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: December 16, 1997
(Date of earliest event reported)
Commission File No. 333-40467
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV (as depositor under the Sale and
Servicing Agreement, dated as of December 1, 1997, relating to the Life
Financial Home Loan Owner Trust 1997-3, Home Loan Asset Backed Notes, Series
1997-3)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
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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 December 16, 1997, Life Financial Home Loan Owner Trust 1997-3 (the
"Owner Trust") issued Home Loan Asset Backed Notes, Series 1997-3, Class A-1,
Class A-2, Class A-3, Class A-4, Class M-1, Class M-2 and Class B (the "Notes"),
having an aggregate original principal balance of $250,000,000. The Notes were
issued pursuant to an Indenture, dated as of December 1, 1997 (the "Indenture")
between Life Financial Home Loan Owner Trust 1997-3 (the "Owner Trust") and
Norwest Bank Minnesota National Association ("Norwest," in such capacity, the
"Indenture Trustee"), a copy of which is filed as an exhibit hereto. The Owner
Trust was formed by PaineWebber Mortgage Acceptance Corporation IV, a Delaware
corporation (the "Registrant"), pursuant to a Trust Agreement, dated as of
December 1, 1997 (the "Owner Trust Agreement") among the Registrant, Wilmington
Trust Company (the "Owner Trustee"), Life Investment Holdings, Inc. (the
"Transferor") and Norwest, as paying agent, a copy of which is filed as an
exhibit hereto. The Notes are secured by the assets of the Owner Trust,
consisting principally of a pool of closed-end 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 Owner Trust by the
Registrant pursuant to a Sale and Servicing Agreement, dated as of December 1,
1997 (the "Sale and Servicing Agreement") among the Owner Trust, the Registrant,
the Transferor, Life Bank, as servicer and the Indenture Trustee a copy of which
is filed as an exhibit hereto.
In addition, the Owner Trust, Life Bank and Norwest, as administrator
of the Owner Trust have entered into an Administration Agreement, dated as of
December 1, 1997 (the "Administration Agreement"), a copy of which is filed as
an exhibit hereto.
Interest on the Notes will be distributed on each Distribution Date
(as defined in the Sale and Servicing Agreement). Monthly payments in reduction
of the principal balance of the Notes will be allocated to the 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
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(EX-4.1) Indenture, dated as of December 1, 1997, between
Life Financial Home Loan Owner Trust 1997-3 and
Norwest Bank Minnesota National Association.
(EX-4.2) Sale and Servicing Agreement, dated as of December
1, 1997, among PaineWebber Mortgage Acceptance
Corporation IV, Life Financial Home Loan Owner
Trust 1997-3, Norwest Bank Minnesota National
Association, Life Bank and Life Investment
Holdings, Inc.
(EX-99.1) Administration Agreement, dated as of December 1,
1997, among Life Financial Home Loan Owner Trust
1997-3, Norwest Bank Minnesota National
Association and Life Bank.
(EX-99.2) Owner Trust Agreement, dated as of December 1,
1997, among PaineWebber Mortgage Acceptance
Corporation IV, Life Investment Holdings, Inc.,
Wilmington Trust Company and Norwest Bank
Minnesota National Association.
<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
December 16, 1997
By: /s/ Joseph Piscina
------------------
Joseph Piscina
Director
<PAGE>
INDEX TO EXHIBITS
-----------------
Paper (P) or
Exhibit No. Description Electronic(E)
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(EX-4.1) Indenture, dated as of December 1, 1997, E
between Life Financial Home Loan Owner Trust
1997-3 and Norwest Bank Minnesota National
Association.
(EX-4.2) Sale and Servicing Agreement, dated as of E
December 1, 1997, among PaineWebber Mortgage
Acceptance Corporation IV, Life Financial Home
Loan Owner Trust 1997-3, Norwest Bank Minnesota
National Association, Life Bank and Life
Investment Holdings, Inc.
(EX-99.1) Administration Agreement, dated as of December E
1, 1997, among Life Financial Home Loan Owner
Trust 1997-3, Norwest Bank Minnesota National
Association and Life Bank.
(EX-99.2) Owner Trust Agreement, dated as of December 1, E
1997, among PaineWebber Mortgage Acceptance
Corporation IV, Life Investment Holdings, Inc.,
Wilmington Trust Company and Norwest Bank
Minnesota National Association.
================================================================================
INDENTURE
between
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3,
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of December 1, 1997
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
Home Loan Asset Backed Notes,
Series 1997-3
================================================================================
<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/or 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
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and/or 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/or 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
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money
Section 8.02. Trust Accounts; Payments
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
<PAGE>
This Indenture entered into effective December 1, 1997, between LIFE
FINANCIAL HOME LOAN OWNER TRUST 1997-3, a Delaware business trust, as Issuer
(the "Issuer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its
individual capacity but solely 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
6.79% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3 7.12% Home
Loan Asset Backed Notes (the "Class A-3 Notes"), Class A-4 7.54% Home Loan Asset
Backed Notes (the "Class A-4 Notes"), Class M-1 7.76% Home Loan Asset Backed
Notes (the "Class M-1 Notes"), Class M-2 7.96% Home Loan Asset Backed Notes (the
"Class M-2 Notes") and Class B 9.09% Home Loan Asset Backed Notes (the "Class B
Notes" and, together with the Class A Notes, Class M-1 Notes and Class M-2
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 Owner 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 Company or
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 Owner 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 Minneapolis, Minnesota. 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 Minneapolis, Minnesota.
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
December 1, 1997, among the Administrator, the Issuer and the Company.
"Administrator" means Norwest Bank Minnesota, National Association, a
national banking association, 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 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 Owner Trust, the Owner 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 or Class B 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 Owner Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit C to the Owner Trust Agreement.
"Class A Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes.
"Class A-1 Notes", "Class A-2 Notes", "Class A-3 Notes", "Class A-4 Notes",
"Class B 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.
"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 December 16, 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 Life Bank, a federally chartered stock savings bank, 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 date of execution of this Agreement is located at
Norwest Place, Sixth and Marquette, Minneapolis, Minnesota 55479, Attention:
Structured Finance/Life 1997-3, 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.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" means any Class of Notes as set forth 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 Fitch and P-1 by Moody's (or comparable ratings if Fitch and
Moody's are not the Rating Agencies).
"Due Period" means, with respect to any Payment Date and any Class of
Notes, the calendar month immediately preceding the month of such Payment 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.
"Fitch" means Fitch IBCA, Inc. or any successor thereto.
"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 Classes 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 Notes.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means Norwest Bank Minnesota, National Association, a
national 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" or "Owner Trust" means Life Financial Home Loan Owner Trust 1997-3
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 Classes Noteholders" means on any date, Holders
of Highest Priority Classes Notes representing more than 50% of the Voting
Interests of the Highest Priority Classes 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 January 2009
A-2 September 2011
A-3 February 2014
A-4 April 2024
M-1 April 2024
M-2 April 2024
B April 2024
"Moody's" means Moody's Investors Services, Inc. or any successor thereto.
"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 or Class B 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: FN(1)
Class A-2: 6.79%
Class A-3: 7.12%
Class A-4: 7.54%; 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 8.04%
Class M-1: 7.76%; 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 M-1 Notes
shall be 8.26%
Class M-2: 7.96%; 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 M-2 Notes
shall be 8.46%
Class B: 9.09%; 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 B Notes
shall be 9.59%
- ------------------------------
(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 0.18%, 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 6.18% 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 Trust Agreement" means the Trust Agreement dated as of December 1,
1997, among PaineWebber Mortgage Acceptance Corporation IV, as Depositor, the
Transferor, Norwest Bank Minnesota, National Association, as Paying Agent and
Wilmington Trust Company, as Owner Trustee.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Owner Trust Agreement, or any
successor Owner Trustee under the Owner 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 payments from the
Note Payment Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Payment Date" means the 25th day of any month or if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in January 1998.
"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 either or all of (i) Fitch or (ii) Moody's. 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 Payment Date, the last Business Day of the
month immediately preceding the month in which such Payment Date occurs.
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01 hereof, the Payment 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.
Remittance Date: The 20th day of each month, or if such 20th day is not a
Business Day, the first Business Day immediately following such day, commencing
in January 1998.
"Residual Interest Certificate" has the meaning assigned to such term in
Section 1.1 of the Owner 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 December 1, 1997, among the Issuer, PaineWebber Mortgage Acceptance
Corporation IV, as Depositor, the Transferor, the Company as Servicer, and
Norwest Bank Minnesota, National Association, as Indenture Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" shall mean Life Bank, in its capacity as servicer under the Sale
and Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the States of the United States of America or the
District of Columbia.
"Transferor" means Life Investments Holding, Inc., a Delaware corporation.
"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 the product of (i) 99% and (ii) 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 "Life Financial
Home Loan Owner Trust 1997-3 Asset Backed Notes, Series 1997-3". 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 or the Administrator. 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 or the Administrator 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 Classes of Notes for original issue in the following principal amounts:
Class A-1, $80,000,000; Class A-2, $48,890,000; Class A-3, $27,570,000; Class
A-4, $24,790,000; Class M-1, $27,500,000; Class M-2, $22,500,000; Class B,
$18,750,000. 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 December 16,
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. Each Class of 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, the Indenture
Trustee, the Administrator and the Paying Agent 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, the
Administrator, the Paying Agent and any agent of the Issuer, the Indenture
Trustee, the Administrator or the Paying Agent 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/or 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 Payment 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 Payment 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 Payment 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
Payment 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 the amount of any 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
Priority Classes 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 Payment 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 Payment
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 destroyed or returned to it; provided, however, that such
Issuer Order is timely and the Notes have not been previously disposed of by the
Indenture Trustee.
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 Owner 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 power and authority to execute, deliver and
perform its obligations under the Owner 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 Owner 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 Owner 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
the Rating Agencies confirming that the Class A-1, Class A-2, Class A-3 and
Class A-4 Notes have been rated "AAA" by Fitch and "Aaa" by Moody's and
letters signed by the Rating Agencies confirming that the Class M-1 Notes,
the Class M-2 Notes and the Class B Notes have been rated "AA", "A" and
"BBB", respectively by Fitch and "Aa2", "A2" and "Baa2", respectively by
Moody's; 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 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 Voting Interests of the Outstanding 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. 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.
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 of the Issuer 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 of the Issuer.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and/or 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 Payment Account on each Payment 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 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/or 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 City of Minneapolis, Minnesota 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 Payment 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 Payment 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 Payment Date and the
Redemption Date, the Paying Agent shall deposit or cause to be deposited in the
Note Payment Account an aggregate sum sufficient to pay the amounts due on such
Payment 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, payments 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 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 Owner Trust Agreement or other than in connection with, or relating to,
the issuance of Notes pursuant to this Indenture, or amend the Owner 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 payment (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) payments 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 Owner 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 payments
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 Company or 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.
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 Payment Account for payment thereof on the
related Payment 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 Payment Account for payment thereof on the
related Payment Date, default in the payment of the principal of or any
installment of the principal of any Note (i) when the same becomes due and
payable or (ii) 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 Owner Trust Agreement or any
representation or warranty of the Company made in the Owner 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(a)(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 Classes 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 Classes 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/or 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/or
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/or 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/or 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 Servicer for any amounts then due and payable as the
Servicing Advance Reimbursement Amount under the Sale and Servicing
Agreement;
FOURTH: 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;
FIFTH: to the applicable Noteholders for amounts due and unpaid on the
Notes for principal, pro rata among the Holders of each such 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
SIXTH: to the Owner Trustee, for any amounts to be distributed pro
rata to the holders of the Residual Interest Certificate pursuant to the
Owner 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 Classes 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 the Majority Priority
Highest Classes Noteholders.
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 Classes 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/or 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 Classes
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 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
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 Majority Priority Highest
Classes 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 Classes 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.
(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(a)(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, 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.
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 Noteholder 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 Payment
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.
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(a)(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
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.
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; Payments. (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 Remittance Date of each month, 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 Payment Account. On each Payment Date, to the extent funds
are available in the Note Payment Account, the Indenture Trustee shall either
retain funds in the Note Payment Account for payment on such day or make the
withdrawals from the Note Payment Account and deposits into the Certificate
Distribution Account for distribution on such Payment Date as required pursuant
to Section 5.01(c) of the Sale and Servicing Agreement.
(c) On each Payment Date and Redemption Date, to the extent funds are
available in the Note Payment Account, the Indenture Trustee shall make the
following payments from the amounts on deposit in the Note Payment 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 Payment Dates
and (ii) all Nonrecoverable Servicing Advances not previously reimbursed,
(B) to the Indenture Trustee, an amount equal to the sum of the Indenture
Trustee Fee, all unpaid Indenture Trustee Fees from prior Payment Dates and
interest and gains on funds held in the Note Payment Account, and (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
(ii) to the Noteholders, the amounts set forth in Sections 5.01(d) and
(e) of the Sale and Servicing Agreement.
(d) On each Payment 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 Payment 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 Payment Date, the
Indenture Trustee shall deliver the Servicer's Monthly Remittance Report (as
defined in the Sale and Servicing Agreement) with respect to such Payment 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 and to the Owner Trustee pursuant to Section 8.02(c)(i)(C) 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 Class Principal Balance 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 Rights";
(d) reduce the percentage of the Voting Rights 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 Payment 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 Owner Trust Agreement, the Indenture Trustee
shall, upon Issuer Order, consent to any proposed amendment to the Owner Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Owner 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 Owner 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 Owner Trust
Agreement) may, at their option, effect an early redemption of the Notes on any
Payment Date on or after the Payment 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; and
(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).
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: Life Financial Home Loan
Owner Trust 1997-3, in care of Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
James Lawler, 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
Fitch, One State Street Plaza, New York, New York 10004, Attention: Structured
Finance Residential Mortgage and (iv) in the case of Moody's, 99 Church Street,
New York, New York 10007, Attention: Residential Mortgage Pass-Through Group.
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. Owner 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 Owner 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.
LIFE FINANCIAL HOME LOAN
OWNER TRUST 1997-3
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By:---------------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
By:---------------------------------------------
Name:
Title:
<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 WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee on behalf of LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 December, 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 NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, 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 December, 1997.
--------------------------------
Notary Public in and for the
State of New York
(Seal)
My commission expires:
- ----------------------------
<PAGE>
SCHEDULE A
[FORM OF NOTES]
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 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>
$80,000,000
No. A-1-1 CUSIP NO. 53184N AH9
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS A-1 Floating Rate ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Eighty Million Dollars ($80,000,000)
payable on each Payment 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 Payment 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 December 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
Classes 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 December 1, 1997 between the Issuer and Norwest Bank Minnesota,
National Association, 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 0.18%, subject to a maximum
rate equal to the Net Weighted Average Rate on each Payment 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 Payment Date (after
giving effect to all payments of principal made on the preceding Payment 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 Payment Date during the period
beginning on the Payment Date in the calendar month preceding the month in which
the related Payment Date occurs (or, in the case of the first Payment Date,
December 16, 1997) and ending on the day preceding the related Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
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 and Class B 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 Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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 Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<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 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>
$48,890,000
No. A-2-1 CUSIP NO. 53184N AJ5
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS A-2 6.79% ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Forty Eight Million Eight Hundred
Ninety Thousand Dollars ($48,890,000) payable on each Payment 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 Payment 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 December 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 Classes 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 December 1, 1997 between the
Issuer and Norwest Bank Minnesota, National Association, a national banking
association, 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 Payment 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 Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date). Interest on this Note will accrue for each Payment
Date during the calendar month preceding such Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
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 6.79% 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 and Class B 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 Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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-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 Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<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 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>
$27,570,000
No. A-3-1 CUSIP NO. 53184N AK2
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS A-3 7.12% ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Seven Million Five Hundred
Seventy Thousand Dollars ($27,570,000) payable on each Payment 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 Payment 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 December 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 Classes 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 December 1, 1997 between the
Issuer and Norwest Bank Minnesota, National Association, a national banking
association, 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 Payment 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 Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date). Interest on this Note will accrue for each Payment
Date during the calendar month preceding such Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
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 7.12% 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 and Class B 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 Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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-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 Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<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 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>
$24,790,000
No. A-4-1 CUSIP NO. 53184N AL0
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS A-4 7.54% ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Seven Hundred
Ninety Thousand Dollars ($24,790,000) payable on each Payment 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 Payment 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 December 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 Classes 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 December 1, 1997 between the
Issuer and Norwest Bank Minnesota, National Association, a national banking
association, 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 Payment 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 Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the interest on this Note
shall be increased by a rate per annum equal to 0.50%. Interest on this Note
will accrue for each Payment Date during the calendar month preceding such
Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
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 7.54% 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 and Class B 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 Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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-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 Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<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 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>
$27,500,000
No. M-1-1 CUSIP NO. 53184N AM8
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS M-1 7.76% ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Seven Million Five Hundred
Thousand Dollars ($27,500,000) payable on each Payment 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 Payment 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 December 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 Classes 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 December 1, 1997 between the
Issuer and Norwest Bank Minnesota, National Association, a national banking
association, 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 Payment 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 Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the interest on this Note
shall be increased by a rate per annum equal to 0.50%. Interest on this Note
will accrue for each Payment Date during the calendar month preceding such
Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
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 7.76% 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-1 Notes and Class B 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 Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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 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 Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<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 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>
$22,500,000
No. M-2-1 CUSIP NO. 53184N AN6
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS M-2 7.96% ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Five Hundred
Thousand Dollars ($22,500,000) payable on each Payment 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 Payment 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 December 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 Classes 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 December 1, 1997 between the
Issuer and Norwest Bank Minnesota, National Association, a national banking
association, 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 Payment 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 Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the interest on this Note
shall be increased by a rate per annum equal to 0.50%. Interest on this Note
will accrue for each Payment Date during the calendar month preceding such
Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
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 7.96% 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 and Class B 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 Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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 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 Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS B 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 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>
$18,750,000
No. B-1 CUSIP NO. 53184N AP1
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
CLASS B 9.09% ASSET BACKED NOTES
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, 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 Eighteen Million Seven Hundred Fifty
Thousand Dollars ($18,750,000) payable on each Payment 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 Note and the denominator of which
is the aggregate principal amount of all Class B Notes by (ii) the aggregate
amount, if any payable from the Note Payment Account in respect of principal on
the Class B Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing
Agreement dated as of December 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 Classes 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 December 1, 1997 between the Issuer and Norwest Bank
Minnesota, National Association, a national banking association, 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 Payment 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 Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the interest on this Note
shall be increased by a rate per annum equal to 0.50%. Interest on this Note
will accrue for each Payment Date during the calendar month preceding such
Payment 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: December __, 1997
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner 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: December __, 1997
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
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 9.09% Asset Backed Notes (herein called the "Class B
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 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 and Class B 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 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 25th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in January 1998.
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
Classes 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 B Notes shall be made pro rata to the holders of the Class B Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the 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
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes (located in Minneapolis, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class B 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-Funding 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 Depositor or the Issuer, or join in any institution
against the Depositor 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 Owner 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:
------------------------*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of December 1, 1997
among
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
LIFE BANK
(Servicer and Originator)
LIFE INVESTMENT HOLDINGS, INC.
(Transferor)
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Indenture Trustee)
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
HOME LOAN ASSET BACKED NOTES
SERIES 1997-3
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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
and the Originator
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
Section 4.10 Foreclosure
Section 4.11 Title, Management and Disposition of Foreclosure Property
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Payment Account
Section 5.02 Certificate 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; WITHHOLDING
Section 6.01 Statements
Section 6.02 Withholding
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 the 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
EXHIBIT A - Home Loan Schedule
EXHIBIT B - Reserved
EXHIBIT C - Form of Subsequent Transfer Agreement
EXHIBIT D - Collection Account Certification
<PAGE>
This Sale and Servicing Agreement is entered into effective as of December
1, 1997, among LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, a Delaware business
trust (the "Issuer" or the "Owner Trust"), PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, a Delaware corporation, as Depositor (the "Depositor"), LIFE
INVESTMENT HOLDINGS, INC., a Delaware corporation, as Transferor (the
"Transferor") and LIFE BANK, a federally chartered stock savings bank ("Life"),
as Servicer and Originator (the "Servicer" or the "Originator") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association, 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, Transferor, the Servicer and the Indenture Trustee hereby agree as
follows for the benefit of each of them and for the benefit of the holders of
the Notes issued under the Indenture 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.
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.
Accrual Period: With respect to the Class A-1 Notes, the period beginning
on the Payment Date in the calendar month preceding the month in which the
related Payment Date occurs (or, in the case of the first Payment Date, December
16, 1997) and ending on the day preceding the related Payment Date. With respect
to the other Classes of Notes, the calendar month preceding the month in which
the related Payment Date occurs.
Addition Notice: For any date during the Pre-Funding Period, a notice
(which shall be in writing) given to the Rating Agencies, the Indenture Trustee
and the Owner Trustee pursuant to Section 2.06 hereof.
Adjustable Rate Loan: Each Home Loan identified on the Home Loan Schedule
as having an adjustable Home Loan Interest Rate.
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 Payment 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 Payment Date) over (b)
the sum of the Pool Principal Balance and the Pre-Funding Amount, each as of the
end of the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Payment Date,
sequentially, to Class B Notes, the Class M-2 Notes and the Class M-1 Notes, in
that order.
Appraised Value: The appraised value of any Mortgaged Property, based upon
the appraisal made at the time the related Home Loan is originated.
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 Payment 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, Life 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 (including, with respect to the first
Payment Date, the Required Interest Deposit), Note Payment 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 Payment Date.
Available Payment Amount: With respect to any Payment Date, the Available
Collection Amount minus the amount required to be paid from the Note Payment
Account pursuant to Section 5.01(c)(i), plus on the Payment 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-Funding 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: $1,045,601.65.
Capitalized Interest Requirement: With respect to the Payment Date in
January 1998, (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 6.18%
per annum), minus (ii) in the case of any Subsequent Loan transferred to the
Owner 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 Payment 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 6.18% per
annum), minus (ii) in the case of any Subsequent Loan transferred to the Owner
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 Payment Date in March 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 6.18% per
annum) ,minus (iii) in the case of any Subsequent Loan transferred to the Owner
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 Payment Date in April 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 6.18% 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 Owner 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)(vii)(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 Owner 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 Notes: Collectively the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class M-1
Note, Class M-2 Note and Class B Note: The respective meanings assigned thereto
in the Indenture.
Class B Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes and the Mezzanine Notes
(after taking into account any distributions made on such Payment Date in
reduction of the Class Principal Balances of the Classes of Class A Notes and
Mezzanine Notes) and (ii) the Overcollateralization Target Amount for such
Payment Date; provided, however, that such amount shall never be less than zero
or greater than the Original Class Principal Balance of the Class B 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 Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes (after taking into
account distributions made on such Payment Date in reduction of the Class
Principal Balances of the Classes of Class A Notes) and (ii) the greater of (x)
the sum of (1) 33.00% of the Pool Principal Balance as of the related
Determination Date and (2) the Overcollateralization Target Amount for such
Payment 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 Payment Date prior
to the Stepdown Date, zero; with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes (after taking into
account any distributions made on such Payment Date in reduction of the Class
Principal Balances of the Classes of Class A Notes) plus the Class Principal
Balance of the Class M-1 Notes (after taking into account any distributions made
on such Payment 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 Payment 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 Payment Dates and (ii) with respect to the Class M-1,
Class M-2 and Class B Notes, all Allocable Loss Amounts applied in reduction of
principal of such Classes on all previous Payment Dates.
Clean-up Call Date: The first Payment Date on which the Pool Principal
Balance declines to 10% or less of the Maximum Collateral Amount.
Closing Date: December 16, 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 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 December 1, 1997
by and among the Issuer, the Depositor, the Transferor, the Servicer, the
Indenture Trustee and Norwest Bank Minnesota, National Association, a national
banking association, 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. Norwest Bank Minnesota
National Association, shall be the initial Custodian pursuant to the terms of
the Custodial Agreement.
Custodian's Final Certification: As defined in Section 2.05(c).
Custodian's Initial Certification: As defined in Section 2.05(a).
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
November 30, 1997 (or the date of origination for those Initial Loans originated
after November 30, 1997), and, with respect to any Subsequent Loan, the date
designated as such in the related Subsequent Transfer Agreement.
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 made 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 Payment Date, the 14th calendar day
of the month in which such Payment Date occurs or if such day is not a Business
Day, the immediately preceding Business Day.
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 Payment Date, the
calendar month immediately preceding such Determination Date or Payment 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 Moody's 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 Payment Date, the excess of (a) the
Available Payment Amount over (b) the Regular Payment 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 IBCA, Inc. or any successor thereto.
Fixed Rate Loan: Each Home Loan identified on the Home Loan Schedule as
bearing a fixed Home Loan Interest Rate.
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.
Gross Margin: As to each Adjustable Rate Loan, the fixed percentage set
forth in the related Debt Instrument and indicated in the Home Loan Schedule as
the "Gross Margin," which percentage is added to the Index on each Interest
Adjustment Date to determine (subject to rounding, any applicable statutory
maximum interest rate, the Periodic Rate Caps, the Lifetime Floor and the
Lifetime Cap) the Mortgage Interest Rate on such Loan until the next Interest
Adjustment Date.
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: With respect to each Fixed Rate Loan, 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). With respect to each Adjustable Rate Loan, subject to
applicable Periodic Rate Cap, the Lifetime Cap and the Lifetime Floor, the
related Index plus the applicable Gross Margin, as shown by the related Home
Loan Schedule as the same may be modified by the Servicer in accordance with
Section 4.01(c).
Home Loan Pool: The pool of Home Loans conveyed to the Issuer pursuant to
this Agreement on the Closing Date and pursuant to the Subsequent Transfer
Agreements on the 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 among Life,
the Transferor and the Depositor, dated as of December 1, 1997.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto and provided to the Indenture Trustee in computer readable form
in a format acceptable to the Indenture Trustee, as amended or supplemented from
time to time specifying, with respect to each Home Loan, the following
information: (i) the Originator'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 Originator and
the principal amount purchased by the Originator with respect to a Home Loan
acquired by the Originator 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) whether an Adjustable Rate Loan or a
Fixed Rate Loan, and if an Adjustable Rate Loan, the Gross Margin, the Lifetime
Cap and Lifetime Floor.
Indenture: The Indenture, dated as of December 1, 1997, between the Issuer
and the Indenture Trustee.
Indenture Trustee: Norwest Bank Minnesota, National Association, a national
banking association, 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 Payment Date one-twelfth of 0.02% 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 Payment Date (or, with
respect to the first Payment Date, the Original Pool Principal Balance).
Indenture Trustee's Home Loan Files: As defined in Section 2.04(a).
Independent: When used with respect to any specified Person, such Person
(i) is in fact independent of the Transferor, 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 the Transferor, the
Servicer, the Depositor or any of their respective Affiliates and (iii) is not
connected with any of the Transferor, 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 the Transferor, 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 the Transferor, 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.
Index: The LIBOR Index.
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.
Interest Adjustment Date: With respect to any Adjustable Rate Loan, the
date on which the Home Loan Interest Rate is or may be adjusted with respect to
such Home Loan.
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
6.00%.
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 Index: The London Interbank Offered Rate for six month U.S. dollar
deposits either as announced by the Federal National Mortgage Association and
available as of the date 45 days before each Interest Adjustment Date or as
published in the Wall Street Journal generally on a day of the month preceding
the month of the Interest Adjustment Date.
LIBOR Notes: The Class A-1 Notes.
Life: Life Bank, a federally chartered stock savings bank.
Lifetime Cap: As to any Adjustable Rate Loan, the maximum Home Loan
Interest Rate set forth in the related Debt Instrument and indicated in the Home
Loan Schedule.
Lifetime Floor: As to any Adjustable Rate Loan, the minimum Home Loan
Interest Rate set forth in the related Debt Instrument and indicated in the Home
Loan Schedule.
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 Payment Date and the
Class M-1 Notes, Class M-2 Notes or the Class B 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 Payment 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
Payment 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 Payment Date immediately following the end
of the Pre-Funding Period.
Maturity Date means, with respect to each Class of Notes, the applicable
maturity date set forth below:
Class Maturity Date
----- -------------
A-1 January 2009
A-2 September 2011
A-3 February 2014
A-4 April 2024
M-1 April 2024
M-2 April 2024
B April 2024
Maximum Collateral Amount: The sum of the Original Pool Balance and the
Original Pre-Funding Amount.
Mezzanine Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Mezzanine Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Mezzanine Noteholders' Interest Carry-Forward Amount for preceding Payment
Dates, over (B) the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date net of the Senior
Noteholders' Interest Payment Amount for such preceding Payment 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 Payment Amount: With respect to any Payment
Date, the sum of the Mezzanine Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Mezzanine Noteholders' Interest Carry-Forward Amount
for such Payment Date.
Mezzanine Noteholders' Monthly Interest Payment Amount: With respect to
each Payment 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 Payment Date (or, in the case of the
first Payment 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
Payment 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 Payment Date, the last day of the calendar month immediately preceding
such Payment 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.
Moody's: Moody's Investors Service, or any successor thereto.
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.
Mortgage Loan: As of any date of determination, each of the Home Loans,
secured by an interest in a Property, transferred and assigned to the Indenture
Trustee pursuant to Section 2.01(a) hereof.
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 2.5 and may from time to
time be permanently modified to a lesser amount (including zero) in the event
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 withdrawn as
a result of such reduction.
Net Delinquency Calculation Amount: With respect to any Payment 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 Payment Dates.
Net Liquidation Proceeds: With respect to any Payment 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 1.02%.
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 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 6.79%
Class A-3 7.12%
Class A-4 7.54% through the last day of the month
immediately preceding the Clean-up Call
Date and 8.04% thereafter;
Class M-1 7.76% through the last day of the month
immediately preceding the Clean-up Call
Date and 8.36% thereafter;
Class M-2 7.96% through the last day of the month
immediately preceding the Clean-up Call
Date and 8.46% thereafter;
Class B 9.09% through the last day of the month
immediately preceding the Clean-up Call
Date and 9.59% thereafter;
(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
0.18%, 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 6.18% per annum.
Note Payment Account: The account established and maintained pursuant to
Section 5.01(a)(2) hereof.
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.
Noteholders' Interest Payment Amount: The sum of the Senior Noteholders'
Interest Payment Amount, the Mezzanine Noteholders' Interest Payment Amount and
the Subordinate Noteholders' Interest Payment Amount.
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 the Transferor, 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: $80,000,000; Class A-2: $48,890,000; Class A-3: $27,570,000;
Class A-4: $24,790,000; Class M-1: $27,500,000; Class M-2: $22,500,000; and
Class B: $18,750,000.
Original Pool Principal Balance: $187,350,664, which is the Pool Principal
Balance as of the Cut-Off Date.
Original Pre-Funding Amount: $62,649,336.
Originator: Life Bank, a federally chartered stock savings bank.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Payment Date, the amount
equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funding 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 Payment 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
Certificates on such Payment Date pursuant to Section 5.01(d) hereof).
Overcollateralization Target Amount: (I) With respect to any Payment Date
occurring prior to the Stepdown Date, an amount equal to the greater of (x)
6.25% of the Maximum Collateral Amount and (y) the Net Delinquency Calculation
Amount; and (II) with respect to any other Payment Date, an amount equal to the
greater of (x) 12.50% 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 Trust: The Issuer.
Owner Trust Agreement: The Trust Agreement dated as of December 1, 1997,
among the Depositor, the Company and the Owner Trustee.
Owner Trust Estate: The assets subject to this Agreement, the Owner Trust
Agreement and the Indenture and assigned to the Issuer, 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 and the Required Interest
Deposit, (iv) such assets as from time to time 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, the Certificate
Distribution Account, the Capitalized Interest Account and the Pre-Funding
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.
Owner Trustee: Wilmington Trust Company, as owner trustee under the Owner
Trust Agreement, and any successor owner trustee under the Owner Trust
Agreement.
Owner Trustee Fee: The annual fee of $2,500 in equal monthly installments
to the Servicer which shall in turn pay such $2,500 to the Owner Trustee on the
Payment Date occurring in December each year during the term of this Agreement
commencing in December 1998; provided, however, that the initial Owner Trustee
Fee shall be paid by the Transferor on the Closing Date.
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.
Payment Date: The 25th day of any month or if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in January 1998.
Payment Statement: As defined in Section 6.01 hereof.
Percentage Interest: As defined in the Owner Trust Agreement.
Periodic Rate Cap: With respect to any Adjustable Rate Loan the periodic
rate cap set forth in the Debt Instrument related thereto.
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 Moody's 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 Payment
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-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 Payment Date in February 1998,
the actual investment earnings earned on amounts on deposit in the Pre-Funding
Account during the period from December 16, 1997 through and including January
31, 1998. With respect to the Payment Date in March 1998, the actual investment
earnings earned on amounts on deposit in the Pre-Funding Account from February
1, 1998 through and including February 28, 1997. With respect to the Payment
Date in April 1998, the actual investment earnings earned on amounts on deposit
in the Pre-Funding Account from March 1, 1998 through and including March 31,
1997.
Pre-Funding Payment Trigger: With respect to the Payment Date following the
Due Period in which the termination of the Pre-Funding Period occurs, a
Pre-Funding Payment Trigger will be deemed to have occurred if, at such time,
the Pre-Funding Amount is greater than or equal to $50,000.
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) March 16, 1997.
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.
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 dated November 18, 1997 as
supplemented by the Prospectus Supplement dated December 10, 1997.
Prospectus Supplement: The Prospectus Supplement December 10, 1997 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, Class M-2 and Class B 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) is
or are Adjustable Rate Loans if the Deleted Home Loan is an Adjustable Rate Loan
or a Fixed Rate Loan if the Deleted Home Loan is a Fixed Rate Loan and, 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 29 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: Moody's 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 Payment Date, the close of business on
the last Business Day of the month immediately preceding the month in which such
Payment 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 Payment Amount: With respect to any Payment Date, the lesser of (a)
the Available Payment Amount and (b) the sum of (i) the Noteholders' Interest
Payment Amount and (ii) the Regular Principal Payment Amount.
Regular Principal Payment Amount: On each Payment 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 Payment 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
Payment 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 Payment Trigger shall have occurred, the amount on deposit
in the Pre-Funding Account on such date, and (vii) on the Payment Date
on which the Issuer 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.
Remittance Date: The 20th day of each month, or if such 20th day is not a
Business Day, the first Business Day immediately following such day, commencing
in January 1998.
Required Interest Deposit: $247,552.50 to be deposited into the Collection
Account on the Closing Date, which represents, with respect to each Home Loan
for which the first payment will occur after December 31, 1997, one month of
interest at the applicable Home Loan Interest Rate.
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 Owner Trust Agreement on each Payment Date and
certain other rights to receive amounts hereunder and under the Owner Trust
Agreement.
Residual Interest Certificate: The meaning assigned thereto in the Owner
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 in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Owner 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
Payment Date, the excess, if any, of (A) the Senior Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Senior Noteholders' Interest Carry-Forward Amount for preceding Payment Dates,
over (B) the amount in respect of interest that is actually deposited in the
Note Payment Account on such preceding Payment Date.
Senior Noteholders' Interest Payment Amount: With respect to any Payment
Date, the sum of the Senior Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Senior Noteholders' Interest Carry-Forward Amount for
such Payment Date.
Senior Noteholders' Monthly Interest Payment Amount: With respect to each
Payment Date and the Classes of Class A Notes, the interest accrued at the
respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment 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
Payment Date (or, in the case of the first Payment Date, on the Closing Date)
after giving effect to all payments of principal to the holders of the other
Classes of Notes on or prior to such preceding Payment 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 Payment Date prior to
the Stepdown Date, zero; with respect to any other Payment Date, an amount equal
to the Pool Principal Balance as of the related Determination Date minus the
greater of (a) the sum of (1) 55.00% of the Pool Principal Balance as of the
related Determination Date and (2) the Overcollateralization Target Amount for
such Payment 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 1997-3: Life Financial Home Loan Asset Backed Notes,
Series 1997-3.
Servicer: Life Bank, a federally chartered stock savings bank 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: As defined in Section 6.01(a).
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 Payment Date, which
shall be the product of 1.00% (100 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.
Six-Month Rolling Delinquency Average: With respect to any Payment 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.
Stepdown Date: The first Payment Date occurring after December 2000, upon
which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.0% of the
Maximum Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 6.25% of
the Maximum Collateral Amount; and
(3) the aggregate of the Class Principal Balances of the Class A
Notes will be able to be reduced on such Payment Date (such
determination to be made by the Indenture Trustee prior to giving
effect to distribution of principal on such Payment 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) 55.00% of the Pool Principal Balance
as of the related Determination Date
and
(2) the Overcollateralization Target
Amount for such Payment 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
Payment Date, the excess, if any, of (A) the Subordinate Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Subordinate Noteholders' Interest Carry-Forward Amount for preceding Payment
Dates, over (B) the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date net of the Senior
Noteholders' Interest Payment Amount and the Mezzanine Noteholders' Interest
Payment Amount for such preceding Payment Date.
Subordinate Noteholders' Interest Payment Amount: With respect to any
Payment Date, the sum of the Subordinate Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Subordinate Noteholders' Interest
Carry-Forward Amount for such Payment Date.
Subordinate Noteholders' Monthly Interest Payment Amount: With respect to
each Payment 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 Payment Date (or, in the case of the
first Payment 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
Payment Date.
Subordinate Notes: The Class B Notes.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan transferred to the Owner 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 Owner 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 Owner 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 Life substantially in the form of
Exhibit C attached hereto by which Subsequent Loans are sold and assigned to the
Owner 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 Section 2.05 or Section 3.05 hereof, the amount, if any, 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 Date: The earlier of (a) the Payment Date in April 2024 and (b)
the Payment Date next following the Monthly Cut-Off Date coinciding with or next
following the date of the liquidation or disposition of the last asset held by
the Issuer pursuant to Section 11.01 hereof.
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 Owner 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 Owner 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: Life Investment Holdings, Inc., a Delaware corporation.
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 Payment Account, the Certificate Distribution
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account.
Trust Fees and Expenses: As of each Payment Date, an amount equal to the
Servicing Compensation, the Indenture Trustee Fee and the Owner Trustee Fee, if
any.
UCC: The Uniform Commercial Code as in effect in the State of New York.
Underwriting Guidelines: The underwriting guidelines of Life, a copy of
which is attached as an exhibit to the Home Loan Purchase Agreement.
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 Owner 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 Owner 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, Life, the Transferor or any other person in
connection with the Owner 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 Owner Trust Estate, including all right, title and interest of the Depositor
in and to the Owner Trust Estate, receipt of which is hereby acknowledged by the
Issuer. Concurrently with such delivery and in exchange therefor, the Issuer has
pledged the Owner 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 Owner Trustee 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 Life or the Transferor, as the
case may be, as a sale of assets by the Depositor or Life or the Transferor, as
the case may be, under GAAP. The Servicer 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 Noteholders.
The Custodian, pursuant to the terms of the Custodial Agreement, shall keep the
Indenture Trustee's Home Loan Files and shall maintain a record to reflect the
pledge of each Home Loan for the benefit of the Noteholders.
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 Issuer 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 Issuer pursuant to this
Agreement or the conveyance of the Home Loans or any of such other property to
the Owner Trustee 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 Issuer 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 Issuer 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 Owner Trustee as "secured party" and describing the Home Loans being sold by
the Depositor to the Issuer 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 Depositor, the Originator and/or
the Transferor shall, on the Closing Date, or the applicable Subsequent Transfer
Date in the case of Subsequent Loans, deliver or cause 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 Originator
in blank, with all prior and intervening endorsements showing a
complete chain of endorsement from origination of the Home Loan to the
Originator;
(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 Originator 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 Originator 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 Originator (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
Originator 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 Originator 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, the Originator and the
Depositor shall, on the Closing Date, or the applicable Subsequent Transfer Date
in the case of Subsequent Loans, deliver or cause 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) 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 Life'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 Life'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 Minnesota and, in connection therewith, shall act solely as agent for
the Securityholders in accordance with the terms hereof and not as agent for the
Originator, the Transferor or any other party.
(d) Within 35 days after the Closing Date in the case of Initial Loans or,
in the case of the Subsequent Loans, within 35 days of the related Subsequent
Transfer Date, the Originator or 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 Originator or the Transferor need not record any
such Assignment of Mortgage in any jurisdiction under the laws of which, as
evidenced by an Opinion of Counsel delivered by the Originator or Transferor (at
the Originator's or 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 Securityholders' interest in the
related Home Loan. With respect to any Assignment of Mortgage as to which the
related recording information is unavailable within 5 days following the Closing
Date in the case of Initial Loans or, in the case of Subsequent Loans, within 5
days of the related Subsequent Transfer Date, such Assignment of Mortgage shall
be submitted for recording within 5 days after receipt of such information but
in no event later than one year after the Closing Date. The Originator or the
Transferor shall request in writing from the Custodian the Assignments of
Mortgage to be recorded pursuant to this subsection (d) and shall return to the
Custodian the recorded Assignments of Mortgage as promptly as practicable upon
receipt thereof. The Indenture Trustee shall be required to retain a copy,
provided to the Indenture Trustee by the Originator or the Transferor, 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 Originator or the Transferor shall promptly prepare a substitute
Assignment of Mortgage or cure such defect, as the case may be, and thereafter
the Originator or 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 Originator or 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, or the applicable Subsequent Transfer Date in the
case of Subsequent Loans, an acknowledgment of receipt of each Indenture
Trustee's Home Loan File received by the Indenture Trustee on the Closing Date
or a Subsequent Transfer Date, as applicable. 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
Owner 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 or
Subsequent Loan, within 45 days after the conveyance of the related Home Loan to
the Owner Trust) and to cause the Custodian to deliver to the Transferor, the
Depositor, the Indenture Trustee 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, the Originator 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 Indenture Trustee 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, valid, legal, executed by a Responsible Officer,
sufficient or appropriate for the represented purpose or that they are other
than what they purport to be on their face, (ii) determine or make
representations as to the collectibility, insurability, effectiveness or
suitability of any Home Loan or (iii) 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 Securityholders and the
Indenture Trustee as the owner thereof for so long as this Agreement continues
in full force and effect. 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 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 Originator or 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
with respect to Initial Loans or within 360 days after the applicable Subsequent
Transfer Date with respect to the Subsequent Loans, and to deliver to the
Transferor, the Depositor, the Indenture Trustee 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 review pursuant to this Agreement or the Custodial
Agreement, the Custodian may conclusively rely on the Originator or the
Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Indenture Trustee 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. Neither the Indenture Trustee 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, valid, legal, executed by a Responsible Officer,
sufficient or appropriate for the represented purpose or that they are other
than what they purport to be on their face, (ii) determine or make
representations as to the collectibility, insurability, effectiveness or
suitability of any Home Loan or (iii) to determine whether any Indenture
Trustee's Home Loan File should include any of the documents specified in
Section 2.04(a)(v) hereof. If a material defect in a document constituting part
of a Indenture Trustee's Home Loan File is discovered, then the Depositor, the
Originator and the Transferor shall comply with the cure, substitution and
repurchase provisions of Section 3.05.
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 Life, of all or a portion of the balance of funds in the
Pre-Funding Account, Life shall on such Subsequent Transfer Date sell, transfer,
assign, set over and otherwise convey without recourse to the Owner Trust, all
of its right, title and interest in and to each Subsequent Loan listed on the
related Subsequent Loan Schedule. The transfer by Life to the Owner Trust 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
Life to the Owner Trust. If the assignment and transfer of the Subsequent Loans
and the other property specified in this Section 2.06(a) from Life to the Owner
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, Life 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) Life shall be deemed to have granted
and does hereby grant to the Owner Trust as of each Subsequent Transfer Date a
perfected, first priority security interest in the entire right, title and
interest of Life in and to the related Subsequent Loans and all other property
conveyed to the Owner Trust 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 Life 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 Owner Trust and use such cash to
purchase the Subsequent Loans on behalf of the Owner 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) Life shall have provided the Indenture Trustee and the
Rating Agencies with an Addition Notice, which notice shall be given no
fewer than four Business Days prior to the related Subsequent Transfer
Date and shall designate the Subsequent Loans to be sold to the Owner
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 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) Life 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) Life shall have delivered an Officer's Certificate to
the Indenture Trustee confirming that, as of each Subsequent Transfer
Date, Life 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) Life shall have delivered to the Indenture Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) (including those set forth in
clause (B) of subparagraph (vii) below) and in the related Subsequent
Transfer Agreement;
(vi) Life shall have delivered an Officer's Certificate to the
Indenture Trustee confirming that the representations and warranties of
Life pursuant to Section 3.04 (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 are true and correct with respect to the Subsequent Loans
and Life, as applicable, as of the Subsequent Transfer Date;
(vii) the Owner Trust shall not purchase a Subsequent
Loan unless:
(A) each Rating Agency shall consent thereto (which
consent shall be evidenced by a letter from the Rating
Agency);
(B) the following conditions shall have been
satisfied: (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 Life 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 April 2023; (VI) such Subsequent Loan, if a Fixed
Rate Loan, must have a Home Loan Interest Rate of at least
9.10%, and, if an Adjustable Rate Loan, must have a Home Loan
Interest Rate of at least 9.25%; (VII) any such Subsequent
Loan must have an original Combined Loan-to-Value Ratio of no
more than 135%, (VIII) such Subsequent Loan must be
underwritten, re-underwritten or reviewed, as applicable, in
accordance with the underwriting guidelines of Life 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
Owner Trust, the Home 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 Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee confirming that, as a
result of such purchase, the percentage of the Pool Principal
Balance comprised of Home Loans that do not constitute "real
estate mortgages" (as set forth in Section 3.04(af)) remains
the same or increases.
(viii) in connection with the transfer and assignment of the
Subsequent Loans, Life shall satisfy the document delivery requirements
set forth in Section 2.05 hereof; and
(ix) each proposed Subsequent Loan must be listed on the Home
Loan Schedule 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
Payment Date, the Indenture Trustee shall determine (i) the amount and correct
dispositions of the Capitalized Interest Requirement and Pre-Funding Account
Earnings for such Payment 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 Life
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 Owner
Trust pursuant to the Owner 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 Issuer,
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 Issuer;
(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 Issuer
good title to, and the Issuer will be the sole owner of, each Home Loan
free and clear of any lien;
(j) The Depositor acquired title to 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; and
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended.
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 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 and is licensed, qualified and in good standing in each state
where a Mortgaged Property is located if the laws of such state require
licensing or qualification in order for the Transferor to conduct such
business and to perform its obligations as the Transferor hereunder,
and in any event the Transferor is in compliance with the laws of any
such state to the extent necessary to ensure the enforceability of the
related Home Loans, 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 presently 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 is no action, suit, proceeding or investigation
pending or, to the knowledge of the Transferor, threatened, before any
court, administrative agency or governmental tribunal against the
Transferor which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Transferor, or in any
material impairment of the right or ability of the Transferor to carry
on its business substantially as now conducted, or in any material
liability on the part of the Transferor, or which would draw into
question the validity of this Agreement, the Loans, or of any action
taken or to be taken in connection with the obligations of the
Transferor contemplated herein, or which would impair materially the
ability of the Transferor to perform under the terms of this Agreement
or that might prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(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 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 Transferor to conduct its business or perform its obligations
hereunder;
(k) The Transferor does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement. 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;
(l) The Transferor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended;
(m) Upon the receipt of each Indenture Trustee's Home Loan
File by the Depositor or the Custodian, as agent for the Depositor
under this Agreement, the Depositor, or the Custodian, as agent for the
Depositor will have good title to each related Home Loan and such other
items comprising the corpus of the Owner Trust Estate free and clear of
any lien created by the Transferor (other than liens which will be
simultaneously released);
(n) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Transferor, and
the transfer, assignment and conveyance of the Debt Instruments and the
Mortgages by the Transferor to the Depositor pursuant to the Home Loan
Purchase Agreement are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction;
(o) The Home Loans are not intentionally selected in a manner
so as to affect adversely the interests of the Depositor or any
transferee of the Depositor (including the Indenture Trustee);
(p) The Transferor has determined that it will treat the
disposition of the Home Loans pursuant to the Home Loan Purchase
Agreement as a sale for accounting purposes, but not for tax purposes;
(q) The Transferor has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in
connection with the sale of the Home Loans to the Depositor other than
to the Depositor or an affiliate thereof; and
(r) The consideration received by the Transferor upon the sale
of the Home Loans under the Home Loan Purchase Agreement constitutes
fair consideration and reasonably equivalent value for the Loans.
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 Owner 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 and Life 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 and
the Originator.
Each of the Servicer and the Originator 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) It is a federal savings bank duly organized, validly
existing and in good standing under the laws of the United States of
America and has all licenses necessary to carry on its business as now
being conducted and is licensed, qualified and in good standing in each
state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order for the Servicer to conduct
such business and to perform its obligations as the Servicer hereunder
and is in any event 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 Loan in accordance with the terms of this
Agreement;
(b) The execution and delivery of this Agreement by it and its
performance of and compliance with the terms of this Agreement will not
violate the its 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 it is a party or which may be applicable to it or any of its
assets;
(c) It 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 it, 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) It is not in violation of, and the execution and delivery
of this Agreement by it 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 it or materially and
adversely affect the performance of its duties hereunder or impair the
ability of the Indenture Trustee (or the Servicer as agent of the
Indenture Trustee) to realize on the Loans or impair the value of the
Home Loans;
(e) There is no action, suit, proceeding or investigation
pending or, to its knowledge, threatened, before any court,
administrative agency or government tribunal against it that, either in
any one instance or in the aggregate, may result in any material
adverse change in its business, operations, financial condition,
properties or assets, or in any material impairment of its right or
ability to carry on its business substantially as now conducted, or in
any material liability on its part, or which would draw into question
the validity of this Agreement, the Home Loans, or of any action taken
or to be taken in connection with its obligations contemplated herein,
or which would impair materially its ability to perform under the terms
of this Agreement or that might prohibit its entering into this
Agreement or the consummation of any of the transactions contemplated
hereby;
(f) The Servicer will examine each Subservicing Agreement and
will be familiar with the terms thereof. Each designated Subservicer
and the terms of each Subservicing Agreement will be required to comply
with the provisions of Section 4.07. The terms of any Subservicing
Agreement will not be inconsistent with any of the provisions of this
Agreement;
(g) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by it of, or compliance by it 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;
(h) The collection practices used by it with respect to the
Home Loans have been, in all material respects, legal, proper, prudent
and customary in the nonconforming mortgage servicing business;
(i) The transactions contemplated by this Agreement are in
the ordinary course of its business;
(j) It 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;
(k) It is an Eligible Servicer and services mortgage loans in
accordance with Accepted Servicing Procedures and the computer systems
utilized by the Servicer in the performance of its servicing activities
hereunder will be capable of properly performing any calculations and
recordkeeping functions with respect to the Home Loans on and after
January 1, 2000;
(l) No Officer's Certificate, statement, report or other
document prepared by it 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;
(m) It is solvent and will not be rendered insolvent as a
result of the performance of its obligations pursuant to this
Agreement;
(n) It has not waived any default, breach, violation or event
of acceleration existing under any Debt Instrument or the related
Mortgage;
(o) It is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended;
(p) It will cause to be performed any and all acts required to
be performed by the Servicer to preserve the rights and remedies of the
Owner Trustee 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 Owner Trustee and the
Indenture Trustee;
(q) The Servicer shall comply with, and shall service, or
cause to be serviced, each Home Loan, in accordance with all applicable
laws;
(r) 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;
(s) The Prospectus Supplement (other than (i) the statements
set forth in the paragraph immediately preceding the final paragraph of
the cover of the Prospectus Supplement and the first sentence of the
final paragraph of the cover of the Prospectus Supplement and (ii) the
statements under the following captions: "SUMMARY -- Securities
Issued", "-- Priority of Payments", "--Maturity Date", "-Credit
Enhancement", "-- Tax Status", "-- ERISA", "-- Legal Investment",
"DESCRIPTION OF THE NOTES", "DESCRIPTION OF CREDIT ENHANCEMENT",
"FEDERAL INCOME TAX CONSEQUENCES", "ERISA CONSIDERATIONS", "LEGAL
INVESTMENT MATTERS" and "UNDERWRITING", as to which the Transferor
makes no statement) 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
(t) The Originator 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, 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, the Owner Trustee
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
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.
Each of the Transferor and the Originator hereby represents and warrants to
the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee and the
Noteholders, with respect to each Home 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 set forth in each Home Loan Schedule is complete, true
and correct;
(b) The information to be provided by the Originator and the Transferor to
the Depositor or the Owner Trustee in connection with a Subsequent Loan will be
true and correct in all material respects at the date or dates respecting which
such information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee simple (or its
equivalent under applicable state law) estate in the real property securing the
amount owed by the Obligor under the Debt Instrument subject only to (i) the
lien of current real property taxes and assessments which are not delinquent,
(ii) any related first mortgage loan, (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally in the area wherein
the related Mortgaged Property is located and specifically referred to in the
title insurance policy delivered to the originator of the Home Loan and referred
to or otherwise considered in the appraisal obtained in connection with the
origination of the related Home Loan and (iv) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by such Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property;
(d) Immediately prior to the sale of the Home Loan to the Depositor (i) the
Transferor or the Originator, as the case may be, was the sole owner and holder
of each Home Loan, (ii) each Home Loan was not otherwise assigned or pledged,
(iii) the Transferor or the Originator, as the case may be, had good,
indefeasible and marketable title thereto, (iv) the Transferor or the
Originator, as the case may be, had full right to transfer and sell the Home
Loan therein to the Depositor or the Transferor, as the case may be, hereunder
free and clear of any encumbrance, equity interest, participation interest,
lien, pledge, charge, claim or security interest, and (v) the Transferor or the
Originator, as the case may be, had full right and authority subject to no
interest or participation of, or agreement with, any other party, to sell and
assign each Home Loan to the Depositor or the Transferor, as the case may be, or
the Originator, as the case may be, hereunder and following the sale of each
Home Loan by the Depositor to the Owner Trustee, the Owner Trustee will own such
Home Loan free and clear of any encumbrance, equity interest, participation
interest, lien, pledge, charge, claim or security interest (other than the lien
created by this Agreement);
(e) As of the Cut-Off Date, no payment of principal or interest on or in
respect of any Home Loan remains unpaid for 30 or more days past the date the
same was due in accordance with the related Debt Instrument without regard to
applicable grace periods;
(f) No Fixed Rate Loan has a Home Loan Interest Rate less than, 9.10% per
annum and the weighted average interest rate of the Fixed Rate Loans as of the
Cut-Off Date was 14.11% and no Adjustable Rate Loan has a Lifetime Floor less
than 9.25% per annum and the weighted average interest rate of the Adjustable
Rate Loans as of the Cut-Off Date was 11.50%;
(g) At origination, no Home Loan had an original term to maturity of
greater than 360 months;
(h) As of the Cut-Off Date, the weighted average remaining term to maturity
of the Home Loans was 108.0 months;
(i) There is no mechanics' or similar lien or claim for work, labor or
material (and no rights are outstanding that under law could give rise to such
lien) affecting the Mortgaged Property; the related Mortgaged Property is not
subject to any lien or claim which is or may be a lien prior to, or equal or
coordinate with, the lien of such Mortgage, except those which are insured
against by the title insurance policy referred to in (ag) below;
(j) There is no delinquent tax or assessment lien against any Mortgaged
Property;
(k) Such Home Loan, the Mortgage, and the Debt Instrument, including,
without limitation, the obligation of the Obligor to pay the unpaid principal of
and interest on the Debt Instrument, are each not subject to any right of
rescission (or any such rescission right has expired in accordance with
applicable law), set-off, counterclaim, or defense, including the defense of
usury, nor will the operation of any of the terms of the Debt Instrument or the
Mortgage, or the exercise of any right thereunder, render either the Debt
Instrument or the Mortgage unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim, or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim, or defense has
been asserted with respect thereto;
(l) The Mortgaged Property is free of material damage and is in good
repair, and there is no pending or threatened proceeding for the total or
partial condemnation of the Mortgaged Property;
(m) The Transferor has not received a notice of default of any first
mortgage loan secured by the Mortgaged Property which has not been cured by a
party other than the Transferor;
(n) Each Debt Instrument and Mortgage are in substantially the forms
previously provided to the Owner Trustee;
(o) No Home Loan had, at the date of origination, a Combined Loan-to-Value
Ratio in excess of 135%, and the weighted average Combined Loan-to-Value ratio
of all Home Loans as of the Cut-Off Date was 108.0%;
(p) The Home Loan was not originated in a program in which the amount of
documentation in the underwriting process was limited in comparison to the
originator's normal documentation requirements for similar type loans;
(q) No more than the following percentages of the Home Loans by Principal
Balance as of the Cut-Off Date were secured by Mortgaged Properties located in
the following states:
Percent of
State Principal Balance
----- -----------------
California 17.2%
Virginia 8.2%
Florida 5.9%
Oklahoma 5.8%
Maryland 5.6%
(r) The Home Loans were not selected by the Originator or the Transferor
for sale to the Transferor or the Depositor on any basis adverse to the
Depositor relative to the portfolio of similar mortgage loans of the Transferor;
(s) None of the Home Loans constitutes a lien on leasehold interests;
(t) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. To the best of the
Originator's or the Transferor's knowledge, there is no homestead or other
exemption available to the related Obligor which would materially interfere with
the right to sell the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage. The Mortgage contains customary and
enforceable provisions for the acceleration of the payment of the Principal
Balance of such Home Loan in the event all or any part of the related Mortgaged
Property is sold or otherwise transferred without the prior written consent of
the holder thereof;
(u) Each Home Loan has been closed and the proceeds of such Home Loan have
been fully disbursed, including reserves set aside by the Originator or the
Transferor, there is no requirement for, and the Originator or the Transferor
shall not make any, future advances thereunder. Any future advances made prior
to the Cut-Off Date have been consolidated with the principal balance secured by
the Mortgage, and such principal balance, as consolidated, bears a single
interest rate and single repayment term reflected on the applicable Home Loan
Schedule. The Principal Balance as of the Cut-Off Date does not exceed the
original principal amount of such Home Loan. Any and all requirements as to
completion of any on-site or off site improvements and as to disbursements of
any escrow funds therefor have been complied with. All costs, fees, and expenses
incurred in making, or recording such Home Loan have been paid and the related
Obligor is not entitled to any refund of any amounts paid or due under the
related Debt Instrument or Mortgage;
(v) All Home Loans were originated in compliance with Life's Underwriting
Guidelines and conform in all material respects to the description thereof set
forth in the Prospectus Supplement;
(w) The terms of the Mortgage and Debt Instrument have not been impaired,
waived, altered, or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the Indenture
Trustee and which has been delivered to the Indenture Trustee. The substance of
any such alteration or modification is or as to Subsequent Loans will be
reflected on the applicable Home Loan Schedule and, to the extent necessary, has
been or will be approved by (i) the insurer under the applicable mortgage title
insurance policy, and (ii) the insurer under any other insurance policy required
hereunder for such Home Loan where such insurance policy requires approval and
the failure to procure approval would impair coverage under such policy;
(x) No instrument of release, satisfaction, subordination, rescission,
waiver, alteration, or modification has been executed in connection with such
Home Loan, no Home Loan has been satisfied, canceled, subordinated or rescinded,
in whole or in part, and no Home Loan has been released, in whole or in part,
except in connection with an assumption agreement which has been approved by the
insurer under any insurance policy required hereunder for such Home Loan where
such policy requires approval and the failure to procure approval would impair
coverage under such policy, and which is part of the Mortgage File and has been
delivered to the Indenture Trustee, and the terms of which are reflected in the
applicable Home Loan Schedule;
(y) There is no default, breach, violation, or event of acceleration
existing under the Mortgage or the Debt Instrument and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event of acceleration, and
neither the Originator nor the Transferor has waived any such default, breach,
violation or event of acceleration. All taxes, governmental assessments
(including assessments payable in future installments), insurance premiums,
water, sewer, and municipal charges, leaseholder payments, or ground rents which
previously became due and owing in respect of or affecting the related Mortgaged
Property have been paid. Neither the Originator nor the Transferor has not
advanced funds, or induced, solicited, or knowingly received any advance of
funds by a party other than the Obligor, directly or indirectly, for the payment
of any amount required by the Mortgage or the Debt Instrument;
(z) All of the improvements which were included for the purposes of
determining the Appraised Value of the Mortgaged Property were completed at the
time that such Home Loan was originated and lie wholly within the boundaries and
building restriction lines of such Mortgaged Property. 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. All inspections, licenses, and certificates
required to be made or issued with respect to all occupied portions of the
Mortgaged Property (including all such improvements which were included for the
purpose of determining such Appraised Value) and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriters certificates, have been made or obtained from the
appropriate authorities and the Mortgaged Property is lawfully occupied under
applicable law;
(aa) There do not exist any circumstances or conditions with respect to the
Mortgage, the Mortgaged Property, the Obligor, or the Obligor's credit standing
that can be reasonably expected to cause such Home Loan to become delinquent or
adversely affect the value or marketability of such Home Loan, other than any
such circumstances or conditions permitted under Life's Underwriting Guidelines;
(ab) All parties which have had any interest in the Mortgage, 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
Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal savings
associations or national banks, (D) not doing business in such state, or (E) not
required to qualify to do business in such state;
(ac) The Debt Instrument, the Mortgage and every other agreement, if any,
executed by the applicable Obligor in connection with such Home Loan, are
genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally and except
that the equitable remedy of specific performance and other equitable remedies
are subject to the discretion of the courts. All parties to the Debt Instrument,
the Mortgage and every other such agreement had legal capacity to execute the
Debt Instrument, the Mortgage and every other such agreement and convey the
estate therein purported to be conveyed, and the Debt Instrument, the Mortgage
and every other such agreement have been duly and properly executed by such
parties or pursuant to a valid power-of-attorney that has been recorded with the
Mortgage;
(ad) The transfer of the Debt Instrument and the Mortgage as and in the
manner contemplated by the Home Loan Purchase Agreement is sufficient either (i)
fully to transfer to the Transferor or the Depositor all right, title, and
interest of the Originator and the Transferor thereto, respectively, as note
holder and mortgagee or (ii) to grant to the Depositor the security interest
referred to in Section 2.3 of the Home Loan Purchase Agreement. The Mortgage has
been duly assigned and the Debt Instrument has been duly endorsed. The
assignment of Mortgage delivered to the Indenture Trustee pursuant to Section
2.04 of this Agreement is in recordable form and is acceptable for recording
under the laws of the applicable jurisdiction. The endorsement of the Debt
Instrument, the delivery to the Indenture Trustee of the endorsed Debt
Instrument, and such assignment of Mortgage, and the delivery of such assignment
of Mortgage for recording to, and the due recording of such assignment of
Mortgage in, the appropriate public recording office in the jurisdiction in
which the Mortgaged Property is located are sufficient to permit the Indenture
Trustee to avail itself of all protection available under applicable law against
the claims of any present or future creditors of the Originator or the
Transferor, and are sufficient to prevent any other sale, transfer, assignment,
pledge, or hypothecation of the Debt Instrument and Mortgage by the Originator
or the Transferor from being enforceable;
(ae) Any and all requirements of any federal, state, or local law
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity, or disclosure
laws applicable to such Home Loan have been complied with, and the Servicer
shall maintain in its possession, available for the Indenture Trustee's
inspection, and shall deliver to the Indenture Trustee or its designee upon
demand, evidence of compliance with all such requirements. The consummation of
the transactions contemplated by this Agreement will not cause the violation of
any such laws;
(af) With respect to the Initial Loans, on the Closing Date, and with
respect to the Subsequent Loans, as of 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 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 the 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% or more of the
gross proceeds.
(ag) Such Home Loan, if a first lien, is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy and
such Home Loan, if a second lien, is covered by a PERT policy, issued by and the
valid and binding obligation of a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring Life, and its
successors and assigns, as to the first or second, as applicable, priority lien,
of the Mortgage in the original principal amount of such Home Loan. The
assignment to the Indenture Trustee of the Transferor's interest in such
mortgage title insurance policy does not require the consent of or notification
to the insurer. Such mortgage title insurance policy is in full force and effect
and will be in full force and effect and inure to the benefit of the Indenture
Trustee and the Owner Trustee upon the consummation of the transactions
contemplated by this Agreement, the Home Loan Purchase Agreement and the
Indenture. No claims have been made under such mortgage title insurance policy
and neither the Transferor nor any prior holder of the Mortgage has done, by act
or omission, anything which would impair the coverage of such mortgage title
insurance policy;
(ah) All improvements upon the Mortgaged Property are insured against loss
by fire, hazards of extended coverage, and such other hazards as are customary
in the area where the Mortgaged Property is located pursuant to fire and hazard
insurance policies naming the Servicer as loss payee thereunder. If the
Mortgaged Property at origination was located in an area identified on a flood
hazard boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Indenture Trustee upon the
consummation of the transactions contemplated by this Agreement, and contain a
standard mortgagee clause naming the originator of such Home Loan, and its
successors and assigns, as mortgagee and loss payee. All premiums thereon have
been paid. The Mortgage obligates the Obligor to maintain all such insurance at
the Obligor's cost and expense, and upon the Obligor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Obligor's cost and expense and to seek reimbursement therefor from the
Obligor, and neither the Originator, the Transferor nor any prior holder of the
Mortgage has acted or failed to act so as to impair the coverage of any such
insurance policy or the validity, binding effect, and enforceability thereof;
(ai) If the Mortgage constitutes a deed of trust, a trustee, authorized and
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Indenture Trustee or the holders of
Notes to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Obligor;
(aj) The Mortgaged Property consists of one or more parcels of real
property separately assessed for tax purposes. Each Mortgaged Property is
improved by a one-to-four-family residential dwelling, which does not include
(i) a unit in a cooperative apartment, (ii) a property constituting part of a
syndication, (iii) a time share unit, (iv) a property held in trust, (v) a
mobile home, (vi) a manufactured dwelling, (vii) a log-constructed home, or
(viii) a recreational vehicle, and each such Mortgaged Property does not
constitute other than real property under applicable state law;
(ak) There exist no material deficiencies with respect to escrow deposits
and payments, if such are required, for which customary arrangements for
repayment thereof have not been made or which the Originator and the Transferor
expects not to be cured, and no escrow deposits or payments of other charges or
payments due the Originator and the Transferor have been capitalized under the
Mortgage or the Debt Instrument;
(al) Such Home Loan was not originated at a below market interest rate.
Such Home Loan does not have a shared appreciation feature, or other contingent
interest feature;
(am) The origination and collection practices used by the Originator and
the Transferor with respect to such Home Loan have been in all respects legal,
proper, prudent, and customary in the mortgage origination and servicing
business;
(an) The Obligor has, to the extent required by applicable law, executed a
statement to the effect that the Obligor has received all disclosure materials,
if any, required by applicable law with respect to the making of fixed-rate
mortgage loans. The Servicer shall maintain or cause to be maintained such
statement in the Mortgage File;
(ao) All amounts received by the Originator or the Transferor with respect
to such Home Loan after the Cut-Off Date and required to be deposited in the
Collection Account have been so deposited in the Collection Account and are, as
of the Closing Date, or will be as of the Subsequent Transfer Date, as
applicable, in the Collection Account;
(ap) Any appraisal report with respect to a Mortgaged Property contained in
the Home Loan File was signed prior to the approval of the application for such
Home Loan by a qualified appraiser, duly appointed by the originator of such
Home Loan, who had no interest, direct or indirect, in the Mortgaged Property or
in any loan made on the security thereof and whose compensation is not affected
by the approval or disapproval of such application;
(aq) When measured by the Cut-Off Date Principal Balances as of the Cut-Off
Date, the Obligors with respect to at least 100% of the Home Loans represented
at the time of origination that the Obligor would occupy the Mortgaged Property
as the Obligor's primary residence;
(ar) The Home Loan Interest Rate and Monthly Payment with respect to the
Adjustable Rate Loans are adjusted in accordance with the terms of the related
Debt Instrument. All required notices of interest rate and payment amount
adjustments have been sent to the Obligor on a timely basis and the computations
of such adjustments were properly calculated. Installments of interest on the
Adjustable Rate Loans are subject to change due to the adjustments to the Home
Loan Interest Rate on each Interest Adjustment Date, with interest calculated
and payable in arrears, sufficient to amortize the Home Loan fully by the stated
maturity date over the original term of the Home Loan. All Home Loan Interest
Rate adjustments have been made in strict compliance with state and federal law
and the terms of the related Debt Instrument. Any interest required to be paid
pursuant to state and local law has been properly paid and credited. As of the
Cut-Off Date, for each Adjustable Rate Loan, the Lifetime Cap is not lower than
approximately 12.80% per annum, the Lifetime Floor is not lower than
approximately 9.25% per annum, the Gross Margin is not less than approximately
4.63%, the related Debt Instrument does not provide for negative amortization,
limits in the amount of monthly payments or a conversion feature, the Home Loan
Interest Rate is subject to adjustment on each Interest Adjustment Date to equal
the sum of LIBOR plus the applicable Gross Margin, subject to rounding, the
Periodic Rate Cap, the applicable Lifetime Floor and the applicable Lifetime Cap
on each Interest Adjustment Date;
(as) To the best of the Originator's and the Transferor's knowledge, there
exists no violation of any local, state, or federal environmental law, rule or
regulation in respect of the Mortgaged Property which violation has or could
have a material adverse effect on the market value of such Mortgaged Property.
Neither the Originator nor the Transferor has knowledge of any pending action or
proceeding directly involving the related Mortgaged Property in which compliance
with any environmental law, rule or regulation is in issue; and, to the best of
the Originator's or the Transferor's 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 employment of such Mortgaged
Property;
(at) With respect to second lien Home Loans:
(i) neither the Originator nor the Transferor has knowledge
that the Obligor has received notice from the holder of the
prior mortgage that such prior mortgage is in default;
(ii) no consent from the holder of the prior mortgage is
needed for the creation of the second lien Mortgage or, if
required, has been obtained and is in the related Home Loan
File;
(iii) if the prior mortgage has a negative amortization
features, the Combined Loan-to-Value Ratio was determined
using the maximum loan amount of such prior mortgage; and
(iv) the related first mortgage loan encumbering the related
Mortgaged Property does not have a mandatory future advance
provision;
(au) the maturity date of the Home Loan is prior to the maturity date of
the related prior lien if such provides for a balloon payment;
(av) Each Home Loan conforms, and all such Home Loans in the aggregate
conform, to the individual and aggregate descriptions thereof in the Prospectus
Supplement;
(aw) The Originator and the Transferor further represent and warrant to the
Owner Trustee, the Indenture Trustee and the Noteholders that as of the
Subsequent Cut-Off Date all representations and warranties set forth in clauses
(a) through (av) above and clause (ax) through (bf) below are correct in all
material respects as to each Subsequent Loan, and (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 second
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 Loan Rate less the applicable Servicing Fee rate, 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 April 2023; (vi) such
Subsequent Loan, if an Adjustable Rate Loan must have an adjustable Loan Rate of
at least 9.25%, and if a Fixed Rate Loan, must have a fixed Loan Rate of at
least 9.10%; (vii) any such Subsequent Loan must have an original Combined
Loan-to-Value Ratio of no more than 135%; (viii) such Subsequent Loan must be
underwritten, re-underwritten or reviewed, as applicable, in accordance with the
Underwriting Guidelines of Life 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 Owner Trust, the Loans included in the Owner Trust 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.
(ax) To the best of the Originator's and the Transferor's knowledge, no
error, omission, misrepresentation, negligence, fraud or similar occurrence with
respect to a Home Loan has taken place on the part of any person, including
without limitation the Obligor, any appraiser, a builder or developer, or any
other party involved in the origination of the Home Loan or in the application
of any insurance in relation to such Home Loan;
(ay) Each Debt Instrument held by the Indenture Trustee is the sole
original Debt Instrument and no copies exist which are not stamped duplicate;
(az) Each Mortgage was recorded, and all subsequent assignments of the
original Mortgage have been recorded in the appropriate jurisdictions wherein
such recordation is necessary to perfect the lien thereof as against creditors
of the Originator and the Transferor;
(ba) No more than 3.5% of the Fixed Rate Loans, and 4.9% of the Adjustable
Rate Loans are secured by properties sharing a single ZIP code;
(bb) With respect to each Home Loan, the payments required of the related
Obligor are and will be such that the Home Loan will fully amortize over its
term;
(bc) No Home Loan contains any provisions pursuant to which payments are
paid or partially paid with funds deposited in any separate account established
by the Originator, the Transferor, the Obligor or anyone else on behalf of the
Obligor, or paid by any source other than the Obligor. No Home Loan contains any
other similar provision which may constitute a "buydown" provision. No Home Loan
is a graduated payment mortgage loan. No Home Loan has a shared appreciation or
other contingent interest feature;
(bd) The Home Loans are not being transferred with any intent to hinder,
delay or defraud any creditor;
(be) No Obligor has or will have a claim or defense under any express or
implied warranty or otherwise with respect to goods or services provided under
such Home Loan;
(bf) The Mortgage and the Debt Instrument contain the entire agreement of
the parties and all obligations of the seller or subcontractor under the related
Home Loan, and no other agreement defines, modifies, or expands the obligations
of the seller or subcontractor under the Home Loan.
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, the
Owner 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 or Life 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(af) 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 or the Originator's discovery of such breach or the Transferor's or
the Originator's receiving notice thereof such breach has not been remedied by
the Transferor or the Originator and such breach materially and adversely
affects the interests of Securityholders or in the related Home Loan (the
"Defective Home Loan"), the Transferor or the Originator 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 Owner 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 or the Originator shall provide the Servicer, the Indenture Trustee
and the Owner Trustee with a certification of a Responsible Officer on the
Determination Date next succeeding the end of such 60-day period indicating
whether the Transferor or the Originator 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 or the Originator of the Substitution
Adjustment, if any, to be deposited in the Collection Account. For purposes of
calculating the Available Collection Amount for any Payment Date, amounts paid
by the Transferor or the Originator 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 Payment
Date shall be deemed to have been paid during the related Due Period and shall
be transferred to the Note Payment 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 or the
Originator 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 and warranties of the Transferor or the
Originator 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 Originator, 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 or the Originator
substitutes a Qualified Substitute Home Loan or Loans, the Transferor or the
Originator shall effect such substitution by delivering (i) to the Indenture
Trustee and Owner Trustee a certification executed by a Responsible Officer of
the Transferor or the Originator to the effect that the Substitution Adjustment
has been credited to the Collection Account and (ii) to the Indenture Trustee
(or Custodian on the Indenture Trustee's behalf, if applicable) 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 (or Life, if substituted by Life). 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 or the Originator shall give written notice to the Issuer, the
Servicer (if the Originator 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 or the Originator 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 Originator 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 or the Originator, as the case may be, 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 Owner
Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor or the Originator pursuant to this Agreement, upon
the deposit of the Purchase Price therefor into the Collection Account, the
Indenture Trustee shall assign to the Transferor or the Originator, as the case
may be, 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 or the Originator to effect the
repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor and
the Originator set forth in this Section 3.05 to cure, purchase or substitute
for a Defective Home Loan (and to indemnify the Owner Trust for certain losses
as described herein in connection with a Defective Home Loan) constitute the
sole remedies hereunder of the Depositor, the Indenture Trustee, the 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 or the Originator relating to or arising out of a
defect in an Indenture Trustee's Home Loan File as contemplated by Section 2.05
hereof or against the Transferor or the Originator 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 the Originator or notice thereof
by the Transferor or the Originator to the Indenture Trustee, (ii) failure by
the Transferor or the Originator to cure such defect or breach or purchase or
substitute such Home Loan as specified above, and (iii) demand upon the
Transferor or the Originator, as applicable, by the Issuer or the Majority
Noteholders for all amounts payable in respect of such Home Loan.
(e) Neither the Owner Trustee 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. 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.
(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 Issuer or any of them, any and all instruments of
satisfaction or cancellation or of partial or full release or discharge, and all
other comparable instruments with respect to the 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 Issuer 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
Indenture Trustee, the Owner Trustee or the Depositor. 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 proceeds 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. The Servicer shall also
cause each Subservicer to maintain a policy of insurance covering errors and
omissions and a fidelity bond which would meet the requirements set forth above.
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 Life, the Transferor and the Depositor, respectively, with respect
to the assets conveyed to the Owner Trust, Life, the Transferor 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 Life, the Transferor and the Depositor,
respectively, and Life, the Transferor 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 Owner Trust has terminated pursuant to Section 9.1 of the Owner Trust
Agreement. The Indenture Trustee agrees to cooperate with Life, the Transferor
and the Depositor in preparing, executing and filing such statements. The
Indenture Trustee agrees to notify Life, the Transferor and the Depositor on the
third Payment 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 Life, the Transferor 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 Life, the Transferor or the
Depositor has ceased to do business whenever any such financing and continuation
statements must be filed or Life, the Transferor or the Depositor fails to file
any such financing statements or continuation statements at least one month
prior to the expiration thereof and the Indenture Trustee is notified of such
failure or has actual knowledge thereof, each of Life, the Transferor 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 relating to assets conveyed to the Owner Trust
and the Depositor does hereby make, constitute and appoint the Owner 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 relating to assets conveyed to the Owner Trust.
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, subject to Section
4.01(b), the Servicer shall take, on behalf of the Issuer and the Indenture
Trustee, all reasonable actions that are necessary to protect the interests of
the Securityholders and/or to preserve the security of the related Home Loan.
The Servicer shall promptly notify 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 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 Owner 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 Owner 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.
The Indenture Trustee shall, on behalf of the Issuer, 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 indemnify and hold harmless each of the Issuer and the Depositor
for any costs, expenses or liability arising as a result of the failure of the
Indenture Trustee to perform its duties and obligations under this Section 4.09.
Section 4.10 Foreclosure.
(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, in accordance with the standard of
care specified in Section 4.01(a), take such action as it shall deem to be in
the best interest of the Securityholders, including but not limited to
proceeding against the Mortgaged Property securing such Home Loan, and any other
actions that in the reasonable judgment of the Servicer will be likely to
maximize the proceeds realizable therefrom under the circumstances. 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 Issuer 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 Owner Trust by
creating net liquidation proceeds (after reimbursement of all amounts owed with
respect to such Home Loan to the Servicer).
Prior to acquiring any Foreclosure Property, however, the Servicer shall
cause a review to be performed, in accordance with Accepted Servicing
Procedures, on the related Mortgaged Property by a company such as Equifax, Inc.
or Toxicheck, and the scope of such review shall be limited to the review of
public records and documents for indications that such Mortgaged Property has on
it, has under it, or is near hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental problem,
the Servicer shall provide a copy to the Indenture Trustee of the related report
with an attached certification of a Responsible Officer that based on an
analysis of all available information (including potential clean up costs and
liability claims) at the time it is the best judgment of such Responsible
Officer that such foreclosure shall increase Net Liquidation Proceeds to the
Owner Trust and the Owner Trust shall take title to such Mortgaged Property. The
Indenture Trustee shall promptly forward such report and certification to the
Noteholders.
(c) The Indenture Trustee shall furnish the Servicer, 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 and the
Indenture Trustee shall not be accountable for the actions of the Servicer under
such powers of attorney or other documents and shall be indemnified by the
Servicer with respect to such actions. 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 Owner 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 Owner Trustee nor
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 Owner 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 Payment 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 (collectively, the
"Collection Account"), which shall be separate Eligible Accounts and
may be interest-bearing, entitled "Collection Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the
Life Financial Home Loan Asset Backed Notes, Series 1997-3". 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 certification, substantially in the Form of Exhibit D
attached hereto, by the Servicer and acknowledged by the depository
institution. 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, and in accordance with the preceding paragraph, 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 Payment 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 one
or more Note Payment Accounts (collectively, the "Note Payment
Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Note Payment Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the
Life Financial Home Loan Asset Backed Notes, Series 1997-3". Funds in
the Note Payment 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 on account of principal and interest
on the Home Loans collected after the Cut-Off Date, including
(A) any Capitalized Interest Subsequent Deposit and (B) on the
Closing Date, the Required Interest Deposit;
(ii) all Net Liquidation Proceeds pursuant to
Section 4.11 hereof;
(iii) all Insurance Proceeds;
(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 Payment Account on the next Payment Date following such
Due Period.
(2) Deposits to Note Payment Account. On the Remittance Date
of each month the Servicer shall instruct the Indenture Trustee
to withdraw from the Collection Account the Available Collection
Amount and deposit such into the Note Payment Account for such
Payment 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 Servicing Advance 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 Payment Account. To the extent funds are
available in the Note Payment Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Payment Date) shall make withdrawals therefrom by
9:00 a.m. (New York City time) on each Payment Date, for application in the
following order of priority:
(i) to distribute on such Payment 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
Payment Dates and (ii) all Nonrecoverable Servicing Advances
not previously reimbursed, (b) to the Indenture Trustee, an
amount equal to the sums of the Indenture Trustee Fee all
unpaid Indenture Trustee Fees from prior Payment Dates and
interest and gains on funds held in the Note Payment Account
and (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
(ii) to deposit into the Certificate Distribution
Account the applicable portions of the Available Payment
Amount distributable in respect of the Residual Interest
calculated pursuant subsections (d) and (e) of this Section
5.01 on such Payment 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 Payment Account hereunder until the Class Principal Balance of each
Class of Notes has been reduced to zero.
(d) On each Payment Date, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance Report
for such Payment Date) shall distribute the Regular Payment Amount from the Note
Payment 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 Payment Amount for such Payment
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 Payment Amount for such
Payment Date;
(iii) to the holders of the Class B Notes, the
Subordinate Noteholders' Interest Payment Amount for such
Payment Date;
(iv) if with respect to such Payment Date the
Pre-Funding Payment 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 Class A Notes to the Senior Optimal
Principal Balance for such Payment Date; provided, however,
that on each Payment Date occurring on or after any reduction
of the Class Principal Balances of the Class M-1 Notes, Class
M-2 Notes and the Class B Notes to zero through the
application of Allocable Loss Amounts, amounts shall be
distributed among the remaining Class A 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 Payment Date;
(vii) to the holders of the Class B Notes, the amount
necessary to reduce the Class Principal Balances thereof to
the Class B Optimal Principal Balance for such Payment Date;
(viii) to the appropriate Classes of Notes, an amount
equal to the Overcollateral Deficiency Amount, if any, in the
priorities and amounts specified in Section 5.01 (d) (after
giving effect to payments made pursuant to clauses (i) through
(vii) above, and thereafter, sequentially, to the Class M-1
Notes, Class M-2 Notes and the Class B 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 Payment Date, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance Report
for such Payment 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
Payment 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 Payment Date; and
(C) (i) to the holders of the Class B Notes,
until the Class Principal Balance thereof
has been reduced to the Class B Optimal
Principal Balance for such Payment Date; and
(ii) sequentially, to the Class M-1 Notes, the Class M-2
Notes and the Class B Notes, in that order, until
their respective Loss Reimbursement Deficiencies, if
any, have been paid in full (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.
(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 with the Indenture Trustee for the
benefit of the Owner Trustee on behalf of the Certificateholders one or more
Certificate Distribution Accounts (collectively, the "Certificate Distribution
Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Certificate Distribution Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the Life
Financial Home Loan Asset Backed Notes, Series 1997-3". Funds in the Certificate
Distribution Account shall be invested in accordance with Section 5.03 hereof.
(b) Distributions. On each Payment Date the Indenture Trustee shall
withdraw from the Note Payment Account all amounts required to be deposited into
the Certificate Distribution Account with respect to such Payment Date pursuant
to Section 5.01(c)(ii) hereof and, on behalf of the Owner Trustee, shall deposit
such amounts into the Certificate Distribution Account. The Indenture Trustee
shall distribute all remaining amounts on deposit in the Note Payment 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 Owner Trustee shall distribute all amounts on deposit in the Certificate
Distribution Account to the holders of the Residual Interest Certificates.
(c) All distributions made on each Class of Notes on each Payment 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
Payment 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 Indenture Trustee, 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 Payment 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 Owner 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 Owner Trust Agreement. Subject
to rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee 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 Owner Trust Estate. Subject to the rights of the
Indenture Trustee, the Owner Trustee agrees, by its acceptance hereof, that such
Certificate Distribution Account shall be subject to the sole and exclusive
custody and control of the Owner Trustee for the benefit of the Issuer and the
parties entitled to distributions therefrom, including, without limitation, the
Certificateholders, and the Owner Trustee shall have sole signature and
withdrawal authority with respect to the Certificate Distribution Account.
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
Owner 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 Owner 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, except that funds held in the
Note Payment Account shall be invested by the Indenture Trustee in
Permitted Investments selected by it. 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
Payment Date, or the Remittance Date in the case of funds in and
Permitted Investments relating to the Collection Account, 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 the Collection Account and the Certificate
Distribution Account shall be deposited into such account immediately
upon receipt by the Indenture Trustee. All interest and any other
investment earnings on amounts or investments held in the Note Payment
Account shall be payable to 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 "Norwest Bank Minnesota, National
Association, as Indenture Trustee, in trust for the Life Financial Home
Loan Asset Backed Notes, Series 1997-3". While the Indenture Trustee
holds the Certificate Distribution Account, on behalf of the Owner
Trustee, all Permitted Investments in which funds in the Certificate
Distribution Account are invested shall be held by or registered in the
name of "Norwest Bank Minnesota, National Association, as Indenture
Trustee, on behalf of the Owner Trustee, in trust for the Life
Financial Home Loan Asset Backed Notes, Series 1997-3".
(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 or Owner Trustee, respectively, 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 Servicer 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 Trust
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 1.01 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 1.01 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 1.01 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 Payment Date, any Allocable Loss Amounts shall be applied to the
reduction of the Class Principal Balances of the Class B 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 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, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the Life
Financial Home Loan Asset Backed Notes, Series 1997-3." 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 Owner Trustee will deposit in the Pre-Funding
Account the Pre-Funding Amount (which Pre-Funding Amount was received from the
Depositor and derived 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-Funding 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-Funding 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-Funding Amount is equal to or less than $50,000,
and deposit such amount in the Note Payment 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-Funding Amount is greater than $50,000, and
deposit such amounts to the Note Payment Account to be applied in reduction of
the Class Principal Balance of each Class of Notes, pro rata, based on the
respective Original Class Principal Balances.
(c) On the Business Day preceding each of the second and third Payment
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, Norwest Bank Minnesota, National Association, as Indenture Trustee, in
trust for the Life Financial Home Loan Asset Backed Notes, Series 1997-3." 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 Owner Trustee 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 Owner Trustee 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; WITHHOLDING
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 following report (the
"Servicer's Monthly Remittance Report") setting forth (i) the date of such
Report (day, month and year), the name of the Issuer (i.e. "Life Financial Home
Loan Owner Trust 1997-3"), the Series designation of the Notes (i.e. "Series
1997-3") and the date of this Agreement, (ii) the payments and collections
received with respect to the Home Loans during the Due Period for the month
immediately preceding the month in which such Determination Date occurs and
(iii) if not included in the Servicer's Monthly Remittance Report, a printed
report, setting forth the information described in clauses (xii)-(xvii) of
Section 6.01(b). 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 Payment Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Payment
Statement") to the Depositor, 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. "Life Financial Home Loan Owner Trust 1997-3"), the
Series designation of the Notes (i.e., "Series 1997-3"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available
Payment Amount for the related Payment 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 Payment 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 Payment
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 Payment Date;
(vii) the Servicing Compensation, the Indenture Trustee
Fee and the Owner Trustee Fee, if any, for such Payment
Date;
(viii) the Overcollateralization Amount on such Payment
Date, the Overcollateralization Target Amount as of such
Payment Date, the Net Loan Losses incurred during the
related Due Period, the cumulative Net Loan Losses as of
such Payment Date, the Allocable Loss Amount for such
Payment Date and the application of the Allocable Loss
Amount Priority for such Payment 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 Pre-Funding Amount of the end of the related
Due Period;
(xii) 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;
(xiii) 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;
(xiv) 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;
(xv) 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);
(xvi) the scheduled principal payments and the
principal prepayments received with respect to the Home Loans
during the Due Period; and
(xvii) 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.
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 pursuant to this Section 6.01
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. Such information shall be deemed to have been furnished to the
extent included in information returns provided to Securityholders under the
provisions of the Code as from time to time in force.
(d) On each Payment Date, the Indenture Trustee shall forward to the
holders of the Residual Interest Certificates a copy of the Payment Statement in
respect of such Payment Date and a statement setting forth the amounts actually
distributed to such holders of the Residual Interest Certificates on such
Payment 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 Withholding.
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 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 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 Owner Trust, the
Servicer, on behalf of the Indenture Trustee, shall exercise any right the Owner
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 Owner Trust, the
Servicer, on behalf of the Owner 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 Owner 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
Owner 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, in
the form of Exhibit C to the Custodial Agreement, release the related Indenture
Trustee's Home Loan File to the Servicer in accordance with Section 3(b) 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 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 Payment 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 Depositor and the
Rating Agencies not later than 90 days following the end of each fiscal year of
the Servicer (beginning with fiscal year ending 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
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 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, the Indenture Trustee, the Owner Trustee and each of
their respective agents shall have the right upon reasonable 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 may be 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, the Indenture Trustee, the
Owner 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 Owner Trustee 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
Issuer, 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 Issuer 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 Issuer and held harmless against any loss, liability
or expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Securities, 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, the Owner
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 the 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 November 30, 1997 Cut-Off
Date, 21.75%, or (2) thereafter 32.625% (where the "Expected
Loan Loss Percentage" shall be the sum of (A) the cumulative
Net Loan Losses divided by the Original 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 Original 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 Original 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 Original Pool Principal Balance).
(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied and the Indenture Trustee has been informed or has
actual knowledge thereof, 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.
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 Payment 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 Owner Trustee 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 and the Majority Noteholders 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 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 to the Indenture 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 Issuer on or after any Payment 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 Payment 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 Payment Account pursuant to Section
5.01(b)(2) hereof for distribution to Noteholders on the succeeding Payment
Date; and any amounts received with respect to the Home Loans and Foreclosure
Properties subsequent to the Due Period immediately preceding such final Payment
Date shall belong to the purchaser thereof. For purposes of calculating the
Available Payment Amount for such final Payment Date, amounts transferred to the
Note Payment Account immediately preceding such final Payment 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 Issuer 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
Owner 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, Life Financial Home Loan Owner Trust 1997-3, c/o Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Emmett R. Harmon, 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, Life Financial Corp., 10540 Magnolia Avenue,
Suite B, Riverside, California 92505, Attention: L. Bruce Mills, 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, Norwest Bank Minnesota, National Association, Norwest
Place, Sixth and Marquette, Minnesota 55479, Attention: Structured Finance/Life
1997-3; 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 Payment 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 Fitch IBCA, Inc., One State Street Plaza, New York, New
York 10004, Attention: Structured Finance - Residential Mortgage or (ii) if to
Moody's Investors Service, 99 Church Street, New York, New York 10007,
Attention: Residential Mortgage Pass-Through Group.
Section 12.14 Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Owner 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.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Depositor, the Transferor, the Servicer
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.
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3,
By: Wilmington Trust Company, 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
LIFE INVESTMENT HOLDINGS, INC., as
Transferor
By:
---------------------------------------
Name:
Title:
LIFE BANK, as Servicer
By:
---------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
---------------------------------------
Name:
Title:
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
December 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 WILMINGTON TRUST
COMPANY, not in its individual capacity but in its capacity as Owner Trustee of
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3 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 WILMINGTON TRUST COMPANY, this the ____ day
of December, 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
December 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 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 FINANCIAL ASSET SECURITIES CORP., this the
____ day of December, 1997.
-----------------------------------
Notary Public, State of ___________
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day of
December 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 LIFE BANK, as the
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 LIFE BANK, this the ____ day of December,
1997.
-----------------------------------
Notary Public, State of ___________
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day of
December 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 LIFE INVESTMENT
HOLDINGS, INC., as the Transferor, 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 LIFE INVESTMENT HOLDINGS, INC., this the
____ day of December, 1997.
-----------------------------------
Notary Public, State of ___________
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day of
December 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 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, 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 NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, this the __ day of December, 1997.
-----------------------------------
Notary Public, State of ___________
<PAGE>
EXHIBIT A
to
Sale and Servicing Agreement
Requests for a copy of the Home Loan Schedule should be made in writing to
the Office of General Counsel of PaineWebber Mortgage Acceptance Corporation IV,
at 1285 Avenue of the Americas, New York, Attention: John Fearey, Esq.
<PAGE>
EXHIBIT C
SUBSEQUENT TRANSFER AGREEMENT (the "Subsequent Transfer Agreement"), dated
as of [________, 199_], among Life Bank ("Life"), Life Investment Holding, Inc.
(the "Transferor"), Life Financial Home Loan Owner Trust 1997-3 (the "Issuer" or
the "Owner Trust") and Norwest Bank Minnesota, National Association, as
indenture trustee (in such capacity, 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 December 1, 1997 (the "Purchase Agreement"), among PaineWebber Mortgage
Acceptance Corporation IV, as Depositor (the "Depositor"), Life and Life
Investment Holdings, Inc. (the "Transferor"), Life has sold, transferred,
assigned and otherwise conveyed to the Transferor all its right, title and
interest in and to certain Home Loans and the Transferor has sold, transferred,
assigned and otherwise conveyed to the Depositor all its right, title and
interest in and to such Home Loans.
WHEREAS, pursuant to the terms of a Sale and Servicing Agreement, dated as
of December 1, 1997 (the "Sale and Servicing Agreement"), among Life Financial
Home Loan Owner Trust 1997-3 (the "Owner Trust"), Life, the Transferor, the
Originator and the Indenture Trustee, Life has the obligation to sell, transfer,
assign and otherwise convey to the Owner Trust 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 Life sell all its right, title and
interest in and to the Subsequent Loans and the Related Documents to the Owner
Trust 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 Owner Trust. Life, concurrently with the
execution and delivery of this Subsequent Transfer Agreement, does hereby sell,
transfer, assign, set over, and otherwise convey to the Owner Trust, 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) Life'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.
3. Obligations of Life Upon Sale. In connection with any transfer pursuant
to Section 2 hereof, Life 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 Owner Trust pursuant to this Subsequent
Transfer Agreement and (b) to deliver to the Indenture Trustee 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 Life, Life shall on behalf of the
Owner Trust deliver to, and deposit with the Custodian, on behalf of the Owner
Trustee, 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 Life, Life shall on behalf of the
Owner Trust deliver to, and deposit with the Servicer, as the designated agent
of the Owner Trustee, on or before the Subsequent Transfer Date the Servicer's
Home Loan File with respect to each Subsequent Loan.
Life further hereby confirms to the Indenture Trustee that, as of the
Subsequent Transfer Date it has caused the portions of Life'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 Owner Trust.
The parties hereto intend that each of the transactions set forth herein be
a sale by Life to the Owner Trust of all of Life'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, Life hereby grants to
the Owner Trust a security interest in all of the Life'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 Life'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 Life to the
Owner Trust on the Subsequent Transfer Date, the Owner Trust agrees to pay to
Life 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, Transferor, at its own
expense, shall record each Assignment of Mortgage in favor of the Indenture
Trustee to the same extent required under Section 2.4 of the Purchase Agreement.
5. Representations and Warranties. (a) Each of Life and 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) Each of Life and the Transferor further represents and warrants to the
Owner Trust 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 5(b) shall survive delivery of the respective Subsequent
Loan Files to the Indenture Trustee on behalf of the Owner Trust. In the event
that (a) any of the representations and warranties of Life or 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) Life or the Transferor shall fail to
cure such breach within the time period specified in Section 3.05 of the Sale
and Servicing Agreement, Life or 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 Life or the
Transferor pursuant to this Section 5(b) that are made to Life's or the
Transferor's best knowledge, if it is discovered by any of Life, 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 Life's or the Transferor's lack
of knowledge, such inaccuracy shall be deemed a breach of the applicable
representation and warranty.
6. Covenants of Life. Life hereby covenants that except for the transfer
hereunder, Life 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 Life will defend the right, title and
interest of the Owner Trust, in, to and under the Subsequent Loans, against all
claims of third parties claiming through or under Life.
Whenever and so often as requested by the Indenture Trustee, Life or the
Transferor, 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 Life,
the Transferor and the Owner Trust created hereby shall terminate, except for
Life's, the Transferor's and the Owner Trust's indemnity obligations as provided
herein, upon the termination of the Owner 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
Owner Trust is purchasing, and Life is selling, the Subsequent Loans rather than
pledging the Subsequent Loans to secure a loan by the Owner Trust to Life. The
parties hereto each intend to treat the transaction for accounting purposes as a
sale by Life, and a purchase by the Owner Trust, of the Subsequent Loans. For
federal income tax purposes, the parties hereto each intend to treat the Notes
as debt. The Indenture Trustee 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 Life 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, Life, the Transferor, the Indenture Trustee and the
Owner Trust 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.
LIFE BANK
By:
--------------------------------------
Name:
Title:
LIFE INVESTMENT HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By:
--------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
--------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Subsequent Loan Schedule
------------------------
<PAGE>
EXHIBIT D
COLLECTION ACCOUNT CERTIFICATION
Life Bank ("Life") hereby certifies that it has established the account
described below as a Collection Account pursuant to Section 5.1(a)(1) of the
Sale and Servicing Agreement, dated as of December 1, 1997, among Life Financial
Home Loan Owner Trust 1997-3, PaineWebber Mortgage Acceptance Corporation IV,
Life, Life Investment Holdings, Inc. and Norwest Bank Minnesota, National
Association, as Indenture Trustee.
Title of Account: Collection Account, Norwest Bank Minnesota,
National Association, as Indenture Trustee, in
trust for the Life Financial Home Loan Asset
Backed Notes, Series 1997-3.
Account Number: ______________________
Name and Address
of office or branch
of the institution
at which Account is
maintained: ______________________
______________________
______________________
Life Bank
By: ______________________
L. Bruce Mills
Executive Vice President,
Secretary and Treasurer
Acknowledged:
[ ]
_________________________
Name:
Title:
================================================================================
TRUST AGREEMENT
among
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
as Depositor,
LIFE INVESTMENT HOLDINGS, INC.,
as Transferor,
WILMINGTON TRUST COMPANY,
as Owner Trustee
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Paying Agent
Dated as of December 1, 1997
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
Home Loan Asset Backed Notes, Series 1997-3
================================================================================
<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
Transferor; Covenant of the Transferor.........................
ARTICLE III
RESIDUAL INTEREST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership..............................................
SECTION 3.2 The Residual Interest Certificates.............................
SECTION 3.3 Execution, Authentication and Delivery of Residual Interest
Certificates...................................................
SECTION 3.4 Registration of Transfer and Exchange of Residual Interest
Certificates...................................................
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Residual Interest
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;
Covenants......................................................
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, the Basic
Documents 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 Residual Interest Certificates or
Home Loans.....................................................
SECTION 7.7 Owner Trustee May Own Residual Interest Certificates and Notes.
SECTION 7.8 Licenses.......................................................
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..................................................
SECTION 11.12 Residual Interest Transfer Restrictions........................
EXHIBIT A Form of Residual Interest Certificate
EXHIBIT B Reserved
EXHIBIT C Form of Certificate of Trust
EXHIBIT D Form of Certificate of Non-Foreign Status
<PAGE>
TRUST AGREEMENT, dated as of December 1, 1997, among PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, a Delaware corporation, as Depositor (the
"Depositor"), LIFE INVESTMENT HOLDINGS, INC., a Delaware corporation (the
"Transferor"), WILMINGTON TRUST COMPANY, a Delaware banking corporation, as
Owner Trustee (the "Owner Trustee") and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association (the "Paying Agent").
WITNESSETH:
In consideration of the mutual agreements and covenants herein contained,
the Depositor, the Transferor, the Paying Agent and the Owner Trustee 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 December 1, 1997 among the Issuer, the Transferor, and Norwest Bank
Minnesota, National Association, as Administrator.
"Administrator" shall mean Norwest Bank Minnesota, National Association, 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 Section 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 Rodney Square
North, 1100 North Market Street, Wilmington, DE 19890-0001, Attention: Corporate
Trust Administration; or at such other address in the State of Delaware as the
Owner Trustee may designate by notice to the Owners and the Transferor, 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 Transferor).
"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 December 1, 1997, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means Norwest Bank Minnesota, National Association, as
Indenture Trustee under the Indenture.
"Issuer" shall mean Life Financial Home Loan Owner Trust 1997-3, 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 a person other than a "U.S. Person."
"Owner" shall mean each holder of a Residual Interest Certificate.
"Owner Trust Certificates" shall mean the Residual Interest Certificates.
"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 Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor owner trustee hereunder.
"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 Payment Date the last Business Day of
the month immediately preceding the month in which such Payment Date occurs.
"Residual Interest" shall mean the right to receive distributions of Excess
Spread, if any, and certain other funds, if any, on each Payment Date, pursuant
to Sections 5.01(d) and 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 Owner Trust as Issuer, PaineWebber
Mortgage Acceptance Corporation as Depositor, Norwest Bank Minnesota, National
Association, as Indenture Trustee, the Transferor and Life, as 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.
"U.S. Person" shall mean a citizen or resident of the United States, a
corporation, partnership (except as 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 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, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible 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 "Life
Financial Home Loan Owner Trust 1997-3", 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
Transferor.
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 Transferor, 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 Transferor 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 Residual Interest 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 sole Owner or 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 and in
the Business Trust Statute 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. 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 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 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
Transferor; Covenant of the Transferor.
(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 Transferor hereby represents and warrants to the Owner Trustee
that:
(i) The Transferor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(ii) The Transferor 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 Transferor 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 Transferor 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 Transferor, or any
indenture, agreement or other instrument to which the Transferor 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 Transferor's knowledge, any order, rule or regulation
applicable to the Transferor of any court or of any Federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Transferor or its
properties.
(v) There are no proceedings or investigations pending or, to the
Transferor's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Transferor 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 Transferor of
its obligations under, or the validity or enforceability of, this
Agreement.
(c) The Transferor 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
RESIDUAL INTEREST 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 Residual Interest Certificates, the Depositor shall be the sole Owner of the
Trust.
SECTION 3.2 The Residual Interest Certificates. The Residual Interest
Certificates shall not be issued with a principal amount. The Residual Interest
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of a Trust Officer of the Owner Trustee. Residual Interest
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Residual Interest
Certificates or did not hold such offices at the date of authentication and
delivery of such Residual Interest Certificates.
A transferee of a Residual Interest 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 Residual Interest Certificate duly registered in such
transferee's name pursuant to Section 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Residual Interest
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 Residual Interest
Certificate shall entitle its holder to any benefit under this Agreement, or
shall be valid for any purpose, unless there shall appear on such Residual
Interest 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 Residual Interest
Certificate shall have been duly authenticated and delivered hereunder. All
Residual Interest Certificates shall be dated the date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of Residual Interest
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 Residual Interest Certificates and
of transfers and exchanges of Residual Interest Certificates as herein provided.
The Owner Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Residual Interest
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 Residual
Interest Certificates in authorized denominations of a like aggregate amount
dated the date of authentication by the Owner Trustee or any authenticating
agent provided that prior to such execution, authentication and delivery, the
Owner Trustee shall have received an Opinion of Counsel to the effect that the
proposed transfer will not cause the Trust to be characterized as an association
(or a publicly traded partnership) taxable as a corporation or alter the tax
characterization of the Notes for federal income tax. At the option of an Owner,
Residual Interest Certificates may be exchanged for other Residual Interest
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Residual Interest Certificates to be exchanged at the office or
agency maintained pursuant to Section 3.8.
Every Residual Interest 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 Residual Interest 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 Residual Interest 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 Residual Interest 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 Residual Interest Certificates for a period of 15 days preceding
the due date for any payment with respect to the Residual Interest Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Residual Interest
Certificates. If (a) any mutilated Residual Interest 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
Residual Interest 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 Residual Interest 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 Residual Interest Certificate, a new Residual Interest
Certificate of like tenor and denomination. In connection with the issuance of
any new Residual Interest 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 Residual Interest 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 Residual
Interest Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a Residual
Interest Certificate for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Residual Interest
Certificate shall be registered in the Certificate Register as the owner of such
Residual Interest 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 Owner
Trustee shall furnish or cause to be furnished to the Servicer and the
Depositor, within 15 days after receipt by the Owner Trustee 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 Owner
Trustee, and such application states that the applicant desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Residual Interest Certificates and such application is accompanied
by a copy of the communication that such applicants propose to transmit, then
the Owner Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Owner, by receiving and holding a
Residual Interest Certificate, shall be deemed to have agreed not to hold any of
the Depositor, the Transferor, 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 Residual Interest
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
Residual Interest Certificates and the Basic Documents may be served. The Owner
Trustee initially designates the Administrator's office in the Borough of
Manhattan, The City of New York as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Transferor
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 Indenture Trustee as Paying Agent under this Agreement. The Owner Trustee
hereby appoints the Paying Agent to establish and maintain the Certificate
Distribution Account. 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 Indenture Trustee 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 Indenture Trustee also in its role as
Paying Agent, for so long as the Indenture Trustee 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 Transferor,
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 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, LIFE FINANCIAL 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 Transferor, 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 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 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 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.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters;
Covenants. (a) 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:
(i) 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);
(ii) 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);
(iii) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder is required;
(iv) 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;
(v) 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;
(vi) the consent to the calling or waiver of any default of any Basic
Document;
(vii) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(viii) except as provided in Article IX hereof, dissolve, terminate or
liquidate the Trust in whole or in part;
(ix) 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;
(x) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement;
(xi) do any act that conflicts with any other Basic Document;
(xii) do any act which would make it impossible to carry on the
ordinary business of the Trust;
(xiii) confess a judgment against the Trust;
(xiv) possess Trust assets, or assign the Trust's right to property,
for other than a Trust purpose;
(xv) cause the Trust to lend any funds to any entity; or
(xvi) change the Trust's purpose and powers from those set forth in
this Trust Agreement.
(b) The Trust agrees to abide by the following restrictions:
(i) Other than as contemplated by the Basic Documents and related
documentation, the Trust shall not incur any indebtedness.
(ii) Other than as contemplated by the Basic Documents and related
documentation, the Trust shall not engage in any dissolution, liquidation,
consolidation, merger or sale of assets.
(iii) The Trust shall not engage in any business activity in which it
is not currently engaged other as contemplated by the Basic Documents and
related documentation.
(iv) The Trust shall not form, or cause to be formed, any subsidiaries
and shall not own or acquire any asset other as contemplated by the Basic
Documents and related documentation.
(v) Other than as contemplated by the Basic Documents and related
documentation, the Trust shall not follow the directions or instructions of
the Transferor.
(c) The Trust shall:
(i) Maintain books and records separate from any other person or
entity.
(ii) Maintain its bank accounts separate from any other person or
entity.
(iii) Not commingle its assets with those of any other person or
entity.
(iv)Conduct its own business in its own name.
(v) Other than as contemplated by the Basic Documents and related
documentation, pay its own liabilities and expenses only out of its own
funds.
(vi) Observe all formalities required under the Business Trust
Statute.
(vii) Enter into transactions with Affiliates or Life or the
Transferor only if 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.
(viii) Not guarantee or become obligated for the debts of any other
entity or person.
(ix)Not hold out its credit as being available to satisfy the
obligation of any other person or entity.
(x) Not acquire the obligations or securities of its Affiliates or the
Transferor.
(xi) Other than as contemplated by the Basic Documents 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.
(xii) Other than as contemplated by the Basic Documents and related
documentation, not pledge its assets for the benefit of any other person or
entity.
(xiii) Hold itself out as a separate entity from the Transferor or
Life and not conduct any business in the name of the Transferor or Life.
(xiv) Correct any known misunderstanding regarding its separate
identity.
(xv) 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.
(d) The Owner Trustee shall not have the power, except upon the direction
of the Owners and, subject to Section 11.16 of the Indenture, 100% of the
Noteholders, and to the extent otherwise consistent with the Basic Documents, to
(i) remove or replace the Servicer or the Indenture Trustee, (ii) institute
proceedings to have the Trust declared or adjudicated a bankrupt or insolvent,
(iii) consent to the institution of bankruptcy or insolvency proceedings against
the Trust, (iv) file a petition or consent to a petition seeking reorganization
or relief on behalf of the Trust under any applicable federal or state law
relating to bankruptcy, (v) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or any similar official) of the
Trust or a substantial portion of the property of the Trust, (vi) make any
assignment for the benefit of the Trust's creditors, (vii) cause the Trust to
admit in writing its inability to pay its debts generally as they become due,
(viii) take any action, or cause the Trust to take any action, in furtherance of
any of the foregoing (any of the above, a "Bankruptcy Action"). So long as the
Indenture remains in effect, no Certificateholder shall have the power to take,
and shall not take, any Bankruptcy Action with respect to the Trust or the
Transferor or direct the Owner Trustee to take any Bankruptcy Action with
respect to the Trust or the Transferor.
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. 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 a voluntary Bankruptcy Action relating to
the Trust unless the conditions specified in Section 4.1 (d) 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 Owner Trustee shall cause
the Servicer, for the benefit of the Owners, to establish and maintain with
Norwest Bank Minnesota, National Association for the benefit of the Owner
Trustee one or more Eligible Accounts which, so long as the Indenture Trustee
holds such Trust Account on behalf of the Owner Trustee, shall be entitled
"Certificate Distribution Account, Norwest Bank Minnesota, National Association,
on behalf of the Owner Trustee, in trust for the Life Financial Home Loan Asset
Backed Securities, Series 1997-3." 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 Owner Trustee and the Paying
Agent 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 and the
Servicer.
In addition to the foregoing, the Certificate Distribution Account is a
Trust Account under the Sale and Servicing Agreement and constitutes part of the
Owner 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 Transferor agrees to direct and shall have the sole authority to direct
the Owner Trustee or Indenture Trustee 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 Payment 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) of the Sale and Servicing Agreement with respect to such Payment Date.
(b) On each Payment Date, the Owner Trustee shall cause the Paying Agent to
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 Payment 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 Owner
Trustee 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 Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The 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 Owner Trustee 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 Owner Trustee 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 Payment 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 Payment 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 Owner Trustee 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 Transferor. The Owner
Trustee shall not be liable for payment of any interest in respect of such
moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners, the
Internal Revenue Service and Others. The Owner Trustee 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
Transferor 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 Owner Trustee shall
receive an Opinion of Counsel that, based on a change in applicable law
occurring after the date hereof, or as a result of a transfer by the Transferor
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 beneficial owners of the
Trust, the Owner Trustee shall inform the Indenture Trustee in writing of such
event, (x) the Owner Trustee 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 Transferor (or if the
Transferor no longer owns any Residual Interest Certificates, the Owner
designated for such purpose by the Transferor to the Owner Trustee in writing)
at least (5) days before such returns are due to be filed, and (y) capital
accounts shall be maintained for each Owner (or beneficial owner) in accordance
with the Treasury Regulations under Section 704(b) of the Code reflecting each
such Owner's (or beneficial owner's) pro rata share of the income, gains,
deductions, and losses of the Trust and/or guaranteed payments made by the Trust
and contributions to, and distributions from, the Trust. The Transferor (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 Owner Trustee 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 Transferor is hereby designated as
tax matters partner or, if the Transferor 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 Transferor (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 Transferor (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
Residual Interest 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 Transferor 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, $80,000,000; Class A-2
Notes, $48,890,000; Class A-3 Notes, $25,570,000; Class A-4 Notes, $24,790,000;
Class M-1 Notes, $27,500,000; Class M-2 Notes, $22,500,000; and Class B Notes,
$18,750,000. The Administrator on behalf of the Owner Trustee shall authenticate
and deliver the Residual Interest 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 Administration Agreement or this Agreement,
respectively; and
(b) to obtain and preserve, the Issuer's qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Indenture, the Notes, the
Collateral and each other instrument and agreement included in the Owner Trust
Estate.
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, the Basic
Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or Instructions. The
Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.3 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
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 or the Owners;
(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 Transferor 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 Residual Interest 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 Transferor, the Indenture Trustee or the
Servicer under any of the Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations of the Trust
under this Agreement or the Basic Documents that are required to be performed by
the 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 provided, that the Owner Trustee shall be liable for
its negligence or willful misconduct in the event that it assumes the duties and
obligations of the Indenture Trustee under the Sale and Servicing Agreement
pursuant to Section 10.5.
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 Transferor, and 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 indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound.
(b) The Paying Agent hereby represents and warrants to the Depositor and
the Transferor, and for the benefit of the Owners, that:
(i) It is a national banking association duly organized and validly
existing in good standing under the laws of the United States. 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 Minnesota 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 Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Residual Interest Certificates or
Home Loans. The recitals contained herein and in the Residual Interest
Certificates (other than the signature and countersignature of the Owner Trustee
on the Residual Interest Certificates) shall be taken as the statements of the
Depositor and the Transferor, 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
Residual Interest Certificates (other than the signature and countersignature of
the Owner Trustee on the Residual Interest 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 Owner
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 Transferor 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 Residual Interest Certificates and Notes.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Residual Interest Certificates or Notes and may deal with the
Depositor, the Transferor, 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.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use its
best efforts to obtain and maintain the effectiveness of any licenses required
in connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE 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 Transferor and the Owner Trustee, and
the Owner Trustee shall be entitled to be reimbursed by the Transferor 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 before the date hereof between the Transferor and the
Paying Agent.
SECTION 8.2 Indemnification. The Transferor shall be liable as primary
obligor, and the Servicer as secondary obligor pursuant to the Administration
Agreement, for, and shall indemnify the Owner Trustee, the Paying Agent and
their successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee or the Paying Agent
hereunder, except only that the Transferor 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 Section 9.01(d) of the
Sale and Servicing 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
Transferor, 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 Residual Interest Certificates shall be subject to an early
redemption or termination at the option of the Transferor 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 Transferor nor any Owner shall be entitled to revoke or terminate
the Trust.
(d) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Residual Interest
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 Payment Date upon or
with respect to which final payment of the Residual Interest Certificates shall
be made upon presentation and surrender of the Residual Interest Certificates at
the office of the Paying Agent therein designated, (ii) the amount of any such
final payment and (iii) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Residual Interest Certificates at the office of the Paying
Agent therein specified. 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 Residual Interest Certificates, the Paying Agent shall cause to
be distributed to Certificateholders amounts distributable on such Payment Date
pursuant to Section 5.02 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not surrender their
Residual Interest 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
Residual Interest Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Residual Interest 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 Residual Interest Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. 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.
(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 Fitch and "A2" by Moody's. 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 Residual Interest 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 Owner Trustee and the Paying
Agent each agree that upon the occurrence and continuation of an Event of
Default, the Paying Agent shall resign as Paying Agent under this Agreement and,
upon ten Business Days notice from the Paying Agent, the Owner Trustee shall
assume the duties and obligations of the Paying Agent and the Indenture Trustee
under this Agreement and the Paying Agent's duties relating to this Agreement
under the Sale and Servicing Agreement.
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 Transferor 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.
This Agreement may also be amended from time to time by the Depositor, the
Transferor 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 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
Transferor, 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 certified mail,
postage prepaid, return receipt requested, 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
Transferor, Life Investment Holdings, Inc., 10540 Magnolia Avenue, Suite B,
Riverside, California 92505, Attention: L. Bruce Mills; (iv) if to the Paying
Agent, Norwest Bank Minnesota, National Association, Norwest Place, Sixth and
Marquette, Minneapolis, Minnesota 55479, Attention: Structured Finance/Life
Financial 1997-3 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
Transferor, the Owner Trustee and its successors and each owner and its
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by 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 Residual Interest 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 Transferor, the Depositor or the Trust, or join in any institution
against the Transferor 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 Residual Interest Certificates, the Notes, this
Agreement or any of the Basic Documents.
SECTION 11.9 No Recourse. Each Owner by accepting a Residual Interest
Certificate acknowledges that such Residual Interest 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 Transferor, 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 Residual
Interest 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.
SECTION 11.12 Residual Interest Transfer Restrictions. 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 Residual Interest
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.
<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: ____________________________________
Barbara J. Dawson
Senior Vice President
LIFE INVESTMENT HOLDINGS, INC.
By: ____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: ____________________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, 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, LIFE
FINANCIAL 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>
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
RESIDUAL INTEREST CERTIFICATE
No. ______
THIS CERTIFIES THAT _______________________________ (the "Owner") is the
registered owner of a ____% residual interest in Life Financial Home Loan Owner
Trust 1997-3 (the "Trust") existing under the laws of the State of Delaware and
created pursuant to the Trust Agreement dated as of December 1, 1997 (the "Trust
Agreement") between PaineWebber Mortgage Acceptance Corporation IV, as
Depositor, Life Investment Holdings, Inc., as the Transferor, Wilmington Trust
Company, not in its individual capacity but solely in its fiduciary capacity as
owner trustee under the Trust Agreement (the "Owner Trustee") and Norwest Bank
Minnesota, National Association, 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.
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Trust Agreement
By: _________________________________________
Authorized Signatory
DATED: December _, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
----------------------------.
as 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:
____________________________________*/
- -------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
<PAGE>
EXHIBIT B
[Reserved]
<PAGE>
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
THIS Certificate of Trust of Life Financial Home Loan Owner Trust 1997-3
(the "Trust"), dated December ___, 1997, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, and
Norwest Bank Minnesota, National Association, as paying agent, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, Section 3801
et seq.).
1. Name. The name of the business trust formed hereby is Life Financial
Home Loan Owner Trust 1997-3.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration.
* * *
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the owner trustee and paying
agent of the Trust, have executed this Certificate of Trust as of the date first
above written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as trustee under a Trust
Agreement dated as of December 1, 1997
By: ________________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as
Paying Agent
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 December 1, 1997
(the "Trust Agreement"), among PaineWebber Mortgage Acceptance Corporation IV,
as depositor, Life Investment Holdings, Inc., Norwest Bank Minnesota, National
Association, and Wilmington Trust Company, 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 Life Financial Home Loan Owner Trust 1997-3, Residual
Interest Certificates (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
- -----------
*Note: If signed pursuant to a power of attorney, the power of attorney must
accompany this certificate.
================================================================================
ADMINISTRATION AGREEMENT
dated as of December 1, 1997
among
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
(the "Issuer")
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Administrator
(the "Administrator")
and
LIFE BANK
(the "Company")
Home Loan Asset Backed Notes, Series 1997-3
================================================================================
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 U.S. Bank 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 December 1, 1997, among LIFE FINANCIAL
HOME LOAN OWNER TRUST 1997-3, a Delaware business trust, as Issuer (the
"Issuer"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Administrator
("Norwest Bank" and in such capacity, the "Administrator"), and LIFE BANK, a
federally chartered savings bank, as the Company (the "Company").
W I T N E S S E T H:
WHEREAS, the Issuer is a business trust (the "Owner Trust") under the
Delaware Business Trust Act (12 Del. C. Section 3801 et seq.) created by a Trust
Agreement relating to the Owner Trust dated as of December 1, 1997 (the "Owner
Trust Agreement"), among PaineWebber Mortgage Acceptance Corporation IV, as
depositor (the "Depositor"), Life Investment Holdings, Inc., as the Transferor
(the "Transferor"), Wilmington Trust Company, as Owner Trustee, and Norwest
Bank, as Paying Agent (in such capacity, the "Paying Agent"); and
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes (the "Notes"),
Series 1997-3; and
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture dated as of December 1, 1997 (the
"Indenture"), between the Issuer and Norwest Bank, 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 December 1, 1997 (the "Sale and Servicing Agreement"), among the Issuer, the
Transferor, Life Bank, as Servicer (in such capacity, the "Servicer") and the
Originator (in such capacity, the "Originator"), the Depositor and Norwest Bank,
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 Owner Trust
Agreement (the Sale and Servicing Agreement, the Note Depository Agreement, the
Indenture and the Owner 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 the City of
Minneapolis, Minnesota, 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 Owner 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
Payment 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 documents and
reports by the Issuer on Forms 8-K and 10-K as required under
the Exchange Act, the rules and regulations of the Commission
thereunder and the TIA (Section 7.03);
(P) filing Internal Revenue Service Form 8811 within 30
days of the Closing Date, designating the officer of the
Indenture Trustee that Noteholders may contact for original
issue discount information with respect to the Notes, and
updating such Form at the time or times required by the Code;
and
(Q) perform such matters with respect to Subsequent
Mortgage 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 Owner
Trust Agreement with respect to, among other things, accounting and
reports to Owners, and the Administrator shall be responsible for the
performance of the tax duties set forth in Section 5.5 of the Owner
Trust Agreement upon receipt of the Opinion of Counsel specified in
Section 5.5 of the Trust Agreement stating that it is necessary to
perform such tax duties; provided, however, that the Owner Trustee
shall retain responsibility for the distribution of the Schedule K-1's
necessary to enable each Owner to prepare its federal and state income
tax returns; provided further, that the Indenture Trustee shall receive
written notification if there shall be two or more beneficial owners of
the Owner Trust.
(b) (i) The Administrator shall perform the duties of the
Administrator specified in Section 10.02 of the Owner 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 Owner 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)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 Owner Trust Estate (Section 3.05);
(iii) delivery of the annual delivery of Opinions of Counsel, in
accordance with Section 3.06 of the Indenture, as to the Owner 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);
(iv)monitoring the Issuer's compliance with its negative covenants
(Section 3.08) and the compliance of the Servicer with certain of its
obligations under the Sale and Servicing Agreement (Section 3.11);
(v) compliance with any directive of the Indenture Trustee with
respect to the sale of the Owner Trust Estate in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing under the Indenture (Section 5.04);
(vi)appointing a successor Indenture Trustee pursuant to Section
6.08 of the Indenture (Section 6.08);
(vii) causing one or more accounts to be opened in the Owner
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);
(viii) preparing an Issuer Request and Officers' Certificate and
obtaining an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Owner Trust Estate as defined in the
Indenture (Sections 8.05 and 8.06);
(ix)preparing Issuer Orders and obtaining of Opinions of Counsel
with respect to any proposed amendment of the Owner Trust Agreement or
amendment to or waiver of any provision of any other document relating
to the Owner Trust Agreement (Section 9.07); and
(x) 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 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
Owner 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 Owner 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 Owner Trust's payments (or allocations of income)
to an Owner as contemplated in Section 5.2(c) of the Owner 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.
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, the Owner Trustee 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 or the Owner Trustee, as applicable.
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.
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
Owner 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
Life Financial Home Loan Owner Trust 1997-3
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Department
with a copy to the Company at
Life Bank
10540 Magnolia Avenue
Suite B
Riverside, California 92505
Attention: L. Bruce Mills
(b) if to the Administrator, to
Norwest Bank Minnesota, National Association
Norwest Place
Sixth and Marquette 55479
Attention: Structured Finance/Life 1997-3
(c) if to the Servicer, to
Life Bank
10540 Magnolia Avenue
Suite B
Riverside, California 92505
Attention: L. Bruce Mills
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 payments 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 Norwest Bank in Other Capacities.
Nothing in this Agreement shall affect any obligation that Norwest Bank 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 Wilmington Trust Company not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall Wilmington Trust Company 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
Owner 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 Owner Trust, and that such obligations on the part of the
Administrator shall be enforceable at the instance of the Indenture Trustee and
the Owner Trust.
Section 21. Bankruptcy Matters.
No party to this Agreement shall take any action to cause the Owner Trust
to dissolve in whole or in part or file a voluntary petition or otherwise
initiate proceedings to have the Owner Trust adjudicated bankrupt or insolvent,
or consent to the institution of bankruptcy or insolvency proceedings against
the Owner Trust, or file a petition seeking or consenting to reorganization or
relief of the Owner Trust as debtor under any applicable federal or state law
relating to bankruptcy, insolvency or other relief for debtors with respect to
the Owner Trust; or seek or consent to the appointment of any trustee, receiver,
conservator, assignee, sequestrator, custodian, liquidator (or other similar
official) of the Owner Trust or of all or any substantial part of the properties
and assets of the Owner Trust, or cause the Owner Trust to make any general
assignment for the benefit of creditors of the Owner 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.
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee,
By:
--------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Administrator,
By:
----------------------------------------
Name:
Title:
LIFE BANK,
as the Company,
By:
----------------------------------------
Name:
Title:
