Distribution Account in respect of
principal on the Class M-2 Notes pursuant to Section 5.01(d) and (e) of the Sale
and Servicing Agreement dated as of October 1, 1997; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the applicable Maturity Date, (ii) the Termination Date, if any,
pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii) the date
on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee at the direction of or with the prior written consent of the
Majority Highest Priority Class Noteholders has declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of October 1, 1997 between the
Issuer and The Bank of New York, a New York banking corporation, which also
contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-2 7.35% Asset Backed Notes (herein called the "Class
M-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class M-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class M-2 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class M-2 Notes
shall be made pro rata to the holders of the Class M-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class M-2 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: _______________________
__________________________
Signature Guaranteed:
_______________________________
<PAGE>
CLASS B-1 NOTE
ANY PERSON WHO PURCHASES THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
DEEMED TO HAVE MADE, UPON SUCH PURCHASE, THE REPRESENTATIONS SET FORTH UNDER THE
HEADING "NOTICES TO INVESTORS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED OCTOBER
30, 1997 FOR THE DITECH HOME LOAN OWNER TRUST 1997-1 HOME LOAN ASSET BACKED
NOTES, SERIES 1997-1.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
1933 ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF
THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE INDENTURE TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
See Schedule I Attached Hereto
No. B-1-1 CUSIP NO. 25500P AG 1
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS B-1 7.69% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum set forth on Schedule I attached hereto
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Class B-1 Note and the denominator of which is the aggregate
principal amount of all Class B-1 Notes by (ii) the aggregate amount, if any
payable from the Note Distribution Account in respect of principal on the Class
B-1 Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing
Agreement dated as of October 1, 1997; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of (i) the
applicable Maturity Date, (ii) the Termination Date, if any, pursuant to Section
11.01 of the Sale and Servicing Agreement or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Indenture Trustee at the
direction of or with the prior written consent of the Majority Highest Priority
Class Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. Capitalized terms used but
not defined herein are defined in Article I of the Indenture (the "Indenture")
dated as of October 1, 1997 between the Issuer and The Bank of New York, a New
York banking corporation, which also contains rules as to construction that
shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-1 7.69% Asset Backed Notes (herein called the "Class
B-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class B-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class B-1 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class B-1 Notes
shall be made pro rata to the holders of the Class B-1 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class B-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ____________________
__________________________
Signature Guaranteed:
___________________________
<PAGE>
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SCHEDULE I
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Amount Date Initial
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$6,300,000 October 30, 1997
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<PAGE>
CLASS B-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
ANY PERSON WHO PURCHASES THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
DEEMED TO HAVE MADE, UPON SUCH PURCHASE, THE REPRESENTATIONS SET FORTH UNDER THE
HEADING "NOTICES TO INVESTORS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED OCTOBER
17, 1997 FOR THE DITECH HOME LOAN OWNER TRUST 1997-1 HOME LOAN ASSET BACKED
NOTES, SERIES 1997-1.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
1933 ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF
THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
Note Principal Amount: See Schedule I Attached Hereto
No. B-2-1 CUSIP NO. 25500P AH 9
DITECH HOME LOAN OWNER TRUST 1997-1
CLASS B-2 8.85% ASSET BACKED NOTES
DITECH HOME LOAN OWNER TRUST 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum set forth on Schedule I attached hereto
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Class B-2 Note and the denominator of which is the aggregate
principal amount of all Class B-2 Notes by (ii) the aggregate amount, if any
payable from the Note Distribution Account in respect of principal on the Class
B-2 Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing
Agreement dated as of October 1, 1997; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of (i) the
applicable Maturity Date, (ii) the Termination Date, if any, pursuant to Section
11.01 of the Sale and Servicing Agreement or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Indenture Trustee at the
direction of or with the prior written consent of the Majority Highest Priority
Class Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. Capitalized terms used but
not defined herein are defined in Article I of the Indenture (the "Indenture")
dated as of October 1, 1997 between the Issuer and The Bank of New York, a New
York banking corporation, which also contains rules as to construction that
shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment in full, on the principal amount of this Note outstanding
on the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date). Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, an "Accrual Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note. This
Note is issued on October 30, 1997, and based on its issue price of 91.70548%,
including accrued interest, and a stated redemption price at maturity equal to
its initial principal balance (plus fifteen days of interest at the Note
Interest Rate hereon), is issued with original issue discount ("OID") for
federal income tax purposes. Assuming that this Certificate pays in accordance
with projected cash flows reflecting an assumed prepayment rate equal to 100% of
the Prepayment Assumption (as defined in the Prospectus Supplement dated October
24, 1997 with respect to the offering of the Class A-4, Class M-1 and Class M-2
Notes) used to price this Note: (i) the amount of OID as a percentage of the
initial principal balance of this Note is approximately 8.66327333%; (ii) the
annual yield to maturity of this Note, compounded monthly, is approximately
10.26%; and (iii) the amount of OID allocable to the short first accrual period
(October 30, 1997 to November 15, 1997) as a percentage of the initial principal
balance of this Certificate, calculated using the exact method, is approximately
0.02235370%.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: October __, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: October __, 1997
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-2 8.85% Asset Backed Notes (herein called the "Class
B-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class B-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2 Notes
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class B-2 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the 15th
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing in November 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class B-2 Notes
shall be made pro rata to the holders of the Class B-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class B-2 Notes may be redeemed (a) in whole, but not in part, at the option of
the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the sum of the Original Pool Principal Balance and the Original
Pre-Funded Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Seller or the Issuer, or join in any institution
against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________________
___________________________
Signature Guaranteed:
_________________________
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE I
- --------------------------------------------------------------------------------
Amount Date Initial
- ---------------------------- ------------------------ --------------------------
$2,700,000 October 30, 1997
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<PAGE>
EXHIBIT B-1
FORM OF RULE 144A TRANSFER CERTIFICATE
Re: DiTech Home Loan Owner Trust 1997-1
Asset-Backed Notes Series 1997-1
--------------------------------
Reference is hereby made to the Indenture dated as of October 1, 1997 (the
"Indenture") between DiTech Home Loan Owner Trust 1997-1 (the "Trust") and The
Bank of New York (the "Indenture Trustee"). Capitalized terms used but not
defined herein shall have the meanings given to them in the Sale and Servicing
Agreement dated as of October 1, 1997 among the Trust, DiTech Funding
Corporation ("DiTech"), PaineWebber Mortgage Acceptance Corporation IV (the
"Depositor"), and The Bank of New York as Indenture Trustee.
The undersigned (the "Transferor") has requested a transfer of $_________
initial Class Principal Balance of Class B-[1][2] Notes to [insert name of
transferee].
In connection with such request, and in respect of such Class B-[1][2]
Notes, the Transferor hereby certifies that such Class B-[1][2] Notes are being
transferred in accordance with (i) the transfer restrictions set forth in the
Indenture and the Class B-[1][2] Notes and (ii) Rule 144A under the Securities
Act of 1933, as amended to a purchaser that the Transferor reasonably believes
is a "qualified institutional buyer" within the meaning of Rule 144A purchasing
for its own account or for the account of a "qualified institutional buyer,"
which purchaser is aware that the sale to it is being made in reliance upon Rule
144A, in a transaction meeting the requirements of Rule 144A and in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction.
This certificate and the statements contained herein are made for your
benefit and the benefit of PaineWebber and the Depositor.
_________________________________
[Name of Transferor]
By:_____________________________
Name:
Title:
Dated: ____________, ____
<PAGE>
EXHIBIT B-2
FORM OF PURCHASER'S LETTER FOR
INSTITUTIONAL ACCREDITED INVESTOR
_________________________
[Date]
Dear Sirs:
In connection with our proposed purchase of $_________________ initial
Class Principal Balance of Class B-[1][2] Home Loan Asset Backed Notes, Series
1997-1 (the "Offered Notes") issued by DiTech Home Loan Owner Trust 1997-1 (the
"Trust"), we confirm that:
(1) We have received a copy of the Private Placement Memorandum dated October
__, 1997 relating to the Offered Notes (the "Private Placement
Memorandum"), and we understand that the Offered Notes have not been, and
will not be, registered under the Securities Act of 1933, as amended (the
"1933 Act") or any state securities laws, and may not be sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Offered Notes we will do so only (A) pursuant to a
registration statement which has been declared effective under the 1933
Act, (B) for so long as the Offered Notes are eligible for resale pursuant
to Rule 144A under the 1933 Act, to a Person we reasonably believe is a
"qualified institutional buyer" as defined in Rule 144A that purchases for
its own account or for the account of a qualified institutional buyer to
whom notice is given that the transfer is being made in reliance on Rule
144A, (C) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the 1933 Act (an
"Institutional Accredited Investor") that is acquiring the Offered Notes
for its own account, or for the account of such an Institutional Accredited
Investor, for investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the 1933 Act, in
each case in compliance with the requirements of the Indenture dated as of
October 1, 1997 between DiTech Home Loan Owner Trust 1997-1 and The Bank of
New York, as Indenture Trustee, and applicable state securities laws; and
we further agree, in the capacities stated above, to provide to any person
purchasing any of the Offered Notes from us a notice advising such
purchaser that resales of the Offered Notes are restricted as stated
herein.
(2) We understand that, in connection with any proposed resale of any Offered
Notes to an Institutional Accredited Investor, we will be required to
furnish to the Indenture Trustee and the Depositor a certification from
such transferee in the form hereof to confirm that the proposed sale is
being made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the 1933 Act and applicable state
securities laws. We further understand that the Offered Notes purchased by
us will bear a legend to the foregoing effect.
(3) We are acquiring the Offered Notes for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in
violation of the 1933 Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Offered Notes, and we and any account
for which we are acting are each able to bear the economic risk of such
investment.
(4) We are an Institutional Accredited Investor and we are acquiring the
Offered Notes purchased by us for our own account or for one or more
accounts (each of which is an Institutional Accredited Investor) as to each
of which we exercise sole investment discretion.
(5) We have received such information as we deem necessary in order to make our
investment decision.
Terms used in this letter which are not otherwise defined herein have the
respective meanings assigned thereto in the Private Placement Memorandum or, if
not defined therein, in the Indenture.
You and the Depositor are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
________________________________
[Purchaser]
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT B-3
[FORM OF TRANSFER AFFIDAVIT]
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is the ____________ of ______________ (the "Investor"),
a [corporation duly organized] and existing under the laws of _____________ on
behalf of which he makes this affidavit.
2. The Investor either (i) is not, and is not acquiring the Offered Notes
on behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement subject to Title I of ERISA or Section 4975 of the Code, or
(b) is, or is acquiring the Offered Notes on behalf of or with the assets of, an
employee benefit plan or other retirement plan or arrangement subject to Title I
of ERISA of Section 4975 of the Code and the relevant conditions for exemptive
relief under at least one of the following prohibited transaction class
exemptions have been satisfied: Prohibited Transaction Class Exemption ("PTCE")
96-23 (relating to transactions effected by an "in-house asset manager"), PTCE
95-60 (relating to transactions involving insurance company general accounts,
PTCE 91-38 (relating to transactions involving bank collective investment
funds), PTCE 90-1 (relating to transactions involving insurance company pooled
separate accounts), and PTCE 84-14 (relating to transactions effected by a
"qualified professional asset manager").
3. The Investor hereby acknowledges that under the terms of the Indenture
(the "Agreement") between DiTech Home Loan Owner Trust 1997-1 and The Bank of
New York, as paying agent, dated as of October 1, 1997, no transfer of the
Definitive Notes (as defined in the Agreement) shall be permitted to be made to
any person unless the Depositor and Owner Trustee have received a certificate
from such transferee in the form hereof.
[FOR TRANSFERS IN RELIANCE UPON RULE 144A]
4. The Investor is a "qualified institutional buyer" (as such term is
defined under Rule 144A under the Securities Act of 1933, as amended (the "1933
Act"), and is acquiring the Offered Notes for its own account or as a fiduciary
or agent for others (which others also are "qualified institutional buyers").
The Investor is familiar with Rule 144A under the 1933 Act, and is aware that
the transferor of the Offered Notes and other parties intend to rely on the
statements made herein and the exemption from the registration requirements of
the 1933 Act provided by Rule 144A.
IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to proper authority, by its duly authorized officer,
duly attested, this day of _____________, 199__.
_________________________________
[Investor]
By:______________________________
Name:
Title:
ATTEST:
__________________________
<PAGE>
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
Personally appeared before me the above-named ________________, known or
proved to me to be the same person who executed the foregoing instrument and to
be the ___________ of the Investor, and acknowledged that he executed the same
as his free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ______ day of _______________, 199__.
_______________________________
NOTARY PUBLIC
My commission expires the
______ day of __________, 19__
<PAGE>
EXHIBIT C
ANY PERSON WHO PURCHASES THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
DEEMED TO HAVE MADE, UPON SUCH PURCHASE, THE REPRESENTATIONS SET FORTH UNDER THE
HEADING "NOTICES TO INVESTORS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED OCTOBER
__, 1997 FOR THE DITECH HOME LOAN OWNER TRUST 1997-1 HOME LOAN ASSET BACKED
NOTES, SERIES 1997-1.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
1933 ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF
THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of October 1, 1997
among
DITECH HOME LOAN OWNER TRUST 1997-1
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
DITECH FUNDING CORPORATION
(Transferor and Servicer)
and
THE BANK OF NEW YORK,
(Indenture Trustee)
DITECH HOME LOAN OWNER TRUST 1997-1
HOME LOAN ASSET BACKED NOTES
SERIES 1997-1
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.......................................................
Section 1.02 Other Definitional Provisions.....................................
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans......................................
Section 2.02 Ownership and Possession of Home Loan Files.......................
Section 2.03 Books and Records.................................................
Section 2.04 Delivery of Home Loan Documents...................................
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans; Certain
Substitutions; Certification by the Custodian
Section 2.06 Subsequent Transfers..............................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor...................
Section 3.02 Representations and Warranties of the Transferor..................
Section 3.03 Representations, Warranties and Covenants of the Servicer.........
Section 3.04 Representations and Warranties Regarding Individual Home Loans....
Section 3.05 Purchase and Substitution.........................................
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer............................................
Section 4.02 Payment of Taxes, Insurance and Other Charges.....................
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.....................
Section 4.04 Filing of Continuation Statements.................................
Section 4.05 Superior Liens....................................................
Section 4.06 Subservicing......................................................
Section 4.07 Successor Servicers...............................................
Section 4.08 Maintenance of Insurance..........................................
Section 4.09 Reports to the Securities and Exchange Commission; 144A
Information.......................................................
Section 4.10 Foreclosure; Foreclosure Alternatives.............................
Section 4.11 Title, Management and Disposition of Foreclosure Property.........
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account..................
Section 5.02 Certificate Distribution Account and Note Distribution Account....
Section 5.03 Trust Accounts; Trust Account Property............................
Section 5.04 Allocation of Losses..............................................
Section 5.05 Pre-Funding Account...............................................
Section 5.06 Capitalized Interest Account......................................
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements........................................................
Section 6.02 Specification of Certain Tax Matters..............................
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance...................................
Section 7.02 Release of Home Loan Files........................................
Section 7.03 Servicing Compensation............................................
Section 7.04 Statement as to Compliance and Financial Statements...............
Section 7.05 Independent Public Accountants' Servicing Report..................
Section 7.06 Right to Examine Servicer Records.................................
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements...
Section 7.08 Financial Statements..............................................
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims...............................
Section 9.02 Merger or Consolidation of the Servicer...........................
Section 9.03 Limitation on Liability of the Servicer and Others................
Section 9.04 Servicer Not to Resign; Assignment................................
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee......
Section 9.06 Servicer May Own Securities.......................................
ARTICLE X
DEFAULT
Section 10.01 Events of Default................................................
Section 10.02 Indenture Trustee to Act; Appointment of Successor...............
Section 10.03 Waiver of Defaults...............................................
Section 10.04 Accounting Upon Termination of Servicer..........................
ARTICLE XI
TERMINATION
Section 11.01 Termination......................................................
Section 11.02 Optional Termination.............................................
Section 11.03 Notice of Termination............................................
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders..............................................
Section 12.02 Amendment........................................................
Section 12.03 Recordation of Agreement.........................................
Section 12.04 Duration of Agreement............................................
Section 12.05 Governing Law....................................................
Section 12.06 Notices..........................................................
Section 12.07 Severability of Provisions.......................................
Section 12.08 No Partnership...................................................
Section 12.09 Counterparts.....................................................
Section 12.10 Successors and Assigns...........................................
Section 12.11 Headings.........................................................
Section 12.12 Actions of Securityholders.......................................
Section 12.13 Reports to Rating Agencies.......................................
Section 12.14 Holders of the Residual Interest Certificates....................
Section 12.15 Limitation of Liability of Owner Trustee.........................
EXHIBIT A - Home Loan Schedule
EXHIBIT B - Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C - Form of Subsequent Transfer Agreement
<PAGE>
This Sale and Servicing Agreement is entered into effective as of October
1, 1997, among DITECH HOME LOAN OWNER TRUST 1997-1, a Delaware business trust
(the "Issuer" or the "Trust"), PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV, a
Delaware corporation, as Depositor (the "Depositor"), DITECH FUNDING
CORPORATION, a California corporation ("DiTech"), as Transferor (in such
capacity, the "Transferor") and Servicer (in such capacity, the "Servicer"), and
THE BANK OF NEW YORK, a New York banking corporation, as Indenture Trustee on
behalf of the Noteholders (in such capacity, the "Indenture Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the Issuer, the
Depositor, DiTech, the Indenture Trustee hereby agree as follows for the benefit
of each of them and for the benefit of the holders of the Notes and the Residual
Interest Certificates issued hereunder:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months, except that with respect to the Class A-1 Notes, calculations of accrued
interest shall be made on the basis of a 360-day year and the actual number of
days elapsed in each Accrual Period.
Accrual Period: With respect to the Class A-1 Notes, the period beginning
on the Distribution Date in the calendar month preceding the month in which the
related Distribution Date occurs (or, in the case of the first Distribution
Date, October 30, 1997) and ending on the day preceding the related Distribution
Date. With respect to the other Classes of Notes, the calendar month preceding
the month in which the related Distribution Date occurs.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing mortgage loans such as the
Home Loans held for its own account, giving due consideration to standards of
practice of prudent mortgage lenders and loan servicers that originate and
service mortgage loans comparable to the Home Loans and the reliance placed by
the Securityholders on the Servicer for the servicing of the Home Loans but
without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the
related Obligor;
(ii) the ownership of any Notes or the Residual Interest Certificates
by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive compensation
for its services hereunder with respect to any particular
transaction.
Addition Notice: For any date during the Pre-Funding Period, a notice
(which may be verbal if promptly confirmed in writing) given to the Rating
Agencies, the Indenture Trustee and the Owner Trustee pursuant to Section 2.06
hereof.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, the term "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 corresponding meanings.
Agreement: This Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the excess,
if any, of (a) the aggregate of the Class Principal Balances of all Classes of
Notes (after giving effect to all distributions on such Distribution Date) over
(b) the Pool Principal Balance as of the end of the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
sequentially, to the Class B-2 Notes, the Class B-1 Notes, the Class M-2 Notes
and the Class M-1 Notes, in that order.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the sale of the related Home Loan which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering Mortgages secured by Mortgaged Properties located
in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
amount without duplication equal to the sum of: (i) all amounts received on the
Home Loans or required to be paid by the Servicer or the Transferor during the
related Due Period (exclusive of amounts not required to be deposited by the
Servicer in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof) as reduced by any portion thereof
that may not be withdrawn therefrom pursuant to an order of a United States
bankruptcy court of competent jurisdiction imposing a stay pursuant to section
362 of the United States Bankruptcy Code; (ii) any and all income or gain from
investments in the Collection Account, Note Distribution Account and Certificate
Distribution Account; (iii) upon exercise of optional termination of the Notes
pursuant to Section 11.02 hereof, the Termination Price; (iv) the Purchase Price
paid for any Home Loans required to be purchased pursuant to Section 3.05 hereof
prior to the related Determination Date and the Substitution Adjustment to be
deposited in the Collection Account in connection with any substitution, in each
case prior to the related Determination Date; and (v) the Capitalized Interest
Requirement, if any, with respect to such Distribution Date.
Available Distribution Amount: With respect to any Distribution Date, the
Available Collection Amount minus the amount required to be paid from the Note
Distribution Account pursuant to Section 5.01(c)(i), plus on the Distribution
Date relating to the Due Period in which the termination of the Pre-Funding
Period shall have occurred, the amount on deposit in the Pre-Funding Account at
such time net of any Pre-Funded Earnings.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in The City of New York or in the city in which the
corporate trust office of the Indenture Trustee is located or the city in which
the Servicer's servicing operations are located and are authorized or obligated
by law or executive order to be closed.
"Capitalized Interest Account": The account designated as such, established
and maintained pursuant to Section 5.06 hereof.
"Capitalized Interest Initial Deposit": $333,828.24.
"Capitalized Interest Requirement: With respect to the Distribution Date in
November 1997, (i) the product of (a) the Pre-Funding Amount on the Closing Date
and (b) one-twelfth and (c) the weighted average of the applicable Note Interest
Rates for the Notes (assuming that the Class A-1 Notes bear interest at 5.75625%
per annum) minus (ii) in the case of any Subsequent Loan transferred to the
Trust during the related Due Period, the amount of any interest collected after
the Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Distribution Date in December 1997, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 5.75625% per
annum) minus (iii) in the case of any Subsequent Loan transferred to the Trust
during the related Due Period, the amount of any interest collected after the
Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Distribution Date in January 1998, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear iinterest at 5.75625% per
annum) minus (ii) in the case of any Subsequent Loan transferred to the Trust
during the related Due Period, the amount of any interest collected after the
Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Distribution Date in February 1998, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 5.75625% per
annum) minus (ii) any Pre-Funding Earnings for the related Due Period and minus
(iii) in the case of any Subsequent Loan transferred to the Trust during the
related Due Period, the amount of any interest collected after the Cut-Off Date
applicable to such Subsequent Loan and during such related Due Period.
Capitalized Interest Subsequent Deposit: As defined in Section
2.06(b)(viii)(B)(IV).
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to Section 3.4 of
the Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Class: With respect to the Notes, all Notes bearing the same class
designation.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class M-1
Note, Class M-2 Note, Class B-1 Note and Class B-2 Note: The respective meanings
assigned thereto in the Indenture.
Class B-1 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus the
sum of (i) the aggregate Class Principal Balance of the Senior Notes and the
Mezzanine Notes (after taking into account any distributions made on such
Distribution Date in reduction of the Class Principal Balances of the Classes of
Senior Notes and Mezzanine Notes) and (ii) the greater of (x) the sum of (1)
4.50% of the Pool Principal Balance as of the related Determination Date and (2)
the Overcollateralization Target Amount for such Distribution Date (calculated
without giving effect to the proviso in the definition thereof) and (y) 0.50% of
the Maximum Collateral Amount; provided, however, that such amount shall never
be less than zero or greater than the Original Class Principal Balance of the
Class B-1 Notes.
Class B-2 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus the
sum of (i) the aggregate Class Principal Balance of the Senior Notes, the
Mezzanine Notes and the Class B-1 Notes (after taking into account any
distributions made on such Distribution Date in reduction of the Class Principal
Balances of the Classes of Senior Notes, Mezzanine Notes and Class B-1 Notes)
and (ii) the Overcollateralization Target Amount for such Distribution Date;
provided, however, that such amount shall never be less than zero or greater
than the Original Class Principal Balance of the Class B-2 Notes.
Class Factor: With respect to each Class and any date of determination, the
then applicable Class Principal Balance of such Class divided by the Original
Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus the
sum of (i) the aggregate Class Principal Balance of the Senior Notes (after
taking into account distributions made on such Distribution Date in reduction of
the Class Principal Balances of the Classes of Senior Notes) and (ii) the
greater of (x) the sum of (1) 27.00% of the Pool Principal Balance as of the
related Determination Date and (2) the Overcollateralization Target Amount for
such Distribution Date (calculated without giving effect to the proviso in the
definition thereof) and (y) 0.50% of the Maximum Collateral Amount; provided,
however, that such amount shall never be less than zero or greater than the
Original Class Principal Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
the Pool Principal Balance as of the related Determination Date minus the sum of
(i) the aggregate Class Principal Balance of the Senior Notes (after taking into
account any distributions made on such Distribution Date in reduction of the
Class Principal Balances of the Classes of Senior Notes) plus the Class
Principal Balance of the Class M-1 Notes (after taking into account any
distributions made on such Distribution Date in reduction of the Class Principal
Balance of the Class M-1 Notes) and (ii) the greater of (x) the sum of (1)
15.00% of the Pool Principal Balance as of the related Determination Date and
(2) the Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (y) 0.50% of the
Maximum Collateral Amount; provided, however, that such amount shall never be
less than zero or greater than the Original Class Principal Balance of the Class
M-2 Notes.
Class Principal Balance: With respect to each Class and as of any date of
determination, the Original Class Principal Balance of such Class reduced by the
sum of (i) all amounts previously distributed in respect of principal of such
Class on all previous Distribution Dates and (ii) with respect to the Class M-1,
Class M-2, Class B-1 and Class B-2 Notes, all Allocable Loss Amounts applied in
reduction of principal of such Classes on all previous Distribution Dates.
Clean-up Call Date: The first Distribution Date on which the Pool Principal
Balance declines to 10% or less of the Maximum Collateral Amount.
Closing Date: October 30, 1997.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
Collection Account: The account designated as such, established and
maintained by the Servicer in accordance with Section 5.01 hereof.
Combination Loan: A loan, the proceeds of which were used by the Obligor in
combination to finance property improvements and for debt consolidation or other
purposes.
Combined Loan-to-Value Ratio: With respect to any Home Loan, the fraction,
expressed as a percentage, the numerator of which is the principal balance of
such Home Loan at origination plus, in the case of a junior lien Home Loan, the
aggregate outstanding principal balance of each related Superior Lien on the
date of origination of such Home Loan, and the denominator of which is the
stated value (as described in the underwriting criteria of the Transferor) of
the related Mortgaged Property at the time of origination of such Home Loan.
Credit Score: The credit evaluation scoring methodology developed by Fair,
Isaac and Company.
Custodial Agreement: The custodial agreement dated as of October 1, 1997 by
and between the Issuer, the Depositor, DiTech, as the Transferor and the
Servicer, the Indenture Trustee and The Bank of New York, a New York banking
corporation, as the Custodian, providing for the retention of the Indenture
Trustee's Home Loan Files by the Custodian on behalf of the Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant to the
Custodial Agreement, which custodian shall not be affiliated with the Servicer,
the Transferor, any Subservicer or the Depositor. The Bank of New York, shall be
the initial Custodian pursuant to the terms of the Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the Custodian,
calculated and payable monthly on each Distribution Date pursuant to Section
5.01(c)(i) hereof equal to the fee, if any, set forth in the Custodial
Agreement.
Custodian's Final Certification: As defined in Section 2.05(c).
Custodian's Initial Certification: As defined in Section 2.05(c).
Custodian's Updated Certification: As defined in Section 2.05(c).
Cut-Off Date: With respect to the Initial Loans, the close of business on
September 30, 1997, and, with respect to any Subsequent Loan, the date
designated as such in the related Subsequent Transfer Agreement.
DCR: Duff & Phelps Credit Rating Co.
Debt Consolidation Loan: A loan, the proceeds of which were primarily used
by the related Obligor for debt consolidation purposes or purposes other than to
finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any Home
Loan, including, without limitation, any Liquidated Home Loan with respect to
which any of the following has occurred as of the end of the preceding Due
Period: (a) foreclosure or similar proceedings have been commenced; (b) any
portion of a Monthly Payment becomes 180 days past due by the related Obligor;
or (c) the Servicer or any Subservicer has determined in good faith and in
accordance with customary servicing practices that such Home Loan is in default
or imminent default.
Defective Home Loan: As defined in Section 3.05 hereof.
Deleted Home Loan: A Home Loan replaced or to be replaced by one or more
than one Qualified Substitute Home Loan.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due thereon
is not made by the close of business on the day such Monthly Payment is
scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
due or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such
month), then on the last day of such immediately succeeding month. The
determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc. shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC), transfer thereof
(i) by delivery of such certificated security endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined
in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of
a confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property")
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC: the
making by a Federal Reserve Bank of an appropriate entry crediting
such Trust Account property to an account of a financial intermediary
that is also a "participant" pursuant to applicable federal
regulations; the making by such financial intermediary of entries in
its books and records crediting such book-entry security held through
the Federal Reserve System pursuant to federal book-entry regulations
to the securities account of the Indenture Trustee or its nominee or
custodian and indicating that such custodian holds such Trust Account
Property solely as agent for the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of
confirmation of the purchase by the Indenture Trustee or its nominee
or custodian of such book-entry security; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to
the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof
including, without limitation, Article 8 of the UCC; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the
purchase by the Indenture Trustee or its nominee or custodian of such
uncertificated security, and the making by such financial intermediary
of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or
custodian.
Denomination: With respect to a Note, the portion of the Original Class
Principal Balance represented by such Note as specified on the face thereof.
Depositor: PaineWebber Mortgage Acceptance Corporation IV, a Delaware
corporation, and any successor thereto.
Determination Date: With respect to any Distribution Date, the 8th calendar
day of the month in which such Distribution Date occurs or if such day is not a
Business Day, the immediately preceding Business Day.
Distribution Date: The 15th day of any month or if such 15th day is not a
Business Day, the first Business Day immediately following such day, commencing
in November 1997.
Distribution Statement: As defined in Section 6.01 hereof.
DiTech: DiTech Funding Corporation, a California corporation.
Due Date: The day of the month on which the Monthly Payment is due from the
Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Distribution Date,
the calendar month immediately preceding such Determination Date or Distribution
Date, as the case may be.
Eligible Account: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account the deposits in which are fully
insured by either the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC; (iii) a trust account (which shall be a "segregated trust
account") maintained with the corporate trust department of a federal or state
chartered depository institution or trust company with trust powers and acting
in its fiduciary capacity for the benefit of the Indenture Trustee and the
Issuer, which depository institution or trust company shall have capital and
surplus of not less than $50,000,000; or (iv) an account that will not cause any
Rating Agency to downgrade or withdraw its then-current rating(s) assigned to
the Notes, as evidenced in writing by such Rating Agency. (Each reference in
this definition of "Eligible Account" to the Rating Agency shall be construed as
a reference to Standard & Poor's, DCR and Fitch).
Eligible Servicer: A Person that (i) has demonstrated the ability
professionally and competently to service a portfolio of mortgage loans similar
to the Home Loans and (ii) has a net worth calculated in accordance with GAAP of
at least $500,000.
Event of Default: As described in Section 10.01 hereof.
Excess Spread: With respect to any Distribution Date, the excess of (a) the
Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fidelity Bond: As described in Section 4.03 hereof.
Fitch: Fitch Investors Service, L.P. or any successor thereto.
FNMA: The Federal National Mortgage Association and any successor thereto.
Foreclosed Loan: As of any date of determination, any Home Loan that has
been discharged as a result of (i) the completion of foreclosure or comparable
proceedings; (ii) the Owner Trustee's acceptance of the deed or other evidence
of title to the related Property in lieu of foreclosure or other comparable
proceeding; or (iii) the acquisition by the Owner Trustee of title to the
related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that has
been acquired by the Servicer through foreclosure, deed in lieu of foreclosure
or similar proceedings in respect of the related Home Loan.
GAAP: Generally accepted accounting principles as in effect in the United
States.
Home Loan: Any Debt Consolidation Loan or Combination Loan that is included
in the Home Loan Pool. As applicable, a Home Loan shall be deemed to refer to
the related Debt Instrument, the Mortgage, if any, and any related Foreclosure
Property. The term "Home Loan" includes each Subsequent Loan.
Home Loan File: As to each Home Loan, the Indenture Trustee's Home Loan
File and the Servicer's Home Loan File.
Home Loan Interest Rate: The fixed annual rate of interest borne by a Debt
Instrument, as shown on the related Home Loan Schedule, as the same may be
modified by the Servicer in accordance with Section 4.01(c) or 4.10 hereof.
Home Loan Pool: The pool of Home Loans conveyed to the Issuer pursuant to
this Agreement on the Closing Date and Subsequent Transfer Dates, together with
the rights and obligations of a holder thereof, and the payments thereon and
proceeds therefrom received after the applicable Cut-Off Date, as identified on
the Home Loan Schedule annexed hereto as Exhibit A.
Home Loan Purchase Agreement: The home loan purchase agreement between the
Transferor and the Depositor, dated as of October 1, 1997.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto, as amended or supplemented from time to time specifying, with
respect to each Home Loan, the following information: (i) the Transferor's Home
Loan number; (ii) the Obligor's name and the street address; (iii) the current
principal balance; (iv) the original principal amount with respect to any Home
Loan originated by the Transferor and the principal amount purchased by the
Transferor with respect to a Home Loan acquired by the Transferor subsequent to
its origination; (v) the combined loan-to-value ratio as of the date of the
origination of the related Home Loan; (vi) the paid through date; (vii) the Home
Loan Interest Rate; (viii) the final maturity date under the Debt Instrument;
(ix) the Monthly Payment; (x) the occupancy status of the Mortgaged Property, if
any; (xi) the lien priority of the Mortgage, if any; (xii) the original term of
the Debt Instrument; (xiii) the Credit Score, if applicable; and (xiv) the debt
to income ratio of the related Obligor.
Indenture: The Indenture, dated as of October 1, 1997, between the Issuer
and the Indenture Trustee.
Indenture Trustee: The Bank of New York, a New York banking corporation, as
Indenture Trustee under the Indenture and this Agreement acting on behalf of the
Noteholders, or any successor indenture trustee under the Indenture or this
Agreement.
Indenture Trustee Fee: As to any Distribution Date, the greater of (a)
one-twelfth of 0.0175% times the Pool Principal Balance as of the opening of
business on the first day of the calendar month preceding the calendar month of
such Distribution Date (or, with respect to the first Distribution Date, the
Original Pool Principal Balance) and (b) one-twelfth of $10,000.
Indenture Trustee's Home Loan File: As defined in Section 2.04(a) hereof.
Independent: When used with respect to any specified Person, such Person
(i) is in fact independent of DiTech, the Servicer, the Depositor or any of
their respective Affiliates, (ii) does not have any direct financial interest
in, or any material indirect financial interest in, any of DiTech, the Servicer,
the Depositor or any of their respective Affiliates and (iii) is not connected
with any of DiTech, the Servicer, the Depositor or any of their respective
Affiliates, as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions; provided, however, that a
Person shall not fail to be Independent of DiTech, the Servicer, the Depositor
or any of their respective Affiliates merely because such Person is the
beneficial owner of 1% or less of any class of securities issued by DiTech, the
Servicer, the Depositor or any of their respective Affiliates, as the case may
be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is Independent.
Initial Loan: Each Home Loan conveyed to the Issuer pursuant to this
Agreement on the Closing Date.
Insurance Policies: With respect to any Property, any related insurance
policy.
Insurance Proceeds: With respect to any Property, all amounts collected in
respect of Insurance Policies and not required to be applied to the restoration
of the related Property or paid to the related Obligor.
LIBOR: With respect to each Accrual Period (other than the initial Accrual
Period) and each Class of LIBOR Notes, the rate for United States dollar
deposits for one month that appears on the Telerate Screen Page 3750 as of 11:00
a.m., London time, on the related LIBOR Determination Date. If such rate does
not appear on such page (or such other page as may replace that page on that
service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Indenture Trustee), LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Indenture
Trustee and no Reference Bank Rate is available, LIBOR will be LIBOR applicable
to the preceding Accrual Period. LIBOR for the initial Accrual Period will be
5.65625%.
LIBOR Business Day: Any day on which banks are open for dealing in foreign
currency and exchange in London and New York City.
LIBOR Determination Date: With respect to each Accrual Period, the second
LIBOR Business Day before the first day of such Accrual Period, as determined by
the Indenture Trustee.
LIBOR Notes: The Class A-1 Notes.
Liquidated Home Loan: With respect to any date of determination, any
Foreclosure Property or any Home Loan in respect of which a Monthly Payment is
in excess of 30 days past due and as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to collect have been
recovered from or on account of such Home Loan or the related Foreclosure
Property; provided, however, that in any event such Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore be a Liquidated
Home Loan upon the earliest to occur of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from the
Home Loan and any related Mortgaged Property, or (c) the date on which any
portion of a Monthly Payment on any Home Loan is in excess of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition, any
cash amounts received in connection with the management of the Mortgaged
Properties from Defaulted Home Loans and any other amounts required to be
deposited in the Collection Account pursuant to Section 5.01(b) hereof, in each
case other than Insurance Proceeds and Released Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Distribution Date and
the Class M-1 Notes, Class M-2 Notes, Class B-1 Notes or the Class B-2 Notes,
the amount of Allocable Loss Amounts applied to the reduction of the Class
Principal Balance of such Class and not reimbursed pursuant to Section 5.01
hereof as of such Distribution Date plus interest accrued on the unreimbursed
portion thereof at the applicable Note Interest Rate through the end of the Due
Period immediately preceding such Distribution Date; provided, however, that no
interest shall accrue on any amount of such accrued and unpaid interest.
Majority Noteholders: Until such time as the sum of the Class Principal
Balances of all Classes of Notes has been reduced to zero, the holder or holders
of in excess of 50% of the Class Principal Balance of all Classes of Notes.
Majority Residual Interestholders: The holder or holders of in excess of
50% of the Residual Interest.
Mandatory Redemption Date: The Distribution Date immediately following the
end of the Pre-Funding Period.
Maturity Date means, with respect to each Class of Notes, Distribution Date
in the applicable month set forth below:
Class Maturity Date
----- -------------
A-1 April 2009
A-2 April 2013
A-3 August 2018
A-4 January 2024
M-1 January 2024
M-2 January 2024
B-1 January 2024
B-2 January 2024
Maximum Collateral Amount: The sum of the Original Pool Balance and the
Original Pre-Funded Amount.
Mezzanine Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess, if any, of (A) the Mezzanine Noteholders' Monthly
Interest Distribution Amount for the preceding Distribution Date plus any
outstanding Mezzanine Noteholders' Interest Carry-Forward Amount for preceding
Distribution Dates, over (B) the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date
net of the Senior Noteholders' Interest Distribution Amount for such preceding
Distribution Date; it being understood that the interest of the Class M-1
Noteholders in the Mezzanine Noteholders' Interest Carry-Forward Amount is
senior to that of the Class M-2 Noteholders.
Mezzanine Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Mezzanine Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Mezzanine Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Mezzanine Noteholders' Monthly Interest Distribution Amount: With respect
to each Distribution Date and the Classes of Mezzanine Notes, the interest
accrued at the respective Note Interest Rates on the respective Class Principal
Balances of such Classes immediately preceding such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to the holders of such Classes of Notes on
or prior to such preceding Distribution Date.
Mezzanine Notes: The Class M-1 Notes and Class M-2 Notes.
Monthly Cut-Off Date: The last day of any calendar month and, with respect
to any Distribution Date, the last day of the calendar month immediately
preceding such Distribution Date.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by an Obligor on the related Home Loan, as set forth in the
related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument creating
a lien in accordance with applicable law on a Mortgaged Property to secure the
Debt Instrument which evidences a secured Home Loan.
Mortgaged Property: The real property encumbered by the Mortgage which
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing a Home Loan is located as set forth in the Home Loan Schedule.
Multiplier: The Multiplier will initially equal 1.50 and may from time to
time be permanently modified to a lesser amount (including zero), provided that
the Issuer shall have delivered to the Indenture Trustee written confirmation
from each Rating Agency that the rating assigned by it to each Class of Notes
which it originally rated will not be downgraded or withdrawal as a result of
such reduction.
Net Delinquency Calculation Amount: With respect to any Distribution Date,
the excess, if any, of (x) the product of the Multiplier and the Six-Month
Rolling Delinquency Average over (y) the aggregate of the amounts of Excess
Spread for the three preceding Distribution Dates.
Net Liquidation Proceeds: With respect to any Distribution Date,
Liquidation Proceeds received during the related Due Period, net of any
reimbursements to the Servicer made from such amounts for any unreimbursed
Servicing Compensation and Servicing Advances (including Nonrecoverable
Servicing Advances) made and any other fees and expenses paid in connection with
the foreclosure, conservation and liquidation of the related Liquidated Home
Loans or Foreclosure Properties pursuant to Section 4.11 hereof.
Net Loan Losses: With respect to any Defaulted Home Loan that is subject to
a modification pursuant to Section 4.01(c) hereof, an amount equal to the
portion of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
Interest Rate, less the rate at which the Servicing Fee is calculated.
Net Weighted Average Rate: With respect to any Accrual Period, a rate per
annum equal to the weighted average (by principal balance) of the Home Loan
Interest Rates as of the first day of the related Due Period less 0.7675%.
Nonrecoverable Servicing Advance: With respect to any Foreclosure Property,
(a) any Servicing Advance previously made and not reimbursed from late
collections, Liquidation Proceeds, Insurance Proceeds or the Released Mortgaged
Property Proceeds or (b) a Servicing Advance proposed to be made in respect of a
Home Loan or Foreclosure Property either of which, in the good faith business
judgment of the Servicer, as evidenced by an Officer's Certificate delivered to
the Indenture Trustee, would not be ultimately recoverable.
Note: Any of the Senior Notes, the Mezzanine Notes or the Subordinate
Notes.
Note Distribution Account: The account established and maintained pursuant
to Section 5.01(a)(2) hereof.
Noteholders' Interest Distribution Amount: The sum of the Senior
Noteholders' Interest Distribution Amount, the Mezzanine Noteholders' Interest
Distribution Amount and the Subordinate Noteholders' Interest Distribution
Amount.
Note Interest Rate: With respect to each Class of Notes, the annual rate of
interest payable to the holders of such Class of Notes, as specified below:
Class Note Interest Rate
----- ------------------
Class A-1 (1)
Class A-2 6.59%
Class A-3 6.71%
Class A-4 7.36% through the last day of
the month immediately
preceding the Clean-up Call
Date and 7.86% thereafter;
Class M-1 7.25%
Class M-2 7.35%
Class B-1 7.69%
Class B-2 8.85%
(1) Interest will accrue on the Class A-1 Notes during each Accrual
Period at a per annum interest rate equal to LIBOR for the
related LIBOR Determination Date plus 0.10%, subject to a maximum
rate equal to the Net Weighted Average Rate. The Note Interest
Rate applicable to the Class A-1 Notes for the initial Accrual
Period will be 5.75625% per annum.
Note Redemption Amount: As of any date of determination, an amount without
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Notes plus all accrued and unpaid interest thereon,
(ii) any Trust Fees and Expenses due and unpaid on such date and (iii) any
Servicing Advance Reimbursement Amount.
Noteholder: A holder of a Note.
Obligor: Each obligor on a Debt Instrument.
Officer's Certificate: A certificate delivered to the Indenture Trustee or
the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Depositor, the Servicer or the Transferor, in each case, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to the
Rating Agencies), who may be employed by DiTech, the Servicer, the Depositor or
any of their respective Affiliates.
Original Class Principal Balance: With respect to the Classes of Notes, as
follows: Class A-1: $24,636,000; Class A-2: $22,945,000; Class A-3: $24,897,000;
Class A-4: $13,622,000; Class M-1: $17,700,000; Class M-2: $7,200,000; Class
B-1: $6,300,000; and Class B-2: $2,700,000.
Original Pool Principal Balance: $89,074,845, which is the Pool Principal
Balance as of the Cut-Off Date.
Original Pre-Funding Amount: $30,925,155.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Distribution Date, the
amount equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funded Amount, each as of the end of the preceding Due Period, over (B) the
aggregate of the Class Principal Balances of the Notes (after giving effect to
the distributions made on such date pursuant to Section 5.01(d)) hereof.
Overcollateralization Deficiency Amount: With respect to any Distribution
Date, the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount (after giving effect to all prior distributions on
the Classes of Notes and to any prior distribution on the Residual Interest on
such Distribution Date pursuant to Section 5.01(d) hereof).
Overcollateralization Target Amount: (I) With respect to any Distribution
Date occurring prior to the Stepdown Date, an amount equal to the greater of (x)
4.00% of the Maximum Collateral Amount and (y) the Net Delinquency Calculation
Amount; and (II) with respect to any other Distribution Date, an amount equal to
the greater of (x) 8.00% of the Pool Principal Balance as of the end of the
related Due Period and (y) the Net Delinquency Calculation Amount; provided,
however, that the Overcollateralization Target Amount shall in no event be less
than 0.50% of the Maximum Collateral Amount or greater than the sum of the
aggregate Class Principal Balances of all Classes of Notes.
Owner Trustee: Bankers Trust (Delaware), as owner trustee under the Trust
Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $2,500 which shall be paid annually in
advance on the Closing Date and each anniversary thereof to the Owner Trustee in
October each year during the term of this Agreement commencing in October 1997.
Ownership Interest: As to any Note, any ownership or security interest in
such Note, including any interest in such Note as the holder thereof and any
other interest therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Percentage Interest: As defined in the Trust Agreement.
Permitted Investments: Each of the following:
(1) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following criteria:
(A) it must be between the Indenture Trustee and either (x) primary
dealers on the Federal Reserve reporting dealer list which are rated
in one of the two highest categories for long-term unsecured debt
obligations by each Rating Agency or (y) banks rated in the highest
categories for long-term unsecured debt obligations by each Rating
Agency; and (B) it must be in writing and include the following terms:
(a) the securities acceptable for transfer are either (i) direct U.S.
government obligations or (ii) obligations of a federal agency that
are backed by the full faith and credit of the U.S. government or by
FNMA or FHLMC; (b) a term no greater than 60 days for any repurchase
transaction; (c) the collateral must be delivered to the Indenture
Trustee or a third party custodian acting as agent for the Indenture
Trustee by appropriate book entries and confirmation statements, and
must have been delivered before or simultaneously with payment (i.e.,
perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at
current market price plus accrued interest and the value of the
collateral must be equal to at least 104% of the amount of cash
transferred by the Indenture Trustee under the repurchase agreement
and, if the value of the securities held as collateral declines to an
amount below 104% of the cash transferred by the Indenture Trustee
plus accrued interest (i.e., a margin call), then additional cash
and/or acceptable securities must be transferred to the Indenture
Trustee to satisfy such margin call; provided, however, that if the
securities used as collateral are obligations of FNMA or FHLMC, then
the value of the securities held as collateral must equal at least
105% of the cash transferred by the Indenture Trustee under such
repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any state,
including the Indenture Trustee; provided, however, that the debt
obligations of such depository institution or trust company at the
date of the acquisition thereof have been rated by each Rating Agency
in the highest long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee,
which are fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
Affiliates of the Indenture Trustee, which at the date of acquisition
is rated by each Rating Agency in its highest short-term rating
category and which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository
institutions which have debt obligations rated by each Rating Agency
in the highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term
rating category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at
the time at which the investment is made;
provided, however, that no instrument described in the foregoing subparagraphs
shall evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to each of Standard & Poor's, DCR and Fitch.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period; provided, however, that the Pool Principal Balance on any
Distribution Date on which the Termination Price is to be paid to Noteholders
will be deemed to have been equal to zero as of such date.
Pre-Funded Percentage: With respect to any Class of Notes and a
Distribution Date, the percentage obtained from the fraction, the numerator of
which is the Class Principal Balance of such Class of Notes on the Closing Date
and the denominator of which is the Maximum Collateral Amount.
Pre-Funding Account: The account created and maintained by the Indenture
Trustee pursuant to Section 5.05 hereof.
Pre-Funding Amount: With respect to any date, the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings).
Pre-Funding Earnings: With respect to the Distribution Date in December
1997, the actual investment earnings earned on amounts on deposit in the
Pre-Funding Account during the period from October 30, 1997 through and
including November 30, 1997. With respect to the Distribution Date in January
1998, the actual investment earnings earned on amounts on deposit in the
Pre-Funding Account from December 1, 1997 through and including December 31,
1997. With respect to the Distribution Date in February 1998, the actual
investment earnings earned on amounts on deposit in the Pre-Funding Account from
January 1, 1997 through and including January 31, 1997
Pre-Funding Period: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre-Funding Earnings) is less than
$50,000, (ii) the date on which any Event of Default relating to the Servicer
occurs and (iii) January 30, 1998.
Pre-Funding Distribution Trigger: With respect to the Distribution Date
following the Due Period in which the termination of the Pre-Funding Period
occurs, a Pre-Funding Distribution Trigger will be deemed to have occurred if,
at such time, the Pre-Funded Amount is greater than or equal to $50,000.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as of
the last day of the preceding Due Period (after giving effect to all payments
received thereon and the allocation of any Net Loan Losses with respect thereto
for a Defaulted Home Loan which relates to such Due Period), without giving
effect to amounts received in respect of such Home Loan or related Foreclosure
Property after such Due Period; provided, however, that any Liquidated Home Loan
shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period, any
principal amount received on a Home Loan in excess of the principal of the
Monthly Payment due in such Due Period.
Private Placement Memorandum: The Private Placement Memorandum to be
prepared by the Depositor in connection with the Class B-1 and Class B-2 Notes.
Property: The property (real, personal or mixed) encumbered by the Mortgage
which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus as supplemented by the
Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement to be prepared by the
Depositor in connection with the issuance and sale of the Class A-1, Class A-2,
Class A-3, Class A-4, Class M-1 and Class M-2 Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the date of repurchase computed at
the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Defective Home Loan
(after deducting therefrom any amounts received in respect of such repurchased
Defective Home Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the date of repurchase).
Qualified Substitute Home Loan: A home loan or home loans substituted for a
Deleted Home Loan pursuant to Section 2.05 or Section 3.05 hereof, which (i) has
or have an interest rate or rates of not less than, and not more than two
percentage points greater than, the Home Loan Interest Rate for the Deleted Home
Loan, (ii) matures or mature not more than one year than, and not more than one
year earlier, than the maturity date of Deleted Home Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance or Balances of the Deleted Home Loan or Loans as of such date,
(iv) has or have a lien priority equal or superior to that of the Deleted Home
Loan or Loans, (v) has or have a borrower or borrowers with a comparable credit
grade classification to the credit grade classification of the Obligor on the
Deleted Home Loan or Loans, including a Credit Score equal to or greater than
such Deleted Home Loan, (vi) has or have a borrower or borrowers with a
debt-to-income ratio no higher than the debt-to-income ratio of the Obligor with
respect to the Deleted Loan, and (vii) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.04
hereof and is or are not more than 30 days delinquent as of the date of
substitution for such Deleted Home Loan or Loans. For purposes of determining
whether multiple mortgage loans proposed to be substituted for one or more
Deleted Home Loans pursuant to Section 2.05 or Section 3.05 hereof are in fact
"Qualified Substitute Home Loans" as provided above, the criteria specified in
clauses (i) and (iii) above may be considered on an aggregate or weighted
average basis, rather than on a loan-by-loan basis (i.e., so long as the
weighted average Home Loan Interest Rate of any loans proposed to be substituted
is not less than two percentage points less than and not more than two
percentage points greater than the Home Loan Interest Rate for the designated
Deleted Home Loan or Loans, the requirements of clause (i) above would be deemed
satisfied).
Rating Agencies: Standard & Poor's, DCR and Fitch. If no such organization
or successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable person designated
by the Servicer, notice of which designation shall have been given to the
Indenture Trustee and the Issuer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Distribution Date, the close of business
on the last Business Day of the month immediately preceding the month in which
such Distribution Date occurs.
Reference Bank Rate: With respect to any Accrual Period, the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for United States dollar deposits for one month that are
offered by the Reference Banks as of 11:00 a.m., New York City time, on the
second LIBOR Business Day prior to the first day of such Accrual Period to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the outstanding Class Principal Balance of the Class A-1
Notes, provided that at least two such Reference Banks provide such rate. If
fewer than two offered rates appear, the Reference Bank Rate will be arithmetic
mean of the rates quoted by one or more major banks in New York City, selected
by the Indenture Trustee, as of 11:00 a.m., New York City time, on such date for
loans in U.S. Dollars to leading European Banks for a period of one month in
amounts approximately equal to the outstanding Class Principal Balance of the
Class A-1 Notes. If no such quotation can be obtained, the Reference Bank Rate
will be the Reference Bank Rate applicable to the preceding Accrual Period.
Reference Banks: Three money center banks selected by the Indenture
Trustee.
Regular Distribution Amount: With respect to any Distribution Date, the
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Noteholders' Interest Distribution Amount, (ii) the Regular Principal
Distribution Amount and (iii) if such Distribution Date relates to the Due
Period in which the Pre-Funding Period shall have ended and at the termination
of such Pre-Funding Period a Pre-Funding Distribution Trigger shall have
occurred, the amount on deposit in the Pre-Funding Account on such date.
Regular Principal Distribution Amount: On each Distribution Date, an amount
equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes
of Notes immediately prior to such Distribution Date; and
(B) the sum of (i) each scheduled payment of principal collected
by the Servicer in the related Due Period, (ii) all full and partial
principal prepayments applied by the Servicer during such related Due
Period, (iii) the principal portion of all Net Liquidation Proceeds,
Insurance Proceeds and Released Mortgaged Property Proceeds received
during the related Due Period, (iv) that portion of the Purchase Price
of any repurchased Home Loan which represents principal received prior
to the related Determination Date, (v) the principal portion of any
Substitution Adjustments required to be deposited in the Collection
Account as of the related Determination Date, (vi) if such
Distribution Date relates to the Due Period in which the Pre-Funding
Period shall have ended and at the termination of such Pre-Funding
Period a Pre-Funding Distribution Trigger shall have occurred, the
amount on deposit in the Pre-Funding Account on such date, and (vii)
on the Distribution Date on which the Trust is to be terminated
pursuant to Section 11.02 hereof, the Termination Price (net of any
accrued and unpaid interest, Trust Fees and Expenses due and unpaid on
such date and Servicing Advance Reimbursement Amount).
Released Mortgaged Property Proceeds: With respect to any secured Home
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which proceeds in either case are not released to the Obligor in accordance with
applicable law, Accepted Servicing Procedures and this Agreement.
Residual Interest: The interest which represents the right to the amount
remaining, if any, after all prior distributions have been made under this
Agreement, the Indenture and the Trust Agreement on each Distribution Date and
certain other rights to receive amounts hereunder and under the Trust Agreement.
Residual Interest Certificate: The meaning assigned thereto in the Trust
Agreement.
Responsible Officer: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer of the
Owner Trustee or any agent acting under a power of attorney with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Issuer. When used with respect to the Depositor, the
Transferor, the Servicer or the Custodian, the President or any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
Securities: The Notes or Residual Interest Certificates.
Securityholder: Any Noteholder or Certificateholder.
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess, if any, of (A) the Senior Noteholders' Monthly
Interest Distribution Amount for the preceding Distribution Date plus any
outstanding Senior Noteholders' Interest Carry-Forward Amount for preceding
Distribution Dates, over (B) the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date.
Senior Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Senior Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Senior Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Senior Noteholders' Monthly Interest Distribution Amount: With respect to
each Distribution Date and the Classes of Senior Notes, the interest accrued at
the respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Distribution Date (or, in the case of
the first Distribution Date, on the Closing Date) after giving effect to all
payments of principal to the holders of such Classes of Notes on or prior to
such preceding Distribution Date.
Senior Notes: The Class A-1, Class A-2, Class A-3 and Class A-4 Notes.
Senior Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
an amount equal to the Pool Principal Balance as of the related Determination
Date minus the greater of (a) the sum of (1) 56.50% of the Pool Principal
Balance as of the related Determination Date and (2) the Overcollateralization
Target Amount for such Distribution Date (without giving effect to the proviso
in the definition thereof) and (b) 0.50% of the Maximum Collateral Amount,
provided; however, that such amount shall never be less than zero or greater
than the sum of the Original Class Principal Balances of the Notes.
Series or Series 1997-1: DiTech Home Loan Asset Backed Notes, Series
1997-1.
Servicer: DiTech, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant to
Section 10.01(b) hereof.
Servicer's Fiscal Year: January 1st through December 31st of each year.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
customarily included in the servicer's loan file for the related type of Home
Loan as specifically set forth in Section 2.04(b).
Servicer's Monthly Remittance Report: A report prepared and computed by the
Servicer in substantially the form of Exhibit B attached hereto.
Servicing Advance Reimbursement Amount: With respect to any date of
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date, including Nonrecoverable Servicing Advances.
Servicing Advances: Subject to Section 4.01(b) hereof, all reasonable,
customary and necessary "out of pocket" costs and expenses advanced or paid by
the Servicer with respect to the Home Loans in accordance with the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of a Mortgaged Property, including without limitation advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including without limitation foreclosures, collections
and liquidations pursuant to Section 4.10 hereof, (iii) the conservation,
management and sale or other disposition of a Foreclosure Property pursuant to
Section 4.11 hereof, (iv) the preservation of the security for a Home Loan if
any lienholder under a Superior Lien has accelerated or intends to accelerate
the obligations secured by such Superior Lien pursuant to Section 4.05 hereof;
provided, however, that such Servicing Advances are reimbursable to the Servicer
out of Net Liquidation Proceeds.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.03 hereof.
Servicing Fee: As to each Home Loan (including any Home Loan that has been
foreclosed and has become a Foreclosure Property, but excluding any Liquidated
Home Loan), the fee payable monthly to the Servicer on each Distribution Date,
which shall be the product of 0.75% (75 basis points) and the Principal Balance
of such Home Loan as of the beginning of the immediately preceding Due Period,
divided by 12. The Servicing Fee includes any servicing fees owed or payable to
any Subservicer, which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Home Loans whose
name and specimen signature appears on a list of servicing officers annexed to
an Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, to the Issuer and the Indenture Trustee, on behalf of the
Noteholders, as such list may from time to time be amended.
Servicing Plan: The meaning assigned thereto in Section 10.01(c) herein.
Servicing Plan Trigger: The meaning assigned thereto in Section 10.01(c)
herein.
Six-Month Rolling Delinquency Average: With respect to any Distribution
Date, the average of the applicable 60-Day Delinquency Amounts for each of the
six immediately preceding Due Periods, where the 60-Day Delinquency Amount for
any Due Period is the aggregate of the Principal Balances of all Home Loans that
are 60 or more days delinquent, in foreclosure or Foreclosure Property as of the
end of such Due Period.
Standard & Poor's: Standard & Poor's, a division of The McGraw-Hill
Companies, or any successor thereto.
Stepdown Date: The first Distribution Date occurring after October 2000,
upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of
Maximum Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 4.00% of
the Maximum Collateral Amount; and
(3) the aggregate of the Class Principal Balances of the Senior
Notes will be able to be reduced on such Distribution Date (such
determination to be made by the Indenture Trustee prior to giving
effect to distribution of principal on such Distribution Date) to the
excess of:
(I) the Pool Principal Balance as of the related
Determination Date over
(II) the greater of
(a) the sum of
(1) 56.50% of the Pool Principal Balance as of the related
Determination Date and
(2) the Overcollateralization Target Amount for such
Distribution Date (such amount to be calculated (x) without
giving effect to the proviso in the definition thereof and
(y) pursuant only to clause (II) of the definition thereof);
and
(b) 0.50% of the Maximum Collateral Amount.
Subordinate Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess, if any, of (A) the Subordinate Noteholders'
Monthly Interest Distribution Amount for the preceding Distribution Date plus
any outstanding Subordinate Noteholders' Interest Carry-Forward Amount for
preceding Distribution Dates, over (B) the amount in respect of interest that is
actually deposited in the Note Distribution Account on such preceding
Distribution Date net of the Senior Noteholders' Interest Distribution Amount
and the Mezzanine Noteholders' Interest Distribution Amount for such preceding
Distribution Date; it being understood that the interest of the Class B-1
Noteholders in the Subordinate Noteholders' Interest Carry-Forward Amount is
senior to that of the Class B-2 Noteholders.
Subordinate Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Subordinate Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Subordinate Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Subordinate Noteholders' Monthly Interest Distribution Amount: With respect
to each Distribution Date and the Classes of Subordinate Notes, the interest
accrued at the respective Note Interest Rates on the respective Class Principal
Balances of such Classes immediately preceding such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to the holders of such Classes of Notes on
or prior to such preceding Distribution Date.
Subordinate Notes: The Class B-1 Notes and Class B-2 Notes.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan transferred to the Trust during any month which
Subsequent Loan does not have a Monthly Payment due until the second Due Period
following such month, an amount equal to the product of (a) the Loan Balance of
such Subsequent Loan on the related Cut-Off Date and (b) one-twelfth of the Net
Loan Rate on such Subsequent Loan.
Subsequent Loan: Each Home Loan sold to the Trust for inclusion pursuant to
Section 2.06 hereof and the related Subsequent Transfer Agreement, which Home
Loan shall be listed on the related Subsequent Loan Schedule.
Subsequent Loan Schedule: The schedule of Subsequent Loans transferred to
the Trust pursuant to the related Subsequent Transfer Agreement and attached
thereto.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Owner Trustee, Indenture Trustee and the Transferor substantially in the
form of Exhibit C attached hereto by which Subsequent Loans are sold and
assigned to the Trust.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement; provided, however, that in no event shall there be more than three
(3) such Subsequent Transfer Agreements.
Subservicer: Any Person with which the Servicer has entered into a
Subservicing Agreement and which is an Eligible Servicer and satisfies any
requirements set forth in Section 4.06(a) hereof in respect of the
qualifications of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant to a
Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.06(a) hereof, copies of which shall be made
available, along with any modifications thereto, to the Issuer and the Indenture
Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Sections 2.05 or Section 3.05 hereof, the amount, if any determined
by the Servicer, by which (a) the sum of the aggregate principal balance (after
application of principal payments received on or before the date of
substitution) of any Qualified Substitute Home Loans as of the date of
substitution, plus any accrued and unpaid interest thereon to the date of
substitution, is less than (b) the sum of the aggregate of the Principal
Balances, together with accrued and unpaid interest thereon to the date of
substitution, of the related Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
other than a first priority lien, the mortgage loan(s) having a superior
priority lien on the related Mortgaged Property .
Termination Price: As of any date of determination, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Home Loan included in the Trust as of
the applicable Monthly Cut-Off Date; (ii) all unpaid interest accrued on the
Principal Balance of each such Home Loan at the related Net Loan Rate to such
Monthly Cut-Off Date; and (iii) the aggregate fair market value of each
Foreclosure Property included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Indenture Trustee as of
a date not more than 30 days prior to such Monthly Cut-Off Date.
Transferor: DiTech, in its capacity as the transferor hereunder.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in the Trust Accounts and all proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the Certificate Distribution
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account.
Trust Agreement: The Trust Agreement dated as of October 1, 1997, among the
Depositor, the Company, the Paying Agent and the Owner Trustee.
Trust Estate: The assets subject to this Agreement, the Trust Agreement and
the Indenture and assigned to the Trust, which assets consist of: (i) such Home
Loans as from time to time are subject to this Agreement as listed in the Home
Loan Schedule, as the same may be amended or supplemented from time to time
including by the addition of Subsequent Loans, the removal of Deleted Home Loans
and the addition of Qualified Substitute Home Loans, together with the
Servicer's Home Loan Files and the Indenture Trustee's Home Loan Files relating
thereto and all proceeds thereof, (ii) the Mortgages and security interests in
Mortgaged Properties, (iii) all payments in respect of interest due with respect
to the Home Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date (iv) such assets as from time to time
are identified as Foreclosure Property, (v) such assets and funds as are from
time to time are deposited in the Collection Account, the Note Distribution
Account and the Certificate Distribution Account, including amounts on deposit
in such accounts which are invested in Permitted Investments, (vi) the Issuer's
rights under all insurance policies with respect to the Home Loans and any
Insurance Proceeds, (vii) Net Liquidation Proceeds and Released Mortgaged
Property Proceeds, and (viii) all right, title and interest of the Depositor in
and to the obligations of the Transferor under the Home Loan Purchase Agreement
pursuant to which the Depositor acquired the Home Loans from the Transferor, and
all proceeds of any of the foregoing.
Trust Fees and Expenses: As of each Distribution Date, an amount equal to
the Servicing Compensation, the Indenture Trustee Fee, the Owner Trustee Fee and
the Custodian Fee, if any.
UCC: The Uniform Commercial Code as in effect in the State of New York.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms in this Agreement
or in any such certificate or other document are inconsistent with the meanings
of such terms under GAAP, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery of
the Notes and the Residual Interest Certificates to the Depositor or its
designee, upon the order of the Depositor, the Depositor, as of the Closing Date
and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right, title and interest of the Depositor in and to the Trust Estate. The
foregoing sale, transfer, assignment, set over and conveyance does not, and is
not intended to, result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Transferor or any other person in connection
with the Trust Estate or under any agreement or instrument relating thereto
except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to it of
the Trust Estate, including all right, title and interest of the Depositor in
and to the Trust Estate, receipt of which is hereby acknowledged by the Issuer.
Concurrently with such delivery and in exchange therefor, the Issuer has pledged
the Trust Estate to the Indenture Trustee, and the Indenture Trustee, pursuant
to the written instructions of the Issuer, has executed and caused the Notes to
be authenticated and delivered to the Depositor or its designee, upon the order
of the Issuer. In addition, concurrently with such delivery and in exchange
therefor, the Owner Trustee, pursuant to the instructions of the Depositor, has
executed (not in its individual capacity, but solely as Owner Trustee on behalf
of the Issuer) and caused the Residual Interest Certificates to be authenticated
and delivered to the Depositor or its designee, upon the order of the Depositor.
Section 2.02 Ownership and Possession of Home Loan Files.
Upon the issuance of the Notes, with respect to the Home Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of the
related Servicer's Home Loan File and the Indenture Trustee's Home Loan File
shall be vested in the Trust and pledged to the Indenture Trustee for the
benefit of the Securityholders, although possession of the Servicer's Home Loan
Files (other than items required to be maintained in the Indenture Trustee's
Home Loan Files) on behalf of and for the benefit of the Securityholders shall
remain with the Servicer, and the Custodian shall take possession of the
Indenture Trustee's Home Loan Files as contemplated in Section 2.05 hereof.
Section 2.03 Books and Records.
The sale of each Home Loan shall be reflected on the balance sheets and
other financial statements of the Depositor or the Transferor, as the case may
be, as a sale of assets by the Depositor or the Transferor, as the case may be,
under GAAP. Each of the Servicer and the Custodian shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Home Loan which shall be clearly marked to reflect the ownership of each Home
Loan by the Owner Trustee and pledged to the Indenture Trustee for the benefit
of the Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01(a) hereof from the
Depositor to the Trust and such property shall not be property of the Depositor.
If the assignment and transfer of the Home Loans and the other property
specified in Section 2.01(a) hereof to the Trust pursuant to this Agreement or
the conveyance of the Home Loans or any of such other property to the Trust is
held or deemed not to be a sale or is held or deemed to be a pledge of security
for a loan, the Depositor intends that the rights and obligations of the parties
shall be established pursuant to the terms of this Agreement and that, in such
event, (i) the Depositor shall be deemed to have granted and does hereby grant
to the Trust a first priority security interest in the entire right, title and
interest of the Depositor in and to the Home Loans and all other property
conveyed to the Trust pursuant to Section 2.01 hereof and all proceeds thereof
and (ii) this Agreement shall constitute a security agreement under applicable
law. Within ten (10) days of the Closing Date, the Depositor shall cause to be
filed UCC-1 financing statements naming the Trust as "secured parties" and
describing the Home Loans being sold by the Depositor to the Trust with the
office of the Secretary of State of the state in which the Depositor is located.
Section 2.04 Delivery of Home Loan Documents.
(a) With respect to each Home Loan, the Transferor and/or the Depositor, as
applicable, shall, on the Closing Date, deliver or caused to be delivered to the
Custodian, as the designated agent of the Indenture Trustee, each of the
following documents (collectively, the "Indenture Trustee's Home Loan Files"):
(i) The original Debt Instrument, endorsed by the Transferor in
blank or in the following form: "Pay to the order of The Bank of New
York, as Indenture Trustee under the Sale and Servicing Agreement,
dated as of October 1, 1997, DiTech Home Loan Owner Trust 1997-1,
without recourse", with all prior and intervening endorsements showing
a complete chain of endorsement from origination of the Home Loan to
the Transferor;
(ii) The original Mortgage with evidence of recording thereon
(or, if the original Mortgage has not been returned from the
applicable public recording office or is not otherwise available, a
copy of the Mortgage certified by a Responsible Officer of the
Transferor or by the closing attorney or by an officer of the title
insurer or agent of the title insurer which issued the related title
insurance policy, if any, or commitment therefor to be a true and
complete copy of the original Mortgage submitted for recording) and,
if the Mortgage was executed pursuant to a power of attorney, the
original power of attorney with evidence of recording thereon (or, if
the original power of attorney has not been returned from the
applicable public recording office or is not otherwise available, a
copy of the power of attorney certified by a Responsible Officer of
the Transferor or by the closing attorney or by an officer of the
title insurer or agent of the title insurer which issued the related
title insurance policy, if any, or commitment therefor, to be a true
and complete copy of the original power of attorney submitted for
recording);
(iii) The original executed Assignment of Mortgage, in recordable
form. The Assignment of Mortgage may be a blanket assignment, to the
extent such assignment is effective under applicable law, for
Mortgages covering Mortgaged Properties situated within the same
county. If the Assignment of Mortgage is in blanket form, an
Assignment of Mortgage need not be included in the individual
Indenture Trustee's Home Loan File;
(iv) All original intervening assignments of mortgage, with
evidence of recording thereon, showing a complete chain of assignment
from origination of the Home Loan to the Transferor (or, if any such
assignment of mortgage has not been returned from the applicable
public recording office or is not otherwise available, a copy of such
assignment of mortgage certified by a Responsible Officer of the
Transferor or by the closing attorney or by an officer of the title
insurer or agent of the title insurer which issued the related title
insurance policy, if any, or commitment therefor to be a true and
complete copy of the original assignment submitted for recording); and
(v) The original, or a copy certified by the Transferor to be a
true and correct copy of the original, of each assumption,
modification, written assurance or substitution agreement, if any.
(b) With respect to each Home Loan, the Transferor and the Depositor shall,
on the Closing Date, deliver or caused to be delivered to the Servicer, as the
designated agent of the Indenture Trustee, each of the following documents
(collectively, the "Servicer's Home Loan Files"): (i) an original or copy of
truth-in-lending disclosure, (ii) an original or copy of the credit application,
(iii) an original or copy of the consumer credit report, (iv) an original or
copy of verification of employment and income, or verification of
self-employment income, (v) if the Home Loan is a Combination Loan, an original
or copy of contract of work or written description with cost estimates, if any,
(vi) if the Home Loan is a Combination Loan for which the Transferor prepares an
inspection report, an original or copy of the report of inspection of
improvements to the Property, (vii) to the extent not included in (clause (ii)
of this Section 2.04(b), an original or copy of a written verification (or a
notice of telephonic verification, with written verification to follow) that the
Obligor at the time of origination was not more than 30 days delinquent on any
Superior Lien on the Mortgaged Property, (viii) if the Home Loan is secured by a
Mortgage, a copy of the HUD-1 or HUD 1-A Closing Statement indicating the sale
price, or an existing Uniform Residential Appraisal Report, or a Drive-by
Appraisal documented on FHLMC Form 704, or a tax assessment, or a full Uniform
Residential Appraisal Report prepared by a national appraisal firm in accordance
with the Transferor's guidelines, and (ix) an original or a copy of a title
search as of the time of origination with respect to the Property in accordance
with the Transferor's guidelines.
(c) The Indenture Trustee shall cause the Custodian to take and maintain
continuous physical possession of the Indenture Trustee's Home Loan Files in the
State of California and, in connection therewith, shall act solely as agent for
the Securityholders in accordance with the terms hereof and not as agent for the
Transferor or any other party.
(d) Within 60 days after the Closing Date in the case of Initial Loan or,
in the case of the subsequent Loans, within 60 days of the related Subsequent
Transfer Date, the Transferor, at its own expense, shall record each Assignment
of Mortgage (which may be a blanket assignment if permitted by applicable law)
in the appropriate real property or other records; provided, however, that the
Transferor need not record any such Assignment of Mortgage which relates to a
Home Loan in any jurisdiction under the laws of which, as evidenced by an
Opinion of Counsel delivered by the Transferor (at the Transferor's expense) to
the Indenture Trustee and the Rating Agencies, the recordation of such
Assignment of Mortgage is not necessary to protect the Indenture Trustee's and
the Certificateholder's interest in the related Home Loan. With respect to any
Assignment of Mortgage as to which the related recording information is
unavailable within 60 days following the Closing Date in the case of Initial
Loans or, in the case of Subsequent Loans, within 60 days of the related
Subsequent Transfer Date, such Assignment of Mortgage shall be submitted for
recording within 30 days after receipt of such information but in no event later
than one year after the Closing Date. The Indenture Trustee shall be required to
retain a copy of each Assignment of Mortgage submitted for recording. In the
event that any such Assignment of Mortgage is lost or returned unrecorded
because of a defect therein, the Transferor shall promptly prepare a substitute
Assignment of Mortgage or cure such defect, as the case may be, and thereafter
the Transferor shall be required to submit each such Assignment of Mortgage for
recording.
(e) All recordings required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Transferor.
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans; Certain
Substitutions; Certification by the Custodian.
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date an acknowledgment of receipt of the Indenture
Trustee's Home Loan File for each Home Loan. The Indenture Trustee declares that
it will cause the Custodian to hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in the
Trust Estate and delivered to the Custodian, in trust, upon and subject to the
conditions set forth herein. The Indenture Trustee agrees to cause the Custodian
to review each Indenture Trustee's Home Loan File within 45 days after the
Closing Date (or, with respect to any Qualified Substitute Home Loan, within 45
days after the conveyance of the related Home Loan to the Trust) and to cause
the Custodian to deliver to the Transferor, the Depositor, the Indenture
Trustee, the Issuer and the Servicer a certification (the "Custodian's Initial
Certification") to the effect that, as to each Home Loan listed in the Home Loan
Schedule (other than any Home Loan paid in full or any Home Loan specifically
identified as an exception to such certification), (i) all documents required to
be delivered to the Indenture Trustee pursuant to this Agreement are in its
possession or in the possession of the Custodian on its behalf (other than as
expressly permitted by Section 2.04 hereof), (ii) all documents delivered by the
Depositor and the Transferor to the Custodian pursuant to Section 2.04 hereof
have been reviewed by the Custodian and have not been mutilated or damaged and
appear regular on their face (handwritten additions, changes or corrections
shall not constitute irregularities if initialed by the Obligor) and relate to
such Home Loan, (iii) based on the examination of the Custodian on behalf of the
Indenture Trustee, and only as to the foregoing documents, the information set
forth on the Home Loan Schedule accurately reflects the information set forth in
the Indenture Trustee's Home Loan File and (iv) each Debt Instrument has been
endorsed as provided in Section 2.04 hereof. Neither the Issuer nor the
Custodian shall be under any duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable or appropriate for the represented
purpose or that they are other than what they purport to be on their face or
(ii) to determine whether any Indenture Trustee's Home Loan File should include
any of the documents specified in Section 2.04(a)(v) hereof.
(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Noteholders and the Indenture
Trustee as the owner thereof for so long as the Indenture continues in full
force and effect; after the Indenture is terminated in accordance with the terms
thereof, the Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders. It is
intended that, by the Servicer's agreement pursuant to this Section 2.05(b), the
Indenture Trustee shall be deemed to have possession of the Servicer's Home Loan
Files for purposes of Section 9-305 of the Uniform Commercial Code of the state
in which such documents or instruments are located. The Servicer shall promptly
report to the Indenture Trustee any failure by it to hold the Servicer's Home
Loan File as herein provided and shall promptly take appropriate action to
remedy any such failure. In acting as custodian of such documents and
instruments, the Servicer agrees not to assert any legal or beneficial ownership
interest in the Home Loans or such documents or instruments. The Servicer agrees
to indemnify the Securityholders and the Indenture Trustee for any and all
liabilities, obligations, losses, damages, payments, costs or expenses of any
kind whatsoever which may be imposed on, incurred by or asserted against the
Securityholders or the Indenture Trustee as the result of any act or omission by
the Servicer relating to the maintenance and custody of such documents or
instruments which have been delivered to the Servicer; provided, however, that
the Servicer will not be liable for any portion of any such amount resulting
from the negligence or misconduct of any Securityholders or the Indenture
Trustee; and provided, further, that the Servicer will not be liable for any
portion of any such amount resulting from the Servicer's compliance with any
instructions or directions consistent with this Agreement issued to the Servicer
by the Indenture Trustee. The Indenture Trustee shall have no duty to monitor or
otherwise oversee the Servicer's performance as custodian hereunder.
(c) The Custodian shall, for the benefit of the Securityholders, review
each Indenture Trustee's Home Loan File within 60 days after the date it
delivered a Custodian's Initial Certification and deliver to the Transferor, the
Depositor, the Indenture Trustee, the Issuer and the Servicer an updated
certification (a "Custodian's Updated Certification"), setting forth those
exceptions listed on the Custodian's Initial Certification which continue to
exist on the date of such Custodian's Updated Certification. With respect to any
Home Loans which are set forth as exceptions in the Custodian's Updated
Certification because recorded assignments or original or certified copies of
Mortgages have not yet been delivered to the Custodian, the Transferor shall
cure such exceptions by delivering such missing documents to the Custodian no
later than 360 days after the Closing Date.
The Custodian agrees, for the benefit of the Securityholders, to review
each Indenture Trustee's Home Loan File within 360 days after the Closing Date
and to deliver to the Transferor, the Depositor, the Indenture Trustee, the
Issuer and the Servicer a final certification (a "Custodian's Final
Certification"), setting forth those exceptions listed on the Custodian's
Updated Certification which continue to exist on the date of such Custodian's
Final Certification.
In performing any such review, the Custodian may conclusively rely on the
Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Issuer nor the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Indenture Trustee's Home Loan File is discovered, then the Depositor
and Transferor shall comply with the cure, substitution and repurchase
provisions of Section 3.05 hereof.
Section 2.06 Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in this Article
II and pursuant to the terms of the related Subsequent Transfer Agreement, in
consideration of the Issuer's delivery, on each Subsequent Transfer Date to or
upon the order of the Transferor, of all or a portion of the balance of funds in
the Pre-Funding Account, the Transferor shall on such Subsequent Transfer Date
sell, transfer, assign, set over and otherwise convey without recourse to the
Issuer, all of its right, title and interest in and to each Subsequent Loan
listed on the related Subsequent Loan Schedule. The transfer by the Transferor
to the Issuer of the Subsequent Loans set forth in the related Subsequent
Transfer Agreement shall be absolute and shall be intended by all parties hereto
to be treated as a sale by the Transferor to the Trust. If the assignment and
transfer of the Subsequent Loans and the other property specified in this
Section 2.06(a) from the Transferor to the Trust pursuant to this Agreement is
held or deemed not to be a sale or is held or deemed to be a pledge of security
for a loan, the Transferor intends that the rights and obligations of the
parties shall be established pursuant to the terms of this Agreement and that,
in such event, (i) the Transferor shall be deemed to have granted and does
hereby grant to the Issuer as of each Subsequent Transfer Date a perfected,
first priority security interest in the entire right, title and interest of the
Transferor in and to the related Subsequent Loans and all other property
conveyed to the Issuer pursuant to this Section 2.06(a) and all proceeds
thereof, and (ii) this Agreement shall constitute a security agreement under
applicable law. The amount released to the Transferor from the Pre-Funding
Account shall be one hundred percent (100%) of the aggregate Principal Balances
of the Subsequent Loans as of the related Cut-Off Date so transferred.
(b) The Indenture Trustee, at the direction of the Issuer, shall contribute
from the Pre-Funding Account funds in an amount equal to one hundred percent
(100%) of the aggregate Principal Balances of the Subsequent Loans as of the
related Cut-Off Date so transferred to the Trust and use such cash to purchase
the Subsequent Loans on behalf of the Trust, along with the other property and
rights related thereto described in paragraph (a) above only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) the Transferor shall have provided the Indenture Trustee,
Owner Trustee and the Rating Agencies with an Addition Notice, which
notice shall be given no fewer than two Business Days prior to the
related Subsequent Transfer Date and shall designate the Subsequent
Loans to be sold to the Trust and the aggregate Principal Balances of
such Subsequent Loans as of the related Cut-Off Date; and the Rating
Agencies shall have provided written confirmation to the Indenture
Trustee and the Owner Trustee that the purchase of such Subsequent
Loans will not result in a downgrade, withdrawal or qualification of
the ratings then in effect for the Outstanding Notes;
(ii) the Transferor shall have deposited in the Collection
Account all principal collected after the related Cut-Off Date and
interest payments collected after the related Cut-Off Date in respect
of each Subsequent Loan and the related Subsequent Cut-Off Date
Deposit;
(iii) the Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee and the Owner Trustee confirming
that, as of each Subsequent Transfer Date, the Transferor was not
insolvent, would not be made insolvent by such transfer and was not
aware of any pending insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) the Transferor shall have delivered to the Indenture Trustee
and the Owner Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b) and in the related Subsequent Transfer Agreement upon which the
Indenture Trustee and Owner Trustee may rely without independent
verification;
(vi) the Transferor shall have delivered an Officer's Certificate
to the Indenture Trustee and the Owner Trustee confirming that the
representations and warranties of the Transferor pursuant to Section
3.04 hereof (other than to the extent representations and warranties
relate to statistical information as to the characteristics of the
Initial Loans in the aggregate) and pursuant to Section 3.02 hereof
are true and correct with respect to the Subsequent Loans and the
Transferor, as applicable, as of the Subsequent Transfer Date;
(vii) the Trust shall not purchase a Subsequent Loan unless (A)
the Rating Agencies shall consent thereto (which consent shall not be
unreasonably withheld and shall be evidenced by a letter from the
Rating Agencies), (B) the following conditions shall have been
satisfied as to each Subsequent Loan: (I) no Subsequent Loans may be
30 or more days contractually delinquent as of the applicable Cut-Off
Date; (II) the lien securing any such Subsequent Loan must not be
lower than third priority; (III) such Subsequent Loan must have an
outstanding Principal Balance of at least $2,500 as of the applicable
Cut-Off Date; (IV) the first payment on such Subsequent Loan must be
due no later than the last day of the Due Period immediately
succeeding the Due Period in which it is transferred, unless the
Transferor deposits into the Collection Account 30 days' interest on
such Subsequent Loan at the Home Loan Interest Rate less the
applicable Servicing Fee rate (each such amount, a "Capitalized
Interest Subsequent Deposit"), in which event the first payment on
such Subsequent Loan must be due no later than the last day of the
second Due Period following the Due Period in which the transfer
occurs; (V) such Subsequent Loan is a fully amortizing loan with level
payments over the remaining term of no fewer than 10 years and no more
than 25 years and the scheduled maturity will be no later than January
2023; (VI) such Subsequent Loan must have a fixed Home Loan Interest
Rate of at least 9.50%; (VII) any such Subsequent Loan must have an
original Combined Loan-to-Value Ratio of no more than 125%, (VIII)
such Subsequent Loan must be underwritten, re-underwritten or
reviewed, as applicable, in accordance with the underwriting
guidelines of the Transferor in effect at such time or in a manner
similar to the Initial Loans, and (IX) following the purchase of such
Subsequent Loans by the Trust, the Loans included in the Pool must
have a weighted average interest rate and a weighted average remaining
term to maturity as of each respective Cut-Off Date comparable to
those of the Initial Loans included in the initial Pool and (C) the
following conditions shall have been satisfied with respect to the
Subsequent Loans conveyed on the Subsequent Transfer Date, (I) the
average weighted Home Loan Interest Rate must be greater than or equal
to 13.1%, (II) the average weighted Combined Loan-to-Value Ratio must
be less than or equal to 113%, (III) the average weighted FICO Score
must be greater than or equal to 680 and (IV) the average weighted
remaining term to maturity must be greater than or equal to 260
months.
(viii) in connection with the transfer and assignment of the
Subsequent Loans, the Transferor shall satisfy the document delivery
requirements set forth in Section 2.05 hereof; and
(ix) each proposed Subsequent Loan must be listed on Exhibit A
hereto as the same may be amended from time to time with the approval
of the Depositor.
(c) In connection with each Subsequent Transfer Date and on the related
Distribution Date, the Indenture Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement and Pre-Funding
Account Earnings for such Distribution Date in accordance with the provisions of
this Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and the Capitalized Interest Account.
In the event that any amounts are released as a result of calculation error by
the Indenture Trustee from the Pre-Funding Account or from the Capitalized
Interest Account, the Indenture Trustee shall not be liable therefor and the
Transferor shall immediately repay such amounts to the Indenture Trustee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Servicer, the Indenture Trustee, the Owner Trustee and the Noteholders that as
of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its
property, to carry on its business as currently conducted, to enter
into and perform its obligations under this Agreement and to create
the Trust pursuant to the Trust Agreement;
(b) The execution and delivery of this Agreement by the Depositor
and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's certificate of incorporation or
by-laws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result
in the breach or acceleration of, any material contract, agreement or
other instrument to which the Depositor is a party or which may be
applicable to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into
and consummate the transactions contemplated by this Agreement, has
duly authorized the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Owner Trustee, the Indenture Trustee, the Transferor and the Servicer,
constitutes a valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with the terms hereof, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Depositor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Depositor currently pending with regard to
which the Depositor has received service of process and no action or
proceeding against, or investigation of, the Depositor is, to the
knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined
adversely, would prohibit its entering into this Agreement or render
the Notes invalid, (B) seek to prevent the issuance of the Notes or
the consummation of any of the transactions contemplated by this
Agreement or (C) if determined adversely, would prohibit or materially
and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this
Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, this Agreement or the Notes, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Home Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of
the Home Loans to the Trust;
(i) As of the Closing Date, the Depositor had good title to, and
was the sole owner of, each Home Loan free and clear of any lien other
than any such lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Depositor will have delivered to the Trust good
title to, and the Trust will be the sole owner of, each Home Loan free
and clear of any lien;
(j) The Depositor acquired title to each of the Home Loans in
good faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Depositor pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
Section 3.02 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Servicer, the
Indenture Trustee, the Owner Trustee, the Noteholders and the Depositor that as
of the Closing Date or the Subsequent Transfer Date, as the case may be (except
as otherwise specifically provided herein):
(a) The Transferor is a corporation licensed as a mortgage lender
duly organized, validly existing and in good standing under the laws
of the State of California and has, and had at all relevant times,
full corporate power to originate or purchase the Home Loans, to own
its property, to carry on its business as currently conducted and to
enter into and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the
Transferor and its performance of and compliance with the terms of
this Agreement will not violate the Transferor's articles of
incorporation or by-laws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Transferor is a
party or which may be applicable to the Transferor or any of its
assets;
(c) The Transferor has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Owner Trustee, the Indenture Trustee and the
Depositor, constitutes a valid, legal and binding obligation of the
Transferor, enforceable against it in accordance with the terms
hereof, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar
laws relating to or affecting the rights of creditors generally, and
by general equity principles (regardless of whether such enforcement
is considered in a proceeding in equity or at law);
(d) The Transferor is not in violation of, and the execution and
delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Transferor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Transferor currently pending with regard to
which the Transferor has received service of process and no action or
proceeding against, or investigation of, the Transferor is, to the
knowledge of the Transferor, threatened or otherwise pending before
any court, administrative agency or other tribunal that (A) if
determined adversely, would prohibit its entering into this Agreement
or render the Notes invalid, (B) seek to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by
this Agreement or (C) if determined adversely, would prohibit or
materially and adversely affect the sale of the Home Loans to the
Depositor, the performance by the Transferor of its obligations under,
or the validity or enforceability of, this Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution,
delivery and performance by the Transferor of, or compliance by the
Transferor with, this Agreement, (2) the issuance of the Notes, (3)
the sale of the Home Loans under the Home Loan Purchase Agreement or
(4) the consummation of the transactions required of it by this
Agreement, except such as shall have been obtained before the Closing
Date;
(g) The Transferor acquired title to the Home Loans in good
faith, without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect
to the Home Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing
business;
(i) No Officer's Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Transferor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or by the performance of its
obligations hereunder; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Transferor
prior to the date hereof;
(k) All information provided by or on behalf of the Transferor to
the Depositor or its Affiliates with respect to (i) summaries of the
individual Home Loans and any letters, certifications and other
materials furnished to the Depositor by the Transferor relating to the
Home Loans, (ii) report of environmental assessments of the related
Mortgaged Properties, (iii) reports of site inspections of the related
Mortgaged Properties, (iv) all information and documentation relating
to the Home Loans and included in the investor and Rating Agencies due
diligence and any documents or information relating to the Home Loans
and provided by the Transferor or any of its affiliates to potential
investors, including but not limited to Home Loan legal, underwriting
and servicing documents and information, (y) the information regarding
the Home Loans, underwriting, and the Transferor set forth in the
Prospectus and the Prospectus Supplement, and (vi) any computer
diskettes, computer tapes and/or other electronic media containing (A)
the information on the Home Loan Schedule, and (B) information
regarding the Home Loans provided to the Depositor or its Affiliates
and used in preparing Computational Materials (as such term is defined
in the no-action letter issued by the staff of the Securities and
Exchange Commission (the "SEC"), dated May 20, 1994 to Kidder, Peabody
Acceptance Corporation I), Collateral Term Sheets, ABS Term Sheets,
and/or Structural Term Sheets (as such terms are defined in the
no-action letter issued by the SEC, dated February 17, 1995 to the
Public Securities Association does not contain an untrue statement of
a material fact and does not omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading; and
(l) The Transferor has transferred the Home Loans without any
intent to hinder, delay or defraud any of its creditors.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Indenture
Trustee's Home Loan Files to the Custodian (as the agent of the Indenture
Trustee) and shall inure to the benefit of the Securityholders, the Depositor,
the Servicer, the Indenture Trustee, the Owner Trustee and the Trust. Upon
discovery by any of the Transferor, the Depositor, the Servicer, the Indenture
Trustee or the Owner Trustee of a breach of any of the foregoing representations
and warranties that materially and adversely affects the value of any Home Loan
or the interests of the Securityholders therein, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the other parties. The obligations of the
Transferor set forth in Section 3.05 hereof to cure any breach or to substitute
for or repurchase an affected Home Loan shall constitute the sole remedies
available hereunder to the Securityholders, the Depositor, the Servicer, the
Indenture Trustee or the Owner Trustee respecting a breach of the
representations and warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the Owner
Trustee, the Indenture Trustee, the Noteholders, the Depositor and the
Transferor that as of the Closing Date or as of such date specifically provided
herein:
(a) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California and is or will be in compliance with the laws of each state
in which any Mortgaged Property is located to the extent necessary to
ensure the enforceability of each Home Loan in accordance with the
terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer
and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's articles of incorporation or by-laws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other
instrument to which the Servicer is a party or which may be applicable
to the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has
duly authorized the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Indenture Trustee, the Owner Trustee and the Depositor, constitutes a
valid, legal and binding obligation of the Servicer, enforceable
against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Servicer or materially and adversely affect the performance of
its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Servicer currently pending with regard to which
the Servicer has received service of process and no action or
proceeding against, or investigation of, the Servicer is, to the
knowledge of the Servicer, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined
adversely, would prohibit its entering into this Agreement or render
the Notes invalid, (B) seek to prevent the issuance of the Notes or
the consummation of any of the transactions contemplated by this
Agreement or (C) if determined adversely, would prohibit or materially
and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this
Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Servicer of, or compliance by the Servicer
with, this Agreement or the Notes, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Servicer is duly licensed where required as a "Licensee"
or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default
would not have a material adverse effect on the ability of the
Servicer to conduct its business or perform its obligations hereunder;
(h) The Servicer is an Eligible Servicer and services mortgage
loans in accordance with Accepted Servicing Procedures;
(i) No Officer's Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Servicer is solvent and will not be rendered insolvent as
a result of the performance of its obligations pursuant to this
Agreement;
(k) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the
related Mortgage;
(l) The Servicer will cause to be performed any and all acts
required to be performed by the Servicer to preserve the rights and
remedies of the Trust and the Indenture Trustee in any Insurance
Policies applicable to the Home Loans including, without limitation,
in each case, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured, joint
loss payee and mortgagee rights in favor of the Trust and the
Indenture Trustee;
(m) The Servicer shall comply with, and shall service, or cause
to be serviced, each Home Loan, in accordance with all applicable
laws; and
(n) The Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement,
it shall remain in good standing under the laws governing its creation
and existence and qualified under the laws of each state in which it
is necessary to perform its obligations under this Agreement or in
which the nature of its business requires such qualification; it shall
maintain all licenses, permits and other approvals required by any law
or regulations as may be necessary to perform its obligations under
this Agreement and to retain all rights to service the Loans; and it
shall not dissolve or otherwise dispose of all or substantially all of
its assets.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Home Loan Files to the Indenture Trustee and
shall inure to the benefit of the Depositor, the Noteholders and the Indenture
Trustee. Upon discovery by any of the Transferor, the Depositor, the Servicer,
the Indenture Trustee or the Owner Trustee of a breach of any of the foregoing
representations, warranties and covenants that materially and adversely affects
the value of any Home Loan or the interests of the Noteholders therein, the
party discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the other parties.
Section 3.04 Representations and Warranties Regarding Individual Home
Loans.
The Transferor hereby represents and warrants to the Depositor, the Issuer,
the Indenture Trustee and the Noteholders, with respect to each Loan as of the
Closing Date, and with respect to each Subsequent Loan, as of the related
Subsequent Transfer Date, except as otherwise expressly stated:
(a) The information pertaining to each Home Loan set forth in the
Home Loan Schedule was true and correct in all material respects as of
the Cut-Off Date;
(b) As of the applicable Cut-Off Date, none of the Loans was 30
or more days past due (without giving effect to any grace period); the
Transferor has not advanced funds, induced, solicited or knowingly
received any advance of funds from a party other than the Obligor,
directly or indirectly, for the payment of any amount required by any
Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage
contain the entire agreement of the parties thereto and have not been
impaired, waived, altered or modified in any respect, except by
written instruments reflected in the related Indenture Trustee's Home
Loan File and recorded, if necessary, to maintain the lien priority of
the any related Mortgage; no instrument of waiver, alteration,
expansion or modification has been executed, and no Obligor has been
released, in whole or in part, except in connection with an assumption
agreement which assumption agreement is part of the related Indenture
Trustee's Home Loan File and the payment terms of which are reflected
in the related Home Loan Schedule;
(d) The Debt Instrument and any related Mortgage are not subject
to any set-off, claims, counterclaim or defense, including the defense
of usury or of fraud in the inducement, and will not be so subject in
the future with respect to the goods and services provided under the
Debt Instrument; and neither the operation of any of the terms of the
Debt Instrument and any related Mortgage, nor the exercise of any
right thereunder, will render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;
(e) Any and all requirements of any federal, state or local law
applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto)
have been complied with;
(f) No Debt Instrument or Mortgage has been satisfied, canceled,
rescinded or subordinated, in whole or part; and the Transferor,
except as otherwise permitted by clause (c) of this Section 3.04, has
not waived the performance by the Obligor of any action, if the
Obligor's failure to perform such action would cause the Debt
Instrument or Home Loan to be in default; and with respect to a Home
Loan, the related Property has not been released from the lien of the
Mortgage, in whole or in part, nor has any instrument been executed
that would effect any such satisfaction, subordination, release,
cancellation or rescission;
(g) Each related Mortgage is a valid, subsisting and enforceable
lien on the related Property, including the land and all buildings on
the Property;
(h) The Debt Instrument and any related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights in general and by general principles
of equity;
(i) To the best of the Transferor's knowledge, all parties to the
Debt Instrument and any related Mortgage had legal capacity at the
time to enter into the Home Loan and to execute and deliver the Debt
Instrument and any related Mortgage, and the Debt Instrument and any
related Mortgage have been duly and properly executed by such parties;
(j) As of the applicable Cut-Off Date, the proceeds of the Home
Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all applicable requirements set forth
in the Home Loan documents have been complied with; the Obligor is not
entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage;
(k) Immediately prior to the sale, transfer and assignment to the
Depositor, the Transferor will have good and indefeasible legal title
to the Home Loan, the related Debt Instrument and any related Mortgage
and the full right to transfer such Home Loan, the related Debt
Instrument and any related Mortgage, and the Transferor will have been
the sole owner thereof, subject to no liens, pledges, charges,
mortgages, encumbrances or rights of others, except for such liens as
will be released simultaneously with the transfer and assignment of
the Home Loans to the Depositor (and the Indenture Trustee's Home Loan
File will contain no evidence inconsistent with the foregoing); and
immediately upon the sale, transfer and assignment contemplated by the
Home Loan Purchase Agreement, the Depositor will hold good title to,
and be the sole owner of each Home Loan, the related Debt Instrument
and any related Mortgage, free of all liens (except any first liens
outstanding as of the Closing Date), pledges, charges, mortgages,
encumbrances or rights of others;
(l) Except for those Home Loans referred to in clause (b) of this
Section 3.04 that are delinquent as of the Cut-Off Date, there is no
default, breach, violation or event of acceleration known to the
Transferor under the Home Loan, the related Debt Instrument and any
related Mortgage and there is no event known to the Transferor which,
with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration thereunder and neither the Transferor nor its
predecessors have waived any such default, breach, violation or event
of acceleration;
(m) The Debt Instrument and any related Mortgage contain
customary and enforceable provisions so as to render the rights and
remedies of the holder thereof adequate for the realization against
the Property of the benefits of the security provided thereby,
including, (A) in the case of any Mortgage designated as a deed of
trust, by trustee's sale, and (B) otherwise by judicial foreclosure;
(n) Each Home Loan is a fixed rate loan; the Debt Instrument
shall mature within not more than 25 years from the date of
origination of the Home Loan; the Debt Instrument is payable in
substantially equal Monthly Payments, with interest payable in
arrears, and requires a Monthly Payment which is sufficient to fully
amortize the original principal balance over the original term and to
pay interest at the related Home Loan Interest Rate; interest on each
Home Loan is calculated on the basis of a 360-day year consisting of
twelve 30-day months, and the Debt Instrument does not provide for any
extension of the original term;
(o) The related Debt Instrument is not and has not been secured
by any collateral except, in the case of a Home Loan, the lien of the
corresponding Mortgage;
(p) With respect to any Home Loan, if the related Mortgage
constitutes a deed of trust, a trustee, duly qualified under
applicable law to serve as such, has been properly designated and
currently so serves and is named in the Mortgage, or a valid
substitution of trustee has been recorded, and no extraordinary fees
or expenses are or will become payable to the trustee under the deed
of trust, except in connection with default proceedings and a
trustee's sale after default by the Obligor;
(q) With respect to any Home Loan, the Transferor has no
knowledge of any circumstances or conditions not reflected in the
representations set forth herein, or in the Home Loan Schedule, or in
the related Indenture Trustee's Home Loan File with respect to the
related Mortgage, the related Property or the Obligor which could
reasonably be expected to materially and adversely affect the value of
the related Property or the marketability of the Home Loan or cause
the Home Loan to become delinquent or otherwise be in default;
(r) Assuming no material change to the applicable law or
regulations in effect as of the Closing Date, after the consummation
of the transactions contemplated by this Agreement, the Indenture
Trustee will have the ability to foreclose or otherwise realize upon a
Property or if otherwise permitted by applicable law, by pursuing
other remedies against an Obligor, if the Home Loan is a Home Loan, or
to enforce the provisions of the related Home Loan against the Obligor
thereunder, if the foreclosure upon any such Property or enforcement
of the provisions of the related Home Loan against the Obligor is
undertaken as set forth in Section 4.10 hereof;
(s) There exists a Home Loan File relating to each Home Loan and
such Home Loan File contains all of the original or certified
documentation listed in Section 2.04 hereof for such Home Loan. Each
Indenture Trustee's Home Loan File has been delivered to the Custodian
and each Servicer's Home Loan File is being held in trust by the
Servicer for the benefit of, and as agent for, the Securityholders and
the Indenture Trustee as their respective interest appear herein. Each
document included in the Home Loan File which is required to be
executed by the Obligor has been executed by the Obligor in the
appropriate places. With respect to each Home Loan, the related
Assignment of Mortgage to the Indenture Trustee is in recordable form
and is acceptable for recording under the laws of the jurisdiction in
which the Property is located. All blanks on any form required to be
completed have been so completed;
(t) Each Property is improved by a residential dwelling and is
not a Home Loan in respect of a manufactured home or mobile home or
the land on which a manufactured home or mobile home has been placed,
unless such manufactured home or mobile home is treated as real estate
under applicable law;
(u) Each Home Loan was underwritten by the Transferor in
accordance with the Transferor's underwriting guidelines;
(v) If the Property securing any Home Loan is in an area
identified by the Federal Emergency Management Agency ("FEMA") as
having special flood hazards, unless the community in which the area
is situated is not participating in the National Flood Insurance
Program and the regulations thereunder or less than a year has passed
since FEMA notification regarding such hazards, a flood insurance
policy is in effect with respect to such Property with a generally
acceptable carrier which complies with section 102(a) of the Flood
Disaster Protection Act of 1973; all improvements upon each Property
securing a Home Loan are insured by a generally acceptable insurer
against loss by fire, hazards of extended coverage and such other
hazards as are customary in the area where the Property is located,
pursuant to insurance policies conforming to the requirements of the
Agreement; all such policies contain a standard mortgagee clause
naming the Transferor or its predecessor in interest, its successors
and assigns, as loss payee;
(w) All costs, fees and expenses incurred in originating and
closing the Home Loan and in recording any related Mortgage were paid
and the Obligor is not entitled to any refund of any amounts paid or
due to the lender pursuant to the Debt Instrument or any related
Mortgage;
(x) There is no obligation on the part of the Transferor or any
other party other than the Obligor to make payments with respect to
the Home Loan;
(y) At the time of origination of the Home Loan, each related
Superior Lien, if any, was certified by the Obligor as not being 30 or
more days delinquent;
(z) To the best of the Transferor's knowledge, all parties which
have had any interest in the Home Loan, whether as mortgagee,
assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (i) in compliance with
any and all applicable licensing requirements of the laws of the state
wherein the Property is located, and (ii) (A) organized under the laws
of such state, or (B) qualified to do business in such state, or (C)
federal savings and loan associations or national banks having
principal offices in such state, or (D) not doing business in such
state;
(aa) With respect to each Home Loan, the related Mortgage
contains an enforceable provision requiring the consent of the
mortgagee to assumption of the related Home Loan upon sale of the
Property;
(ab) With respect to each Home Loan, there is no homestead or
other exemption available to the mortgagor which would materially
interfere with the right to sell the related Property at a trustee's
sale or the right to foreclose the Mortgage; no relief has been
requested or allowed to the mortgagor under the Soldiers' and Sailors'
Civil Relief Act of 1940;
(ac) The related Servicer's Home Loan File for each Home Loan
that is a Home Loan contains a title document with respect to such
Home Loan reflecting that title to the related Mortgaged Property is
vested at least 50% in the related Obligor;
(ad) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) is free of
damage which materially and adversely affects the value thereof and
there is no proceeding pending for the total or partial condemnation
of any Property;
(ae) Each Home Loan was originated in compliance with all
applicable laws and, to the best of the Transferor's knowledge, no
fraud or misrepresentation was committed by any Person in connection
therewith;
(af) Each Home Loan has been serviced in accordance with all
applicable laws and, to the best of the Transferor's knowledge, no
fraud or misrepresentation was committed by any Person in connection
therewith;
(ag) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Transferor to the Depositor were
not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction;
(ah) Any Home Loan originated in the State of Texas, was
originated pursuant to either Chapter 3 or Chapter 6 of the Texas
Consumer Credit Code;
(ai) As of the applicable Cut-Off Date, no Obligor is a debtor
under proceedings under the United States Bankruptcy Code, and no
Obligor has defaulted in payments on a Home Loan after the filing of
such bankruptcy case, whether under a plan or reorganization or
otherwise;
(aj) To the best of the Transferor's knowledge, the Transferor
has not advanced funds, or induced, solicited or knowingly received
any advance of loan payments from a party other than, with respect to
a Home Loan, the owner of the Property subject to the Mortgage;
(ak) The Home Loans were originated by the Transferor or through
the Transferor's network of dealers and correspondents (including Home
Loans acquired by such correspondents);
(al) Each Home Loan either complies with the Home Ownership and
Equity Protection Act of 1994 or is not subject to such act;
(am) The Transferor has caused to be performed or shall cause to
be performed within one month of the Closing Date any and all acts
required to preserve the rights and remedies of the Trust and the
Indenture Trustee in any insurance policies applicable to each Home
Loan including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and
establishment of coinsured, joint loss payee and mortgagee rights in
favor of the Indenture Trustee;
(an) With respect to any Home Loan, to the best of the
Transferor's knowledge, the Property is free from any and all toxic
and hazardous substances and there exists no violation of any
environmental law, rule or regulation (whether local, state or
federal) in respect of the Property which violation has or could have
a material adverse effect on the market value of such Property. The
Transferor has no knowledge of any pending action or proceeding
directly involving the related Property in which compliance with any
environmental law, rule or regulation is in issue; and, to the
Transferor's best knowledge, nothing further remains to be done to
satisfy in full all requirements of each such law, rule or regulation
constituting a prerequisite to the use and enjoyment of such Property;
(ao) At the time of its origination no Home Loan was secured by a
Mortgage on a non-owner occupied Mortgaged Property;
(ap) With respect to the Initial Loans, on the Closing Date, and
with respect to the Subsequent Loans, on the Subsequent Transfer Date,
55% or more (by aggregate Principal Balance) of the Home Loans do not
constitute "real estate mortgages" for the purpose of Treasury
Regulations Section 301.7701(i) under the Code. For this purpose a
Home Loan does not constitute a "real estate mortgage" if:
(i) The Home Loan is not secured by an interest in real property,
or
(ii) The Home Loan is not an "obligation principally secured by
an interest in real property." For this purpose an "obligation is
principally secured by an interest in real property" if it satisfies
either test set out in paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally secured by
an interest in real property if the fair market value of the
interest in real property securing the obligation (A) was at
least equal to 80 percent of the adjusted issue price of the
obligation at the time the obligation was originated (or, if
later, the time the obligation was significantly modified);
or (B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the
amount of any lien on the real property interest that is
senior to the obligation being tested, and must be further
reduced by a proportionate amount of any lien that is in
parity with the obligation being tested, in each case before
the percentages set forth in (1)(A) and (1)(B) are
determined. The adjusted issue price of an obligation is its
issue price plus the amount of accrued original issue
discount, if any, as of the date of determination.
(2) Alternative test. An obligation is principally secured by an
interest in real property if substantially all of the
proceeds of the obligation were used to acquire or to
improve or protect an interest in real property that, at the
origination date, is the only security for the obligation.
For purposes of this test, loan guarantees made by the
United States or any state (or any political subdivision,
agency, or instrumentality of the United States or of any
state), or other third party credit enhancement are not
viewed as additional security for a loan. An obligation is
not considered to be secured by property other than real
property solely because the obligor is personally liable on
the obligation. For this purpose only, substantially all of
the proceeds of the obligations means 66 2/3% or more of the
gross proceeds.
(aq) No Home Loan was adversely selected as to credit risk from
the pool of home loans owned by the Transferor;
(ar) With respect to each Home Loan that is not a first lien
mortgage loan, either (i) no consent for the Home Loan was required by
the holder of the related Superior Lien or (ii) such consent has been
obtained and has been delivered to the Indenture Trustee;
(as) Each Home Loan is a home improvement loan for goods or
services, a debt consolidation loan or a home equity loan;
(at) Each Debt Instrument is comprised of a single original
promissory note and each promissory note constitutes an "instrument"
or "chattel paper" for purposes of Article 9 of the UCC; each Debt
Instrument has been delivered to the Custodian and no copy of a Debt
Instrument contains an original authentication or signature of the
Trust;
(au) To the best of the Transferor's knowledge, all improvements
which were considered in determining the appraised value of the
Property lay wholly within the boundaries and building restriction
lines of the Property and no improvements on adjoining properties
encroach upon the Mortgaged Property. No improvement located on or
being part of the Mortgaged Property is in violation of any applicable
zoning law or regulation;
(av) To the best of the Transferor's knowledge, all inspections,
licenses and certificates required to be made, obtained and issued as
of the Closing Date with respect to the improvements and the use and
occupancy of all occupied portions of all Properties have been made,
obtained or issued as applicable;
(aw) The Home Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in
any separate account established by the Transferor, the Obligor or
anyone on behalf of the Obligor, or paid by any source other than the
Obligor nor does it contain any other similar provisions currently in
effect which may constitute a "buydown" provision. The Home Loan is
not a graduated payment Home Loan and the Home Loan does not have a
shared appreciation or other contingent interest feature; and
(ax) The Transferor has reviewed all of the documents
constituting the Mortgage File and has made such inquiries as it deems
necessary to make and confirm the accuracy of the representations set
forth herein.
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties set
forth in Section 3.04 hereof shall survive the conveyance of the Home Loans to
the Issuer, the grant of the Home Loans to the Indenture Trustee and the
delivery of the Notes to the Noteholders. Upon discovery by the Depositor, the
Servicer, the Transferor, the Custodian, the Issuer, the Indenture Trustee or
any Securityholder of a breach of any of such representations and warranties or
the representations and warranties set forth in Section 3.02 which materially
and adversely affects the value of the Home Loans or the interests of the
Securityholders in the related Home Loan (notwithstanding that such
representation and warranty was made to the Transferor's best knowledge), the
party discovering such breach shall give prompt written notice to the others.
The Transferor shall within 60 days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, including any
breach of the representation set forth in Section 3.04(ap) hereof as a result of
an aggregate of Home Loans which would not otherwise cause a breach of any other
representation or warranty, promptly cure such breach in all material respects.
If within 60 days after the earlier of the Transferor's discovery of such breach
or the Transferor's receiving notice thereof such breach has not been remedied
by the Transferor and such breach materially and adversely affects the interests
of the Securityholders or in the related Home Loan (the "Defective Home Loan"),
the Transferor shall on or before the Determination Date next succeeding the end
of such 60-day period either (i) remove such Defective Home Loan from the Trust
(in which case it shall become a Deleted Home Loan) and substitute one or more
Qualified Substitute Home Loans in the manner and subject to the conditions set
forth in this Section 3.05 or (ii) purchase such Defective Home Loan at a
purchase price equal to the Purchase Price by depositing such Purchase Price in
the Collection Account. The Transferor shall provide the Servicer, the Indenture
Trustee and the Issuer with a certification of a Responsible Officer on the
Determination Date next succeeding the end of such 60-day period indicating
whether the Transferor is purchasing the Defective Home Loan or substituting in
lieu of such Defective Home Loan a Qualified Substitute Home Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Transferor of the Substitution Adjustment, if any,
to be deposited in the Collection Account. For purposes of calculating the
Available Collection Amount for any Distribution Date, amounts paid by the
Transferor pursuant to this Section 3.05 in connection with the repurchase or
substitution of any Defective Home Loan that are on deposit in the Collection
Account as of the Determination Date for such Distribution Date shall be deemed
to have been paid during the related Due Period and shall be transferred to the
Note Distribution Account as part of the Available Collection Amount to be
retained therein or transferred to the Certificate Distribution Account, if
applicable, pursuant to Section 5.01(c) hereof.
It is understood and agreed that the obligation of the Transferor to
repurchase or substitute any such Home Loan pursuant to this Section 3.05 shall
constitute the sole remedy against it with respect to such breach of the
foregoing representations or warranties or the existence of the foregoing
conditions. With respect to representations and warranties made by the
Transferor pursuant to Section 3.04 hereof that are made to the Transferor's
best knowledge, if it is discovered by any of the Depositor, the Transferor, the
Indenture Trustee or the Owner Trustee that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Home Loan, notwithstanding the Transferor's lack of
knowledge, such inaccuracy shall be deemed a breach of the applicable
representation and warranty.
(b) As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Issuer (i) a certification executed by a
Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and (ii) the documents
constituting the Indenture Trustee's Home Loan File for such Qualified
Substitute Home Loan or Loans.
The Servicer shall deposit in the Collection Account all payments received
in connection with such Qualified Substitute Home Loan or Loans after the date
of such substitution. Monthly Payments received with respect to Qualified
Substitute Home Loans on or before the date of substitution will be retained by
the Transferor. The Issuer will be entitled to all payments received on the
Deleted Home Loan on or before the date of substitution and the Transferor shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Home Loan. The Transferor shall give written notice to the Issuer,
the Servicer (if the Transferor is not then acting as such), the Indenture
Trustee and Owner Trustee that such substitution has taken place and the
Servicer shall amend the Home Loan Schedule to reflect (i) the removal of such
Deleted Home Loan from the terms of this Agreement and (ii) the substitution of
the Qualified Substitute Home Loan. The Transferor shall promptly deliver to the
Issuer, the Servicer (if the Transferor is not then acting as such), the
Indenture Trustee and Owner Trustee, a copy of the amended Home Loan Schedule.
Upon such substitution, such Qualified Substitute Home Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the Transferor shall
be deemed to have made with respect to such Qualified Substitute Home Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 3.04 hereof. On the date of such substitution,
the Transferor will deposit into the Collection Account an amount equal to the
related Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Indenture Trustee to release the
Deleted Home Loan from the lien of the Indenture and the Servicer will cause
such Qualified Substitute Home Loan to be pledged to the Indenture Trustee under
the Indenture as part of the Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor pursuant to this Agreement, upon the deposit of
the Purchase Price therefor into the Collection Account, the Indenture Trustee
shall assign to the Transferor, without recourse, representation or warranty,
all the Indenture Trustee's right, title and interest in and to such Defective
Home Loans or Home Loans, which right, title and interest were conveyed to the
Indenture Trustee pursuant to Section 2.01 hereof. The Indenture Trustee shall
take any actions as shall be reasonably requested by the Transferor to effect
the repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor set
forth in this Section 3.05 to cure, purchase or substitute for a Defective Home
Loan (and to indemnify the Trust for certain losses as described herein in
connection with a Defective Home Loan) constitute the sole remedies hereunder of
the Depositor, the Issuer, the Indenture Trustee, Owner Trustee and the
Securityholders respecting a breach of the representations and warranties
contained in Section 3.02 and Section 3.04 hereof. Any cause of action against
the Transferor relating to or arising out of a defect in a Indenture Trustee's
Home Loan File as contemplated by Section 2.05 hereof or against the Transferor
relating to or arising out of a breach of any representations and warranties
made in Section 3.04 hereof shall accrue as to any Home Loan upon (i) discovery
of such defect or breach by any party and notice thereof to the Transferor or
notice thereof by the Transferor to the Indenture Trustee, (ii) failure by the
Transferor to cure such defect or breach or purchase or substitute such Home
Loan as specified above, and (iii) demand upon the Transferor, as applicable, by
the Issuer or the Majority Noteholders for all amounts payable in respect of
such Home Loan.
(e) Neither the Issuer nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Home Loan pursuant to this Section or the eligibility of any
Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor, shall
service and administer the Home Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the ordinary servicing practices of prudent
mortgage lending institutions. Notwithstanding anything to the contrary
contained herein, the Servicer, in servicing and administering the Home Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure, liquidation and Foreclosure Property management and liquidation
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering loans of the same type as the Home Loans for its
own account, all in accordance with Accepted Servicing Procedures of prudent
lending institutions and servicers of loans of the same type as the Home Loans
and giving due consideration to the Securityholders' reliance on the Servicer.
The Servicer has and shall maintain the facilities, procedures and experienced
personnel necessary to comply with the servicing standard set forth in this
subsection (a) and the duties of the Servicer set forth in this Agreement
relating to the servicing and administration of the Home Loans. In performing
its obligations hereunder the Servicer shall at all times act in good faith in a
commercially reasonable manner in accordance with applicable law and the Debt
Instruments and Mortgages.
(b) Servicing Advances. In accordance with the preceding general servicing
standard, the Servicer, or any Subservicer on behalf of the Servicer, shall make
all Servicing Advances in connection with the servicing of each Home Loan
hereunder. Notwithstanding any provision to the contrary herein, neither the
Servicer nor any Subservicer on behalf of the Servicer shall have any obligation
to advance its own funds for any delinquent scheduled payments of principal and
interest on any Home Loan or to satisfy or keep current the indebtedness secured
by any Superior Liens on the related Mortgaged Property. No costs incurred by
the Servicer or any Subservicer in respect of Servicing Advances shall, for the
purposes of distributions to Securityholders, be added to the amount owing under
the related Home Loan. Notwithstanding any obligation by the Servicer to make a
Servicing Advance hereunder with respect to a Home Loan, before making any
Servicing Advance that is material in relation to the outstanding principal
balance of such Home Loan, the Servicer shall assess the reasonable likelihood
of (i) recovering such Servicing Advance and any prior Servicing Advances for
such Home Loan and (ii) recovering any amounts attributable to outstanding
interest and principal owing on such Home Loan for the benefit of the
Securityholders in excess of the costs, expenses and other deductions to obtain
such recovery, including without limitation any Servicing Advances therefor and,
if applicable, the outstanding indebtedness of all Superior Liens. The Servicer
shall only make a Servicing Advance with respect to a Home Loan to the extent
that the Servicer determines in its reasonable, good faith judgment that such
Servicing Advance would likely be recovered as aforesaid; provided, however,
that the Servicer will be entitled to be reimbursed for any Nonrecoverable
Servicing Advance pursuant to this Agreement.
(c) Waivers, Modifications and Extensions; Subordination. The Servicer
shall make reasonably diligent efforts to collect all payments called for under
the terms and provisions of the Home Loans and shall, to the extent such
procedures shall be consistent with this Agreement, follow Accepted Servicing
Procedures. The Servicer may in its discretion waive or permit to be waived any
penalty interest or any other fee or charge which the Servicer would be entitled
to retain hereunder as servicing compensation and extend the Due Date on a Debt
Instrument for a period (with respect to each payment as to which the Due Date
is extended) not greater than 90 days after the initially scheduled due date for
such payment. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any additional extension or modification with respect
to any Home Loan other than that permitted by the immediately preceding sentence
unless the Home Loan is a Defaulted Home Loan. The Servicer may in its
discretion enter in subordination agreements with respect to any Home Loan,
provided that the Servicer determines, consistent with this Agreement and
Accepted Servicing Procedures that the entering into of such subordination
agreement is in the best interests of the Trust.
(d) Instruments of Satisfaction or Release. Without limiting the generality
of subsection (c) of this Section 4.01, the Servicer, in its own name or in the
name of a Subservicer, is hereby authorized and empowered, when the Servicer
believes it appropriate in its best judgment, to execute and deliver, on behalf
of the Securityholders and the Trust or any of them, and upon notice to the
Indenture Trustee, any and all instruments of satisfaction or cancellation or of
partial or full release or discharge, and all other comparable instruments with
respect to the Home Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trust and Securityholders. The Servicer shall
service and administer the Home Loans in accordance with applicable state and
federal law and shall provide to the Obligors any reports required to be
provided to them thereby. The Indenture Trustee shall execute, at the written
direction of the Servicer, any limited or special powers of attorney and other
documents reasonably acceptable to the Indenture Trustee to enable the Servicer
or any Subservicer to carry out their servicing and administrative duties
hereunder, including, without limitation, limited or special powers of attorney
with respect to any Foreclosure Property, and the Indenture Trustee shall not be
accountable for the actions of the Servicer or any Subservicers under such
powers of attorney and shall be indemnified by such parties with respect to such
actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers shall,
establish and maintain one or more accounts (each, a "Servicing Account") into
which any collections from the Obligors (or related advances from Subservicers)
for the payment of taxes, assessments, hazard insurance premiums and comparable
items for the account of the Obligors shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. Withdrawals of amounts so collected from a
Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, hazard insurance premiums and comparable items; (ii) reimburse the
Servicer (or a Subservicer to the extent provided in the related Subservicing
Agreement) out of related collections for any advances with respect to taxes,
assessments, hazard insurance premiums and comparable items; (iii) refund to
Obligors any sums as may be determined to be overages; (iv) pay interest, if
required and as described below, to Obligors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
this Agreement in accordance with Section 11.01 hereof. As part of its servicing
duties, the Servicer or Subservicers shall pay to the Obligors interest on funds
in Servicing Accounts to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement from the Trust,
the Indenture Trustee, Owner Trustee, the Depositor, or any Securityholder
therefor. Upon request of the Indenture Trustee, the Transferor or the Servicer
shall cause the bank, savings association or other depository for each Servicing
Account to forward to the Indenture Trustee copies of such statements or reports
as the Indenture Trustee, the Depositor or any Securityholder shall reasonably
request.
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy in
such amounts as required by, and satisfying any other requirements of, the
Federal Housing Administration and the FHLMC, with broad coverage on all
officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Home Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including losses
resulting from forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts (including acts relating to the origination and servicing of
loans of the same type as the Home Loans) of such Servicer Employees. Such
fidelity bond shall also protect and insure the Servicer against losses in
connection with the release or satisfaction of a Home Loan without having
obtained payment in full of the indebtedness secured thereby. In the event of
any loss of principal or interest on a Home Loan for which reimbursement is
received from the Servicer's fidelity bond or errors and omissions insurance,
the process from any such insurance will be deposited in the Collection Account.
No provision of this Section 4.03 requiring such fidelity bond and errors and
omission insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. Upon the request of the Issuer or
the Indenture Trustee, the Servicer shall cause to be delivered to the
requesting party a certified true copy of such fidelity bond and insurance
policy.
Section 4.04 Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by DiTech and the Depositor, respectively, with respect to the assets
conveyed to the Trust, DiTech and the Depositor shall prepare, have executed by
the necessary parties and file in the proper jurisdictions all financing and
continuation statements necessary to maintain the liens, security interests and
priorities of such liens and security interests that have been granted by DiTech
and the Depositor, respectively, and DiTech and the Depositor shall continue to
file on or before each fifth anniversary of the filing of any financing and
continuation statements such additional financing and continuation statements
until the Trust has terminated pursuant to Section 9.1 of the Trust Agreement.
The Indenture Trustee agrees to cooperate with DiTech and the Depositor in
preparing, executing and filing such statements. The Indenture Trustee agrees to
notify DiTech and the Depositor on the third Distribution Date prior to each
such fifth anniversary of the requirement that they file such financing and
continuation statements. The filing of any such statement with respect to DiTech
and the Depositor shall not be construed as any indication of an intent of any
party contrary to the expressed intent set forth in Section 2.03 hereof. If
DiTech or the Depositor has ceased to do business whenever any such financing
and continuation statements must be filed or DiTech or the Depositor fails to
file any such financing statements or continuation statements at least one month
prior to the expiration thereof, each of DiTech and the Depositor does hereby
make, constitute and appoint the Indenture Trustee its attorney-in-fact, with
full power and authority, to execute and file in its name and on its behalf any
such financing statements or continuation statements required under this Section
4.04. The granting of such power of attorney to the Indenture Trustee by the
Transferor and the Depositor does not create an obligation on the part of the
Indenture Trustee to execute or file any such financing or continuation
statements and the Indenture Trustee shall have no liability in connection
therewith.
Section 4.05 Superior Liens.
If the Servicer is notified that any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien, or has declared or intends to declare a default under the related mortgage
or the promissory note secured thereby, or has filed or intends to file an
election to have any Mortgaged Property sold or foreclosed, the Servicer shall
take, on behalf of the Issuer and the Indenture Trustee, reasonable actions to
protect the interests of the Securityholders and/or to preserve the security of
the related Home Loan consistent with the requirements of this Agreement,
provided that the Servicer shall not be required to make any Servicing Advances
to cure the default or reinstate the Superior Lien. The Servicer shall promptly
notify the Issuer and the Indenture Trustee if it takes any such action.
Section 4.06 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for any servicing
and administration of Home Loans with any institution that is an Eligible
Servicer and in compliance with the laws of each state necessary to enable it to
perform its obligations under such Subservicing Agreement. The Servicer shall
give prior written notice to the Issuer and the Indenture Trustee of the
appointment of any Subservicer. The Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement and to either service the related Home Loans directly or
enter into a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Home Loans.
Each Subservicing Agreement shall include the provision that such agreement
may be immediately terminated by the Indenture Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall any
Subservicing Agreement require the Indenture Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to terminate
such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Issuer, the
Indenture Trustee and the Securityholders for the servicing and administration
of the Home Loans in accordance with the provisions of this Agreement 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
Servicer alone were servicing and administering the Home Loans. For purposes of
this Agreement, the Servicer shall be deemed to have received payments on Home
Loans when the Subservicer has actually received such payments and, unless the
context otherwise requires, references in this Agreement to actions taken or to
be taken by the Servicer in servicing the Home Loans include actions taken or to
be taken by a Subservicer on behalf of the Servicer. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification of
the Servicer by such Subservicer, and nothing contained in this Agreement shall
be deemed to limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Issuer, the Indenture Trustee and the Securityholders pursuant
to Section 4.07 hereof, shall thereupon assume all of the rights and obligations
of the Servicer under each Subservicing Agreement that the Servicer may have
entered into, unless the successor Servicer elects to terminate any Subservicing
Agreement in accordance with its terms. The successor Servicer shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer 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
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements which accrued prior to the transfer of servicing to the
successor Servicer. The Servicer, at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Home 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.
(d) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Issuer, the Indenture Trustee and the Securityholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims 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 Servicer, in
its good faith business judgment, would require were it the owner of the related
Home Loans. The Servicer 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 Home Loan or (ii) from a
specific recovery of costs, expenses or attorneys' fees against the party
against which such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none of
the Issuer, the Indenture Trustee or the Securityholders shall be deemed parties
thereto or shall have any claims, rights, obligations, duties or liabilities
with respect to the Subservicer in its capacity as such except as set forth in
subsection (c) of this Section 4.06.
(f) In those cases where a Subservicer is servicing a Home Loan pursuant to
a Subservicing Agreement, the Subservicer will be required to establish and
maintain one or more accounts (collectively, the "Subservicing Account"). The
Subservicing Account shall be an Eligible Account. The Subservicer will be
required to deposit into the Subservicing Account, no later than the first
Business Day after receipt, all proceeds of Home Loans received by the
Subservicer and remit such proceeds to the Servicer for deposit in the
Collection Account not later than the Business Day following receipt thereof by
the Subservicer. Notwithstanding anything in this subsection (f) to the
contrary, the Subservicer shall only be able to withdraw funds from the
Subservicing Account for the purpose of remitting such funds to the Servicer for
deposit into the Collection Account. The Servicer shall require the Subservicer
to cause any collection agent of the Subservicer to send a copy to the Servicer
of each statement of monthly payments collected by or on behalf of the
Subservicer within five Business Days after the end of every month, and the
Servicer shall compare the information provided in such reports with the
deposits made by the Subservicer into the Collection Account for the same
period. The Servicer shall be deemed to have received payments on the Home Loans
on the date on which the Subservicer has received such payments.
Section 4.07 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes unable
to perform its obligations under this Agreement, the Indenture Trustee will
become the successor servicer or will appoint a successor servicer in accordance
with the provisions of Section 10.02 hereof; provided, however, that any
successor servicer, excluding the Indenture Trustee, shall satisfy the
requirements of an Eligible Servicer and shall be approved by the Rating
Agencies.
Section 4.08 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained for each Foreclosure Property
acquired by the Trust such types and amounts of insurance coverage as the
Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home Loan:
(A) for the restoration or repair of the affected Property,
in which event such amounts shall be released to the
Obligor in accordance with the terms of the related
Debt Instrument or
(B) to the extent not so used, in reduction of the
Principal Balance of the related Home Loan, in which
event such amounts shall be deposited into the
Collection Account,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.10 hereof, in the case of amounts
received in respect of any Foreclosure Property, for the restoration
or repair of such Foreclosure Property, unless the Servicer
determines, consistent with the servicing standard set forth in
Section 4.01 hereof, that such restoration or repair is not in the
best economic interest of the Trust, in which event such amounts shall
be deposited into the Collection Account as a payment received from
the operation of such Foreclosure Property.
Section 4.09 Reports to the Securities and Exchange Commission; 144A
Information.
(a) The Indenture Trustee shall, on behalf of the Trust, cause to be filed
with the Securities and Exchange Commission all monthly reports on Form 8-K and
annual reports on Form 10-K required to be filed under the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Upon the request of the
Indenture Trustee, each of the Servicer and the Transferor shall cooperate with
the Indenture Trustee in the preparation of any such report and shall provide to
the Indenture Trustee in a timely manner all such information or documentation
as the Indenture Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section 4.09. The Indenture
Trustee shall pay any fees, costs, expenses and liabilities (including legal
fees and expenses) incurred by each of the Issuer and the Depositor arising as a
result of the negligent failure of the Indenture Trustee to perform its duties
and obligations under this Section 4.09.
(b) The Servicer shall provide to the Indenture Trustee, if requested,
information regarding the Class B Notes and the Home Loans and such other
information as the Indenture Trustee shall be required to deliver to any holder
of a Class B Note and any prospective transferee designated by any such holder
to satisfy the condition of eligibility set forth in Rule 144A(d)(4) under the
Securities Act.
Section 4.10 Foreclosure; Foreclosure Alternatives.
(a) If any monthly payment due under any Home Loan is not paid when the
same is due and payable, or if the Obligor fails to perform any other covenant
or obligation under such Home Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem to
be in the best interest of the Trust, including but not limited to proceeding
against the Property securing such Home Loan, accepting short pay-offs, short
sales, entering into assumptions and modifications, pursuing collection
litigation or alternative court proceedings to foreclosure actions. In the event
that the Servicer determines not to proceed against the Mortgaged Property or
Obligor, as applicable, on or before the Determination Date following such
determination, the Servicer shall determine in good faith in accordance with
customary servicing practices that all amounts which it expects to receive with
respect to such Home Loan have been received. If the Servicer makes such a
determination, it shall give notice to such effect to the Issuer and the
Indenture Trustee.
(b) In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, unless otherwise
prohibited by applicable law or court or administrative order, the Servicer, on
behalf of the Trust and the Indenture Trustee, may, at any time, institute
foreclosure proceedings to the extent permitted by law, exercise any power of
sale to the extent permitted by law, obtain a deed in lieu of foreclosure, or
otherwise acquire possession of or title to the related Mortgaged Property, by
operation of law or otherwise.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to the
extent permitted by law, obtain a deed in lieu of foreclosure or otherwise
acquire possession of or title to any Property, by operation of law or
otherwise, only in the event that in the Servicer's reasonable judgment such
action is likely to result in a positive economic benefit to the Trust by
creating net liquidation proceeds (after reimbursement of all amounts owed with
respect to such Home Loan to the Servicer).
(c) The Indenture Trustee shall execute within 5 days after request of the
Servicer therefor, any powers of attorney and other documents necessary and
appropriate to carry out its duties hereunder, including any documents or powers
of attorney necessary to foreclose any Mortgage. The forms of any such powers or
documents shall be appended to such requests.
Section 4.11 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Indenture Trustee
for the benefit of the Securityholders. The Servicer shall manage, conserve,
protect and operate each Foreclosure Property for the Indenture Trustee and the
Securityholders solely for the purpose of the prudent and prompt disposition and
sale of such Foreclosure Property. The Servicer shall, either itself or through
an agent selected by the Servicer, manage, conserve, protect and operate the
Foreclosure Property in the same manner that it manages, conserves, protects and
operates other foreclosure property for its own account.
Subject to Section 4.10 hereof, the Servicer shall, consistent with the
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of Properties securing such of the Home Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. In connection with realization upon
defaulted Home Loans, the Servicer shall follow such practices and procedures as
it shall deem necessary or advisable, as shall be normal and usual in accordance
with Accepted Servicing Procedures and as shall meet the requirements of
insurers under any insurance policy required to be maintained hereunder with
respect to the related Home Loan. The Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings; provided, however,
that such costs and expenses will be recoverable as Servicing Advances by the
Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
any cause of damage to a Mortgaged Property such that the complete restoration
of such property is not fully reimbursable by the hazard insurance policies
required to be maintained pursuant to this Agreement unless it shall determine
in its reasonable judgment, as evidenced by a certificate of a Servicing
Officer, that such foreclosure or restoration, as the case may be, will increase
the proceeds of liquidation of the related Home Loan after reimbursement to
itself of Servicing Advances. Any Servicing Advances made with respect to a Home
Loan shall be recoverable by the Servicer only from recoveries on such Home Loan
except to the extent such Servicing Advance is deemed a Nonrecoverable Servicing
Advance.
The Servicer may offer to sell to any Person any Foreclosure Property, if
and when the Servicer determines, in a manner consistent with Accepted Servicing
Procedures, that such a sale would be in the best interests of the Trust. The
Servicer shall give the Indenture Trustee not less than five days' prior notice
of its intention to sell any Foreclosure Property and shall accept the highest
bid received from any Person for any Foreclosure Property in an amount at least
equal to the sum of:
(1) the Principal Balance of the related foreclosed Home Loan
plus the outstanding amount of any Superior Liens; and
(2) all unpaid interest accrued thereon at the related Home Loan
Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of any
bid determined to be fair as aforesaid, the Servicer shall offer the affected
Foreclosure Property for sale to any Person, other than an Interested Person, in
a commercially reasonable manner for a period of not less than 10 or more than
30 days, and shall accept the highest cash bid received therefor in excess of
the highest bid previously submitted. If no such bid is received, any Interested
Person may resubmit its original bid and the Servicer shall accept the highest
outstanding cash bid, regardless of from whom received. No Interested Person
shall be obligated to submit a bid to purchase any Foreclosure Property and,
notwithstanding anything to the contrary herein, neither the Indenture Trustee,
in its individual capacity, nor any of its Affiliates may bid for or purchase
any Foreclosure Property pursuant hereto.
In determining whether any bid constitutes a fair price for any Foreclosure
Property, the Servicer shall take into account, and any appraiser or other
expert in real estate matters shall be instructed to take into account, as
applicable, among other factors, the financial standing of any tenant of the
Foreclosure Property, the physical condition of the Foreclosure Property and the
state of the local and national economies.
Subject to the provisions of Section 4.10 hereof, the Servicer shall act on
behalf of the Indenture Trustee in negotiating and taking any other action
necessary or appropriate in connection with the sale of any Foreclosure
Property, including the collection of all amounts payable in connection
therewith. Any sale of a Foreclosure Property shall be without recourse to the
Indenture Trustee, the Servicer or the Trust and, if consummated in accordance
with the terms of this Agreement, neither the Servicer nor the Indenture Trustee
shall have any liability to any Securityholder with respect to the purchase
price therefor accepted by the Servicer or the Indenture Trustee.
The Servicer may contract with any independent contractor for the operation
and management of any Foreclosure Property; provided, however, that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs
and expenses) to the Servicer as soon as practicable, but in no event
later than 30 days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.11 relating to any
such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its
duties and obligations hereunder with respect to the operation and
management of any such Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations
in connection with the operation and management of such Foreclosure
Property.
The Servicer shall be entitled to enter into any agreement with any
independent contractor performing services for it related to its
duties and obligations hereunder for indemnification of the Servicer
by such independent contractor, and nothing in this Agreement shall be
deemed to limit or modify such indemnification. The Servicer shall not
be liable for any fees owed by it to any such independent contractor
and any amounts so expended shall be deemed Servicing Advances. Each
liquidation of a Foreclosure Property shall be carried by the Servicer
at such price and upon such terms and conditions as the Servicer shall
deem necessary or advisable and as shall be normal and usual in its
several servicing activities, and the resulting Liquidation Proceeds
shall be distributed in accordance with Section 5.01 hereof.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for the benefit
of the Securityholders, shall cause to be established and maintained one or
more Collection Accounts in the State of New York (collectively, the
"Collection Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Collection Account, The Bank of New York, as
Indenture Trustee, in trust for the DiTech Home Loan Asset Backed Notes,
Series 1997-1". The Collection Account may be maintained with the Indenture
Trustee or any other depository institution which satisfies the
requirements set forth in the definition of Eligible Account. The creation
of any Collection Account other than one maintained with the Indenture
Trustee shall be evidenced by a letter agreement between the Servicer and
the depository institution acceptable to the Indenture Trustee. A copy of
such letter agreement shall be furnished to the Indenture Trustee and, upon
request of any Securityholder, to such Securityholder. Funds in the
Collection Account shall be invested in accordance with Section 5.03
hereof.
The Collection Account shall be established, as of the Closing Date, with
the Indenture Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Issuer and the Indenture
Trustee, be transferred to a different depository institution so long as such
transfer is to an Eligible Account acceptable to the Indenture Trustee.
(2) Establishment of Note Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Noteholders, shall cause
to be established and maintained with the Indenture Trustee in the State of
New York one or more Note Distribution Accounts (collectively, the "Note
Distribution Account"), which shall be separate Eligible Accounts and may
be interest-bearing, entitled "Note Distribution Account, The Bank of New
York, as Indenture Trustee, in trust for the DiTech Home Loan Asset Backed
Notes, Series 1997-1". Funds in the Note Distribution Account shall be
invested in accordance with Section 5.03 hereof.
(b) (1) Deposits to Collection Account. The Servicer shall use its best
efforts to deposit or cause to be deposited (without duplication), within
two (2) Business Days after receipt thereof, into the Collection Account
and retain therein in trust for the benefit of the Securityholders:
(i) all payments in respect of interest due with respect to the
Home Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date, including any amounts
required to be deposited in the Collection Account pursuant to Section
2.06(b)(vii)(B)(IV) hereof;
(ii) all Net Liquidation Proceeds pursuant to Section 4.11
hereof, to the extent required under Section 4.08;
(iii) all Insurance Proceeds, to the extent required under
Section 4.08;
(iv) all Released Mortgaged Property Proceeds;
(v) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.05 and 3.05 hereof;
(vi) the deposit of the Termination Price under Section 11.01
hereof;
(vii) any amount to be deposited from the Pre-Funding Account or
the Capitalized Interest Account; and
(viii) interest and gains on funds held in the Collection
Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03 hereof,
and such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to the
Servicer from the Note Distribution Account on the next Distribution Date
following such Due Period.
(2) Deposits to Note Distribution Account. On the second Business Day
prior to each Distribution Date, the Indenture Trustee (based on
information provided by the Servicer for such Distribution Date) shall
withdraw from the Collection Account the Available Collection Amount and
deposit such into the Note Distribution Account for such Distribution Date.
(3) Withdrawals from Collection Account. The Indenture Trustee, at the
direction of the Servicer, shall also make the following withdrawals from
the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicer Reimbursement Amount;
(iii) to clear and terminate the Collection Account in connection
with the termination of this Agreement; and
(iv) to make the payments set forth in Section 9.01(e) hereof.
(c) Withdrawals from Note Distribution Account. To the extent funds
are available in the Note Distribution Account, the Indenture Trustee
(based on the information provided by the Servicer contained in the
Servicer's Monthly Remittance Report for such Distribution Date) shall make
withdrawals therefrom by 9:00 a.m. (New York City time) on each
Distribution Date, for application in the following order of priority:
(i) to distribute on such Distribution Date the following amounts
pursuant to the Indenture in the following order: (a) to the Servicer,
an amount equal to (i) the Servicing Compensation (net of any amounts
retained prior to deposit into the Collection Account pursuant to
subsection (b)(1) above) and all unpaid Servicing Compensation from
prior Distribution Dates and (ii) all Nonrecoverable Servicing
Advances not previously reimbursed, (b) to the Indenture Trustee, an
amount equal to the Indenture Trustee Fee and all unpaid Indenture
Trustee Fees from prior Distribution Dates, (c) to the Owner Trustee,
an amount equal to the Owner Trustee Fee or any unpaid portion of the
Owner Trustee Fees, and (d) to the Custodian, an amount equal to the
Custodian Fee, if any, and all unpaid Custodian Fees from prior
Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable
in respect of the Residual Interest calculated pursuant to subsections
(d) and (e) of this Section 5.01 on such Distribution Date.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Distribution Account hereunder until the Class Principal Balance of
each Class of Notes has been reduced to zero.
(d) On each Distribution Date, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall distribute the Regular
Distribution Amount from the Note Distribution Account (in the case of all
amounts distributable to Noteholders) and from the Certificate Distribution
Account (in the case of all amounts distributable to Certificateholders),
in the following order of priority:
(i) to the holders of the Senior Notes pro rata, the Senior
Noteholders Interest Distribution Amount for such Distribution Date;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, their respective portions of the Mezzanine
Noteholders' Interest Distribution Amount for such Distribution Date;
(iii) sequentially, to the holders of the Class B-1 and Class B-2
Notes, in that order, their respective portions of the Subordinate
Noteholders' Interest Distribution Amount for such Distribution Date;
(iv) if with respect to such Distribution Date the Pre-Funding
Distribution Trigger shall have occurred, the amount on deposit in the
Pre-Funding Account at the end of the Pre-Funding Period will be
distributed as principal to all Classes of Notes pro rata based on the
Original Class Principal Balances thereof;
(v) sequentially, to the holders of the Class A-1, Class A-2,
Class A-3 and Class A-4 Notes, in that order, until the respective
Class Principal Balances thereof are reduced to zero, the amount
necessary to reduce the aggregate Class Principal Balance of the
Senior Notes to the Senior Optimal Principal Balance for such
Distribution Date; provided, however, that on each Distribution Date
occurring on or after any reduction of the Class Principal Balances of
the Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and the Class
B-2 Notes to zero through the application of Allocable Loss Amounts,
amounts shall be distributed among the remaining Senior Notes pro rata
in accordance with their outstanding Class Principal Balances and not
sequentially;
(vi) sequentially, to the holders of the Class M-1 Notes and
Class M-2 Notes in that order, the amount necessary to reduce the
Class Principal Balances thereof to the Class M-1 Optimal Principal
Balance and the Class M-2 Optimal Principal Balance, respectively, for
such Distribution Date;
(vii) sequentially, to the holders of the Class B-1 and Class B-2
Notes, in that order, the amount necessary to reduce the Class
Principal Balances thereof to the Class B-1 Optimal Principal Balance
and the Class B-2 Optimal Principal Balance, respectively, for such
Distribution Date;
(viii) sequentially, to the Class M-1 Notes, Class M-2 Notes,
Class B-1 and the Class B-2 Notes, in that order, until their
respective Loss Reimbursement Deficiencies have been paid in full
(first, to the reimbursement of Allocable Loss Amounts, until
completely reimbursed and then, to any accrued interest thereon); and
(ix) any remaining amount to the holders of the Residual Interest
Certificates.
(e) On each Distribution Date, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall distribute the Excess
Spread, if any, in the following order of priority:
(i) in an amount equal to the Overcollateralization Deficiency
Amount, if any, as follows:
(A) sequentially, to the holders of the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes, in that order,
until the respective Class Principal Balances thereof
are reduced to zero and until the aggregate of their
Class Balances have been reduced to the Senior Optimal
Principal Balance for such Distribution Date;
(B) sequentially, to the holders of the Class M-1 Notes and
Class M-2 Notes, in that order, until the respective
Class Principal Balances thereof have been reduced to
the Class M-1 Optimal Principal Balance and Class M-2
Optimal Principal Balance, respectively, for such
Distribution Date; and
(C) (i) sequentially, to the holders of the Class B-1 Notes
and Class B-2 Notes, until the respective Class
Principal Balances thereof have been reduced to the
Class B-1 Optimal Principal Balance and the Class B-2
Optimal Principal Balance for such Distribution Date;
and
(ii) sequentially, to the Class M-1 Notes, the Class M-2 Notes,
Class B-1 Notes and the Class B-2 Notes, in that order, until their
respective Loss Reimbursement Deficiencies, if any, have been paid in
full (in the case of the Class M-1 Notes and Class M-2 Notes: first,
to the reimbursement of Allocable Loss Amounts until completely
reimbursed and, then, to any accrued interest thereon); and
(iii) any remaining amount to the holders of the Residual
Interest Certificates.
Section 5.02 Certificate Distribution Account and Note Distribution
Account.
(a) Establishment of Certificate Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Certificateholders, shall
cause to be established and maintained in the State of New York with the
Indenture Trustee for the benefit of the Trust one or more Certificate
Distribution Accounts (collectively, the "Certificate Distribution Account"),
each of which shall be an Eligible Account and may be interest-bearing, entitled
"Certificate Distribution Account for the DiTech Home Loan Owner Trust 1997-1".
Funds in the Certificate Distribution Account shall be invested in accordance
with Section 5.03 hereof.
(b) Distributions. On each Distribution Date the Indenture Trustee shall
withdraw from the Note Distribution Account all amounts required to be deposited
into the Certificate Distribution Account with respect to such Distribution Date
pursuant to Section 5.01(c)(ii) hereof and, on behalf of the Trust, shall
deposit such amounts into the Certificate Distribution Account. The Indenture
Trustee shall distribute all remaining amounts on deposit in the Note
Distribution Account to the holders of the Notes to the extent of amounts due
and unpaid on the Notes for principal thereof and interest thereon. The
Indenture Trustee, on behalf of the Trust shall distribute all amounts on
deposit in the Certificate Distribution Account first to the Indenture Trustee
to the extent of amounts due and not otherwise reimbursed pursuant to Section
6.07 of the Indenture and second, to the holders of the Residual Interest
Certificates.
(c) All distributions made on each Class of Notes on each Distribution Date
will be made on a pro rata basis among the Noteholders of record of such Class
of Notes on the next preceding Record Date based on the Percentage Interest
represented by their respective Notes, without preference or priority of any
kind, and, except as otherwise provided in the next succeeding sentence, shall
be made by wire transfer of immediately available funds to the account of such
Noteholder, if such Noteholder shall own of record Notes in original
Denominations aggregating at least $250,000 and shall have so notified the
Indenture Trustee, and otherwise by check mailed to the address of such
Noteholder appearing in the Notes Register. The final distribution on each Note
will be made in like manner, but only upon presentment and surrender of such
Note at the location specified in the notice to Noteholders of such final
distribution.
(d) All distributions made on the Residual Interest Certificates on each
Distribution Date will be made pro rata among the holders of the Residual
Interest Certificates of record on the next preceding Record Date based on their
percentage holdings in the Residual Interest, without preference or priority of
any kind, and, except as otherwise provided in the next succeeding sentence,
shall be made by wire transfer of immediately available funds to the account of
each such holder, if such holder shall own of record a Residual Interest
Certificate in an original denomination aggregating at least a 50% holding of
the Residual Interest and shall have so notified the Paying Agent, and otherwise
by check mailed to the address of such Residual Interest holder appearing in the
Certificate Register. The final distribution on each Residual Interest
Certificate will be made in like manner, but only upon presentment and surrender
of such Residual Interest Certificate at the location specified in the notice to
holders of the Residual Interest Certificates of such final distribution. Any
amount distributed to the holders of the Residual Interest Certificates on any
Distribution Date shall not be subject to any claim or interest of holders of
the other Classes of Notes.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to the
provisions hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from each Trust
Account in accordance with the Indenture and this Agreement shall be released
from the lien of the Indenture upon such distribution thereunder or hereunder.
The Indenture Trustee shall possess all right, title and interest in and to all
funds on deposit from time to time in the Trust Accounts (other than the
Certificate Distribution Account) and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Trust Estate. If, at any time, any
Trust Account ceases to be an Eligible Account, the Indenture Trustee (or the
Servicer on its behalf) shall, within ten Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent) (i)
establish a new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account, and (iii) transfer any cash and investments from such
ineligible Trust Account to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate Distribution
Account), the Indenture Trustee agrees, by its acceptance hereof, that each such
Trust Account shall be subject to the sole and exclusive custody and control of
the Indenture Trustee for the benefit of the Noteholders and the Issuer, as the
case may be, and the Indenture Trustee shall have sole signature and withdrawal
authority with respect thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder shall also be subject to and
established and maintained in accordance with the Trust Agreement. Subject to
rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee or the Paying Agent shall possess for the benefit of the
Certificateholders all right, title and interest in all funds on deposit from
time to time in the Certificate Distribution Account and in all proceeds thereof
(including all income thereon) and all such funds, investments, proceeds and
income shall be part of the Trust Account Property and the Trust Estate.
Notwithstanding the preceding, the distribution of amounts from the Certificate
Distribution Account in accordance with Section 5.01(c)(ii) hereof shall also be
made for the benefit of the Indenture Trustee (including without limitation with
respect to its duties under the Indenture and this Agreement relating to the
Trust Estate), and the Indenture Trustee (in its capacity as Indenture Trustee)
shall have the right, but not the obligation, to take custody and control of the
Certificate Distribution Account and to cause the distribution of amounts
therefrom in the event that the Owner Trustee fails to distribute such amounts
in accordance with subsections (c) and (d) of Section 5.02.
The Servicer shall have the power, revocable by the Indenture Trustee or by
the Owner Trustee with the consent of the Indenture Trustee, to instruct the
Indenture Trustee or Owner Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer to carry out its
duties hereunder or permitting the Indenture Trustee or Owner Trustee to carry
out their respective duties herein or under the Indenture or the Trust
Agreement, as applicable.
(b) (1) Investment of Funds. So long as no Event of Default shall have
occurred and be continuing, the funds held in any Trust Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed by the Transferor in
writing or by telephone or facsimile transmission confirmed in writing by
the Servicer. In any case, funds in any Trust Account must be available for
withdrawal without penalty, and any Permitted Investments must mature or
otherwise be available for withdrawal, not later than the Business Day
immediately preceding the Distribution Date next following the date of such
investment and shall not be sold or disposed of prior to its maturity
subject to subsection (b)(2) of this Section. All interest and any other
investment earnings on amounts or investments held in any Trust Account
shall be deposited into such Trust Account immediately upon receipt by the
Indenture Trustee. All Permitted Investments in which funds in any Trust
Account (other than the Certificate Distribution Account) are invested must
be held by or registered in the name of "The Bank of New York, as Indenture
Trustee, in trust for the DiTech Home Loan Asset Backed Notes, Series
1997-1". While the Indenture Trustee holds the Certificate Distribution
Account on behalf of the Trust, all Permitted Investments in which funds in
the Certificate Distribution Account are invested shall be held by or
registered in the name of "Certificate Distribution Account for DiTech Home
Loan Owner Trust 1997-1".
(2) Insufficiency and Losses in Trust Accounts. If any amounts are
needed for disbursement from any Trust Account held by or on behalf of the
Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Trust Account. The Indenture Trustee shall not be liable for any investment
loss or other charge resulting therefrom, unless such loss or charge is
caused by the failure of the Indenture Trustee to perform in accordance
with this Section 5.03.
If any losses are realized in connection with any investment in any Trust
Account pursuant to this Agreement and the Indenture, then the Transferor shall
deposit the amount of such losses (to the extent not offset by income from other
investments in such Trust Account) into such Trust Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be taxed to the Issuer and for federal
and state income tax purposes the Issuer shall be deemed to be the owner of each
Trust Account.
(c) Subject to section 6.01 of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Account held
by the Indenture Trustee resulting from any investment loss on any Permitted
Investment included therein (except to the extent that the Indenture Trustee is
the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit accounts shall
be held solely in the Eligible Accounts, subject to the last sentence of
subsection (a) of this Section 5.03; and each such Eligible Account shall
be subject to the sole and exclusive dominion, custody and control of the
Indenture Trustee; and, without limitation on the foregoing, the Indenture
Trustee shall have sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with paragraph
(a) of the definition of "Delivery" in Section 1.1 hereof and shall be
held, pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in section 8-313(4) of the
UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" in Section 1.1 hereof and shall be maintained by
the Indenture Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated security"
under Article VIII of the UCC and that is not governed by clause (3) above
shall be delivered to the Indenture Trustee in accordance with paragraph
(c) of the definition of "Delivery" in Section 1.1 hereof and shall be
maintained by the Indenture Trustee, pending maturity or disposition,
through continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture Trustee
or by the Issuer with the consent of the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer or the Issuer to carry out their
respective duties hereunder or permitting the Indenture Trustee to carry out its
duties under the Indenture.
Section 5.04 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than the
related Principal Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Home Loan, such Net Liquidation
Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds or partial
payment shall be applied to payment of the related Debt Instrument, first, to
interest accrued at the Home Loan Interest Rate and, then, to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be applied
to the reduction of the Class Principal Balances of the Class B-2, the Class B-1
Notes, the Class M-1 Notes and Class M-2 Notes in accordance with the Allocable
Loss Amount Priority.
Section 5.05 Pre-Funding Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the State of New York in the name of the Indenture
Trustee a Pre-Funding Account (the "Pre-Funding Account"), which shall be a
separate Eligible Account and may be interest-bearing, entitled "Pre-Funding
Account, The Bank of New York, as Indenture Trustee, in trust for the DiTech
Home Loan Asset Backed Securities, Series 1997-1." The Pre-Funding Account may
be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of a Pre-Funding Account other than one maintained with
the Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Indenture Trustee. A
copy of such letter agreement shall be furnished to the Indenture Trustee and,
upon request of any Securityholder, to such Securityholder. Funds in the
Pre-Funding Account shall be invested in accordance with Section 5.03 hereof.
On the Closing Date, the Trust will deposit in the Pre-Funding Account the
Pre-Funded Amount from the net proceeds of the sale of the Notes. On each
Subsequent Transfer Date, upon satisfaction of the conditions set forth in
Section 2.06 hereof with respect to such transfer, the Indenture Trustee shall
withdraw from the Pre-Funding Account an amount equal to the Principal Balances
of the Subsequent Loans transferred to the Issuer on such Subsequent Transfer
Date and distribute such amount to or upon the order of the Transferor.
(b) If the Pre-Funded Amount has not been reduced to zero on the last day
of the Pre-Funding Period after giving effect to any reductions in the
Pre-Funded Amount on such date pursuant to paragraph (a) above, the Indenture
Trustee in writing shall withdraw from the Pre-Funding Account on the Mandatory
Redemption Date (i) if the Pre-Funded Amount is equal to or less than $50,000,
and deposit such amount in the Note Distribution Account to be applied to reduce
the Outstanding Amount of the Class of Notes then entitled to distributions of
principal and (ii) if the Pre-Funded Amount is greater than $50,000, and deposit
such amounts to the Note Distribution Account to be applied in reduction of the
Class Principal Balance of each Class of Notes based on the related Pre-Funded
Percentage.
(c) On the Business Day preceding each of the second and third Distribution
Dates, if applicable, the Indenture Trustee shall withdraw the related
Pre-Funding Earnings for the related Due Period and remit such amounts to the
Transferor.
Section 5.06 Capitalized Interest Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the name of the Indenture Trustee a Capitalized
Interest Account (the "Capitalized Interest Account"), which shall be a separate
Eligible Account and may be interest-bearing, entitled "Capitalized Interest
Account, The Bank of New York, as Indenture Trustee, in trust for the DiTech
Home Loan Asset Backed Notes, Series 1997-1." The Capitalized Interest Account
may be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of a Capitalized Interest Account other than one
maintained with the Indenture Trustee shall be evidenced by a letter agreement
between the Servicer and the depository institution acceptable to the Indenture
Trustee. A copy of such letter agreement shall be furnished to the Indenture
Trustee and, upon request of any Securityholder, to such Securityholder. Funds
in the Capitalized Interest Account shall be invested in accordance with Section
5.03 hereof.
On the Closing Date, the Trust will deposit in the Capitalized Interest
Account the Capitalized Interest Initial Deposit from the net proceeds of the
sale of the Notes and the Certificates and on each Subsequent Transfer Date the
Trust will deposit in the Capitalized Interest Account any applicable
Capitalized Interest Subsequent Deposit with respect to each Subsequent Loan.
(b) On each Determination Date during the Pre-Funding Period (including the
Determination Date in the month following the Due Period during which the
Pre-Funding Period ends), the Indenture Trustee will withdraw from the
Capitalized Interest Account an amount equal to the Capitalized Interest
Requirement and deposit such amount into the Collection Account.
(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account shall be paid to the Transferor.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver to
the Indenture Trustee by facsimile, the receipt and legibility of which shall be
confirmed by telephone, and with hard copy thereof to be delivered no later than
one (1) Business Day after such Determination Date, the Servicer's Monthly
Remittance Report, setting forth the date of such Report (day, month and year),
the name of the Issuer (i.e. "DiTech Home Loan Owner Trust 1997-1"), the Series
designation of the Notes (i.e. "Series 1997-1") and the date of this Agreement,
all in substantially the form set out in Exhibit B hereto. Furthermore, no later
than each Determination Date, the Servicer shall deliver to the Indenture
Trustee a magnetic tape or computer disk providing such information regarding
the Servicer's activities in servicing the Home Loans during the related Due
Period as the Indenture Trustee may reasonably require.
(b) On each Distribution Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Distribution
Statement") to the Depositor, the Owner Trustee, the Securityholders and the
Rating Agencies, stating the date of original issuance of the Notes (day, month
and year), the name of the Issuer (i.e. "DiTech Home Loan Owner Trust 1997-1"),
the Series designation of the Notes (i.e., "Series 1997-1"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available Distribution Amount
for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Notes before and
after giving effect to distributions made to the holders of such Notes on
such Distribution Date, and the Pool Principal Balance as of the first and
last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the Notes then
outstanding;
(iv) the amount of principal, if any, and interest to be distributed
to each Class of Notes on the related Distribution Date;
(v) with respect to each Class of Notes, the Optimal Principal Balance
thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount to be
distributed to the Noteholders or the holders of the Residual Interest on
such Distribution Date;
(vii) the Servicing Compensation, the Indenture Trustee Fee, the Owner
Trustee Fee and, the Custodian Fee, if any, for such Distribution Date;
(viii) the Overcollateralization Amount on such Distribution Date, the
Overcollateralization Target Amount as of such Distribution Date, the Net
Loan Losses incurred during the related Due Period, the cumulative Net Loan
Losses as of such Distribution Date, the Allocable Loss Amount for such
Distribution Date and the application of the Allocable Loss Amount Priority
for such Distribution Date;
(ix) the weighted average maturity of the Home Loans and the weighted
average Home Loan Interest Rate of the Home Loans;
(x) certain performance information, including, without limitation,
delinquency and foreclosure information with respect to the Home Loans and
60-Day Delinquency Amounts (as defined in the definition of "Six-Month
Rolling Delinquency Average" in Section 1.01 hereof), as set forth in the
Servicer's Monthly Remittance Report;
(xi) the number of and aggregate Principal Balance of all Home Loans
in foreclosure proceedings and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all Home
Loans, all as of the close of business on the last day of the related Due
Period;
(xii) the number of and the aggregate Principal Balance of the Home
Loans in bankruptcy proceedings and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all Home
Loans, all as of the close of business on the last day of the related Due
Period;
(xiii) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such Home
Loans to the aggregate Principal Balances of all Home Loans, all as of the
close of business on the last day of the related Due Period;
(xiv) during the related Due Period (and cumulatively, from the
Closing Date through the most current Due Period), the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that became
Defaulted Home Loans, (B) that became Liquidated Home Loans, (C) that
became Deleted Home Loans pursuant to Section 3.05 hereof as a result of
such Deleted Home Loans being Defective Home Loans, and (D) that became
Deleted Home loans pursuant to Section 3.05 hereof as a result of such
Deleted Home Loans being Defaulted Home Loans or a Home Loan in default or
imminent default, including the foregoing amounts by loan type (i.e.,
Combination Loans, or Debt Consolidation Loans);
(xv) the scheduled principal payments and the principal prepayments
received with respect to the Home Loans during the Due Period and the
cumulative principal prepayment received since the Cut-off Date;
(xvi) the number and aggregate Principal Balance of Home Loans that
were 30, 60 or 90 days Delinquent as of the close of business on the last
day of the related Due Period; and
(xvii) the aggregate Principal Balance of each Loan which has become a
Liquidated Loan since the Cut-Off Date, also expressed as a percentage Pool
Principal Balance.
In the case of information furnished to Securityholders pursuant to
subclause (b)(iv) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note with a $1,000 Denomination.
All reports prepared by the Indenture Trustee of the withdrawals from and
deposits into the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the Indenture
Trustee may fully rely upon and shall have no liability with respect to such
information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a Securityholder such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b)(iv) of this Section 6.01, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Securityholder.
(d) On each Distribution Date, the Indenture Trustee shall forward to the
holders of the Residual Interest Certificates a copy of the Distribution
Statement in respect of such Distribution Date and a statement setting forth the
amounts actually distributed to such holders of the Residual Interest
Certificates on such Distribution Date, together with such other information as
the Indenture Trustee deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a holder of Residual Interest Certificates, if
requested in writing by such Person, a statement containing the information
provided pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a holder of Residual
Interest Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each holder
of a Residual Interest Certificate, during the term of this Agreement, such
periodic, special or other reports, including information tax returns or reports
required with respect to the Notes and the Residual Interest Certificates, as
shall be necessary, reasonable, or appropriate with respect to the Noteholders
or the holders of Residual Interest Certificates, or otherwise with respect to
the purposes of this Agreement, all such reports or information in the case of
the Residual Interest Certificates to be provided by and in accordance with such
applicable instructions and directions as the Majority Residual Interestholders
may reasonably require.
(g) Reports and computer tapes furnished by the Servicer and the Indenture
Trustee pursuant to this Agreement shall be deemed confidential and of a
proprietary nature and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Depositor or the Servicer or for
any other purpose except as set forth in this Agreement.
Section 6.02 Specification of Certain Tax Matters.
The Indenture Trustee shall comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any
distributions made to any Noteholder or Certificateholder of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith, giving due effect to any applicable
exemptions from such withholding and effective certifications or forms provided
by the recipient. Any amounts withheld pursuant to this Section 6.02 shall be
deemed to have been distributed to the Noteholders or Certificateholders, as the
case may be, for all purposes of this Agreement or the Indenture.
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the related lender's
option) become due and payable upon the sale or other transfer of an
interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without the
consent of the related lender in connection with any such sale or other
transfer, then, for so long as such Home Loan is included in the Trust, the
Servicer, on behalf of the Indenture Trustee, shall exercise any right the
Trust or the Indenture Trustee may have as the lender of record with
respect to such Home Loan (x) to accelerate the payments thereon or (y) to
withhold its consent to any such sale or other transfer, in a manner
consistent with Accepted Servicing Procedures.
(b) If any Home Loan contains a provision in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the related lender's
option) become due and payable upon the creation of any lien or other
encumbrance on the related Property; or
(ii) requires the consent of the related lender to the creation of any
such lien or other encumbrance on the related Property, then, for so long
as such Home Loan is included in the Trust, the Servicer, on behalf of the
Trust, or the Indenture Trustee shall exercise any right the Indenture
Trustee may have as the lender of record with respect to such Home Loan (x)
to accelerate the payments thereon or (y) to withhold its consent to the
creation of any such lien or other encumbrance, in a manner consistent with
Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the Indenture
Trustee's right to receive notice of any assumption of a Home Loan, any sale or
other transfer of the related Mortgaged Property or the creation of any lien or
other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus all
interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment in full of
such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to the
Trust pursuant to Section 3.05 hereof;
(iv) such Home Loan or the related Foreclosure Property has been sold
in connection with the termination of the Trust pursuant to Section 11.01
hereof; or
(v) the related Foreclosure Property has been sold pursuant to Section
4.11 hereof.
In each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this Agreement
with respect to such Home Loan and requesting that the Indenture Trustee release
to the Servicer the related Indenture Trustee's Home Loan File, and the
Indenture Trustee shall, within five Business Days or such shorter period as may
be required by applicable law, release, or cause the Custodian to release
(unless such Indenture Trustee's Home Loan File has previously been released),
the related Indenture Trustee's Home Loan File to the Servicer and execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest ownership of such Home Loan in the
Servicer or such other Person as may be specified in such certificate, the forms
of any such instrument to be appended to such certificate.
(b) From time to time and as appropriate for the servicing or foreclosure
of any Home Loan, the Indenture Trustee shall, upon request of the Servicer,
release the related Indenture Trustee's Home Loan File (or any requested portion
thereof) to the Servicer in accordance with Section 3(a) of the Custodial
Agreement.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be entitled
to receive from the Collection Account the Servicing Fee, out of which the
Servicer shall pay any servicing fees owed or payable to any Subservicer.
Additional servicing compensation in the form of prepayment penalties,
assumption fees, modification fees, and other administrative fees, insufficient
funds charges, amounts remitted pursuant to Section 7.01 hereof and late payment
charges shall be part of the Servicing Compensation payable to the Servicer
hereunder and shall be paid either by the Servicer's retaining such additional
servicing compensation prior to deposit into the Collection Account pursuant to
Section 5.01(b)(1) hereof or, if deposited into the Collection Account, as part
of the Servicing Compensation withdrawn from the Note Distribution Account
pursuant to Section 5.01(c)(1) hereof.
The Servicer 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. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred by
any successor Servicer or the Indenture Trustee in replacing the Servicer in the
event of a default by the Servicer in the performance of its duties under the
terms and conditions of this Agreement and (ii) the annual monitoring fees of
the Rating Agencies.
Section 7.04 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Indenture Trustee, the Owner Trustee the
Depositor and the Rating Agencies not later than 90 days following the end of
each fiscal year of the Servicer (beginning in 1998), an Officer's Certificate
stating that (i) a review of the activities of the Servicer during the preceding
year and of performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof and what action the Servicer proposes to take with
respect thereto.
Contemporaneously with the submission of the Officer's Certificate required
by the preceding paragraph, the Servicer shall deliver to the Indenture Trustee
and the Owner Trustee a copy of its annual audited financial statements prepared
in the ordinary course of business. The Servicer shall, upon the request of the
Depositor, deliver to such party any unaudited quarterly financial statements of
the Servicer.
The Servicer agrees to make available to the Depositor on a reasonable
basis a knowledgeable officer of the Servicer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor on
reasonable notice to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Depositor that the Servicer has
the ability to service the Home Loans in accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel relating
to the performance of the obligations of the Servicer hereunder, (ii) its
financial condition, (iii) the Home Loans and (iv) the performance of the
obligations of any Subservicer under the related Subservicing Agreement, in each
case as the Indenture Trustee or the Depositor may reasonably request from time
to time.
Section 7.05 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer (beginning with fiscal year 1998), the Servicer at its expense shall
cause any of Arthur Andersen & Co., Coopers & Lybrand LLP, Deloitte & Touche
LLP, Ernst & Young LLP, KPMG Peat Marwick LLP and Price Waterhouse & Co. or some
other nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Owner Trustee, the Rating Agencies and the Depositor
to the effect that such firm has examined certain documents and records relating
to the servicing of the Home Loans under this Agreement or of mortgage loans
under pooling and servicing agreements (including the Home Loans and this
Agreement) substantially similar to one another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
the Audit Program for Mortgages serviced for FHLMC, such firm confirms that such
servicing has been conducted in compliance with such pooling and servicing
agreements except for such significant exceptions or errors in records that, in
the opinion of such firm, the Uniform Single Attestation Program for Mortgage
Bankers or the Attestation Program for Mortgages serviced for FHLMC requires it
to report, each of which errors and omissions shall be specified in such
statement. In rendering such statement, such firm may rely, as to matters
relating to direct servicing of mortgage loans by Subservicers, upon comparable
statements for examinations conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC (rendered within one year of such statement) of
independent public accountants with respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder individually or in the aggregate holding, in each case,
at least 20% of the Voting Interests, the Indenture Trustee, the Issuer and each
of their respective agents shall have the right upon 15 days prior notice,
during normal business hours and as often as reasonably required, to examine,
audit and copy, at the expense of the Person making such examination, any and
all of the books, records or other information of the Servicer (including
without limitation any Subservicer to the extent provided in the related
Subservicing Agreement), whether held by the Servicer or by another on behalf of
the Servicer, which is reasonable and which is relevant to the performance or
observance by the Servicer of the terms, covenants or conditions of this
Agreement. In the case of the supervisory agents and examiners of the Issuer,
Indenture Trustee and the Securityholders, access to the documentation regarding
the Home Loans required by applicable state and federal regulations shall be
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it. Each
Securityholder, the Indenture Trustee and the Issuer agree that any information
obtained pursuant to the terms of this Agreement shall be held confidential.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Securityholders and any prospective Securityholder to
inspect the Servicer's servicing facilities during normal business hours for the
purpose of satisfying the Securityholders and such prospective Securityholder
that the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.01(b)(1) hereof, the aggregate of withdrawals from the
Collection Account for each category of withdrawal specified in Section
5.01(b)(2) and (3) hereof, in each case, for the related Due Period.
Section 7.08 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders annual audited financial statements
of the Servicer for one or more of the most recently completed five fiscal years
for which such statements are available, which request shall not be unreasonably
denied.
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Transferor, the Owner Trustee, the
Trust, the Depositor and the Indenture Trustee (each an "Indemnified Party") and
hold harmless each of them against any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable 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
any of the Servicer's representations and warranties and covenants contained in
this Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Home Loans in compliance with the terms of this
Agreement; provided, however, that if the Servicer is not liable pursuant to the
provisions of Section 9.01(d) hereof for its failure to perform its duties and
service the Home Loans in compliance with the terms of this Agreement, then the
provisions of this Section 9.01 shall have no force and effect with respect to
such failure.
(b) The Transferor, the Depositor, the Owner Trustee or the Indenture
Trustee, as the case may be, shall promptly notify the Servicer if a claim is
made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Home Loans in compliance with the terms of this Agreement. The
Servicer shall promptly notify the Indenture Trustee, the Owner Trustee and the
Depositor of any claim of which it has been notified pursuant to this Section
9.01 by a Person other than the Depositor, and, in any event, shall promptly
notify the Depositor of its intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (i) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (ii) the Servicer has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Servicer and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Servicer. The Servicer shall not be
liable for any settlement of any such claim or action unless the Servicer shall
have consented thereto or be in default on its obligations hereunder. Any
failure by an Indemnified Party to comply with the provisions of this Section
9.01 shall relieve the Servicer of liability only if such failure is materially
prejudicial to the position of the Servicer and then only to the extent of such
prejudice.
(d) None of the Transferor, the Depositor, the Servicer or any of the
directors, officers, employees or agents of the Transferor, the Depositor or the
Servicer, or members or Affiliates of the Depositor shall be under any liability
to the Trust or the Securityholders for any action taken, or for refraining from
the taking of any action, in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Transferor, the Depositor, the Servicer or any such person against the remedies
provided herein for the breach of any warranties, representations or covenants
made herein, or against any specific liability imposed on the Transferor, the
Depositor or the Servicer herein, or against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of the duties of the Servicer, the Depositor or the Transferor, as
the case may be, or by reason of reckless disregard of the obligations and
duties of the Servicer, the Depositor or the Transferor, as the case may be,
hereunder. The Transferor, the Depositor, the Servicer and any director,
officer, employee or agent of the Transferor, the Depositor or the Servicer, or
any member or Affiliate of the Depositor may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Trust 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 Notes, other than any loss, liability or
expense related to any specific Home Loan or Home Loans (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 willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Except as
otherwise provided herein, none of the Transferor, the Depositor or the Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not related to its respective duties under this Agreement; provided,
however, that, except as otherwise provided herein, any of the Transferor, the
Depositor or the Servicer may, with the prior consent of the Indenture Trustee,
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Securityholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust, and the
Transferor, the Depositor and the Servicer shall be entitled to be reimbursed
therefor out of the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and will obtain and preserve its qualification to do business
as a foreign corporation and maintain such other licenses and permits in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Home Loans and to perform its duties under this
Agreement; provided, however, that the Servicer may merge or consolidate with
any other corporation upon the satisfaction of the conditions set forth in the
following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable 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. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
hereof, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Indenture Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the preceding
sentence permitting the resignation of the Servicer shall be evidenced by an
independent opinion of counsel to such effect delivered (at the expense of the
Servicer) to the Indenture Trustee. No resignation of the Servicer shall become
effective until the Indenture Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.02 hereof and satisfying the
requirements of Section 4.07 hereof with respect to the qualifications of a
successor Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder and any agreement, instrument or act purporting to effect
any such assignment, transfer, delegation or appointment shall be void.
The Servicer agrees to cooperate with any successor Servicer in effecting
the transfer of the Servicer's servicing responsibilities and rights hereunder
pursuant to the first paragraph of this Section 9.04, including, without
limitation, the transfer to such successor of all relevant records and documents
(including any Home Loan Files in the possession of the Servicer) and all
amounts received with respect to the Home Loans and not otherwise permitted to
be retained by the Servicer pursuant to this Agreement. In addition, the
Servicer, at its sole cost and expense, shall prepare, execute and deliver any
and all documents and instruments to the successor Servicer including all Home
Loan Files in its possession and do or accomplish all other acts necessary or
appropriate to effect such termination and transfer of servicing
responsibilities.
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer and the Indenture Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Indenture Trustee.
Section 9.06 Servicer May Own Securities.
Each of the Servicer and any Affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Securities with
the same rights as it would have if it were not the Servicer or an Affiliate
thereof except as otherwise specifically provided herein. Securities so owned by
or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Servicer or any Affiliate thereof,
during the time such Securities are owned by them, shall be without voting
rights for any purpose set forth in this Agreement. The Servicer shall notify
the Indenture Trustee promptly after it or any of its Affiliates becomes the
owner or pledgee of a Security.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the Servicer
shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection Account
in accordance with Section 5.01(b) hereof any payments in respect of the
Home Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues unremedied
for a period of 30 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice is
a "Notice of Default" hereunder, shall have been given (a) to the Servicer
by the Indenture Trustee or the Issuer, or (b) to the Servicer, the
Indenture Trustee or the Issuer by the Majority Noteholders; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property; or
(v) the Servicer shall admit in writing its inability to pay its debts
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations; or
(vi) the Majority Noteholders (A) shall receive notice from the
Servicer that the Servicer is no longer able to discharge its duties under
this Agreement or (B) shall determine, in their reasonable judgment and
based upon published reports (including wire services), which they
reasonably believe in good faith to be reliable, that the Servicer:
a) has experienced a material adverse change in its business,
assets, liabilities, operations, condition (financial or otherwise) or
prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary course; or
(d) as of any Determination Date, the total Expected Loan Loss
Percentage (as defined below) exceeds (1) up to the fifth (5th)
anniversary of the September 30, 1997 Cut-Off Date, 31.5%, or (2)
thereafter 21% (where the "Expected Loan Loss Percentage" shall be the
sum of (A) the cumulative Net Loan Losses divided by the Initial Pool
Principal Balance, plus (B) 25% of the aggregate Principal Balance of
the Home Loans which are then more than 30 but less than 60 days
delinquent divided by the Initial Pool Principal Balance, plus (C) 50%
of the aggregate Principal Balance of the Home Loans which are then
more than 60 but less than 90 days delinquent divided by the Initial
Pool Principal Balance, plus (D) 100% of the aggregate Principal
Balance of the Home Loans which are then more than 90 days delinquent
divided by the Initial Pool Principal Balance).
(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied, the Indenture Trustee or the Majority Noteholders,
by notice in writing to the Servicer may, in addition to whatever rights such
Person may have at law or in equity to damages, including injunctive relief and
specific performance, may terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Home Loans and the proceeds
thereof, as servicer under this Agreement. Upon receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Home Loans or otherwise, shall, subject to Section
10.02 hereof, pass to and be vested in a successor servicer, or the Indenture
Trustee if a successor servicer cannot be retained in a timely manner, and the
successor servicer, or Indenture Trustee, as applicable, is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including, but not limited
to, the transfer and endorsement or assignment of the Home Loans and related
documents. The Servicer agrees to cooperate with the successor servicer in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the successor servicer
for administration by it of all amounts which shall at the time be credited by
the Servicer to each Collection Account or thereafter received with respect to
the Home Loans.
(c) If, as of any Determination Date, the total Expected Loan Loss
Percentage exceeds (1) up to the fifth (5th) anniversary of the September 30,
1997 Cut-Off Date, 15.75%, or (2) thereafter 26.625% (the "Servicing Plan
Trigger"), the Indenture Trustee shall prepare a plan (a "Servicing Plan") to
replace the Servicer pursuant to Section 10.02 herein and which shall set forth
the identity of any proposed successor servicer which shall be appointed
pursuant to Section 10.02 in the event of an Event of Default under paragraph
(a)(vi)(d) of this Section 10.01 and confirm the Indenture Trustee's obligations
under Section 10.02 herein to act as successor servicer if a successor servicer
cannot be retained in a timely manner.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01 hereof, or the Indenture Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel or accompanied by
the consents required by Section 9.04 hereof, or the Servicer is removed as
servicer pursuant to this Article X, then, subject to Section 4.07 hereof, the
Indenture Trustee shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior to
it; and, provided further, that if a successor servicer cannot be retained in a
timely manner, the Indenture Trustee shall act as successor Servicer. In the
event the Indenture Trustee assumes the responsibilities of the Servicer
pursuant to this Section 10.02, the Indenture Trustee will make reasonable
efforts consistent with applicable law to become licensed, qualified and in good
standing in each Mortgaged Property State the laws of which require licensing or
qualification in order to perform its obligations as Servicer hereunder or,
alternatively, shall retain an agent that is so licensed, qualified and in good
standing in any such Mortgaged Property State.
In the case that the Indenture Trustee serves as successor servicer, the
Indenture Trustee in such capacity shall not be liable for any servicing of the
Home Loans prior to its date of appointment and shall not be subject to any
obligations to repurchase any Home Loans. The successor servicer shall be
obligated to make Servicing Advances hereunder. As compensation therefor, the
successor servicer appointed pursuant to the following paragraph, shall be
entitled to all funds relating to the Home Loans which the Servicer would have
been entitled to receive from the Note Distribution Account pursuant to Section
5.01(c) hereof as if the Servicer had continued to act as servicer hereunder,
together with other Servicing Compensation in the form of assumption fees, late
payment charges or otherwise as provided in Section 7.03 hereof. The Servicer
shall not be entitled to any termination fee if it is terminated pursuant to
Section 10.01 hereof but shall be entitled to any accrued and unpaid Servicing
Fee to the date of termination.
Any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fee, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee is required to solicit bids to appoint a successor
servicer, the Indenture Trustee shall solicit, by public announcement, bids from
Eligible Servicers. Such public announcement shall specify that the successor
servicer shall be entitled to the full amount of the Servicing Fee and Servicing
Compensation provided for herein. Within 30 days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any unpaid Servicing Fees and unreimbursed Servicing Advances made by the
Indenture Trustee. After such deductions, the remainder of such sum shall be
paid by the Indenture Trustee to the Servicer at the time of such sale, transfer
and assignment to the Servicer's successor. The Indenture Trustee, the Issuer,
any Custodian, the Servicer and any such successor servicer shall take such
action, consistent with this Agreement, as shall be necessary to effect any such
succession. The Servicer agrees to cooperate with the Indenture Trustee and any
successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in any Trust Account maintained by the Servicer or which are
thereafter received with respect to the Home Loans. Neither the Indenture
Trustee nor any other successor servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivering, cash, documents or records to it or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Indenture Trustee to each Securityholder, the Issuer and the
Depositor and, except in the case of the appointment of the Indenture Trustee as
successor to the Servicer (when no consent shall be required), the Depositor,
the Majority Noteholders and the Issuer shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the Indenture
Trustee shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Indenture Trustee may make such
arrangements for the compensation of such successor servicer out of payments on
the Home Loans as it and such successor servicer shall agree; provided, however,
that no such compensation shall be in excess of that permitted the Servicer
pursuant to Section 7.03 hereof, together with other Servicing Compensation in
the form of assumption fees, late payment charges or otherwise as provided in
this Agreement.
Section 10.03 Waiver of Defaults.
The Majority Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article X; provided, however, that the
Majority Noteholders may not waive a default in making a required distribution
on a Note or Residual Interest Certificate without the consent of the related
Noteholder or holder of the Residual Interest Certificate. Upon any 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 thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer shall,
at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Trust Account
maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee all Home Loan Files and related
documents and statements held by it hereunder and a Home Loan portfolio
computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee and to the Issuer and the
Securityholders a full accounting of all funds, including a statement
showing the Monthly Payments collected by it and a statement of monies held
in trust by it for payments or charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer
of servicing of the Home Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice by the Servicer to the Indenture
Trustee and the Owner Trustee of either: (a) the later of (i) the satisfaction
and discharge of the Indenture and the provisions thereof or (ii) the
disposition of all funds with respect to the last Home Loan and the remittance
of all funds due hereunder and the payment of all amounts due and payable to the
Indenture Trustee, the Owner Trustee, the Issuer and the Custodian; or (b) the
mutual consent of the Servicer, the Depositor, the Transferor and all
Securityholders in writing.
Section 11.02 Optional Termination.
The Majority Residual Interestholders may, at their option, effect an early
termination of the Trust on or after any Distribution Date on which the Pool
Principal Balance declines to 10% or less of the Maximum Collateral Amount. The
Majority Residual Interestholders shall effect such early termination by
providing notice thereof to the Indenture Trustee and Owner Trustee and by
purchasing all of the Home Loans at a purchase price, payable in cash, equal to
or greater than the Termination Price. The expense of any Independent appraiser
required under this Section 11.02 shall be a nonreimbursable expense of Majority
Residual Interestholders.
Any such early termination by the Majority Residual Interestholders shall
be accomplished by depositing into the Collection Account on the third Business
Day prior to the Distribution Date on which the purchase is to occur the amount
of the Termination Price to be paid. The Termination Price and any amounts then
on deposit in the Collection Account (other than any amounts not required to
have been deposited therein pursuant to Section 5.01(b)(1) hereof and any
amounts withdrawable therefrom by the Indenture Trustee pursuant to Section
5.01(b)(3) hereof) shall be transferred to the Note Distribution Account
pursuant to Section 5.01(b)(2) hereof for distribution to Noteholders on the
succeeding Distribution Date; and any amounts received with respect to the Home
Loans and Foreclosure Properties subsequent to the Due Period immediately
preceding such final Distribution Date shall belong to the purchaser thereof.
For purposes of calculating the Available Distribution Amount for such final
Distribution Date, amounts transferred to the Note Distribution Account
immediately preceding such final Distribution Date shall in all cases be deemed
to have been received during the related Due Period, and amounts so transferred
shall be applied pursuant to Section 5.01(d) and (e) hereof.
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Trust shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with section 10.02 of the Indenture and (ii) by the
Owner Trustee to the Certificateholders in accordance with section 9.1(d) of the
Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders.
Except as otherwise specifically provided herein, whenever action, consent
or approval of the Securityholders is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositor, the
Servicer, the Transferor, the Indenture Trustee and the Issuer by written
agreement with notice thereof to the Securityholders, without the consent of any
of the Securityholders, to cure any error or ambiguity, to correct or supplement
any provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Securityholders. An amendment described above shall be deemed not to adversely
affect in any material respect the interests of the Securityholders if either
(i) an Opinion of Counsel is obtained to such effect and (ii) the party
requesting the amendment obtains a letter from each of the Rating Agencies
confirming that the amendment, if made, would not result in the downgrading or
withdrawal of the rating then assigned by the respective Rating Agency to any
Class of Notes then outstanding.
(b) This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Transferor, the Indenture Trustee and the Issuer by written
agreement, with the prior written consent of the Majority Noteholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Securityholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
Home Loans or distributions which are required to be made on any Security,
without the consent of the holders of 100% of each Class of Notes affected
thereby, (ii) adversely affect in any material respect the interests of the
holders of any Class of Notes in any manner other than as described in clause
(i), without the consent of the holders of 100% of such Class of Notes, or (iii)
reduce the percentage of any Class of Notes, the consent of which is required
for any such amendment, without the consent of the holders of 100% of such Class
of Notes.
(c) It shall not be necessary for the consent of Securityholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Issuer's own
rights, duties or immunities of the Issuer or the Indenture Trustee, as the case
may be, under this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Noteholders' expense on
direction of the Majority Noteholders but only when accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Noteholders or is necessary for the administration or
servicing of the Home Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to: (i) in
the case of the Depositor, PaineWebber Mortgage Acceptance Corporation IV, 1285
Avenue of the Americas, New York, New York 10019, Attention: John Fearey, Esq.,
or such other addresses as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Depositor; (ii) in the case of the
Issuer, DiTech Home Loan Owner Trust 1997-1, c/o Bankers Trust (Delaware), 1011
Centre Road, Suite 200, Wilmington, DE 19805-1266, Attention: DiTech Home Loan
Owner Trust 1997-1, with a copy to Bankers Trust Company in 3 Park Place, 16th
Floor, Irvine, California 92614, Attention: Mary Bellissimo or such other
address as may hereafter be furnished to the Securityholders and the other
parties hereto; (iii) in the case of the Transferor and Servicer, DiTech Funding
Corporation, 1920 Main Street, Suite 400, Irvine, California 92614, Attention:
J. Paul Reddam, or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Servicer or the
Transferor; (iv) in the case of the Indenture Trustee, The Bank of New York, 101
Barclay Street, 12th Floor East, New York, New York 10826 Attention: Corporate
Trust-MBS Administration; and (v) in the case of the Securityholders, as set
forth in the applicable Note Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Securityholders shall be effective upon
mailing or personal delivery.
Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Indenture Trustee, the Issuer and
the Noteholders and their respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer or the Issuer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
Section 12.12.
(b) The fact and date of the execution by any Securityholder of any such
instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Securityholder shall bind every holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 12.12 as it shall deem necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession, merger or
consolidation of the Servicer, any Custodian or the Issuer;
(iv) notice of final payment on the Notes;
(v) notice of any Event of Default;
(vi) copies of the annual independent accountants' report delivered
pursuant to Section 7.05 hereof, and copies of any compliance reports
delivered by the Servicer including under Section 7.04 hereof; and
(vii) copies of any Distribution Date Statement pursuant to Section
6.01(b) hereof.
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies, such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Standard & Poor's, 26 Broadway, 15th Floor, New York, New
York 10004-1064, Attention: Asset-Backed Monitoring Department, (ii) if to
Fitch, One State Street Plaza, New York, New York 10004, Attention:
[____________] and (iii) if to Duff & Phelps, 55 East Monroe Street, 38th Floor,
Chicago, Illinois 60603, Attention: MBS Monitoring.
Section 12.14 Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Trust Agreement to the holders of the Residual Interest Certificates shall be
paid to such holders pro rata based on their percentage holdings in the Residual
Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest Certificates, such
consent or approval shall be capable of being given by the holder or holders of
not less than 51% of the Residual Interest in aggregate.
Section 12.15 Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement
has been signed by Bankers Trust (Delaware) not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
Bankers Trust (Delaware) in its individual capacity or any beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII AND VIII of the Trust Agreement.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Depositor, the Servicer, the Transferor
and the Indenture Trustee have caused their names to be signed by their
respective officers thereunto duly authorized, as of the day and year first
above written, to this Sale and Servicing Agreement.
DITECH HOME LOAN OWNER TRUST 1997-1,
By: Bankers Trust (Delaware), not in its
individual capacity but solely as
Owner Trustee
By: ____________________________________
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By: ____________________________________
Barbara J. Dawson
Senior Vice President
DITECH FUNDING CORPORATION, as Transferor
and Servicer
By: ____________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Indenture Trustee
By: ____________________________________
Name:
Title:
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared _______________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said BANKERS TRUST (DELAWARE), not in its
individual capacity but in its capacity as Owner Trustee of DITECH HOME LOAN
OWNER TRUST 1997-1 as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF BANKERS TRUST (DELAWARE), this the ____ day
of October, 1997.
_________________________________
Notary Public, State of _________
<PAGE>
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared Barbara J. Dawson, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, as the Depositor, and that she executed the same as
the act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this the
____ day of October, 1997.
_________________________________
Notary Public, State of _________
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared _______________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said DITECH FUNDING
CORPORATION, as the Transferor and Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF DITECH FUNDING CORPORATION, this the ____
day of October, 1997.
_________________________________
Notary Public, State of _________
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared ____________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said THE BANK OF NEW YORK, a
New York banking corporation, as the Indenture Trustee, and that she executed
the same as the act of such entity for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF THE BANK OF NEW YORK, this the ____ day of
October, 1997.
_________________________________
Notary Public, State of _________
<PAGE>
EXHIBIT A
---------
Availabe upon request from:
John Fearey Esq.
PaineWebber Mortgage Acceptance Corporatoin IV
1285 Avenue of the Americas
New York, New York 10019
<PAGE>
EXHIBIT B
---------
Available upon request from the Indenture Trustee
<PAGE>
EXHIBIT C
---------
SUBSEQUENT TRANSFER AGREEMENT (the "Subsequent Transfer Agreement"), dated
as of [________, 199_], between DITECH FUNDING CORPORATION ("DiTech" or the
"Transferor"), DITECH FUNDING HOME LOAN OWNER TRUST 1997-1 (the "Issuer"), and
THE BANK OF NEW YORK, as indenture trustee (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, pursuant to the terms of a Home Loan Purchase Agreement, dated as
of October 1, 1997 (the "Purchase Agreement"), between PaineWebber Mortgage
Acceptance Corporation IV, as Depositor (the "Depositor") and DiTech, as
Transferor, the Transferor has sold, transferred, assigned and otherwise
conveyed to the Depositor all its right, title and interest in and to certain
Home Loans
WHEREAS, pursuant to the terms of a Sale and Servicing Agreement, dated as
of [________, 199_] (the "Sale and Servicing Agreement"), among DiTech Funding
Home Loan Owner Trust 1997-1, as issuer (the "Owner Trust"), DiTech, as
Transferor and servicer, the Depositor and the Indenture Trustee, the Transferor
has the obligation to sell, transfer, assign and otherwise convey to the Issuer
all its right, title and interest in and to certain home loans as listed on
Schedule I attached hereto and the Related Documents thereto (as defined below)
(the "Subsequent Loans") pursuant to and in accordance with this Subsequent
Transfer Agreement;
WHEREAS, the parties hereto desire that the Transferor sell all its right,
title and interest in and to the Subsequent Loans and the Related Documents to
Issuer pursuant to the terms of this Subsequent Transfer Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined herein have the
meanings assigned thereto in the Sale and Servicing Agreement.
2. Sale of Subsequent Loans to Issuer; Grant of Security Interest to
Indenture Trustee. (a) The Transferor, concurrently with the execution and
delivery of this Subsequent Transfer Agreement, does hereby sell, transfer,
assign, set over, and otherwise convey to the Issuer, without recourse but
subject to the other terms and provisions of this Agreement and the Sale and
Servicing Agreement, all of its right, title and interest in and to the
following, whether now existing or hereafter acquired and wherever located: (i)
such Subsequent Loans as listed in the Subsequent Loan Schedule, as of the
[_________ 1, 199_] (the "Cut-Off Date"), together with the Servicer's Home Loan
Files and the Indenture Trustee's Home Loan Files relating thereto and all
proceeds thereof, (ii) the Mortgages and security interests in Mortgaged
Properties, (iii) all payments in respect of interest due with respect to such
Subsequent Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date, (iv) the Transferor's rights under
all insurance policies with respect to such Subsequent Loans and any Insurance
Proceeds, and (v) all proceeds of any of the foregoing.
(b) The Issuer hereby grants on the Subsequent Transfer Date, to the
Indenture Trustee, as Indenture Trustee for the benefit of the Holders of the
Notes, all of the Issuer's right, title and interest in and to: (i) Trust
Estate, inclusive of the Subsequent Loans conveyed hereby; (ii) all right, title
and interest of the Issuer in and to this Subsequent Transfer Agreement
(including the Issuer's right to cause the Transferor to repurchase Home Loans
from the Issuer under certain circumstances described therein); and (iii) all
present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing.
3. Obligations of Transferor Upon Sale. In connection with any transfer
pursuant to Section 2.1 hereof, the Transferor further agrees, at its own
expense, on or prior to the Subsequent Transfer Date (a) to indicate in its
books and records that the Subsequent Loans have been sold to the Issuer
pursuant to this Subsequent Transfer Agreement and (b) to deliver to the Issuer
a computer file containing a true and complete list of all Subsequent Loans in
the format required by Section 2.2 of the Purchase Agreement.
In connection with any conveyance by the Transferor, the Transferor shall
on behalf of the Issuer deliver to, and deposit with the Custodian, on behalf of
the Indenture Trustee, as assignee of the Issuer, on or before the Subsequent
Transfer Date the Related Documents (as defined in the Purchase Agreement) with
respect to each Subsequent Loan.
In connection with any conveyance by the Transferor, the Transferor shall
on behalf of the Issuer deliver to, and deposit with the Servicer, as the
designated agent of the Indenture Trustee, as assignee of the Issuer, on or
before the Subsequent Transfer Date the Servicer's Home Loan File with respect
to each Subsequent Loan.
The Transferor further hereby confirms to the Issuer that, as of the
Subsequent Transfer Date it has caused the portions of the Transferor's
electronic ledger relating to the Subsequent Loans to be clearly and
unambiguously marked to indicate that the Subsequent Loans have been sold to the
Issuer.
The parties hereto intend that each of the transactions set forth herein be
a sale by the Transferor to the Issuer of all the Transferor's right, title and
interest in and to the Subsequent Loans and other property described above. In
the event the transactions set forth herein are deemed not to be a sale, the
Transferor hereby grants to the Issuer a security interest in all of the
Transferor's right, title and interest in, to and under the Subsequent Loans and
other property described above, whether now existing or hereafter created, to
secure all of the Transferor's obligations hereunder; and this Subsequent
Transfer Agreement shall constitute a security agreement under applicable law.
4. Payment of Purchase Price for the Subsequent Loans
(a) In consideration of the sale of the Subsequent Loans from the
Transferor to the Issuer on the Subsequent Transfer Date, the Issuer agrees to
pay to the Transferor on the Subsequent Transfer Date by transfer of immediately
available funds, an amount equal to 100% of the aggregate Principal Balances of
the Subsequent Loans as of the Cut-Off Date.
(b) Within 60 days of the Subsequent Transfer Date, the Transferor, at its
own expense, shall record each Assignment of Mortgage in favor of the Indenture
Trustee to the same extent required under Section 2.3 of the Purchase Agreement.
5. Transferor Representations and Warranties. (a) The Transferor hereby
makes the representations and warranties to the Issuer as of the Cut-Off Date
and the Subsequent Transfer Date specified in Section 3.1(a) of the Purchase
Agreement.
(b) The Transferor further represents and warrants to the Issuer that with
respect to the Subsequent Loans as of the Subsequent Transfer Date each of the
representations and warranties contained in Section 3.04 of the Sale and
Servicing Agreement are true and correct.
It is understood and agreed that the representations and warranties set
forth in this Section 3.1(b) shall survive delivery of the respective Subsequent
Loan Files to the Indenture Trustee on behalf of the Issuer. In the event that
(a) any of the representations and warranties of the Transferor in Section 3.04
of the Sale and Servicing Agreement are determined to be untrue in a manner that
materially and adversely affects the value of, or the interests of the
Securityholders in, any Subsequent Loan with respect to which such
representation or warranty is made and (b) the Transferor shall fail to cure
such breach within the time period specified in Section 3.05 of the Sale and
Servicing Agreement, the Transferor shall be obligated to repurchase or
substitute the affected Subsequent Loan(s) in accordance with the provisions of
Section 3.05 of the Sale and Servicing Agreement.
With respect to representations and warranties made by the Transferor
pursuant to this Section 3.1(b) that are made to the Transferor's best
knowledge, if it is discovered by any of the Issuer, the Transferor or the
Indenture Trustee that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Subsequent Loan, notwithstanding the Transferor's lack of knowledge,
such inaccuracy shall be deemed a breach of the applicable representation and
warranty.
6. Covenants of the Transferor. The Transferor hereby covenants that except
for the transfer hereunder, the Transferor will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any lien on, any Subsequent Loan, or any interest therein; and the Transferor
will defend the right, title and interest of the Trust, as assignee of the
Issuer, in, to and under the Subsequent Loans, against all claims of third
parties claiming through or under the Transferor.
Whenever and so often as requested by the Issuer or the Transferor or the
Lender, the other party promptly will execute and deliver or cause to be
executed and delivered all such other and further instruments, documents, or
assurances, and promptly do or cause to be done all such other things, as may be
necessary and reasonably required to vest more fully in the requesting party all
rights, interests, powers, benefits, privileges and advantages conferred or
intended to be conferred upon it by this Agreement.
7. Termination. The respective obligations and responsibilities of the
Transferor and Issuer created hereby shall terminate, except for the
Transferor's and Issuer's indemnity obligations as provided herein, upon the
termination of the Trust as provided in Article XI of the Sale and Servicing
Agreement.
8. Governing Law. This Subsequent Transfer Agreement shall be governed by
and construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
9. Intention of the Parties. It is the intention of the parties that the
Issuer is purchasing, and the Transferor is selling, the Subsequent Loans rather
than pledging the Subsequent Loans to secure a loan by the Issuer to the
Transferor. The parties hereto each intend to treat the transaction for
accounting purposes as a sale by the Transferor, and a purchase by the Issuer,
of the Subsequent Loans. For federal income tax purposes, the parties hereto
each intend to treat the transaction as debt. The Issuer will have the right to
review the Subsequent Loans and the related Subsequent Loan Files to determine
the characteristics of the Subsequent Loans which will affect the federal income
tax consequences of owning the Subsequent Loans and the Transferor will
cooperate with all reasonable requests made by the Issuer in the course of such
review.
10. The representations and warranties set forth in Article III shall
survive the purchase of the Subsequent Loans hereunder.
11. This Subsequent Transfer Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Section 11 no other Person shall
have the right or obligation hereunder.
<PAGE>
IN WITNESS WHEREOF, the Transferor and the Issuer have caused this
Subsequent Transfer Agreement to be duly executed on their behalf by their
respective officers thereunto duly authorized as of the day and year first above
written.
DITECH FUNDING SUBSEQUENT LOAN OWNER
TRUST 1997-1, as Issuer
By: ________________________________
Barbara J. Dawson
Senior Vice President
DITECH FUNDING CORPORATION,
as Transferor
By: ________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Indenture Trustee
By: ________________________________
<PAGE>
SCHEDULE I
Subsequent Loan Schedule
================================================================================
ADMINISTRATION AGREEMENT
dated as of October 1, 1997
among
DITECH HOME LOAN OWNER TRUST 1997-1
(the "Issuer")
and
THE BANK OF NEW YORK,
as Administrator
(the "Administrator")
and
DITECH FUNDING CORPORATION
(the "Company")
Home Loan Asset Backed Notes, Series 1997-1
================================================================================
<PAGE>
TABLE OF CONTENTS
Section 1. Duties of the Administrator
Section 2. Duties of the Company with Respect to the Indenture
Section 3. Records
Section 4. Compensation
Section 5. Additional Information to Be Furnished to the Issuer
Section 6. Independence of the Administrator
Section 7. No Joint Venture
Section 8. Other Activities of Administrator and Servicer
Section 9. Term of Agreement; Resignation and Removal of Administrator or
Servicer
Section 10. Action upon Termination, Resignation or Removal of the
Administrator
Section 11. Notices
Section 12. Amendments
Section 13. Successor and Assigns
Section 14. Governing Law
Section 15. Headings
Section 16. Counterparts
Section 17. Severability
Section 18. Not Applicable to BNY in Other Capacities
Section 19. Limitation of Liability of Owner Trustee
Section 20. Benefit of Agreement
Section 21. Bankruptcy Matters
Section 22. Capitalized Terms
<PAGE>
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT dated as of October 1, 1997, among DITECH HOME
LOAN OWNER TRUST 1997-1, a Delaware business trust, as Issuer (the "Issuer"),
THE BANK OF NEW YORK, a New York banking corporation, not in its individual
capacity but solely as Administrator ("BNY" and in such capacity, the
"Administrator"), and DITECH FUNDING CORPORATION, a California corporation, as
the Company (the "Company").
W I T N E S S E T H:
WHEREAS, the Issuer is a business trust (the "Trust") under the Delaware
Business Trust Act (12 Del. C. Section 3801 et seq.) created by a Trust
Agreement relating to the Trust dated as of October 1, 1997 (the "Trust
Agreement"), among PaineWebber Mortgage Acceptance Corporation IV, as depositor
(the "Depositor"), DiTech Funding Corporation, as the Company, Bankers Trust
(Delaware), as Owner Trustee, and BNY, as Paying Agent; and
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes (the "Notes"),
Series 1997-1; and
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture dated as of October 1, 1997 (the
"Indenture"), between the Issuer and BNY, as Indenture Trustee (in such
capacity, the "Indenture Trustee"); and
WHEREAS, the Issuer has entered into certain agreements in connection with
the issuance of the Notes, including (i) a Sale and Servicing Agreement dated as
of October 1, 1997 (the "Sale and Servicing Agreement"), among the Issuer,
DiTech Funding Corporation, as Transferor and Servicer, the Depositor and BNY,
as Indenture Trustee, (ii) the Letter of Representations, among the Issuer, the
Indenture Trustee and The Depository Trust Company relating to the Notes (the
"Note Depository Agreement"), (iii) the Indenture and (iv) the Trust Agreement
(the Sale and Servicing Agreement, the Note Depository Agreement, the Indenture
and the Trust Agreement being hereinafter referred to collectively as the
"Related Agreements"); and
WHEREAS, pursuant to the Related Agreements, the Issuer is required to
perform certain duties in connection with the Notes and the collateral therefor
pledged pursuant to the Indenture (the "Collateral"); and
WHEREAS, the Issuer desires to have the Administrator and the Servicer,
respectively, perform certain of the duties of the Issuer referred to in the
preceding clause, and to provide such additional services consistent with the
terms of this Agreement and the Related Agreements as the Issuer may from time
to time request; and
WHEREAS, the Administrator and the Servicer have the capacity to provide
the respective services required hereby and are willing to perform such services
for the Issuer on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
Section 1. Duties of the Administrator.
(a) Duties with Respect to the Note Depository Agreement, the Sale and
Servicing Agreement and the Indenture.
(i) The Administrator agrees to perform all of the duties of the
Issuer under the Note Depository Agreement. In addition, the
Administrator shall consult with the Owner Trustee regarding the
duties of the Issuer under the Sale and Servicing Agreement, the
Indenture and the Note Depository Agreement. The Administrator shall
monitor the performance of the Issuer and shall notify the Owner
Trustee when action is necessary to comply with the Issuer's duties
under the Sale and Servicing Agreement, the Indenture and the Note
Depository Agreement. In addition to the foregoing, the Administrator
shall take all appropriate action that is the duty of the Issuer to
take with respect to the following matters under the Sale and
Servicing Agreement and the Indenture (parenthetical section
references are to sections of the Indenture):
(A) the preparation of the Notes and the execution of the
Notes upon their issuance and upon the registration of any
transfer or exchange of the Notes (Sections 2.02 and 2.03);
(B) the duty to cause the Note Register to be kept and to
give the Indenture Trustee notice of any appointment of a new
Note Registrar and the location, or change in location, of the
Note Register (Section 2.03);
(C) the notification of Noteholders of the final principal
payment on the Notes or of the redemption of the Notes or the
duty to cause the Indenture Trustee to provide such notification
(Sections 2.06(b) and 10.02);
(D) performing the function of the Issuer with respect to
the cancellation of the Notes (Section 2.01);
(E) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery
of the same to the Indenture Trustee (Section 2.08);
(F) the maintenance of an office in New York, New York for
registration of transfer or exchange of Notes (Section 3.02);
(G) the delivery to the Indenture Trustee and the Rating
Agencies of prompt written notice of each Event of Default under
the Indenture (Section 3.14);
(H) the duty to act as Paying Agent for the Issuer and the
duty to cause newly appointed Paying Agents, if any, to deliver
to the Indenture Trustee the instrument specified in the
Indenture regarding funds held in trust (Section 3.03);
(I) directing the Indenture Trustee to deposit moneys with
Paying Agents, if any, other than the Indenture Trustee (Section
3.03);
(J) notifying the Indenture Trustee and the Rating Agencies
of the occurrence of an Event of Default under the Sale and
Servicing Agreement by the Servicer or the Transferor and, if
such an Event of Default arises from the failure of the Servicer
or the Transferor to perform any of their respective duties under
the Sale and Servicing Agreement, the taking of all reasonable
steps available to remedy such failure (Section 3.07(d)), and
upon the termination of the Servicer, the appointment of a
Successor Servicer thereunder and the notifications in connection
therewith (Section 3.07(e) and (f));
(K) monitoring the Issuer's obligations as to the
satisfaction and discharge of the Indenture (Section 4.01);
(L) opening one or more accounts in the Trust's name
(Section 8.02);
(M) notifying the Rating Agencies of a redemption of the
Notes and the duty to cause the Majority Residual Interestholders
to deposit the Termination Price into the Note Distribution
Account and the Certificate Distribution Account (Section 10.01);
(N) providing the Indenture Trustee with calculations
pertaining to original issue discount, if any, on the Notes and,
if applicable, the accrual of market discount or the amortization
of premium on the Notes to the extent the Administrator has
received from the Servicer sufficient information to calculate
such amounts (Section 3.03);
(O) the preparation and filing of all copies of the annual
reports and of the information, documents and other reports
required by the Commission pursuant to Section 13 or 15(d) of the
Exchange Act, the rules and regulations of the Commission
thereunder and the TIA (Section 7.03); and
(P) perform such matters with respect to the Subsequent
Loans as may be required on each Subsequent Transfer Date.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in the Trust
Agreement with respect to Article III and Article V thereof.
(b) (i) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be
performed in connection with the resignation or removal of the Owner
Trustee, and any other duties expressly required to be performed by
the Administrator under the Trust Agreement.
(ii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer
and shall be, in the Administrator's opinion, no less favorable to the
Issuer than would be available from unaffiliated parties.
Section 2. Duties of the Company with Respect to the Indenture.
(a) The Company shall take all appropriate action that is the duty of
the Issuer to take with respect to the following matters under the
Indenture (parenthetical section references are to sections of the
Indenture):
(i) preparing, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of
Collateral (Section 2.09);
(ii) the preparation and filing of all documents required to
maintain the Issuer's existence, rights and franchises as a business
trust under the laws of the State of Delaware and to obtain and
preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary (Section 3.04);
(iii) preparation and execution of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of
the Indenture, necessary to protect the Trust Estate (Section 3.05);
(iv) contract with or otherwise obtain the assistance of other
Persons to assist the Issuer in performing its duties under the
Indenture (Section 3.07);
(v) delivery of the annual delivery of Opinions of Counsel, in
accordance with Section 3.06 of the Indenture, as to the Trust Estate,
and the annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(vi) monitoring the Issuer's compliance with its negative
covenants (Section 3.08), the compliance of the Servicer with certain
of its obligations under the Sale and Servicing Agreement (Section
3.11), and delivering notice of each Event of Default on the part of
the Servicer or the Transferor of its obligations under the Sale and
Servicing Agreement and each default on the part of the Transferor of
its obligations under the Home Loan Purchase Agreement (Section 3.14);
(viii) delivery of an Officer's Certificate, an Opinion of
Counsel and any Independent Certificate required in connection with
satisfaction and discharge of the Indenture (Section 4.01)
(viii) compliance with any directive of the Indenture Trustee
with respect to the sale of the Indenture Trust Estate in a
commercially reasonable manner if an Event of Default shall have
occurred and be continuing under the Indenture (Section 5.04);
(ix) appointing a successor Indenture Trustee pursuant to Section
6.08 of the Indenture (Section 6.08);
(x) causing one or more accounts to be opened in the Trust's name
and preparing Issuer Orders, Officers' Certificates and Opinions of
Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(xi) preparing an Issuer Request and Officers' Certificate and
obtaining an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Indenture Trust Estate as defined in
the Indenture (Sections 8.05 and 8.06);
(xii) preparing Issuer Orders and obtaining of Opinions of
Counsel with respect to any proposed amendment of the Indenture, Sale
and Servicing Agreement or Trust Agreement or amendment to or waiver
of any provision of any other document relating to the Trust Agreement
(Section 9.07 and Section 9.03); and
(xiii) notifying the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information
required pursuant to Section 11.04 of the Indenture (Section 11.04).
(b) The Company will indemnify the Owner Trustee and its employees,
officers, directors and agents for, and hold them harmless against, any
losses, liability or expense incurred without gross negligence or bad faith
on their part, arising out of or in connection with the acceptance or
administration of the transactions contemplated by the Trust Agreement,
including the reasonable costs and expenses of defending themselves against
any claim or liability in connection with the exercise or performance of
any of their powers or duties under the Trust Agreement.
(i) Additional Duties. In addition to the duties of the Company
set forth above, the Company shall prepare for execution by the Issuer
or shall cause the preparation by other appropriate persons of all
such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer to prepare, file or
deliver pursuant to the Related Agreements, and at the request of the
Owner Trustee shall take all appropriate action that it is the duty of
the Issuer to take pursuant to the Related Agreements. Subject to
Section 5 hereof and in accordance with the directions of the Owner
Trustee, the Company shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Related Agreements) as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner
Trustee and are reasonably within the capability of the Company.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding
tax is imposed on the Trust's payments (or allocations of income) to
an Owner as contemplated in Section 5.2(c) of the Trust Agreement. Any
such notice shall specify the amount of any withholding tax required
to be withheld by the Owner Trustee pursuant to such provision.
(iii) The Company hereby agrees to pay and indemnify the
Indenture Trustee such amounts as are required pursuant to Section
6.07 of the Indenture.
Section 3. Records.
The Administrator shall maintain appropriate books of account and records
relating to services performed hereunder, which books of account and records
shall be accessible for inspection by the Issuer and the Servicer at any time
during normal business hours.
Section 4. Compensation.
The Administrator will perform the duties and provide the services called
for under Section 1 hereof without any separate compensation therefor for so
long as the Indenture and the Sale and Servicing Agreement remain in effect, and
thereafter for such compensation as shall be agreed upon among the
Administrator, and the Servicer. The Administrator agrees to perform all its
duties under this Agreement regardless of any non-payment of fees or expenses by
the Company.
Section 5. Additional Information to Be Furnished to the Issuer.
The Administrator shall furnish to the Issuer from time to time such
additional information regarding the Collateral as the Issuer shall reasonably
request.
Section 6. Independence of the Administrator.
For all purposes of this Agreement, the Administrator shall be an
independent contractor and shall not be subject to the supervision of the Issuer
or the Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by the
Issuer, the Administrator shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee. Notwithstanding anything herein to the
contrary, in no event shall the Administrator be deemed the "issuer" for
securities law purposes as the Administrator is merely an independent contractor
for certain enumerated ministerial functions.
Section 7. No Joint Venture.
Nothing contained in this Agreement (i) shall constitute the Administrator
or the Servicer, respectively, and either the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
Section 8. Other Activities of Administrator and Servicer.
Nothing herein shall prevent the Administrator, the Servicer or their
respective Affiliates from engaging in other businesses or, in its sole
discretion, from acting in a similar capacity as an administrator for any other
person or entity even though such person or entity may engage in business
activities similar to those of the Issuer or the Owner Trustee.
Section 9. Term of Agreement; Resignation and Removal of Administrator or
Servicer.
(a) This Agreement shall continue in force until the termination of
the Trust Agreement in accordance with its terms, upon which event this
Agreement shall automatically terminate.
(b) Subject to Section 9(e) hereof, the Administrator or the Servicer
may resign their respective duties hereunder by providing the Issuer with
at least 60 days' prior written notice.
(c) Subject to Section 9(e) hereof, the Issuer may remove the
Administrator without cause by providing the Administrator with at least 60
days' prior written notice.
(d) Subject to Section 9(e) hereof, the Issuer may remove the
Administrator immediately upon written notice of termination from the
Issuer to the Administrator if any of the following events occurs:
(i) the Administrator defaults in the performance of any of its
duties under this Agreement and, after notice of such default, does
not cure such default within ten days (or, if such default cannot be
cured in such time, does not give within ten days such assurance of
cure as shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises enters a decree
or order for relief, and such decree or order shall not have been
vacated within 60 days, in respect of the Administrator in any
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appoints a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official for the Administrator or any substantial part of its property
or orders the winding-up or liquidation of its affairs; or
(iii) the Administrator commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, consents to the entry of an order for relief in
an involuntary case under any such law, consents to the appointment of
a receiver, liquidator, assignee, trustee, custodian, sequestrator or
similar official for the Administrator or any substantial part of its
property, consents to the taking of possession by any such official of
any substantial part of its property, makes any general assignment for
the benefit of creditors or fails generally to pay its debts as they
become due.
The Administrator agrees that if any of the events specified in clause (ii)
or clause (iii) of this Section 9(d) shall occur, it shall give written notice
thereof to the Issuer and the Indenture Trustee within seven days after the
happening of such event.
(e) No resignation or removal of the Administrator or Servicer,
respectively, pursuant to this Section 9(d) shall be effective until (i) a
successor Administrator or Servicer, as the case may be, shall have been
appointed by the Issuer and (ii) such successor Administrator or Servicer
shall have agreed in writing to be bound by the terms of this Agreement in
the same manner as the Administrator or Servicer is bound hereunder.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(g) Subject to Section 9(e) and (f) hereof, the Administrator
acknowledges that upon the appointment of a successor Indenture Trustee
pursuant to Section 6.08 of the Indenture, the Administrator shall
immediately resign and such successor Indenture Trustee shall automatically
become the Administrator under this Agreement. Any such successor Indenture
Trustee shall be required to agree to assume the duties of the
Administrator under the terms and conditions of this Agreement in its
acceptance of appointment as successor Indenture Trustee.
(h) The Servicer's appointment hereunder will terminate automatically
on the Servicer's resignation or removal under the Sale and Servicing
Agreement.
Section 10. Action upon Termination, Resignation or Removal of the
Administrator.
Promptly upon the effective date of termination of this Agreement pursuant
to Section 9(a) or the resignation or removal of the Administrator pursuant to
Section 9(b) or (c), respectively, the Administrator shall be entitled to be
paid all reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 9(a) deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator and, in the
event of the resignation or removal of the Administrator pursuant to Section
9(b), (c) or (d), the Administrator shall cooperate with the Issuer and take all
reasonable steps requested to assist the Issuer in making an orderly transfer of
the duties of the Administrator.
Section 11. Notices.
Any notice, report or other communication given hereunder shall be in
writing and addressed as follows:
(a) if to the Issuer, to
DiTech Home Loan Owner Trust 1997-1
c/o Bankers Trust (Delaware)
1011 Centre Road, Suite 200
Wilmington, DE 19805-1266
with a copy to:
Bankers Trust Company
3 Park Plaza, 16th Floor
Irvine, California 92614
Attention: DiTech Home Loan Owner Trust 1997-1
with a copy to the Company at
DiTech Funding Corporation
1920 Main Street, Suite 400,
Irvine, California 92614
Attention: J. Paul Reddam
(b) if to the Administrator, to
The Bank of New York
101 Barclay Street, 12th floor,
New York, New York 10826
Attention: Corporate Trust-MBS Administration
(c) if to the Servicer, to
DiTech Funding Corporation
1920 Main Street, Suite 400,
Irvine, California 92614
Attention: J. Paul Reddam
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand delivered
to the address of such party as provided above.
Section 12. Amendments.
This Agreement may be amended from time to time by a written amendment duly
executed and delivered by the Issuer, the Administrator and the Servicer, with
the prior written consent of the Owner Trustee without the consent of the
Noteholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner, the rights of the Noteholders; provided, however, that such
amendment will not materially and adversely affect the interest of any
Noteholder. An amendment described above shall be deemed not to adversely affect
in any material respects the interests of any Noteholder if either (i) an
Opinion of Counsel is obtained to such effect or (ii) the party requesting the
amendment satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended by the Issuer, the Administrator and the
Servicer with the prior written consent of the Owner Trustee and the holders of
Notes evidencing at least a majority of the Outstanding Amount of the Notes for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of Noteholders; provided, however, that no such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments in respect of the Home Loans or distributions that are
required to be made for the benefit of the Noteholders or (ii) reduce the
aforesaid percentages of the holders of Notes which are required to consent to
any such amendment, in the case of either clause (i) or clause (ii) hereof,
without the consent of the holders of all the Outstanding Notes. Notwithstanding
the foregoing, the Administrator may not amend this Agreement without the
permission of the Servicer, which permission shall not be withheld unreasonably.
Section 13. Successor and Assigns.
This Agreement may not be assigned by the Administrator unless such
assignment is previously consented to in writing by the Owner Trustee and the
Servicer, subject to the satisfaction of the Rating Agency Condition in respect
thereof. An assignment with such consent and satisfaction, if accepted by the
assignee, shall bind the assignee hereunder in the same manner as the
Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement
may be assigned by the Administrator without the consent of the Owner Trustee or
the Servicer to a corporation or other organization that is a successor (by
merger, consolidation or purchase of assets) to the Administrator; provided,
however, that such successor organization executes and delivers to the Issuer,
the Owner Trustee and the Servicer an agreement in which such corporation or
other organization agrees to be bound hereunder by the terms of said assignment
in the same manner as the Administrator is bound hereunder. Subject to the
foregoing, this Agreement shall bind any successors or assigns of the parties
hereto.
Section 14. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 15. Headings.
The section headings hereof have been inserted for convenience of reference
only and shall not be construed to affect the meaning, construction or effect of
this Agreement.
Section 16. Counterparts.
This Agreement may be executed in counterparts, each of which when so
executed shall together constitute but one and the same agreement.
Section 17. Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 18. Not Applicable to BNY in Other Capacities.
Nothing in this Agreement shall affect any obligation that BNY may have in
any other capacity.
Section 19. Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement
has been countersigned by Bankers Trust (Delaware) not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall Bankers Trust (Delaware) in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Articles VI, VII and VIII of the
Trust Agreement.
Section 20. Benefit of Agreement.
It is expressly agreed that in performing its duties under this Agreement,
the Administrator will act for the benefit of holders of the Notes as well as
for the benefit of the Trust, and that such obligations on the part of the
Administrator shall be enforceable at the instance of the Indenture Trustee and
the Trust.
Section 21. Bankruptcy Matters.
No party to this Agreement shall take any action to cause the Trust to
dissolve in whole or in part or file a voluntary petition or otherwise initiate
proceedings to have the Trust adjudicated bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against the Trust, or
file a petition seeking or consenting to reorganization or relief of the Trust
as debtor under any applicable federal or state law relating to bankruptcy,
insolvency or other relief for debtors with respect to the Trust; or seek or
consent to the appointment of any trustee, receiver, conservator, assignee,
sequestra- tor, custodian, liquidator (or other similar official) of the Trust
or of all or any substantial part of the properties and assets of the Trust, or
cause the Trust to make any general assignment for the benefit of creditors of
the Trust or take any action in furtherance of any of the above actions.
Section 22. Capitalized Terms.
Capitalized terms used and not defined herein have the meanings assigned to
them in the Indenture. Capitalized terms used and not defined herein or in the
Indenture have the meanings assigned to them in the Sale and Servicing
Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware),
not in its individual capacity
but solely as Owner Trustee,
By:________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Administrator,
By:______________________________________
Name:
Title:
DITECH FUNDING CORPORATION,
as the Company,
By:______________________________________
Name:
Title:
================================================================================
TRUST AGREEMENT
among
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
as Depositor,
DITECH FUNDING CORPORATION,
as the Company,
BANKERS TRUST (DELAWARE),
as Owner Trustee
and
THE BANK OF NEW YORK,
as Paying Agent
Dated as of October 1, 1997
DITECH HOME LOAN OWNER TRUST 1997-1
Home Loan Asset Backed Notes, Series 1997-1
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms..................................................
SECTION 1.2 Other Definitional Provisions......................................
ARTICLE II
ORGANIZATION
SECTION 2.1 Name...............................................................
SECTION 2.2 Office.............................................................
SECTION 2.3 Purposes and Powers................................................
SECTION 2.4 Appointment of Owner Trustee.......................................
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate.................
SECTION 2.6 Declaration of Trust...............................................
SECTION 2.7 Title to Trust Property............................................
SECTION 2.8 Situs of Trust.....................................................
SECTION 2.9 Representations and Warranties of the Depositor and the Company;
Covenant of the Company............................................
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership..................................................
SECTION 3.2 The Trust Certificates.............................................
SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates.......
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates........
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates............
SECTION 3.6 Persons Deemed Owners..............................................
SECTION 3.7 Access to List of Owners' Names and Addresses......................
SECTION 3.8 Maintenance of Office or Agency....................................
SECTION 3.9 Appointment of Paying Agent........................................
SECTION 3.10 Restrictions on Transfer of Residual Interest Certificates........
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters.............
SECTION 4.2 Action by Owners with Respect to Certain Matters...................
SECTION 4.3 Action by Owners with Respect to Bankruptcy........................
SECTION 4.4 Restrictions on Owners' Power......................................
SECTION 4.5 Majority Control...................................................
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account.....................................
SECTION 5.2 Application Of Trust Funds.........................................
SECTION 5.3 Method of Payment..................................................
SECTION 5.4 Segregation of Moneys; No Interest.................................
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners, the
Internal Revenue Service and Others................................
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority..................................................
SECTION 6.2 General Duties.....................................................
SECTION 6.3 Action upon Instruction............................................
SECTION 6.4 No Duties Except as Specified in this Agreement or in Instructions.
SECTION 6.5 No Action Except Under Specified Documents or Instructions.........
SECTION 6.6 Restrictions.......................................................
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties....................................
SECTION 7.2 Furnishing of Documents............................................
SECTION 7.3 Representations and Warranties.....................................
SECTION 7.4 Reliance; Advice of Counsel........................................
SECTION 7.5 Not Acting in Individual Capacity..................................
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home Loans......
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes.................
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND PAYING AGENT
SECTION 8.1 Fees and Expenses..................................................
SECTION 8.2 Indemnification....................................................
SECTION 8.3 Payments to the Owner Trustee and Paying Agent.....................
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.....................................
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee........................
SECTION 10.2 Resignation or Removal of Owner Trustee...........................
SECTION 10.3 Successor Owner Trustee...........................................
SECTION 10.4 Merger or Consolidation of Owner Trustee..........................
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.........
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments........................................
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners....................
SECTION 11.3 Limitations on Rights of Others...................................
SECTION 11.4 Notices...........................................................
SECTION 11.5 Severability......................................................
SECTION 11.6 Separate Counterparts.............................................
SECTION 11.7 Successors and Assigns............................................
SECTION 11.8 No Petition.......................................................
SECTION 11.9 No Recourse.......................................................
SECTION 11.10 Headings.........................................................
SECTION 11.11 Governing Law....................................................
EXHIBIT A Form of Residual Interest Certificate
EXHIBIT B Form of Residual Interest issued to the Company
EXHIBIT C Form of Certificate of Trust
EXHIBIT D Form of Certificate of Non-Foreign Status
<PAGE>
TRUST AGREEMENT, dated as of October 1, 1997, among PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, a Delaware corporation, as Depositor (the
"Depositor"), DITECH FUNDING CORPORATION, a California corporation (the
"Company"), BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Owner
Trustee (the "Owner Trustee"), and THE BANK OF NEW YORK, a New York banking
corporation, as Paying Agent (the "Paying Agent").
WITNESSETH:
In consideration of the mutual agreements and covenants herein contained,
the Depositor, the Company, the Owner Trustee and the Paying Agent hereby agree
for the benefit of each of them and the holders of the Residual Interest
Certificates as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement, dated
as of October 1, 1997 among the Issuer, the Company, and The Bank of New York,
as Administrator.
"Administrator" shall mean The Bank of New York, or any successor in
interest thereto, in its capacity as Administrator under the Administration
Agreement.
"Agreement" shall mean this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Basic Documents" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Administration Agreement, the Custodial Agreement,
the Note Depository Agreement and the other documents and certificates delivered
in connection therewith.
"Benefit Plan Investor" shall have the meaning assigned to such term in
Section 3.10(b).
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from time to
time.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit C to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a Trust
Certificate is registered.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at 1011 Centre
Road, Suite 200, Wilmington, DE 19805-1266, Attention: DiTech Home Loan Owner
Trust 1997-1; with a copy to Bankers Trust Company, 3 Park Plaza, 16th floor
Irvine, CA 92614, Attention: DiTech Home Loan Owner Trust 1997-1 or at such
other address in the State of Delaware as the Owner Trustee may designate by
notice to the Owners and the Company, or the principal corporate trust office of
any successor Owner Trustee (the address (which shall be in the State of
Delaware) of which the successor owner trustee will notify the Owners and the
Company).
"Definitive Certificate" means a certificated form of security that
represents a Residual Interest Certificate.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Indenture" shall mean the Indenture, dated as of October 1, 1997, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means The Bank of New York, as Indenture Trustee under
the Indenture.
"Insolvency Event" shall have occurred with respect to the Company if:
(i) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Company and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(ii) the Company shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings of
or relating to the Company or of or relating to all or substantially
all of the Company's property; or
(iii) the board of the directors of the Company shall voluntarily
dissolve the Company; or
(iv) the Company shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
provided however, that the substantive consolidation of the Company with an
entity in respect of which the events described in (i) - (iv) above have
occurred shall not constitute an Insolvency Event with respect to the Company.
"Issuer" shall mean DiTech Home Loan Owner Trust 1997-1, the Delaware
business trust created pursuant to this Agreement.
"Majority Residual Interestholders" shall mean the Holders of more than an
aggregate 50% Percentage Interest of the Residual Interest.
"Non-permitted Foreign Holder" shall have the meaning set forth in Section
3.10.
"Non-U.S. Person" shall mean an individual, corporation, partnership or
other person other than a U.S. Person.
"Owner" shall mean each holder of a Residual Interest Certificate.
"Owner Trust Estate" shall mean the contribution of $1 referred to in
Section 2.5 and the Collateral (as defined in the Indenture).
"Owner Trustee" shall mean Bankers Trust (Delaware), a Delaware banking
corporation and its successors and assigns, not in its individual capacity but
solely as owner trustee under this Agreement, and any successor owner trustee
hereunder.
"Paying Agent" shall mean the Indenture Trustee or any successor in
interest thereto or any other paying agent or co-paying agent appointed pursuant
to Section 3.9 and authorized by the Issuer to make payments to and
distributions from the Certificate Distribution Account.
"Percentage Interest" shall mean with respect to each Residual Interest
Certificate, the percentage portion of all of the Residual Interest evidenced
thereby as stated on the face of such Residual Interest Certificate.
"Prospective Owner" shall have the meaning set forth in Section 3.10(a).
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer, the Owner Trustee and the Issuer in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.
"Record Date" shall mean as to each Distribution Date the last Business Day
of the month immediately preceding the month in which such Distribution Date
occurs.
"Residual Interest" shall mean the right to receive distributions of Excess
Spread, if any, and certain other funds, if any, on each Distribution Date,
pursuant to Section 5.01(e) of the Sale and Servicing Agreement.
"Residual Interest Certificate" shall mean a certificate substantially in
the form attached as Exhibit A hereto and evidencing the Residual Interest.
"Residual Interestholder" shall mean any Holder of a Percentage Interest of
the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of the date hereof, among the Trust as Issuer, PaineWebber Mortgage
Acceptance Corporation as Depositor, The Bank of New York, as Indenture Trustee,
and the Company, as Transferor and Servicer, as the same may be amended from
time to time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificates" shall mean the Residual Interest Certificates.
"Underwriter" shall mean PaineWebber Incorporated.
"U.S. Person" shall mean a citizen or resident of the United States, a
corporation, partnership (except to the extent provided in applicable Treasury
regulations) or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or a
trust if (A) for taxable years beginning after December 31, 1996 (or for taxable
years ending after August 20, 1996, if the trustee has made an applicable
election), a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more such U.S.
Persons have authority to control all substantial decisions of the trust or (B)
for all other taxable years, such trust is subject to United States federal
income tax regardless of the source of its income or, to the extent provided in
applicable Treasury regulations, certain trusts in existence on August 20, 1996
which are eligible to elect to be treated as U.S. Persons.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Sale and Servicing Agreement or, if not defined
therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as "DiTech Home
Loan Owner Trust 1997-1", in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in Delaware as
the Owner Trustee may designate by written notice to the Owners and the Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to engage
in the following activities:
(i) to issue the Notes pursuant to the Indenture and to
sell such Notes;
(ii) with the proceeds of the sale of the Notes, to pay
the organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Depositor and the Company, as their
interests may appear pursuant to the Sale and Servicing Agreement;
(iii) to purchase, hold, assign, grant, transfer,
pledge, mortgage and convey the Owner Trust Estate pursuant to the
Indenture and to hold, manage and distribute to the Owners pursuant to
the terms of the Sale and Servicing Agreement any portion of the Owner
Trust Estate released from the lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under
the Basic Documents to which it is to be a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith;
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Owners and the Noteholders; and
(vii) to issue the Residual Interest Certificates
pursuant to this Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor or
the Company shall pay reasonable organizational expenses of the Trust as they
may arise or shall, upon the request of the Owner Trustee, promptly reimburse
the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares that it
will hold the Owner Trust Estate in trust upon and subject to the conditions set
forth herein for the use and benefit of the Owners, subject to the obligations
of the Trust under the Basic Documents. It is the intention of the parties
hereto that the Trust constitute a business trust under the Business Trust
Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that, solely for
federal, state and local income and franchise tax purposes (i) so long as there
is a sole Owner, the Trust shall be treated as a security arrangement, with the
assets of the Trust being the Home Loans and the other assets held by the Trust,
the owner of the Home Loans being the sole Owner and the Notes being
non-recourse debt of the sole Owner, and (ii) if there is more than one Owner,
the Trust shall be treated as a partnership, with the assets of the partnership
being the Home Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Trust Certificates and the Notes being
non-recourse debt of the partnership. The Trust shall not elect to be treated as
an association under Treasury Regulations Section 301.7701-3(a) for federal
income tax purposes. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms consistent with the
characterization of the Trust as provided in the second preceding sentence for
such tax purposes. Effective as of the date hereof, the Owner Trustee shall have
all rights, powers and duties set forth herein with respect to accomplishing the
purposes of the Trust.
SECTION 2.7 Title to Trust Property.
(a) Subject to the Indenture, legal title to all the Owner Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee and/or a separate trustee, as the case
may be.
(b) The Owners shall not have legal title to any part of the Owner Trust
Estate. No transfer by operation of law or otherwise of any interest of the
Owners shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of any part of
the Owner Trust Estate.
SECTION 2.8 Situs of Trust. The Trust will be located and administered in
the State of Delaware and California. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York, except with respect to the accounts maintained by the
Indenture Trustee on behalf of the Owner Trustee. The Trust shall not have any
employees; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York, except with
respect to the payments made by the Indenture Trustee on behalf of the Owner
Trustee. The only office of the Trust will be at the Corporate Trust Office in
Delaware.
SECTION 2.9 Representations and Warranties of the Depositor and the
Company; Covenant of the Company.
(a) The Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Depositor is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and has all licenses necessary to carry on its business as now
being conducted. The Depositor has the power and authority to execute
and deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by
the Depositor and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary action of
the Depositor; this Agreement evidences the valid, binding and
enforceable obligation of the Depositor; and all requisite action has
been taken by the Depositor to make this Agreement valid, binding and
enforceable upon the Depositor in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium and
other, similar laws relating to or affecting creditors' rights
generally or the application of equitable principles in any proceeding,
whether at law or in equity;
(ii) The consummation of the transactions contemplated
by this Agreement will not result in (i) the breach of any terms or
provisions of the Articles of Incorporation or Bylaws of the Depositor,
(ii) the breach of any term or provision of, or conflict with or
constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Depositor, or its
property is subject, or (iii) the violation of any law, rule,
regulation, order, judgment or decree to which the Depositor or its
respective property is subject;
(iii) The Depositor is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any federal, state, municipal or other governmental agency, which
default might have consequences that would materially and adversely
affect the condition (financial or otherwise) or operations of the
Depositor or its properties or might have consequences that would
materially and adversely affect its performance hereunder.
(b) The Company hereby represents and warrants to the Owner Trustee that:
(i) The Company is duly organized and validly existing
as a corporation in good standing under the laws of the State of
California, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted.
(ii) The Company is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(iii) The Company has the power and authority to execute
and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or by-laws of the Company, or any
indenture, agreement or other instrument to which the Company is a
party or by which it is bound; nor result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any law or, to the best of the
Company's knowledge, any order, rule or regulation applicable to the
Company of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending
or, to the Company's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties:
(i) asserting the invalidity of this Agreement, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Company of its
obligations under, or the validity or enforceability of, this
Agreement.
(c) The Company covenants with the Owner Trustee that during the
continuance of this Agreement it will comply in all respects with the provisions
of its Articles of Incorporation in effect from time to time.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Trust Certificates, the Depositor shall be the sole Owner of the Trust.
SECTION 3.2 The Trust Certificates. The Residual Interest Certificates
shall not be issued with a principal amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of a Trust
Officer of the Owner Trustee. Trust Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefits of the Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
execution and authentication and delivery of such Trust Certificates or did not
hold such offices at the date of execution and authentication and delivery of
such Trust Certificates.
A transferee of a Trust Certificate shall become an Owner, and shall be
entitled to the rights and subject to the obligations of an Owner hereunder and
under the Sale and Servicing Agreement, upon such transferee's acceptance of a
Trust Certificate duly registered in such transferee's name pursuant to Section
3.4.
SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates.
Concurrently with the initial sale of the Home Loans to the Trust pursuant to
the Sale and Servicing Agreement, the Owner Trustee shall cause the Residual
Interest Certificates representing 100% of the Percentage Interests of the
Residual Interest to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by its chairman
of the board, its president or any vice president, without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Trust Certificate a certificate
of authentication substantially in the form set forth in Exhibit A, executed by
the Owner Trustee or the Administrator, as the Owner Trustee's authenticating
agent, by manual or facsimile signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8 a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. The Administrator shall be
the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause the Administrator as its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Trust Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of an Owner, Trust
Certificates may be exchanged for other Trust Certificates of authorized
denominations of a like aggregate amount upon surrender of the Trust
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Owner or his attorney duly authorized in writing. In addition,
each Residual Interest Certificate presented or surrendered for registration of
transfer and exchange must be accompanied by a letter from the Prospective Owner
certifying as to the representations set forth in Sections 3.10(a) and (b). Each
Trust Certificate surrendered for registration of transfer or exchange shall be
canceled and disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make and the Certificate Registrar shall not register transfer or
exchanges of Trust Certificates for a period of 15 days preceding the due date
for any payment with respect to the Trust Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates. If (a)
any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate shall have been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee, or the Administrator as the Owner Trustee's
authenticating agent, shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust
Certificate of like tenor and denomination. In connection with the issuance of
any new Trust Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Certificate shall be found at any
time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a Trust
Certificate for registration of transfer, the Owner Trustee or the Certificate
Registrar may treat the Person in whose name any Trust Certificate shall be
registered in the Certificate Register as the owner of such Trust Certificate
for the purpose of receiving distributions pursuant to Section 5.2 and for all
other purposes whatsoever, and neither the Owner Trustee nor the Certificate
Registrar shall be bound by any notice to the contrary.
SECTION 3.7 Access to List of Owners' Names and Addresses. The Certificate
Registrar shall furnish or cause to be furnished to the Servicer, the Indenture
Trustee and the Depositor, within 15 days after receipt by the Certificate
Registrar of a request therefor from the Servicer, the Depositor or the
Indenture Trustee in writing, a list, in such form as the Servicer, the
Depositor or the Indenture Trustee may reasonably require, of the names and
addresses of the Owners as of the most recent Record Date. If a
Certificateholder applies in writing to the Certificate Registrar, and such
application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Trust Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Certificate
Registrar shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Owner, by receiving and holding a Trust
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Company, the Certificate Registrar or the Owner Trustee accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain an office or offices or agency or agencies where Trust Certificates may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Trust Certificates and
the Basic Documents may be served. The Owner Trustee initially designates the
Administrator's office in New York City as its principal corporate trust office
for such purposes. The Owner Trustee shall give prompt written notice to the
Company and to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby appoints
The Bank of New York as Paying Agent under this Agreement. The Paying Agent
shall make distributions to Residual Interestholders from the Certificate
Distribution Account pursuant to Section 5.2 hereof and Section 5.02 of the Sale
and Servicing Agreement and shall report the amounts of such distributions to
the Owner Trustee. The Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. In the event that The Bank of New York shall no
longer be the Paying Agent hereunder, the Owner Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Owner Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Owners in trust for the benefit of the Residual Interestholders
entitled thereto until such sums shall be paid to such Owners. The Paying Agent
shall return all unclaimed funds to the Owner Trustee, and upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its possession to
the Owner Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply
to The Bank of New York also in its role as Paying Agent, for so long as The
Bank of New York shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise. Notwithstanding anything herein to the contrary, the Paying Agent
shall be the same entity as the Indenture Trustee under the Indenture and the
Sale and Servicing Agreement. If the Paying Agent ceases to be the same entity
as the Indenture Trustee under the Indenture and the Sale and Servicing
Agreement, the Paying Agent shall resign and the Owner Trustee shall assume the
duties and obligations of the Paying Agent hereunder and under the Sale and
Servicing Agreement.
SECTION 3.10 Restrictions on Transfer of Residual Interest Certificates.
(a) Each prospective purchaser and any subsequent transferee of
a Residual Interest Certificate (each, a "Prospective Owner"), other
than the Company, shall represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of their respective
successors that:
(i) Such Person is (A) a "qualified institutional buyer"
as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and is aware that the seller
of the Residual Interest Certificate may be relying on the
exemption from the registration requirements of the Securities
Act provided by Rule 144A and is acquiring such Residual
Interest Certificate for its own account or for the account of
one or more qualified institutional buyers for whom it is
authorized to act, or (B) an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act (an "Institutional
Accredited Investor") that is acquiring the Offered Notes for
its own account, or for the account of such an Institutional
Accredited Investor, for investment purposes and not with a
view to, or for offer or sale in connection with any
distribution in violation of the Security Act.
(ii) Such Person understands that the Residual Interest
Certificate have not been and will not be registered under the
Securities Act and may be offered, sold or otherwise
transferred only to a person whom the seller reasonably
believes is (A) a qualified institutional buyer or (B) an
Institutional Accredited Investor, and in accordance with any
applicable securities laws of any state of the United States.
(iii) Such Person understands that the Residual Interest
Certificates bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY
THIS RESIDUAL INTEREST CERTIFICATE HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. THIS RESIDUAL INTEREST CERTIFICATE MAY BE
DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE
144A OR (II) AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT
LIMITED TO, DITECH FUNDING CORPORATION) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
RESIDUAL INTEREST CERTIFICATE UNDER THE ACT OR ANY
STATE SECURITIES LAWS."
(iv) Such Person shall comply with the provisions of
Section 3.10(b), as applicable, relating to the ERISA
restrictions with respect to the acceptance or acquisition of
such Residual Interest Certificate.
(b) Each Prospective Owner, other than the Company, shall
either:
(i) represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of their
respective successors that the Prospective Owner is not (A) an
"employee benefit plan" within the meaning of Section 3(3) of
ERISA, or (B) a "plan" within the meaning of Section
4975(e)(1) of the Code or (C) an entity, including an
insurance company separate account or general account, whose
underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan Investor") and
is not directly or indirectly purchasing such Residual
Interest Certificate on behalf of, as investment manager of,
as named fiduciary of, as trustee of, or with the assets of a
Benefit Plan Investor; or
(ii) furnish to the Owner Trustee and the Certificate
Registrar and any of their respective successors an opinion of
counsel acceptable to such persons that (A) the proposed
transfer of the Residual Interest Certificate to such
Prospective Owner will not cause any assets of the Trust to be
deemed "plan assets" within the meaning of United States
Department of Labor Regulation Section 2510.3-101, or (B) the
proposed transfer of the Residual Interest Certificate will
not give rise to a transaction described in Section 406 of
ERISA or Section 4975(c)(1) of the Code for which a statutory
or administrative exemption is unavailable.
(c) By its acceptance of a Residual Interest Certificate, each Prospective
Owner agrees to execute a Certificate of Non-Foreign Status in the form of
Exhibit D hereto and acknowledges that no legal or beneficial interest in all or
any portion of the Residual Interest Certificate may be transferred directly or
indirectly to an individual, corporation, partnership or other person who is a
Non-U.S. Person, unless such person holds the Residual Interest Certificate in
connection with the conduct of a trade or business within the United States, as
evidenced by a duly completed and submitted Form 4224 or successor form, updated
at the time or times and in the manner specified by the Code (any such Non-U.S.
Person who does not meet such exception being referred to herein as a
"Non-permitted Foreign Holder"), and any such purported transfer shall be void
and have no effect.
(d) The Owner Trustee and the Certificate Registrar shall not execute, and
shall not countersign and deliver, a Residual Interest Certificate in connection
with any transfer thereof unless the transferor shall have provided to the Owner
Trustee and the Certificate Registrar a certificate, signed by the transferee,
which certificate shall contain the consent of the transferee to any amendments
of this Agreement as may be required to effectuate further the foregoing
restrictions on transfer of the Residual Interest Certificates to Non-permitted
Foreign Holders, and an agreement by the transferee that it will not transfer a
Residual Interest Certificate without providing to the Owner Trustee and the
Certificate Registrar a substantially identical certificate, signed by the
Prospective Owner to whom the Residual Interest Certificate is to be
transferred.
(e) The Residual Interest Certificates shall bear an additional legend
referring to the foregoing restrictions contained in paragraphs (c) and (d)
above.
(f) The Residual Interest may not be acquired by or for the account of a
Benefit Plan Investor or a Non-Permitted Foreign Holder. By accepting and
holding a Trust Certificate, the Owner thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan Investor or a
Non-Permitted Foreign Holder.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters. With
respect to the following matters, the Owner Trustee shall not take action, and
the Owners shall not direct the Owner Trustee to take any action, unless at
least 30 days before the taking of such action, the Owner Trustee shall have
notified the Owners in writing of the proposed action and the Owners shall not
have notified the Owner Trustee in writing prior to the 30th day after such
notice is given that such Owners have withheld consent or the Owners have
provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of the Home Loans) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Home Loans);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment or other change to this Agreement or any Basic Document
in circumstances where the consent of any Noteholder is required;
(d) the amendment or other change to this Agreement or any Basic Document
in circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Owners;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable;
(f) the consent to the calling or waiver of any default of any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or Servicer of
their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve, terminate or
liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity, or convey
or transfer all or substantially all of the Trust's assets to any other entity;
(j) cause the Trust to incur, assume or guaranty any indebtedness other
than as set forth in this Agreement;
(k) do any act that conflicts with any other Basic Document;
(1) do any act which would make it impossible to carry on the ordinary
business of the Trust;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to property, for
other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth in this
Trust Agreement.
The Trust agrees to abide by the following restrictions:
(a) Other than as contemplated by the Basic Agreements and related
documentation, the Trust shall not incur any indebtedness.
(b) Other than as contemplated by the Basic Agreements and related
documentation, the Trust shall not engage in any dissolution, liquidation,
consolidation, merger or sale of assets.
(c) The Trust shall not engage in any business activity in which it is not
currently engaged other as contemplated by the Basic Agreements and related
documentation.
(d) The Trust shall not form, or cause to be formed, any subsidiariesan
shall not won or acquire any asset other as contemplated by the Basic Agreements
and related documentation.
(e) Other than as contemplated by the Basic Agreements and related
documentation, the Trsut shall not follow the directions or instructions of the
Transferor.
The Trust shall:
(a) Maintain books and records separate from any other person or entity.
(b) Maintain its bank accounts separate from any other person or entity.
(c) Not commingle its assets with those of any other person or entity.
(d) Conduct its own business in its own name.
(e) Other than as contemplated by the Basic Agreements and related
documentation, pay its own liabilities and expenses only out of its own funds.
(f) Observe all formalities required under the Business Trust Statute.
(g) Enter into transactions with Affiliates or the Transferor only on each
such transaction is intrinsically fair, commercially reasonable, and on the same
terms as would be available in an arm's length transaction with a person or
entity that is not an affiliate.
(h) Not guarantee or become obligated for the debts of any other entity or
person.
(i) Not hold out its credit as being available to satisfy the obligation of
any other person or entity.
(j) Not acquire the obligations or securities of its Affiliates or the
Transferor.
(k) Other than as contemplated by the Basic Agreements and related
documentation, not make loans to any other person or entity or buy or hold
evidence of indebtedness issued by any other person or entity.
(l) Other than as contemplated by the Basic Agreements and related
documentation, not pledge its assets for the benefit of any other person or
entity.
(m) Hold itself out as a separate entity from the Transferor and not
conduct any business in the name of the Transferor.
(n) Correct any known misunderstanding regarding its separate identity.
(o) Not identify itself as a division of any other person or entity.
So long as the Notes or any other amounts owed under the Indenture remain
outstanding, the Trust shall not amend its this Section 4.1 without the prior
written consent of 100% of the Voting Interests of the Notes and the consent of
each Rating Agency , in addition to the requirements under Section 11.1.
The Owner Trustee shall not have the power, except upon the unanimous
direction of the Owners, and to the extent otherwise consistent with the Basic
Documents, to (i) institute proceedings to have the Trust declared or
adjudicated a bankrupt or insolvent, (ii) consent to the institution of
bankruptcy or insolvency proceedings against the Trust, (iii) file a petition or
consent to a petition seeking reorganization or relief on behalf of the Trust
under any applicable federal or state law relating to bankruptcy, (iv) consent
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or any similar official) of the Trust or a substantial portion of the property
of the Trust, (v) make any assignment for the benefit of the Trust's creditors,
(vi) cause the Trust to admit in writing its inability to pay its debts
generally as they become due, (vii) take any action, or cause the Trust to take
any action, in furtherance of any of the foregoing (any of the above, a
"Bankruptcy Action"), provided that so long as the Indenture remains in effect,
neither the Owner Trustee nor any Certificateholder shall have the power to
take, and shall not take, any Bankruptcy Action with respect to the Trust or the
Company or direct the Owner Trustee to take any Bankruptcy Action with respect
to the Trust or the Company.
SECTION 4.2 Action by Owners with Respect to Certain Matters. The Owner
Trustee shall not have the power, except upon the direction of the Owners, to
(a) remove the Administrator under the Administration Agreement pursuant to
Section 8 thereof, (b) appoint a successor Administrator pursuant to Section 8
of the Administration Agreement, (c) remove the Servicer under the Sale and
Servicing Agreement pursuant to Section 10.01 thereof or (d) sell the Home Loans
after the termination of the Indenture, provided that so long as the Indenture
remains in effect, neither the Owner Trustee nor any Certificateholder shall
have the power to take, and shall not take, any such action with respect to the
Trust or the Company. The Owner Trustee shall take the actions referred to in
the preceding sentence only upon written instructions signed by the Owners.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The Owner Trustee
shall not have the power to commence Bankruptcy Action relating to the Trust
unless the conditions specified in Section 4.1 are satisfied.
SECTION 4.4 Restrictions on Owners' Power. The Owners shall not direct the
Owner Trustee to take or refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Majority Residual Interestholders. Except as expressly provided herein, any
written notice of the Owners delivered pursuant to this Agreement shall be
effective if signed by the Majority Residual Interestholders at the time of the
delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Trust shall establish and
maintain in the State of New York with The Bank of New York for the benefit of
the Trust one or more Eligible Accounts which, so long as the Bank of New York
holds such Trust Account on behalf of the Trust, shall be entitled "Certificate
Distribution Account for the DiTech Home Loan Owner Trust 1997-1". Funds shall
be deposited in the Certificate Distribution Account as required by the Sale and
Servicing Agreement.
All of the right, title and interest of the Trust in all funds on deposit
from time to time in the Certificate Distribution Account and in all proceeds
thereof shall be held for the benefit of the Owners and such other persons
entitled to distributions therefrom. Except as otherwise expressly provided
herein or in the Sale and Servicing Agreement, the Certificate Distribution
Account shall be under the sole dominion and control of the Owner Trustee or
Paying Agent for the benefit of the Owners.
In addition to the foregoing, the Certificate Distribution Account is a
Trust Account under the Sale and Servicing Agreement and constitutes part of the
Trust Estate pledged by the Trust to the Indenture Trustee under the Indenture.
The Certificate Distribution Account shall be subject to and established and
maintained in accordance with the applicable provisions of the Sale and
Servicing Agreement and the Indenture, including, without limitation, the
provisions of Section 5.02(c) of the Sale and Servicing Agreement regarding
distributions from the Certificate Distribution Account.
The Company agrees to direct and shall have the sole authority to direct
the Owner Trustee or Paying Agent or their successor in interest, as to the
Permitted Investments in which the funds on deposit in the Trust Accounts (as
such term is defined in the Sale and Servicing Agreement) may be invested.
SECTION 5.2 Application Of Trust Funds.
(a) On each Distribution Date, the Owner Trustee or Indenture Trustee on
behalf of the Owner Trustee, shall direct the Paying Agent to distribute to the
Servicer and the Residual Interestholders from amounts on deposit in the
Certificate Distribution Account the distributions as provided in Section
5.02(b) and (d) of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Paying Agent shall send to DTC and each
Residual Interestholder the statement provided to the Owner Trustee by the
Servicer pursuant to Section 6.01 of the Sale and Servicing Agreement with
respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Paying
Agent is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Paying
Agent from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. In the event of any
claimed overwithholding, Owners shall have no claim for recovery against the
Trust or other Owners. If the amount withheld was not withheld from actual
distributions, the Trust may, at its option, (i) require the Owner to reimburse
the Trust for such withholding (and each Owner agrees to reimburse the Trust
promptly following such request) or (ii) reduce any subsequent distributions by
the amount of such withholding. If there is a possibility that withholding tax
is payable with respect to a distribution (such as a distribution to a Non-U.S.
Person), the Paying Agent may in its sole discretion withhold such amounts in
accordance with this paragraph (c). In the event that an Owner wishes to apply
for a refund of any such withholding tax, the Paying Agent shall reasonably
cooperate with such owner in making such claim so long as such Owner agrees to
reimburse the Owner Trustee for any out-of-pocket expenses incurred.
SECTION 5.3 Method of Payment. Subject to Section 3.10, distributions
required to be made to Owners on any Distribution Date shall be made to each
Owner of, record on the preceding Record Date either by wire transfer, in
immediately available funds, to the account of such Holder at a bank or other
entity having appropriate facilities therefor, if such Owner shall have provided
to the Certificate Registrar appropriate written instructions at least five
Business Days prior to such Distribution Date; or, if not, by check mailed to
such Owner at the address of such holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections 4.1 and
5.2, moneys received by the Trust hereunder and deposited into the Certificate
Distribution Account will be segregated except to the extent required otherwise
by law or the Sale and Servicing Agreement and shall be invested in Permitted
Investments at the direction of the Company. The Owner Trustee shall not be
liable for payment of any interest, charges or losses in respect of such moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners, the
Internal Revenue Service and Others. The Trust shall deliver to each Owner, as
may be required by the Code and applicable Treasury Regulations, or as may be
requested by such Owner, such information, reports or statements as may be
necessary to enable each Owner to prepare its federal and state income tax
returns. Consistent with the Trust's characterization for tax purposes as a
security arrangement for the issuance of non-recourse debt so long as the
Company or any other Person is the sole Owner, no federal income tax return
shall be filed on behalf of the Trust unless either (i) the Trust shall receive
an Opinion of Counsel, from and at the expense of the Company that, based on a
change in applicable law occurring after the date hereof, or as a result of a
transfer by the Company permitted by Section 3.4, the Code requires such a
filing or (ii) the Internal Revenue Service shall determine that the Trust is
required to file such a return. In the event that there shall be two or more
Owners of the Trust, (x) the Trust shall prepare or shall cause to be prepared
federal and, if applicable, state or local partnership tax returns required to
be filed by the Trust and shall remit such returns to the Company (or if the
Company no longer owns any Trust Certificates, the Owner designated for such
purpose by the Company to the Trust in writing) at least (5) days before such
returns are due to be filed, and (y) capital accounts shall be maintained for
each Owner in accordance with the Treasury Regulations under Section 704(b) of
the Code reflecting each such Owner's pro rata share of the income, gains,
deductions, and losses of the Trust and contributions to, and distributions
from, the Trust. The Company (or such designee Owner, as applicable) shall
promptly sign such returns and deliver such returns after signature to the Owner
Trustee and such returns shall be filed by the Trust with the appropriate tax
authorities. In the event that a "tax matters partner" (within the meaning of
Code Section 6231(a)(7) is required to be appointed with respect to the Trust,
the Company is hereby designated as tax matters partner or, if the Company is
not an Owner, the Owner selected by a majority of the Owners (by Percentage
Interest) shall be designated as tax matters partner. In no event shall the
Owner Trustee or the Company (or such designee Owner, as applicable) be liable
for any liabilities, costs or expenses of the Trust or the Noteholders arising
out of the application of any tax law, including federal, state, foreign or
local income or excise taxes or any other tax imposed on or measured by income
(or any interest, penalty or addition with respect thereto or arising from a
failure to comply therewith) except for any such liability, cost or expense
attributable to any act or omission by the Owner Trustee or the Company (or such
designee Owner, as applicable), as the case may be, in breach of its obligations
under this Agreement.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and directed
to execute and deliver or cause to be executed and delivered the Notes, the
Trust Certificates and the Basic Documents to which the Trust is to be a party
and each certificate or other document attached as an exhibit to or contemplated
by the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article III, in each case, in such
form as the Company shall approve, as evidenced conclusively by the Owner
Trustee's execution thereof, and, on behalf of the Trust, to direct the
Indenture Trustee to authenticate and deliver Classes of Securities in the
following aggregate principal amounts: Class A-1 Notes, $24,636,000; Class A-2
Notes, $22,945,000; Class A-3 Notes, $24,897,000; Class A-4 Notes, $13,622,000;
Class M-1 Notes, $17,700,000; Class M-2 Notes, $7,200,000; Class B-1 Notes,
$6,300,000; and Class B-2 Notes, $2,700,000. The Administrator on behalf of the
Owner Trustee shall authenticate and deliver the Trust Certificates. In addition
to the foregoing, the Owner Trustee is authorized, but shall not be obligated,
to take all actions required of the Trust, pursuant to the Basic Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the Owners,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed to
have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator or the Indenture Trustee has agreed in
the Administration Agreement or this Agreement, respectively, to perform any act
or to discharge any duty of the Owner Trustee or the Trust hereunder or under
any Basic Document, and the Owner Trustee shall not be held liable for the
default or failure of the Administrator or the Indenture Trustee to carry out
its obligations under the Basic Documents.
SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the Basic
Documents, the Owners may by written instruction direct the Owner Trustee in the
management of the Trust but only to the extent consistent with the limited
purpose of the Trust. Such direction may be exercised at any time by written
instruction of the Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely to result in
liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instruction from the Owners as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the Owners, and
shall have no liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement, or in any written instruction received by the Owner Trustee
pursuant to Section 6.3; and no implied duties or obligations shall be read into
this Agreement or any Basic Document against the Owner Trustee. The Owner
Trustee shall have no responsibility for filing any financing or continuation
statement in any public office at any time or to otherwise perfect or maintain
the perfection of any security interest or lien granted to it hereunder or to
prepare or file any tax or Securities and Exchange Commission filing for the
Trust or to record this Agreement or any Basic Document. The Owner Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any liens on any part of the Owner Trust
Estate that result from actions by, or claims against, the Owner Trustee that
are not related to the ownership or the administration of the Owner Trust
Estate.
SECTION 6.5 No Action Except Under Specified Documents or Instructions. The
Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.3 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Owners shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts the
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement and the Basic Documents.
The Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment made by
a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of the
Administrator, the Indenture Trustee, the Company, the Transferor, the Servicer
or the Owners pursuant to the terms of the Basic Documents;
(c) no provision of this Agreement or any Basic Document shall require the
Owner Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of any of its rights or powers hereunder or under any Basic
Document if the Owner Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or the Company or for the form, character, genuineness, sufficiency,
value or validity of any of the Owner Trust Estate or for or in respect of the
validity or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty, or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein and in the Basic
Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct of
the Administrator, the Seller, the Company, the Indenture Trustee, the Paying
Agent, the Certificate Registrar or the Servicer under any of the Basic
Documents or otherwise and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust or the Owner Trustee under
this Agreement or the Basic Documents that are required to be performed by the
Paying Agent, the Certificate Registrar or the Administrator under the
Administration Agreement, the Indenture Trustee under the Indenture or the
Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in the
performance of any such act.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish (a) to
the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents and (b) to Noteholders promptly upon written request therefor,
copies of the Sale and Servicing Agreement, the Administration Agreement and the
Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the Depositor and
the Company, for the benefit of the Owners, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Delaware law,
governmental rule or regulation governing the banking or trust powers
of the owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
material indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound.
(b) The Indenture Trustee hereby represents and warrants to the Depositor
and the Company that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the state of New
York. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or New York law,
governmental rule or regulation governing the banking or trust powers
of the Indenture Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created Bankers Trust (Delaware)
acts solely as Owner Trustee hereunder and not in its individual capacity and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home Loans.
The recitals contained herein and in the Trust Certificates (other than the
signature and countersignature of the Trust on the Trust Certificates) shall be
taken as the statements of the Depositor and the Company, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Agreement, of any
Basic Document or of the Trust Certificates (other than the signature and
countersignature of the Owner Trustee on the Trust Certificates and as specified
in Section 7.3) or the Notes, or of any Home Loans or related documents. The
Owner Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Home Loan, or the
perfection and priority of any security interest created by any Home Loan or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments to
be distributed to Owners under this Agreement or the Noteholders under the
Indenture, including, without limitation: the existence, condition and ownership
of any Mortgaged Property; the existence and enforceability of any insurance
thereon; the existence and contents of any Home Loan on any computer or other
record thereof, the validity of the assignment of any Home Loan to the Trust or
of any intervening assignment; the completeness of any Home Loan; the
performance or enforcement of any Home Loan; the compliance by the Depositor,
the Company or the Servicer with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation or any action of the Administrator, the Indenture Trustee or
the Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Trust Certificates or Notes and may deal with the Depositor, the Company, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND PAYING AGENT
SECTION 8.1 Fees and Expenses. The Owner Trustee shall receive as
compensation for its services hereunder such fees as have been separately agreed
upon before the date hereof between the Company and the Owner Trustee, and the
Owner Trustee shall be entitled to be reimbursed by the Company for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder. The Paying Agent shall receive as compensation
for its services hereunder such fees, if any, as have been separately agreed
upon in writing before the date hereof between the Company and the Paying Agent.
SECTION 8.2 Indemnification. The Company shall be liable as primary obligor
for, and shall indemnify the Owner Trustee, the Paying Agent and their
predecessors, successors, assigns, employees, directors, officers, agents and
servants (collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against any Indemnified Party in any way relating to or arising out of this
Agreement, the Basic Documents, the Owner Trust Estate, the administration of
the Owner Trust Estate or the action or inaction of any Indemnified Party
hereunder, except only that the Company shall not be liable for or required to
indemnify an Indemnified Party from and against Expenses arising or resulting
from any of the matters described in the provisions of the third sentence of
Section 7.1 of this Agreement, provided that a standard of gross negligence
shall apply to the Owner Trustee. The indemnities contained in this Section
shall survive the resignation or termination of the Owner Trustee or the
termination of this Agreement. In any event of any claim, action or proceeding
for which indemnity will be sought pursuant to this Section, the Owner Trustee's
or Paying Agent's choice of legal counsel shall be subject to the approval of
the Company, which approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee and Paying Agent. Any amounts
paid to the Owner Trustee and/or Paying Agent pursuant to this Article VIII
shall be deemed not to be a part of the Owner Trust Estate immediately after
such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall terminate
and be of no further force or effect on the earlier of: (i) the satisfaction and
discharge of the Indenture pursuant to Section 4.01 of the Indenture and the
termination of the Sale and Servicing Agreement; and (ii) the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy (the late ambassador of the United States to the Court of St. James's)
alive on the date hereof. The bankruptcy, liquidation, dissolution, death or
incapacity of any Owner shall not (x) operate to terminate this Agreement or the
Trust, nor (y) entitle such Owner's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of all or any part of the Trust or Owner Trust Estate nor (z)
otherwise affect the rights, obligations and liabilities of the parties hereto.
(b) The Trust Certificates shall be subject to an early redemption or
termination at the option of the Company in the manner and subject to the
provisions of Section 11.02 of the Sale and Servicing Agreement.
(c) Except as provided in Sections 9.1(a) and (b) above, none of the
Depositor, the Company nor any Owner shall be entitled to revoke or terminate
the Trust.
(d) Notice of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholders shall surrender their Trust Certificates
to the Paying Agent for payment of the final distributions and cancellation,
shall be given by the Owner Trustee to the Certificateholders and the Rating
Agencies mailed within five Business Days of receipt by the Owner Trustee of
notice of such termination pursuant to Section 9.1(a) or (b) above, which notice
given by the Owner Trustee shall state (i) the Distribution Date upon or with
respect to which final payment of the Trust Certificates shall be made upon
presentation and surrender of the Trust Certificates at the office of the Paying
Agent therein designated, (ii) the amount of any such final payment, (iii) that
the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Trust Certificates at the office of the Paying Agent therein specified and (iv)
no further distributions shall be payable on the Trust Certificates after such
date. The Owner Trustee shall give such notice to the Certificate Registrar (if
other than the Owner Trustee) and the Paying Agent at the time such notice is
given to Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
Section 5.02 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Subject to applicable
escheat laws, any funds remaining in the Trust after exhaustion of such remedies
shall be distributed by the Paying Agent to the Residual Interestholders on a
pro rata basis and the Owner Trustee shall not be liable for payment of such
funds.
(e) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3820 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner Trustee
shall at all times be a corporation satisfying the provisions of Section 3807(a)
of the Business Trust Statute; authorized to exercise corporate powers having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by Federal or state authorities; and having (or having a parent
which has) a long-term rating of at least "A" by Standard & Poor's and DCR. If
such corporation shall publish reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee . The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Administrator and the Indenture Trustee.
Upon receiving such notice of resignation, the Administrator shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Owner Trustee may petition any
court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Administrator, or if at any time the Owner Trustee shall
be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Administrator may remove the Owner Trustee. If the
Administrator shall remove the Owner Trustee under the authority of the
immediately preceding sentence, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee and payment of all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3 Successor Owner Trustee. Any successor Owner Trustee appointed
pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Administrator and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties, and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Administrator and the predecessor Owner Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice of the successor of such Owner
Trustee to all Owners, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator fails to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the
Administrator.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation into
which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Mortgaged Property may at the time be located,
and for the purpose of performing certain duties and obligations of the Owner
Trustee with respect to the Trust and the Trust Certificates under the Sale and
Servicing Agreement, the Administrator and the Owner Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Owner Trustee to act as co-owner trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of all
or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Administrator and the Owner Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment within
25 days after the receipt by it of a request so to do, the Owner Trustee shall
have the power to make such appointment. No co-owner trustee or separate owner
trustee under this Agreement shall be required to meet the terms of eligibility
as a successor trustee pursuant to Section 10.1 and no notice of the appointment
of any co-trustee or separate owner trustee shall be required pursuant to
Section 10.1.
Each separate owner trustee and co-owner trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred upon and
exercised or performed by the Owner Trustee and such separate owner
trustee or co-owner trustee jointly (it being understood that such
separate owner trustee or co-owner trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed, the Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties, and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate owner trustee
or co-owner trustee, but solely at the direction of the Owner Trustee;
provided that Paying Agent, in performing its duties and obligations
under the Sale and Servicing Agreement, may act separately in its
capacity as Indenture Trustee without the Owner Trustee joining in such
Acts;
(ii) no owner trustee under this Agreement shall be
personally liable by reason of any act or omission of any other owner
trustee under this Agreement; and
(iii) the Administrator and the Owner Trustee acting
jointly may at any time accept the resignation of or remove any
separate owner trustee or co-owner trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to the separate owner trustees and co-owner trustees,
as if given to each of them. Every instrument appointing any separate owner
trustee or co-owner trustee, other than this Agreement, shall refer to this
Agreement and to the conditions of this Article. Each separate owner trustee and
co-owner trustee, upon its acceptance of appointment, shall be vested with the
estates specified in its instrument of appointment, either jointly with the
Owner Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Administrator.
Any separate owner trustee or co-owner trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate owner trustee or
co-owner trustee shall die, become incapable of acting, resign or be removed,
all of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
The Indenture Trustee, in its capacity as Paying Agent, shall not have any
rights, duties or obligations except as expressly provided in this Agreement and
the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be amended by
the Depositor, the Company and the Owner Trustee, with prior written notice to
the Rating Agencies, but without the consent of any of the Noteholders or the
Owners or the Indenture Trustee, to cure any ambiguity, to correct or supplement
any provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this Agreement
or of modifying in any manner the rights of the Noteholders or the Owners
provided, however, that such action shall not adversely affect in any material
respect the interests of any Noteholder or Owner. An amendment described above
shall be deemed not to adversely affect in any material respect the interests of
any Noteholder or Owner if (i) an Opinion of Counsel is obtained to such effect,
and (ii) the party requesting the amendment satisfies the Rating Agency
Condition with respect to such amendment. The Owner Trustee shall not be
responsible for obtaining an Opinion of Counsel.
This Agreement may also be amended from time to time by the Depositor, the
Company and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the
Holders (as defined in the Indenture) of Notes evidencing more than 50% of the
Outstanding Amount of the Notes and the Majority Residual Interestholders, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or the Owners; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the Home Loans or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes or the Percentage Interests required to consent to any such
amendment, in either case of clause (a) or (b) without the consent of the
holders of all the outstanding Notes, and in the case of clause (b) without the
consent of the holders of all the outstanding Residual Interest Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Owners, the Noteholders or the
Indenture Trustee pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Owners provided for in this Agreement or in any other Basic
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel provided by the Person requesting the amendment (and
in no event the Owner Trustee) stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners. The Owners
shall not have legal title to any part of the Owner Trust Estate. The Owners
shall be entitled to receive distributions with respect to their undivided
ownership interest therein only in accordance with Articles V and IX. No
transfer, by operation of law or otherwise, of any right, title, or interest of
the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Company, the Owners, the Administrator and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified or permitted
by the terms hereof, all notices shall be in writing, mailed by first class
mail, postage prepaid, and shall be deemed given upon actual receipt by the
intended recipient, at the following addresses: (i) if to the Owner Trustee, its
Corporate Trust Office; (ii) if to the Depositor, PaineWebber Mortgage
Acceptance Corporation IV, 1285 Avenue of the Americas, New York, New York
10019, Attention: John Fearey, Esq., General Counsel; (iii) if to the Company,
DiTech Funding Corporation: 1920 Main Street, Suite 400, Irvine, California
92614, Attention: J. Paul Reddam; (iv) if to the Indenture Trustee, The Bank of
New York: 101 Barclay Street, 12th floor east, New York, New York 10826,
Attention: Corporate Trust - MBS Administration; or, as to each such party, at
such other address as shall be designated by such party in a written notice to
each other party.
(b) Any notice required or permitted to be given to an Owner shall be given
by first-class mail, postage prepaid, at the address of such Owner as shown in
the Certificate Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Depositor, the
Company, the Owner Trustee, the Paying Agent and its successors and each owner
and its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by an Owner
shall bind the successors and assigns of such Owner.
SECTION 11.8 No Petition. The Owner Trustee, by entering into this
Agreement, each Owner, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Company,
the Depositor or the Trust, or join in any institution against the Company or
the Trust of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or law in connection with any obligations relating to the Trust
Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.9 No Recourse. Each Owner by accepting a Trust Certificate
acknowledges that such Owner's Trust Certificate represents a beneficial
interest in the Trust only and does not represent an interest in or an
obligation of the Transferor, the Servicer, the Company, the Depositor, the
Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate thereof
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated in this Agreement, the Trust Certificates
or the Basic Documents.
SECTION 11.10 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.11 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
<PAGE>
IN WITNESS OF, the parties hereto have caused this Trust Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
Depositor
By: ______________________________________
Name: Barbara J. Dawson
Title: Senior Vice President
DITECH FUNDING CORPORATION
By: ______________________________________
Name:
Title:
BANKERS TRUST (DELAWARE), not in its
individual capacity but solely as Owner Trustee
By: ______________________________________
Name:
Title:
THE BANK OF NEW YORK, not in its individual capacity
but solely as Paying Agent
By: ______________________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
FORM OF RESIDUAL INTEREST CERTIFICATE
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO, DITECH
FUNDING CORPORATION) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
RESIDUAL INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.
EXCEPT AS PROVIDED IN SECTION 3.10(B) OF THE TRUST AGREEMENT, NO TRANSFER OF
THIS RESIDUAL INTEREST CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
MADE UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO
THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT (A) AN "EMPLOYEE BENEFIT PLAN" WITHIN
THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, (B) A "PLAN" WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH,
A "BENEFIT PLAN INVESTOR"), AND (II) IS NOT DIRECTLY OR INDIRECTLY PURCHASING
SUCH RESIDUAL INTEREST CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS
NAMED FIDUCIARY OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A BENEFIT PLAN
INVESTOR.
THE TRANSFEREE OF THIS CERTIFICATE SHALL BE SUBJECT TO UNITED STATES FEDERAL
WITHHOLDING TAX UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A
CERTIFICATE OF NON-FOREIGN STATUS CERTIFYING AS TO THE TRANSFEREE'S STATUS AS A
U.S. PERSON UNDER U.S. FEDERAL TAX LAW.
THE OWNER TRUSTEE SHALL NOT EXECUTE, AND SHALL NOT COUNTERSIGN AND DELIVER, A
RESIDUAL INTEREST CERTIFICATE IN CONNECTION WITH ANY TRANSFER OF THIS RESIDUAL
INTEREST CERTIFICATE UNLESS THE TRANSFEROR SHALL HAVE PROVIDED TO THE OWNER
TRUSTEE A CERTIFICATE, SIGNED BY THE TRANSFEREE, WHICH CERTIFICATE SHALL CONTAIN
THE CONSENT OF THE TRANSFEREE TO ANY AMENDMENTS OF THE TRUST AGREEMENT AS MAY BE
REQUIRED TO EFFECTUATE FURTHER THE RESTRICTIONS ON TRANSFER OF THE RESIDUAL
INTEREST CERTIFICATES TO NON-PERMITTED FOREIGN HOLDERS, AND AN AGREEMENT BY THE
TRANSFEREE THAT IT WILL NOT TRANSFER THIS RESIDUAL INTEREST CERTIFICATE WITHOUT
PROVIDING TO THE OWNER TRUSTEE A SUBSTANTIALLY IDENTICAL CERTIFICATE, SIGNED BY
THE PROSPECTIVE OWNER TO WHOM THIS RESIDUAL INTEREST CERTIFICATE IS TO BE
TRANSFERRED.
<PAGE>
DITECH HOME LOAN OWNER TRUST 1997-1
RESIDUAL INTEREST CERTIFICATE
No. ______
THIS CERTIFIES THAT _______________________________ (the "Owner") is the
registered owner of a ____% residual interest in DiTech Home Loan Owner Trust
1997-1 (the "Trust") existing under the laws of the State of Delaware and
created pursuant to the Trust Agreement dated as of October 1, 1997 (the "Trust
Agreement") between PaineWebber Mortgage Acceptance Corporation IV, as
Depositor, DiTech Funding Corporation, as the Company, Bankers Trust (Delaware),
not in its individual capacity but solely in its fiduciary capacity as owner
trustee under the Trust Agreement (the "Owner Trustee") and The Bank of New
York, as Paying Agent (the "Paying Agent"). Initially capitalized terms used but
not defined herein have the meanings assigned to them in the Trust Agreement.
The Owner Trustee, on behalf of the Issuer and not in its individual capacity,
has executed this Residual Interest Certificate by one of its duly authorized
signatories as set forth below. This Residual Interest Certificate is one of the
Residual Interest Certificates referred to in the Trust Agreement and is issued
under and is subject to the terms, provisions and conditions of the Trust
Agreement to which the holder of this Residual Interest Certificate by virtue of
the acceptance hereof agrees and by which the holder hereof is bound. Reference
is hereby made to the Trust Agreement and the Sale and Servicing Agreement for
the rights of the holder of this Residual Interest Certificate, as well as for
the terms and conditions of the Trust created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this Residual
Interest Certificate except in accordance with terms and provisions of the Trust
Agreement.
<PAGE>
THIS RESIDUAL INTEREST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Residual Interest Certificate to be
duly executed.
DITECH HOME LOAN OWNER TRUST 1997-1
By: Bankers Trust (Delaware), not in its individual
capacity but solely as Owner Trustee under the
Trust Agreement
By: _________________________________________
Authorized Signatory
DATED: October _, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
________________________________
as Authenticating Agent
By: __________________________________________
Authorized Signatory
DATED: October _, 1997
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing_____________________________________________________
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated: _______________
______________________________________
Signature Guaranteed:
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO, DITECH
FUNDING CORPORATION) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
RESIDUAL INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.
EXCEPT AS PROVIDED IN SECTION 3.10(B) OF THE TRUST AGREEMENT, NO TRANSFER OF
THIS RESIDUAL INTEREST CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
MADE UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO
THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT (A) AN "EMPLOYEE BENEFIT PLAN" WITHIN
THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, (B) A "PLAN" WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH,
A "BENEFIT PLAN INVESTOR"), AND (II) IS NOT DIRECTLY OR INDIRECTLY PURCHASING
SUCH RESIDUAL INTEREST CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS
NAMED FIDUCIARY OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A BENEFIT PLAN
INVESTOR.
THE TRANSFEREE OF THIS CERTIFICATE SHALL BE SUBJECT TO UNITED STATES FEDERAL
WITHHOLDING TAX UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A
CERTIFICATE OF NON-FOREIGN STATUS CERTIFYING AS TO THE TRANSFEREE'S STATUS AS A
U.S. PERSON UNDER U.S. FEDERAL TAX LAW.
THE OWNER TRUSTEE SHALL NOT EXECUTE, AND SHALL NOT COUNTERSIGN AND DELIVER, A
RESIDUAL INTEREST CERTIFICATE IN CONNECTION WITH ANY TRANSFER OF THIS RESIDUAL
INTEREST CERTIFICATE UNLESS THE TRANSFEROR SHALL HAVE PROVIDED TO THE OWNER
TRUSTEE A CERTIFICATE, SIGNED BY THE TRANSFEREE, WHICH CERTIFICATE SHALL CONTAIN
THE CONSENT OF THE TRANSFEREE TO ANY AMENDMENTS OF THE TRUST AGREEMENT AS MAY BE
REQUIRED TO EFFECTUATE FURTHER THE RESTRICTIONS ON TRANSFER OF THE RESIDUAL
INTEREST CERTIFICATES TO NON-PERMITTED FOREIGN HOLDERS, AND AN AGREEMENT BY THE
TRANSFEREE THAT IT WILL NOT TRANSFER THIS RESIDUAL INTEREST CERTIFICATE WITHOUT
PROVIDING TO THE OWNER TRUSTEE A SUBSTANTIALLY IDENTICAL CERTIFICATE, SIGNED BY
THE PROSPECTIVE OWNER TO WHOM THIS RESIDUAL INTEREST CERTIFICATE IS TO BE
TRANSFERRED.
<PAGE>
DITECH HOME LOAN OWNER TRUST 1997-1
RESIDUAL INTEREST CERTIFICATE
No. 1
THIS CERTIFIES THAT PAINEWEBBER INCORPORATED (the "Owner") is the
registered owner of a 100% residual interest in DiTech Home Loan Owner Trust
1997-1 (the "Trust") existing under the laws of the State of Delaware and
created pursuant to the Trust Agreement dated as of October 1, 1997 (the "Trust
Agreement") between PaineWebber Mortgage Acceptance Corporation IV, as
Depositor, DiTech Funding Corporation, as the Company, Bankers Trust (Delaware),
not in its individual capacity but solely in its fiduciary capacity as owner
trustee under the Trust Agreement (the "Owner Trustee") and The Bank of New
York, as Paying Agent (the "Paying Agent"). Initially capitalized terms used but
not defined herein have the meanings assigned to them in the Trust Agreement.
The Owner Trustee, on behalf of the Issuer and not in its individual capacity,
has executed this Residual Interest Certificate by one of its duly authorized
signatories as set forth below. This Residual Interest Certificate is one of the
Residual Interest Certificates referred to in the Trust Agreement and is issued
under and is subject to the terms, provisions and conditions of the Trust
Agreement to which the holder of this Residual Interest Certificate by virtue of
the acceptance hereof agrees and by which the holder hereof is bound. Reference
is hereby made to the Trust Agreement and the Sale and Servicing Agreement for
the rights of the holder of this Residual Interest Certificate, as well as for
the terms and conditions of the Trust created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this Residual
Interest Certificate except in accordance with terms and provisions of the Trust
Agreement.
<PAGE>
THIS RESIDUAL INTEREST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Residual Interest Certificate to be
duly executed.
DITECH HOME LOAN OWNER TRUST 1997-1
By: BANKERS TRUST (DELAWARE), not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By: _________________________________________
Authorized Signatory
DATED: October 30, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
By: BANKERS TRUST (DELAWARE), not in its
individual capacity but solely as Owner
Trustee under the Authenticating Agent
By: _________________________________________
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated: _______________
------------------------------------
Signature Guaranteed:
------------------------------------
<PAGE>
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
DITECH HOME LOAN OWNER TRUST 1997-1
THIS Certificate of Trust of DiTech Home Loan Owner Trust 1997-1 (the
"Trust"), dated October ___, 1997, is being duly executed and filed by Bankers
Trust (Delaware), a Delaware banking corporation, as trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is DiTech Home Loan
Owner Trust 1997-1.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Bankers Trust (Delaware), 1011 Centre Road,
Suite 200, Wilmington, DE 19805-1266.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustee has executed
this Certificate of Trust as of the date first above written.
BANKERS TRUST (DELAWARE),
not in its individual capacity but solely as
owner trustee under a Trust Agreement dated
as of October 1, 1997
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT D
TO THE TRUST AGREEMENT
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status ("Certificate") is delivered
pursuant to Section 10(c) of the Trust Agreement, dated as of October 1, 1997
(the "Trust Agreement"), among PaineWebber Mortgage Acceptance Corporation IV,
as depositor, DiTech Funding Corporation, The Bank of New York, and Bankers
Trust (Delaware), as Owner Trustee, in connection with the acquisition of,
transfer to or possession by the undersigned, whether as beneficial owner (the
"Beneficial Owner"), or nominee on behalf of the Beneficial Owner of the DiTech
Home Loan Owner Trust 1997-1, Residual Interest Certificates RHS4 (the "Residual
Certificate"). Capitalized terms used but not defined in this Certificate have
the respective meanings given them in the Trust Agreement.
Each holder must complete Part I, Part II (if the holder is a nominee), and in
all cases sign and otherwise complete Part III. In addition, each holder shall
submit with the Certificate an IRS Form W-9 relating to such holder.
To confirm to the Trust that the provisions of Sections 871, 881 or 1446 of the
Internal Revenue Code (relating to withholding tax on foreign partners) do not
apply in respect of the Certificate held by the undersigned, the undersigned
hereby certifies:
Part I - Complete Either A or B
A. Individual as Beneficial Owner
1. I am (The Beneficial Owner is) not a non-resident
alien for purposes of U.S. income taxation;
2. My (The Beneficial Owner's) name and home address
are:
_________________________________
_________________________________
_________________________________; and
3. My (The Beneficial Owner's) U.S. taxpayer
identification number (Social Security Number)
is _____________________.
B. Corporate, Partnership or Other Entity as Beneficial
Owner
1. ______________________ (Name of the Beneficial Owner)
EITHER (X) is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as those
terms are defined in the Code and Treasury Regulations
OR (Y) has furnished the Owner Trustee with a properly
completed Internal Revenue Service Form 4224 (or
applicable successor form), indicating that the
Residual Certificate is held in connection with the
conduct of a trade or business of the Beneficial Owner
within the United States and that the income therefrom
will be included on the Beneficial Owner's United
States federal income tax return, and shall update such
Form 4224 at the time or times and in the manner
provided by the Code and Treasury Regulations;
2. The Beneficial Owner's principal United States office
address and place of incorporation (if applicable) is
_______________________________________; and
3. The Beneficial Owner's U.S. employer identification
number is __________________.
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner, the undersigned
certifies that this certificate has been made in reliance upon information
contained in:
_____ an IRS Form W-9
_____ a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trust at least thirty (30) days prior to the date that the
form relied upon becomes obsolete, and (ii) in connection with change in
Beneficial Owners, the undersigned agrees to submit a new Certificate of
Non-Foreign Status to the Trust promptly after such change.
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee thereof, agrees to
notify the Trust within sixty (60) days of the date that the Beneficial Owner
becomes a foreign person. The undersigned understands that this certificate may
be disclosed to the Internal Revenue Service by the Trust and any false
statement contained therein could be punishable by fines, imprisonment or both.
Under penalties of perjury, I declare that I have examined this certificate
and to the best of my knowledge and belief it is true, correct and complete and
will further declare that I will inform the Trust of any change in the
information provided above, and, if applicable, I further declare that I have
the authority to sign this document.
_______________________________________
Name
_______________________________________
Title (if applicable)
_______________________________________
Signature and Date
