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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 26, 1998
Home Equity Securitization Corp.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
North Carolina 333-44409 56-2064715
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
301 South College Street 28202-6001
Charlotte, North Carolina -------------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (704) 374-4868
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Notes and the Home Equity Loans
Home Equity Securitization Corp. registered issuances of up to
$500,000,000 principal amount of Asset Backed Notes and Asset Backed
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statements
on Form S-3 (Registration File No. 333-44409) (the "Registration Statement").
Pursuant to the Registration Statement, First Greensboro Home Equity Loan Trust
1998-1 (the "Issuer") issued $72,650,000 in aggregate principal amount of its
Asset Backed Notes, Series 1998-1, Class A-1 and $102,350,000 in aggregate
principal amount of its Asset Backed Notes, Series 1998-1, Class A-2 (together,
the "Notes"), on June 26, 1998. This Current Report on Form 8-K is being filed
to satisfy an undertaking to file copies of certain agreements executed in
connection with the issuance of the Notes.
The Notes were issued pursuant to an Indenture (the
"Indenture") attached hereto as Exhibit 4.1, dated as of June 1, 1998, between
First Greensboro Home Equity Loan Trust 1998-1, and The Chase Manhattan Bank, in
its capacity as indenture trustee (the "Indenture Trustee"). The Notes represent
non-recourse obligations of the Issuer, which obligations are secured by a
pledge of home equity loans and certain related property. The Chase Manhattan
Bank will serve as indenture trustee with respect to the Notes.
The assets of the Trust consist of (i) two groups of
nonconforming home equity loans transferred to the Issuer on the Closing Date
(the "Initial Home Equity Loans"), additional nonconforming, fixed rate and
adjustable rate home equity loans, if any, transferred to the Issuer and
allocated to Group II during the Funding Period ("Subsequent Home Equity Loans",
and, together with the Initial Home Equity Loans, the "Home Equity Loans"); (ii)
all interest and principal due under the respective Home Equity Loans on or
after the related cut-off date; (iii) security interests in the properties
securing such Home Equity Loans (the "Properties"); (iv) amounts on deposit in
the Note Account, Pre-Funding Account and Capitalized Interest Account; (v) the
Issuer's rights under the Loan Transfer Agreement and the Servicing Agreement;
and (vi) certain other property.
Interest distributions on the Notes are based on the aggregate
principal balance thereof and the then applicable Note Interest Rate thereof.
The Note Interest Rate for the Class A-1 Notes is 6.53% for each Interest Period
prior to the Initial Redemption Date and 7.03% for each Interest Period
thereafter and the Note Interest Rate for the Class A-2 Notes is 6.55% for each
Interest Period prior to the Initial Redemption Date and 7.05% for each Interest
Period thereafter.
As of June 1, 1998, the Home Equity Loans possessed the
characteristics described in the Prospectus dated June 9, 19987 and the
Prospectus Supplement dated June 22, 1998 filed pursuant to Rule 424(b)(2) of
the Act on June 25, 1998.
Item 5. Other Events
In connection with the offering of First Greensboro Home
Equity Loan Trust 1998-1, Asset Backed Notes, Series 1998-1, described in the
related Prospectus Supplement, certain "Computational Materials" within the
meanings of the May 20, 1994 Kidder, Peabody No-Action Letter and the February
17, 1995 Public Securities Association No-Action Letter were furnished to
certain prospective investors (the "Related Computational Materials").
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibit 1.1. Underwriting Agreement, dated June 22, 1998,
between Home Equity Securitization Corp ("HESC") and First
Union Capital Markets, a division of Wheat First Securities,
Inc. ("First Union").
Exhibit 4.1. Indenture, dated as of June 1, 1998, between the
Issuer and The Chase Manhattan Bank.
Exhibit 8.1. Opinion of Dewey Ballantine LLP re Tax Matters,
dated June 26, 1998.
Exhibit 23.1. Consent of Coopers & Lybrand L.L.P. regarding
financial statements of the Financial Security Assurance Inc.
and Subsidiaries and their report.
Exhibit 99.1 Related Computational Materials (as defined in
Item 5 above).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.
HOME EQUITY SECURITIZATION CORP
as Depositor and on behalf of First
Greensboro Home Equity Loan Trust
1998-1
Registrant
By: /s/ Wallace Saunders
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Name: Wallace Saunders
Title: Assistant Vice President
Dated: July 7, 1998
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EXHIBIT INDEX
Exhibit No. Description
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Exhibit 1.1. Underwriting Agreement, dated June 22, 1998,
between Home Equity Securitization Corp ("HESC") and
First Union Capital Markets, a division of Wheat First
Securities, Inc., ("First Union").
Exhibit 4.1. Indenture, dated as of June 1, 1998, between the Issuer and The
Chase Manhattan Bank.
Exhibit 8.1. Opinion of Dewey Ballantine LLP re Tax Matters, dated June 26,
1998.
Exhibit 23.1. Consent of Coopers & Lybrand LLP regarding financial statements
of the Financial Security Assurance Inc. and Subsidiaries and
their report.
Exhibit 99.1. Related Computational Materials (as defined in Item 5 above).
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Execution Copy
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1998-1
ASSET BACKED NOTES
SERIES 1998-1
UNDERWRITING AGREEMENT
UNDERWRITING AGREEMENT
First Union Capital Markets
A Division of Wheat First Securities, Inc.
301 South College Street
Charlotte, North Carolina 28202-6001
June 22, 1998
Dear Sirs:
Home Equity Securitization Corp. (the "Depositor") proposes,
subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated June 22, 1998 (the "Standard
Provisions"), between the Depositor and Wheat First Securities, Inc., doing
business as First Union Capital Markets, a division of Wheat First Securities,
Inc. ("First Union") to issue and sell to you (the "Underwriter") the Securities
specified in Schedule I hereto (the "Offered Securities") in the amounts set
forth in Schedule I hereto. The Depositor agrees that each of the provisions of
the Standard Provisions is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Underwriting Agreement. Each reference to the "Representative"
herein and in the provisions of the Standard Provisions so incorporated by
reference shall be deemed to refer to you. Unless otherwise defined herein,
terms defined in the Standard Provisions are used herein as therein defined. The
Prospectus Supplement and the accompanying Prospectus relating to the Offered
Securities (together, the "Prospectus") are incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to cause the Issuer to issue and sell to the Underwriter, and the Underwriter
agrees to purchase from the Depositor, at the time and place and at the purchase
price to the Underwriter and in the manner set forth in Schedule I hereto, the
original principal balance of the Offered Securities.
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[Remainder of Page Intentionally Left Blank]
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If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon acceptance hereof
by you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Yours truly,
HOME EQUITY SECURITIZATION CORP.
By: /s/ Wallace Saunders
-----------------------------------
Name: Wallace Saunders
Title: Assistant Vice President
Accepted as of the date hereof:
FIRST UNION CAPITAL MARKETS,
A Division of Wheat First Securities, Inc.
By: /s/ Shanker Merchant
-----------------------------------
Name: Shanker Merchant
Title: Managing Director
[Signature Page to Underwriting Agreement]
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SCHEDULE I
Issuer: First Greensboro Home Equity Loan Trust 1998-1
Title of Offered Securities: First Greensboro Home Equity Loan Trust 1998-1,
Asset Backed Notes, Series 1998-1, Class A-1 and
Class A-2.
Terms of Offered Securities: The Offered Securities shall have the terms set
forth in the Prospectus and shall conform in all
material respects to the descriptions thereof
contained therein, and shall be issued pursuant
to an Indenture to be dated as of June 1, 1998
among the Issuer and The Chase Manhattan Bank,
as indenture trustee.
Purchase Commitment: First Union Capital Markets (a division of Wheat
First Securities, Inc.): $175,000,000
Purchase Price: The purchase price for the Offered Securities
shall be 100.00% of the aggregate principal
balance of the Notes, as of the Closing Date,
plus accrued interest at the rate of 6.53% per
annum for the Class A-1 Notes and 6.55% per
annum for the Class A-2 Notes, on the aggregate
principal balance of the Notes, from June 1,
1998 to, but not including, June 26, 1998.
Specified funds for payment Federal Funds (immediately available funds).
of Purchase Price:
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about June 26, 1998 at 10:00 A.M. eastern
standard time or at such other time as the
Depositor and the Underwriter shall agree.
Closing Location: Offices of Dewey Ballantine LLP, 1301 Avenue of
the Americas, New York, New York 10019.
Representative: Designated Representative: First Union Capital
Markets, a division of Wheat First Securities,
Inc.
Address for Notices, etc.: First Union Capital Markets. One First Union
Center 301 South College Street Charlotte, North
Carolina 28202-6001
Attn: Wallace Saunders
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
June 22, 1998
From time to time, Home Equity Securitization Corp., a North
Carolina corporation (the "Depositor") may enter into one or more underwriting
agreements (each, an "Underwriting Agreement") that provide for the sale of
designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
SECTION 1. The Offered Securities. The Depositor proposes to
cause the Issuer to sell, pursuant to the Underwriting Agreement to the several
Underwriters named therein, asset backed notes (the "Securities") representing
obligations of the Issuer, which obligations are secured by a pledge of home
equity loans (the "Home Equity Loans") and certain related property. The
Securities will be issued pursuant to an indenture (the "Indenture") dated as of
June 1, 1998 by and between the Issuer and The Chase Manhattan Bank, a New York
banking corporation., as indenture trustee (the "Indenture Trustee"). The
underlying loans were originated or acquired by First Greensboro Home Equity,
Inc. (the "Sponsor"). The Sponsor has conveyed its interest in the Home Equity
Loans to First Greensboro Capital Corporation (the "Seller"). The Seller has
conveyed its interest in the Home Equity Loans to First Owner's Trust, Inc., a
special purpose corporation and a wholly-owned subsidiary of the Seller, (the
"Transferor") The Transferor, in turn, will cause the Home Equity Loans to be
conveyed to the Depositor. The Home Equity Loans are to be serviced pursuant to
a Servicing Agreement dated as of June 1, 1998 by and among the Issuer, the
Sponsor, as master servicer (in such capacity, the "Master Servicer"), the
Indenture Trustee and Calmco, Inc., as Master Backup Servicer.
The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Indenture identified in such Underwriting Agreement. The
Securities which are the subject of any particular Underwriting Agreement into
which this Agreement is incorporated are herein referred to as the "Offered
Securities."
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The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-44409), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Base Prospectus" means the prospectus included
in the Registration Statement. The term "Prospectus" means the Base Prospectus
together with the prospectus supplement specifically relating to the Offered
Securities, as first filed with the Commission pursuant to Rule 424. The term
"Preliminary Prospectus" means a preliminary prospectus supplement specifically
relating to the Offered Securities together with the Base Prospectus.
SECTION 2. Offering by the Underwriters. Upon the execution of
the Underwriting Agreement to any Offered Securities and the authorization by
the Representative of the release of such Offered Securities, the several
Underwriters propose to offer for sale to the public the Offered Securities at
the prices and upon the terms set forth in the Prospectus.
SECTION 3. Purchase, Sale and Delivery of the Offered
Securities. Unless otherwise specified in the Underwriting Agreement, payment
for the Offered Securities shall be made by certified or official bank check or
checks payable to the order of the Depositor in immediately available or next
day funds, at the time and place set forth in the Underwriting Agreement, upon
delivery to the Representative for the respective accounts of the several
Underwriters of the Offered Securities registered in definitive form and in such
names and in such denominations as the Representative shall request in writing
not less than five full business days prior to the date of delivery. The time
and date of such payment and delivery with respect to the Offered Securities are
herein referred to as the "Closing Date".
SECTION 4. Conditions of the Underwriters' Obligations. The
respective obligations of the several Underwriters pursuant to the Underwriting
Agreement shall be subject, in the discretion of the Representative, to the
accuracy in all material respects of the representations and warranties of the
Depositor contained herein as of the date of the Underwriting Agreement and as
of the Closing Date as if made on and as of the Closing Date, to the accuracy in
all material respects of the statements of the officers of the Depositor and the
Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required
to be made by or on behalf of the Depositor under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "1934 Act") prior to the sale
of the Offered Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings for such purpose
shall be pending before or threatened by the Commission, or by any authority
administering any state securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall have been complied
with to the Representative's reasonable satisfaction; (iv) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall have been no material
adverse change in the condition, financial or otherwise, earnings,
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affairs, regulatory situation or business prospects of the Depositor; (v) there
are no material actions, suits or proceedings pending before any court or
governmental agency, authority or body or threatened, affecting the Depositor or
the transactions contemplated by the Underwriting Agreement; (vi) the Depositor
is not in violation of its charter or its by-laws or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which it or its properties may be
bound, which violations or defaults separately or in the aggregate would have a
material adverse effect on the Depositor; and (vii) the Representative shall
have received, on the Closing Date a certificate, dated the Closing Date and
signed by an executive officer of the Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or prior to the
Closing Date, trading in securities on the New York Stock Exchange shall have
been suspended or any material limitation in trading in securities generally
shall have been established on such exchange, or a banking moratorium shall have
been declared by New York or United States authorities; (ii) if at or prior to
the Closing Date, there shall have been an outbreak or escalation of hostilities
between the United States and any foreign power, or of any other insurrection or
armed conflict involving the United States which results in the declaration of a
national emergency or war, and, in the reasonable opinion of the Representative,
makes it impracticable or inadvisable to offer or sell the Offered Securities;
or (iii) if at or prior to the Closing Date, a general moratorium on commercial
banking activities in New York shall have been declared by either federal or New
York State authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an executive officer of
the Depositor to the effect that attached thereto is a true and correct copy of
the letter from each nationally recognized statistical rating organization (as
that term is defined by the Commission for purposes of Rule 436(g)(2) under the
1933 Act) that rated the Offered Securities and confirming that, unless
otherwise specified in the Underwriting Agreement, the Offered Securities have
been rated in the highest rating categories by each such organization and that
each such rating has not been rescinded since the date of the applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, special counsel for the Depositor,
dated the Closing Date, in form and substance satisfactory to the Representative
and containing opinions substantially to the effect set forth in Exhibit A
hereto.
(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Sponsor, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the Underwriter and
containing opinions substantially to the effect set forth in Exhibit B hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Indenture Trustee, dated the Closing Date,
in form and substance satisfactory to the Representative and counsel for the
Underwriter and containing opinions substantially to the effect set forth in
Exhibit C hereto.
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(h) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, counsel for the Underwriter, dated the
Closing Date, with respect to the incorporation of the Depositor, the validity
of the Offered Securities, the Registration Statement, the Prospectus and other
related matters as the Underwriter may reasonably require, and the Depositor
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(i) The Representative shall have received, on the Closing
Date, such other opinions of Counsel in form and substance satisfactory to the
Representative and counsel to the Underwriter as the Representative shall
request.
(j) The Representative shall have received, on or prior to the
date of first use of each of the preliminary prospectus supplement and the
prospectus supplement relating to the Offered Securities, and on the Closing
Date if requested by the Representative, letters of independent accountants of
the Depositor in the form and reflecting the performance of the procedures
previously requested by the Representative.
(k) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of an
executive officer of the Depositor satisfactory to the Representative as to the
accuracy of the representations and warranties of the Depositor herein at and as
of such Closing Date as if made as of such date, as to the performance by the
Depositor of all of its obligations hereunder to be performed at or prior to
such Closing Date, and as to such other matters as the Representative may
reasonably request;
(l) The Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of officers of
the Master Servicer in form and substance reasonably satisfactory to the
Representative;
(m) The Note Guaranty Insurance Policy (the "Note Insurance
Policy") shall have been duly executed and issued at or prior to the Closing
Date and shall conform in all material respects to the description thereof in
the Prospectus Supplement.
(n) The Representative shall have received, on the Closing
Date, an opinion of counsel to Financial Security Assurance Inc. (the "Note
Insurer"), dated the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriter and containing opinions
substantially to the effect set forth in Exhibit D hereto.
(o) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (i) any
intended or potential downgrading or (ii) any review or possible change in
rating the direction of which has not been indicated, in the rating accorded the
Note Insurer's claims paying ability by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the 1933 Act.
(p) There has not occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations, since December 31, 1997 of the Note
Insurer, that is in the Representative's judgment material and adverse and that
makes it in the Representative's judgment impracticable to market the Offered
Securities on the terms and in the manner contemplated in the Prospectus.
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(q) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by the President, a senior
vice president or a vice president of the Note Insurer to the effect that the
signer of such certificate has carefully examined the Note Insurance Policy, the
Insurance Agreement dated the Closing Date (the "Insurance Agreement") among the
Note Insurer, the Issuer, the Servicer, the Depositor and the Indenture Trustee
and the related documents and that, to the best of his or her knowledge based on
reasonable investigation:
(i) there are no actions, suits or proceedings pending or
threatened against or affecting the Note Insurer which, if
adversely determined, individually or in the aggregate, would
adversely affect the Note Insurer's performance under the Note
Insurance Policy or the Insurance Agreement;
(ii) each person who, as an officer or representative of the
Note Insurer, signed or signs the Note Insurance Policy, the
Insurance Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in
connection with the transactions described in this Agreement
was, at the respective times of such signing and delivery, and
is now, duly elected or appointed, qualified and acting as
such officer or representative, and the signatures of such
persons appearing on such documents are their genuine
signatures;
(iii) the information contained in the Prospectus under the
caption "THE NOTE INSURANCE" is true and correct in all
material respects and does not omit to state a material fact
with respect to the description of the Note Insurance Policy
or the ability of the Note Insurer to meet its payment
obligations under the Note Insurance Policy;
(iv) the tables regarding the Note Insurer's capitalization
set forth under the heading "THE NOTE INSURANCE The Note
Insurer" present fairly the capitalization of the Note Insurer
as of March 31, 1998;
(v) on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (i) any intended
or potential downgrading or (ii) any review or possible
changes in rating the direction of which has not been
indicated, in the rating accorded the claims paying ability of
the Note Insurer by any "nationally recognized statistical
rating organization," as such term is defined for purposes of
the 1933 Act;
(vi) the audited balance sheet of the Note Insurer as of
December 31, 1997 and the related statement of income and
retained earnings for the fiscal year then ended, and the
accompanying footnotes, together with an opinion thereon of
Coopers & Lybrand L.L.P., independent certified public
accountants, copies of which are incorporated by reference in
the Prospectus, fairly present in all material respects the
financial condition of the Note Insurer as of such date and
for the period covered by such statements in accordance with
generally accepted accounting principles consistently applied.
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(vii) to the best knowledge of such officer, since December
31, 1997 no material adverse change has occurred in the
financial position of the Note Insurer other than as set forth
in the Prospectus.
The officer of the Note Insurer certifying to items (v)-(vii)
shall be an officer in charge of a principal financial
function. The Note Insurer shall attach to such certificate a
true and correct copy of its certificate or articles of
incorporation, as appropriate, and its bylaws, all of which
are in full force and effect on the date of such certificate.
(r) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative may
reasonably request.
SECTION 5. Covenants of the Depositor. In further
consideration of the agreements of the Underwriters contained in the
Underwriting Agreement, the Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto including exhibits and as
many copies of the Prospectus and any supplements and amendments thereto as the
Representative may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement setting forth the
principal amount, notional amount or stated amount, as applicable, of Offered
Securities covered thereby, the price at which the Offered Securities are to be
purchased by the Underwriters from the Depositor, either the initial public
offering price or prices or the method by which the price or prices at which the
Offered Securities are to be sold will be determined, the selling concessions
and reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the Depositor will
not file any amendment to the Registration Statement or any supplement to the
Prospectus of which the Representative shall not previously have been advised
and furnished with a copy a reasonable time prior to the proposed filing or to
which the Representative shall have reasonably objected. The Depositor will use
its best efforts to cause any amendment to the Registration Statement to become
effective as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as it is
able with all requirements imposed upon it by the 1933 Act and the rules and
regulations thereunder to the extent necessary to permit the continuance of
sales or of dealings in the Offered Securities in accordance with the provisions
hereof and of the Prospectus, and the Depositor will prepare and file with the
Commission, promptly upon request by the Representative, any amendments to the
Registration Statement or supplements to the Prospectus which may be necessary
or advisable in connection with the distribution of the Offered Securities by
the Underwriters, and will use its best efforts to cause the same to become
effective as promptly as possible. The Depositor will advise the Representative,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement or any amended Registration Statement has become
effective or any supplement to the Prospectus or any amended Prospectus has been
filed. The Depositor will advise the Representative, promptly after it receives
notice or obtains knowledge thereof, of the issuance
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by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
preliminary Prospectus or the Prospectus, or the suspension of the qualification
of the Offered Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose, or of any
request made by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information, and the
Depositor will use its best efforts to prevent the issuance of any such stop
order or any order suspending any such qualification, and if any such order is
issued, to obtain the lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any event occurs as a
result of which the Prospectus as then amended or supplemented would include any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it is
necessary for any other reason to amend or supplement the Prospectus to comply
with the 1933 Act, to promptly notify the Representative thereof and upon their
request to prepare and file with the Commission, at the Depositor's own expense,
an amendment or supplement which will correct such statement or omission or any
amendment which will effect such compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered Securities pursuant to
the Underwriting Agreement, the Depositor will file, on a timely and complete
basis, all documents that are required to be filed by the Depositor with the
Commission pursuant to Sections 13, 14, or 15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Representative
shall reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification of the
eligibility of the Offered Securities for investment under the laws of such
jurisdictions as the Representative may designate provided that in connection
therewith the Depositor shall not be required to qualify to do business or to
file a general consent to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later than eighteen months
after the date on which the filing of the Prospectus, as amended or
supplemented, pursuant to Rule 424 under the 1933 Act first occurs, an earnings
statement of the Depositor covering a twelve-month period beginning after the
date of the Underwriting Agreement, which shall satisfy the provisions of
Section 11(a) of the 1933 Act and the applicable rules and regulations of the
Commission thereunder (including, at the option of the Depositor, Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in writing copies of
such financial statements and other periodic and special reports as the
Depositor may from time to time distribute generally to its creditors or the
holders of the Offered Securities and to furnish to the Representative copies of
each annual or other report the Depositor shall be required to file with the
Commission.
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(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer to, furnish to the
Representative, as soon as available, a copy of (i) the annual statement of
compliance delivered by the Servicer to the Indenture Trustee under the
Servicing Agreement, (ii) the annual independent public accountants' servicing
report furnished to the Indenture Trustee pursuant to the Servicing Agreement,
(iii) each report regarding the Offered Securities mailed to the holders of such
Securities, and (iv) from time to time, such other information concerning such
Securities as the Representative may reasonably request.
SECTION 6. Representations and Warranties of the Depositor.
The Depositor represents and warrants to, and agrees with, each Underwriter, as
of the date of the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time in accordance with
Rule 415 under the 1933 Act has been filed with the Commission and such
Registration Statement, as amended to the date of the Underwriting Agreement,
has become effective. No stop order suspending the effectiveness of such
Registration Statement has been issued and no proceeding for that purpose has
been initiated or threatened by the Commission. A prospectus supplement
specifically relating to the Offered Securities will be filed with the
Commission pursuant to Rule 424 under the 1933 Act; provided, however, that a
supplement to the Prospectus prepared pursuant to Section 5(b) hereof shall be
deemed to have supplemented the Base Prospectus only with respect to the Offered
Securities to which it relates. The conditions to the use of a registration
statement on Form S-3 under the 1933 Act, as set forth in the General
Instructions on Form S-3, and the conditions of Rule 415 under the 1933 Act,
have been satisfied with respect to the Depositor and the Registration
Statement. There are no contracts or documents of the Depositor that are
required to be filed as exhibits to the Registration Statement pursuant to the
1933 Act or the rules and regulations thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Base Prospectus conformed in all material
respects to the requirements of the 1933 Act and the rules and regulations
thereunder, and did not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; on the date of the Underwriting Agreement
and as of the Closing Date, the Registration Statement and the Prospectus
conform, and as amended or supplemented, if applicable, will conform in all
material respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and on the date of the Underwriting Agreement and as of
the Closing Date, neither of such documents, any Computational Materials nor any
ABS Term Sheets includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and neither of such documents as amended or
supplemented, if applicable, will include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the foregoing does not apply to statements or omissions in any of such documents
based upon written information furnished to the Depositor by any Underwriter
specifically for use therein. "Computational Materials" shall mean those
materials delivered within the meaning of the no-action letter dated May 20,
1994 issued by the Division of Corporation Finance of the Commission to Kidder,
Peabody Acceptance Corporation I. Kidder, Peabody & Co., Incorporated, and
Kidder Structured Asset Corporation and the no-action letter
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dated May 27, 1994 issued by the Division of Corporation Finance of the
Commission to the Public Securities Association for which the filing of such
material is a condition of the relief granted in such letters. "ABS Term Sheet"
shall mean those materials delivered in the form of "Structural Term Sheets" or
"Collateral Term Sheets", in each case within the meaning of the no-action
letter dated February 13, 1995 issued by the Division of Corporation Finance of
the Commission to the Public Securities Association for which the filing of such
material is a condition of the relief granted in such letter.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory situation or business
prospects of the Depositor, whether or not arising in the ordinary course of the
business of the Depositor.
(d) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of North
Carolina.
(e) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals, orders,
licenses, certificates and permits of and from all government or regulatory
officials and bodies to own its properties, to conduct its business as described
in the Registration Statement and the Prospectus and to execute, deliver and
perform this Agreement, the Underwriting Agreement, the Deposit Trust Agreement,
Loan Sale Agreement and the Loan Transfer Agreement, except such as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution by the Underwriters of the Offered Securities; all such
authorizations, approvals, orders, licenses, certificates are in full force and
effect and contain no unduly burdensome provisions; and, except as set forth or
contemplated in the Registration Statement or the Prospectus, there are no legal
or governmental proceedings pending or, to the best knowledge of the Depositor,
threatened that would result in a material modification, suspension or
revocation thereof.
(f) The Offered Securities have been duly authorized, and when
the Offered Securities are issued and delivered pursuant to the Underwriting
Agreement, the Offered Securities will have been duly executed, issued and
delivered and will be entitled to the benefits provided by the Indenture,
subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity (regardless of whether
the entitlement to such benefits is considered in a proceeding in equity or at
law), and will conform in substance to the description thereof contained in the
Registration Statement and the Prospectus, and will in all material respects be
in the form contemplated by the Indenture.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement, the Deposit Trust Agreement and the Loan
Transfer Agreement are within the corporate power of the Depositor and neither
the execution and delivery by the Depositor of this Agreement, the Underwriting
Agreement, the Deposit Trust Agreement, the Loan Sale Agreement and the Loan
Transfer Agreement, nor the consummation by the Depositor of the transactions
therein contemplated, nor the compliance by the Depositor with the provisions
thereof, will conflict with or result in a breach of, or constitute a default
under, the charter or the by-laws of
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the Depositor or any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Depositor or its
properties, or any of the provisions of any indenture, mortgage, contract or
other instrument to which the Depositor is a party or by which it is bound, or
will result in the creation or imposition of a lien, charge or encumbrance upon
any of its property pursuant to the terms of any such indenture, mortgage,
contract or other instrument, except such as have been obtained under the 1933
Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Offered Securities by the
Underwriters.
(h) The Underwriting Agreement has been, and at the Closing
Date the Deposit Trust Agreement, the Loan Transfer Agreement and the Loan Sale
Agreement will have been, duly authorized, executed and delivered by the
Depositor.
(i) At the Closing Date, each of this Agreement, the
Underwriting Agreement, the Deposit Trust Agreement, the Loan Sale Agreement and
the Loan Transfer Agreement will constitute a legal, valid and binding
obligation of the Depositor, enforceable against the Depositor, in accordance
with its terms, subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting the
rights of creditors generally, and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other action of, any court
or governmental authority or agency is required for the consummation by the
Depositor of the transactions contemplated by this Agreement, the Underwriting
Agreement, the Deposit Trust Agreement, the Loan Sale Agreement and the Loan
Transfer Agreement, except such as have been obtained and except such as may be
required under the 1933 Act, the rules and regulations thereunder, or state
securities or "Blue Sky" laws, in connection with the purchase and distribution
of the Offered Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease, own or license, as the case may be, and to
operate, its properties and to carry on its business as presently conducted and
has received no notice of proceedings relating to the revocation of any such
license, permit, consent, order or approval, which singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations, net worth
or condition (financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the Depositor is
a party or of which any property of the Depositor is the subject which, if
determined adversely to the Depositor would individually or in the aggregate
have a material adverse effect on the condition (financial or otherwise),
earnings, affairs, or business or business prospects of the Depositor and, to
the best of the Depositor's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section 3(a)(41) of the
1934 Act.
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(n) At the Closing Date, or any date on which Subsequent Home
Loans are transferred by the Depositor to the Issuer (each, a "Subsequent
Transfer Date"), as the case may be, the representations and warranties made by
the Depositor in such Loan Transfer Agreement will be true and correct as of
such date.
(o) At the time of execution and delivery of the Loan Transfer
Agreement, or on any Subsequent Transfer Date, as the case may be, the Depositor
will have good and marketable title to the Initial Home Equity Loans, or the
Subsequent Home Equity Loans, as the case may be, being transferred to the
Issuer pursuant to the Loan Transfer Agreement, or the Subsequent Home Equity
Loans, free and clear of any lien, mortgage, pledge, charge, encumbrance,
adverse claim or other security interest claiming through the Depositor
(collectively, "Liens"), and will not have assigned to any person any of its
right, title or interest in such Initial Home Equity Loans, or the Subsequent
Home Equity Loans, as the case may be, or in such Loan Transfer Agreement, the
Depositor will have the power and authority to transfer such Initial Home Equity
Loans, or Subsequent Home Equity Loans, as the case may be, to the Issuer and to
cause the Issuer to transfer the Offered Securities to each of the Underwriters,
and upon execution and delivery to the Issuer of the Loan Transfer Agreement and
delivery to each of the Underwriters of the Offered Securities, the Issuer will
have good and marketable title to the Initial Home Equity Loans, or the
Subsequent Home Equity Loans, as the case may be, and each of the Underwriters
will have good and marketable title to the Offered Securities, in each case free
and clear of any Liens claiming through the Depositor.
(p) The Indenture has been duty qualified under the Trust
Indenture Act of 1939, as amended, and the Issuer is not required to be
registered under the Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this Agreement, the
Underwriting Agreement, the Deposit Trust Agreement, the Loan Sale Agreement,
the Loan Transfer Agreement, and the Offered Securities have been or will be
paid at or prior to the Closing Date.
SECTION 7. Indemnification and Contribution. (a) The Depositor
agrees to indemnify and hold harmless each Underwriter (including First Union
Capital Markets Corp. acting in its capacity as Representative and as one of the
Underwriters), and each person, if any, who controls any Underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, any Computational Materials, any ABS Term Sheets, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Depositor will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary
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Prospectus, the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with (1) written information furnished to the Depositor
by any Underwriter through the Representative specifically for use therein or
(2) information regarding the Home Equity Loans except to the extent that the
Depositor has been indemnified by the Sponsor. This indemnity agreement will be
in addition to any liability which the Depositor may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the Depositor's officers
who signed the Registration Statement and each person, if any, who controls the
Depositor, within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities to which the Depositor, or any such director, officer or
controlling person may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, any Computational Materials, any ABS Term Sheets or
any amendment or supplement thereto, or any other prospectus relating to the
Offered Securities, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statements or alleged untrue
statements or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Depositor by any
Underwriter through the Representative specifically for use therein; and each
Underwriter will reimburse any legal or other expenses reasonably incurred by
the Depositor or any such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have. The Depositor acknowledges that the statements
set forth under the caption "UNDERWRITING" in the Prospectus Supplement
constitute the only information furnished to the Depositor by or on behalf of
any Underwriter for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus, and each of the several Underwriters represents
and warrants that such statements are correct as to it.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 7 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by the
Depositor on the one hand, and the Underwriter on the other, from the offering
of the Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters' relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Depositor and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were
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treated as one entity for such purpose). No Underwriter or person controlling
such Underwriter shall be obligated to make contribution hereunder which in the
aggregate exceeds the total underwriting fee of the Offered Securities purchased
by such Underwriter under the Underwriting Agreement, less the aggregate amount
of any damages which such Underwriter and its controlling persons have otherwise
been required to pay in respect of the same or any substantially similar claim.
The Underwriter's obligation to contribute hereunder are several in proportion
to their respective underwriting obligations and not joint. For purposes of this
Section 7, each person, if any, who controls an Underwriter within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as such
Underwriter, and each director of the Depositor, each officer of the Depositor
who signed the Registration Statement, and each person, if any, who controls the
Depositor within the meaning of Section 15 of the 1933 Act, shall have the same
rights to contribution as the Depositor.
(d) The parties hereto agree that the first sentence of
Section 6 of the Indemnification Agreement (the "Indemnification Agreement")
dated as of the Closing Date among the Note Insurer, First Greensboro Home
Equity, Inc., and First Union Capital Markets, division of Wheat First
Securities, Inc. , shall not be construed as limiting the Depositor's right to
enforce its rights under Section 7 of this Agreement. The parties further agree
that, as between the parties hereto, to the extent that the provisions of
Section 6 of the Indemnification Agreement conflict with Section 7 hereof, the
provisions of Section 7 hereof shall govern.
SECTION 8. Survival of Certain Representations and
Obligations. The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Depositor, its officers and the several
Underwriters set forth in, or made pursuant to, the Underwriting Agreement shall
remain in full force and effect, regardless of any investigation, or statement
as to the result thereof, made by or on behalf of any Underwriter, the
Depositor, or any of the officers or directors or any controlling person of any
of the foregoing, and shall survive the delivery of and payment for the Offered
Securities.
SECTION 9. Termination. (a) The Underwriting Agreement may be
terminated by the Depositor by notice to the Representative in the event that a
stop order suspending the effectiveness of the Registration Statement shall have
been issued or proceedings for that purpose shall have been instituted or
threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that the Depositor shall
have failed, refused or been unable to perform all obligations and satisfy all
conditions to be performed or satisfied hereunder by the Depositor at or prior
to the Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other party other than
as provided in Sections 7 and 11 hereof.
SECTION 10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent or less of the aggregate principal amount, notional amount or stated
amount, as applicable,
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of the Offered Securities to be sold under the Underwriting Agreement, as the
case may be, the other Underwriters shall be obligated severally in proportion
to their respective commitments under the Underwriting Agreement to purchase the
Offered Securities which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters so defaults or default
and the aggregate principal amount of the Offered Securities with respect to
which such default or defaults occurs or occur is more than ten percent of the
aggregate principal amount, notional amount or stated amount, as applicable, of
Offered Securities to be sold under the Underwriting Agreement, as the case may
be, and arrangements satisfactory to the Representative and the Depositor for
the purchase of such Offered Securities by other persons (who may include one or
more of the non-defaulting Underwriters including the Representative) are not
made within 36 hours after any such default, the Underwriting Agreement will
terminate without liability on the part of any non-defaulting Underwriters or
the Depositor except for the expenses to be paid or reimbursed by the Depositor
pursuant to Section 11 hereof. As used in the Underwriting Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10. Nothing herein shall relieve a defaulting Underwriter from liability
for its default.
SECTION 11. Expenses. The Depositor agrees with the several
Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated, the Depositor will pay all fees and expenses incident to the
performance of its obligations under the Underwriting Agreement, including, but
not limited to, (i) the Commission's registration fee, (ii) the expenses of
printing and distributing the Underwriting Agreement and any related
underwriting documents, the Registration Statement, any Preliminary Prospectus,
the Prospectus, any amendments or supplements to the Registration Statement or
the Prospectus, and any Blue Sky memorandum or legal investment survey and any
supplements thereto, (iii) fees and expenses of rating agencies, accountants and
counsel for the Depositor, (iv) the expenses referred to in Section 5(e) hereof,
and (v) all miscellaneous expenses referred to in Item 30 of the Registration
Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the Offered
Securities and proposing to purchase and purchasing the Offered Securities under
the Underwriting Agreement will be borne and paid by the Depositor if the
Underwriting Agreement is terminated by the Depositor pursuant to Section 9(a)
hereof or by the Representative on account of the failure, refusal or inability
on the part of the Depositor to perform all obligations and satisfy all
conditions on the part of the Depositor to be performed or satisfied hereunder;
and
(c) the Depositor will pay the cost of preparing the
certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
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SECTION 12. Notices. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Representative at the address and
to the attention of the person specified in the Underwriting Agreement, and, if
sent to the Depositor, shall be mailed, delivered or telegraphed and confirmed
to Home Equity Securitization Corp., One First Union Center, 301 South College
Street, Charlotte, North Carolina 28202-6001, Attention: [Managing
Director-Asset Finance Group]; provided, however, that any notice to any
Underwriter pursuant to the Underwriting Agreement shall be mailed, delivered or
telegraphed and confirmed to such Underwriter at the address furnished by it.
SECTION 13. Representative of Underwriters. Any Representative
identified in the Underwriting Agreement will act for the Underwriters of the
Offered Securities and any action taken by the Representative under the
Underwriting Agreement will be binding upon all of such Underwriters.
SECTION 14. Successors. The Underwriting Agreement shall inure
to the benefit of and shall be binding upon the several Underwriters and the
Depositor and their respective successors and legal representatives, and nothing
expressed or mentioned herein or in the Underwriting Agreement is intended or
shall be construed to give any other person any legal or equitable right, remedy
or claim under or in respect of the Underwriting Agreement, or any provisions
herein contained, the Underwriting Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 15. Time of the Essence. Time shall be of the essence
of each Underwriting Agreement.
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SECTION 16. Governing Law. This Agreement and each
Underwriting Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
[Signature Page Follows]
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If the foregoing is in accordance with your understanding,
please sign and return two counterparts hereof.
Yours truly,
HOME EQUITY SECURITIZATION CORP.
By: /s/ Wallace Saunders
---------------------------------
Name: Wallace Saunders
Title: Assistant Vice President
Accepted as of the date hereof:
FIRST UNION CAPITAL MARKETS,
A Division of Wheat First Securities, Inc.
By: /s/Shanker Merchant
---------------------------
Name: Shanker Merchant
Title: Managing Director
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinion of Dewey Ballantine LLP,
special counsel for the Depositor
(1) Each of the Documents constitutes the valid, legal and
binding agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(2) The Notes, assuming the due execution by the Indenture
Trustee and due authentication by the Indenture Trustee and payment therefor
pursuant to the Underwriting Agreement, are validly issued and outstanding and
are entitled to the benefits of the Indenture.
(3) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Notes or the consummation of any other transaction
contemplated thereby by the Depositor, except such which have been obtained.
(4) The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration Statement
became effective, as of the date of execution of the Underwriting Agreement and
as of the date hereof comply as to form in all material respects with the
requirements of the 1933 Act and the rules and regulations thereunder, and the
Exchange Act and the rules and regulations thereunder, and we do not know of any
amendment to the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character required to be filed as
an exhibit to the Registration Statement or required to be described in the
Registration Statement or the Prospectus, which has not been filed or described
as required.
(5) The Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended and the Issuer is not required to be
registered under the Investment Company Act of 1940.
(6) The statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE NOTES," to the extent such statements
purport to summarize certain provisions of the Notes or of the Indenture, are
fair and accurate in all material respects.
<PAGE>
Exhibit B
Opinion of Counsel to
First Greensboro Home Equity, Inc.
(1) First Greensboro Home Equity, Inc. (the "Company") has
been duly organized and is validly existing as a corporation in good standing
under the State of North Carolina and is duly qualified to transact business in
all states in which the conduct of its business requires such qualification.
(2) The Company has the requisite power and authority to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the conditions of, the Basic Documents to which it is a party
(collectively referred to herein as the FGHE Agreements).
(3) The FGHE Agreements have been duly and validly authorized,
executed and delivered by the Company, all requisite corporate action having
been taken with respect thereto, and each constitutes the valid, legal and
binding agreement of the Company, and are enforceable against the Company in
accordance with their respective terms.
(4) Neither the transfer of the Home Equity Loans to the
Depositor, nor the execution, delivery or performance by the Company of the FGHE
Agreements conflicts or will conflict with or results or will result in a breach
of, or constitutes or will constitute a default under or violates or will
violate, (i) any term or provision of the Articles of Incorporation or By-laws
of the Company; (ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Company or any of its subsidiaries is a
party or is bound; or (iii) any order, judgment, writ, injunction or decree of
any court or governmental agency or body or other tribunal having jurisdiction
over the Company or any of its properties.
(5) The endorsement and delivery of each Mortgage Note, and
the preparation, delivery and recording of an Assignment of Mortgage with
respect to each Mortgage is sufficient fully to transfer to the Depositor and
its assignees all right, title and interest of the Company in the Mortgage Note
and Mortgage, as noteholder and mortgagee or assignee thereof.
(6) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any courts, governmental
agency or body or other tribunal is required under the laws of New York or North
Carolina, for the execution, delivery and performance of the FGHE Agreements or
the consummation of any other transaction contemplated thereby by the Company,
except such which have been obtained.
(7) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Company before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on (i) the consolidated financial
position, business prospects, stockholders's equity or results of operations of
the Company; (ii) the Company's ability to perform its obligations under, or the
validity or enforceability of, the FGHE Agreements; (iii) any Mortgage Note or
Mortgaged Property, or the title of any Mortgagor to any Mortgaged Property; or
(B) which have not otherwise been disclosed in the Registration Statement and to
the best of such counsel's knowledge, no such proceedings or investigations are
threatened or contemplated by governmental authorities or threatened by others.
<PAGE>
Exhibit C
Opinion of Counsel to
the Indenture Trustee
(1) The Indenture Trustee is a banking corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the power and authority to enter into and to take all actions
required of it under the Indenture.
(2) The Indenture has been duly authorized, executed and
delivered by the Indenture Trustee and the Indenture constitutes the legal,
valid and binding obligation of the Indenture Trustee, enforceable against the
Indenture Trustee in accordance with its terms, except as enforceability thereof
may be limited by (A) bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally, as such laws
would apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Indenture Trustee, and (B) general principles
of equity regardless of whether such enforcement is sought in a proceeding at
law or in equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Indenture Trustee in connection with its execution and delivery of the Indenture
or the performance of its obligations thereunder.
(4) The Notes have been duly executed, authenticated and
delivered by the Indenture Trustee.
(5) The execution and delivery of, and performance by the
Indenture Trustee of its obligations under, the Indenture do not conflict with
or result in a violation of any statute or regulation applicable to the
Indenture Trustee, or the charter or bylaws of the Indenture Trustee, or to the
best knowledge of such counsel, any governmental authority having jurisdiction
over the Indenture Trustee or the terms of any indenture or other agreement or
instrument to which the Indenture Trustee is a party or by which it is bound.
<PAGE>
Exhibit D
Opinion of Counsel
to the Note Insurer
(1) The Note Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New York. The
Note Insurer is validly licensed and authorized to issue the Note Insurance
Policy and perform its obligations under the Note Insurance Policy in accordance
with the terms thereof, under the laws of the State of New York.
(2) The execution and delivery by the Note Insurer of the Note
Insurance Policy, and the Indemnification Agreement are within the corporate
power of the Note Insurer and have been authorized by all necessary corporate
action on the part of the Note Insurer; the Note Insurance Policy has been duly
executed and is the valid and binding obligation of the Note Insurer enforceable
in accordance with its terms except that the enforcement of the Note Insurance
Policy may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity.
(3) The Note Insurer is authorized to deliver the
Indemnification Agreement, and the Indemnification Agreement has been duly
executed and is the valid and binding obligation of the Note Insurer enforceable
in accordance with its terms except that the enforcement thereof may be limited
by laws relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights generally and by
general principles of equity and by public policy considerations relating to
indemnification for securities law violations.
(4) No consent, approval, authorization or order of any state
or federal court or governmental agency or body is required on the part of the
Note Insurer, the lack of which would adversely affect the validity or
enforceability of the Note Insurance Policy; to the extent required by
applicable legal requirements that would adversely affect validity or
enforceability of the Note Insurance Policy, the form of each Note Insurance
Policy has been filed with, and approved by, all governmental authorities having
jurisdiction over the Note Insurer in connection with such Note Insurance
Policy.
(5) To the extent the Note Insurance Policy constitutes a
security within the meaning of Section 2(1) of the 1933 Act, it is a security
that is exempt from the registration requirements of the Act.
(6) The information set forth under the captions "THE NOTE
INSURANCE - The Insurance Policy" and "THE NOTE INSURANCE - The Note Insurer" in
the Prospectus insofar as such statements constitute a description of the Note
Insurance Policy, accurately summarizes the Note Insurance Policy.
INDENTURE
BETWEEN
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1998-1,
AS ISSUER,
AND
THE CHASE MANHATTAN BANK,
AS INDENTURE TRUSTEE
Dated as of June 1, 1998
Relating to
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1998-1
ASSET BACKED NOTES, SERIES 1998-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS ..........................................................................................2
Section 1.01. General Definitions.......................................................................2
ARTICLE II THE NOTES ..........................................................................................2
Section 2.01. Forms Generally...........................................................................2
Section 2.02. Forms of Certificate of Authentication....................................................3
Section 2.03. General Provisions With Respect to Principal and Interest Payment.........................3
Section 2.04. Denominations.............................................................................4
Section 2.05. Execution, Authentication, Delivery and Dating............................................4
Section 2.06. Registration, Registration of Transfer and Exchange.......................................5
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes................................................6
Section 2.08. Payments of Principal and Interest........................................................6
Section 2.09. Persons Deemed Owner......................................................................8
Section 2.10. Cancellation..............................................................................8
Section 2.11. Authentication and Delivery of Notes......................................................8
Section 2.12. Book-Entry Note..........................................................................10
Section 2.13. Termination of Book Entry System.........................................................10
ARTICLE III COVENANTS .........................................................................................11
Section 3.01. Payment of Notes.........................................................................11
Section 3.02. Maintenance of Office or Agency..........................................................12
Section 3.03. Money for Note Payments to Be Held In Trust..............................................12
Section 3.04. Existence of Issuer......................................................................14
Section 3.05. Protection of Trust Estate...............................................................14
Section 3.06. Opinions as to Trust Estate..............................................................15
Section 3.07. Performance of Obligations; Servicing Agreement..........................................15
Section 3.08. Investment Company Act...................................................................16
Section 3.09. Negative Covenants.......................................................................16
Section 3.10. Annual Statement as to Compliance........................................................17
Section 3.11. Restricted Payments......................................................................17
Section 3.12. Treatment of Notes as Debt for Tax Purposes..............................................17
Section 3.13. Notice of Events of Default..............................................................17
Section 3.14. Further Instruments and Acts.............................................................18
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................18
Section 4.01. Satisfaction and Discharge of Indenture..................................................18
Section 4.02. Application of Trust Money...............................................................19
ARTICLE V DEFAULTS AND REMEDIES..................................................................................19
Section 5.01. Event of Default.........................................................................19
<PAGE>
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......................................21
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee..............21
Section 5.04. Remedies.................................................................................22
Section 5.05. Indenture Trustee May File Proofs of Claim...............................................22
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes.........................23
Section 5.07. Application of Money Collected...........................................................23
Section 5.08. Limitation on Suits......................................................................24
Section 5.09. Unconditional Rights of Noteholders to Receive Principal and Interest....................25
Section 5.10. Restoration of Rights and Remedies.......................................................25
Section 5.11. Rights and Remedies Cumulative...........................................................25
Section 5.12. Delay or Omission Not Waiver.............................................................26
Section 5.13. Control by Noteholders...................................................................26
Section 5.14. Waiver of Past Defaults..................................................................26
Section 5.15. Undertaking for Costs....................................................................27
Section 5.16. Waiver of Stay or Extension Laws.........................................................27
Section 5.17. Sale of Trust Estate.....................................................................27
Section 5.18. Action on Notes..........................................................................29
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the Issuer.........................29
Section 5.20. Application of the Trust Indenture Act...................................................29
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................29
Section 6.01. Duties of Indenture Trustee..............................................................29
Section 6.02. Notice of Default........................................................................31
Section 6.03. Rights of Indenture Trustee..............................................................31
Section 6.04. Not Responsible for Recitals or Issuance of Notes........................................33
Section 6.05. May Hold Notes...........................................................................33
Section 6.06. Money Held in Trust......................................................................33
Section 6.07. Eligibility, Disqualification............................................................33
Section 6.08. Indenture Trustee's Capital and Surplus..................................................33
Section 6.09. Resignation and Removal; Appointment of Successor........................................34
Section 6.10. Acceptance of Appointment by Successor...................................................35
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.........35
Section 6.12. Preferential Collection of Claims Against Issuer.........................................36
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees....................................36
Section 6.14. Authenticating Agents....................................................................37
Section 6.15. Review of Mortgage Files.................................................................38
Section 6.16. Indenture Trustee Fees and Expenses......................................................40
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.......................................................................40
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders...................40
Section 7.02. Preservation of Information; Communications to Noteholders...............................41
Section 7.03. Reports by Indenture Trustee.............................................................41
<PAGE>
Section 7.04. Reports by Issuer........................................................................41
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES..........................................42
Section 8.01. Collection of Moneys.....................................................................42
Section 8.02. Establishment of Accounts................................................................43
Section 8.03. Note Account.............................................................................43
Section 8.04. Claims against the Note Insurance Policy.................................................45
Section 8.05. Pre-Funding Account and Capitalized Interest Account.....................................47
Section 8.06. General Provisions Regarding the Note Account and Home Equity Loans......................47
Section 8.07. Releases of Defective Home Equity Loans..................................................48
Section 8.08. Reports by Indenture Trustee to Noteholders; Access to Certain Information...............48
Section 8.09. Trust Estate Mortgage Files..............................................................48
Section 8.10. Amendment to Servicing Agreement.........................................................49
Section 8.11. Delivery of the Mortgage Files Pursuant to Servicing Agreement...........................49
Section 8.12. Master Servicer as Agent.................................................................49
Section 8.13. Termination of Master Servicer...........................................................49
Section 8.14. Opinion of Counsel.......................................................................50
Section 8.15. Appointment of Custodians................................................................50
Section 8.16. Rights of the Note Insurer to Exercise Rights of Noteholders.............................50
Section 8.17. Trust Estate and Accounts Held for Benefit of the Note Insurer...........................51
Section 8.18. Claims Upon the Policy; Policy Payments Account..........................................51
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................54
Section 9.01. Supplemental Indentures Without Consent of Noteholders...................................54
Section 9.02. Supplemental Indentures With Consent of Noteholders......................................55
Section 9.03. Execution of Supplemental Indentures.....................................................56
Section 9.04. Effect of Supplemental Indentures........................................................56
Section 9.05. Conformity With Trust Indenture Act......................................................56
Section 9.06. Reference in Notes to Supplemental Indentures............................................57
Section 9.07. Amendments to Governing Documents........................................................57
ARTICLE X REDEMPTION OF NOTES....................................................................................57
Section 10.01. Redemption..............................................................................57
Section 10.02. Form of Redemption Notice...............................................................58
Section 10.03. Notes Payable on Optional Redemption....................................................59
ARTICLE XI MISCELLANEOUS.........................................................................................59
Section 11.01. Compliance Certificates and Opinions....................................................59
Section 11.02. Form of Documents Delivered to Indenture Trustee........................................60
Section 11.03. Acts of Noteholders.....................................................................61
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer and Issuer........................61
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices...................................62
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<PAGE>
Section 11.06. Rules by Indenture Trustee..............................................................63
Section 11.07. Conflict With Trust Indenture Act.......................................................63
Section 11.08. Effect of Headings and Table of Contents................................................63
Section 11.09. Successors and Assigns..................................................................63
Section 11.10. Separability............................................................................63
Section 11.11. Benefits of Indenture...................................................................63
Section 11.12. Legal Holidays..........................................................................64
Section 11.13. Governing Law...........................................................................64
Section 11.14. Counterparts............................................................................64
Section 11.15. Recording of Indenture..................................................................64
Section 11.16. Issuer Obligation.......................................................................64
Section 11.17. No Petition.............................................................................65
Section 11.18. Inspection..............................................................................65
Section 11.19. Usury...................................................................................65
Section 11.20. Third Party Beneficiary.................................................................66
SCHEDULES AND EXHIBITS
Schedule l Schedule of Home Equity Loans
Exhibit A Form of Note
Exhibit B Note Insurance Policy
Exhibit C Form of Notice of Claim
Exhibit D Form of Initial Certification
Exhibit E Form of Final Certification
</TABLE>
iv
<PAGE>
CROSS-REFERENCE TABLE
Cross-reference sheet showing the location in the Indenture of the
provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.1
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
Section 310
(a) (1).............................. 6.07
(a) (2).............................. 6.07, 6.08
(a) (3).............................. 6.13
(a) (4).............................. Not Applicable
(a) (5).............................. 6.07
(b).................................. 6.07, 6.09
(c).................................. Not Applicable
Section 311
(a).................................. 6.12
(b).................................. 6.12
(c).................................. Not Applicable
Section 312
(a).................................. 7.01(a), 7.02(a)
(b).................................. 7.02(b)
(c).................................. 7.02(c)
Section 313
(a).................................. 7.03(a)
(b).................................. 7.03(a)
(c).................................. 11.05
(d).................................. 7.03(b)
Section 314
(a)(1)............................... 7.04
(a)(2)............................... 7.04
(a)(3)............................... 7.04
(a)(4)............................... 7.04
(b)(1)............................... 2.11(c), 11.01
(b)(2)............................... 3.06
(c)(1)............................... 2.11(d), 4.01,
8.02(d), 11.01
(c)(2)............................... 2.11(c), 4.01,
8.02(d), 11.01
(c)(3)............................... 8.02(d)
(d)(1)............................... 11.01(a)
(d)(2)............................... 11.01(a)
(d)(3)............................... 11.01(a)
(e).................................. 11.0 1(b)
Section 315
- ---------------------------------
* This Cross-Reference Table is not part of the Indenture.
<PAGE>
(a).................................. 6.01(b), 6.01(c)(1)
(b).................................. 6.02, 11.05
(c).................................. 6.01(a)
(d)(1)............................... 6.01(b), 6.01(c)
(d)(2)............................... 6.01(c)(2)
(d)(3)............................... 6.01(c)(3)
(e).................................. 5.15
Section 316
(a).................................. 5.20
(b).................................. 5.09
(c).................................. 5.20
Section 317
(a)(1)............................... 5.03
(a)(2)............................... 5.05
(b).................................. 3.01
Section 318
(a).................................. 11.07
<PAGE>
THIS INDENTURE, dated as of June 1, 1998 (as amended or supplemented
from time to time as permitted hereby, this "Indenture"), is between First
Greensboro Home Equity Loan Trust 1998-1, a Delaware business trust (together
with its permitted successors and assigns, the "Issuer") and The Chase Manhattan
Bank, a New York banking corporation, as indenture trustee (together with its
permitted successors in the trusts hereunder, the "Indenture Trustee").
Preliminary Statement
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Asset Backed Notes, Series 1998-1 (the "Notes"),
issuable as provided in this Indenture. All covenants and agreements made by the
Issuer herein are for the benefit and security of the Holders of the Notes and
the Note Insurer. The Issuer is entering into this Indenture, and the Indenture
Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
Granting Clause
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Notes and the Note Insurer, all of the Issuer's
right, title and interest in and to (a) the Initial Home Equity Loans (other
than any principal and interest payments due thereon prior to the Closing Date
whether or not received) listed in Schedule I to this Indenture delivered or
caused to be delivered to the Custodian on behalf of the Indenture Trustee and
the Subsequent Home Equity Loans (other than any principal and interest due
thereon prior to the related Subsequent Cut-Off Date whether or not received)
listed on Schedule I to any Subsequent Transfer Agreement, delivered or caused
to be delivered to the Custodian on behalf of the Indenture Trustee (and all
substitutions for such Home Equity Loans as provided by the Loan Sale
Agreement), together with the related Home Equity Loan documents and any
interest in any Mortgaged Property which secured a Home Equity Loan but which
has been acquired by foreclosure or deed in lieu of foreclosure, and all
payments thereon and proceeds of the conversion, voluntary or involuntary, of
the foregoing, (b) the Servicing Agreement, (c) the Loan Sale Agreement, (d) the
Loan Transfer Agreement, (e) the Management Agreement, (f) the Insurance
Policies, (g) all cash, instruments or other property held or required to be
deposited in the Principal and Interest Account, the Pre-Funding Account, the
Capitalized Interest Account, the Note Accounts and the Reserve Accounts,
including all investments made with funds in such accounts (but not including
any income on funds deposited in, or investments made with funds deposited in,
the Principal and Interest Account, the Pre-Funding Account, the Capitalized
Interest Account, which income shall belong to and be for the account of the
Master Servicer), and (h) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all insurance proceeds and condemnation awards.
Such Grants are made, however, in trust, to secure the Notes equally and ratably
without prejudice, priority or distinction between any Note and any other Note
by reason of difference in time of issuance or otherwise, and for the benefit of
the Note Insurer to secure (x) the payment of all amounts due on the Notes in
accordance with their terms, (y) the payment of all other sums payable under
this Indenture and (z) compliance with the provisions of this Indenture, all as
1
<PAGE>
provided in this Indenture. All terms used in the foregoing granting clauses
that are defined in Section 1.01 are used with the meanings given in said
Section.
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required to the end that the interests of the Holders
of the Notes may be adequately and effectively protected. The Indenture Trustee
agrees that it will hold the Note Insurance Policy in trust and that it will
hold any proceeds of any claim upon the Note Insurance Policy, solely for the
use and benefit of the Noteholders in accordance with the terms hereof and the
Note Insurance Policy.
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions.
Except as otherwise specified or as the context may otherwise require,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions attached hereto as Appendix 1, which is
incorporated by reference herein. All other terms used herein shall have the
meanings specified herein. The definitions of such terms are applicable to the
singular as well as to the plural forms of such terms and to the masculine as
well as to the feminine genders of such terms. Whenever reference is made herein
to an Event of Default or a Default known to the Indenture Trustee or of which
the Indenture Trustee has notice or knowledge, such reference shall be construed
to refer only to an Event of Default or Default of which the Indenture Trustee
is deemed to have notice or knowledge pursuant to Section 6.01(d). All other
terms used herein that are defined in the Trust Indenture Act (as hereinafter
defined), either directly or by reference therein, have the meanings assigned to
them therein.
All references in this instrument to designated "Articles", "Sections",
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed.
The words "herein", "hereof', "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
ARTICLE II
THE NOTES
Section 2.01. Forms Generally.
The Notes shall be in substantially the form set forth on Exhibit A
attached hereto. Each Note may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the Notes
may be listed, or as may, consistently herewith, be determined by the Issuer, as
evidenced by its execution thereof. Any portion of the text of any Note may be
set forth on the reverse thereof with an appropriate reference on the face of
the Note.
2
<PAGE>
The Definitive Notes may be produced in any manner determined by the
Issuer, as evidenced by its execution thereof.
Section 2.02. Forms of Certificate of Authentication.
The form of the Authenticating Agent's certificate of authentication is
as follows:
This is one of the Notes referred to in the within-mentioned Indenture.
___________________________________________, as
Authenticating Agent
By:_________________________________________
Authorized Signatory
Section 2.03. General Provisions With Respect to Principal and Interest
Payment.
The Notes shall be designated generally as the "Asset Backed Notes,
Series 1998-1" of the Issuer.
The aggregate principal amount of Notes that may be authenticated and
delivered under the Indenture is limited to $72,650,000 Class A-1 Notes and
$102,350,000 Class A-2 Notes, except for the Notes authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Sections 2.06, 2.07, or 9.06 of this Indenture. The Notes shall
consist of two classes, each having an Original Note Balance, Note Interest Rate
for the initial Interest Period and Stated Maturity Date, each as follows:
Initial
Original Note Note Interest Final
Designation Balance Rate Maturity Date
- ----------- ------------- ------------- -----------------
Class A-1 $72,650,000 6.53% December 25, 2029
Class A-2 $102,350,000 6.55% December 25, 2029
The Notes shall be issued in the form specified in Section 2.01.
Subject to the provisions of Section 3.01, Section 5.07, Section 5.09
and Section 8.02(d), the principal of the Notes shall be payable in installments
ending no later than the Stated Maturity Date unless the unpaid principal of
such Notes become due and payable at an earlier date by declaration of
acceleration or call for redemption or otherwise.
All payments made with respect to any related Note shall be applied
first to the interest then due and payable on such Note and then to the
principal thereof. All computations of interest accrued on any Note shall be
made on the basis of a year of 360 days and twelve 30-day months.
3
<PAGE>
Interest on the Notes shall accrue at the related Note Interest Rate
during each Interest Period on the Current Note Balance of each Outstanding Note
at the end of such Interest Period. Interest accrued during an Interest Period
shall be payable on the next following Payment Date.
All payments of principal of and interest on any Note shall be made in
the manner specified in Section 2.
Notwithstanding any of the foregoing provisions with respect to
payments of principal of and interest on the Notes, if the Notes have become or
been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled, then payments of principal of and interest on the Notes shall be made
in accordance with Section 5.07.
Section 2.04. Denominations.
The Notes shall be issuable only as registered Notes in the minimum
denomination of $25,000 and integral multiples of $1,000 in excess thereof, with
the exception of one Note which may be issued in a lesser amount.
Section 2.05. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Issuer by an Authorized
Officer of the Owner Trustee. The signature of such Authorized Officer of the
Owner Trustee on the Notes may be manual or by facsimile.
Notes bearing the manual or facsimile signature of an individual who
was at any time an Authorized Officer of the Owner Trustee shall bind the
Issuer, notwithstanding that such individual has ceased to be an Authorized
Officer of the Owner Trustee prior to the authentication and delivery of such
Notes or was not an Authorized Officer of the Owner Trustee at the date of such
Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed on behalf of the Issuer to
the Authenticating Agent for authentication; and the Authenticating Agent shall
authenticate and deliver such Notes as in this Indenture provided and not
otherwise.
Each Note authenticated on the Closing Date shall be dated the Closing
Date. All other Notes that are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
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 Authenticating Agent by the manual signature of one of its
authorized officers or employees, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
4
<PAGE>
Section 2.06. 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 is hereby initially appointed "Note Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided. The
Indenture Trustee shall remain the Note Registrar throughout the term hereof.
Upon any resignation of the Indenture Trustee, the Issuer shall promptly appoint
a successor, with the approval of the Note Insurer, or, in the absence of such
appointment, the Issuer shall assume the duties of Note Registrar.
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, the Owner
Trustee on behalf of the Issuer, shall execute, and the Authenticating Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations, and of a like aggregate initial principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Owner Trustee shall execute, and
the Authenticating Agent shall authenticate and deliver, the Notes that 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, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by the Holder
thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer and the Note Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge as may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.07 not involving any transfer or any exchange
made by the Note Insurer.
The Note Registrar shall not register the transfer of a Note unless the
Note Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not, and is not acquiring the Note on
behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of the Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner of a Book-Entry Note shall be deemed to make one of the
foregoing representations.
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Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes.
If (1) any mutilated Note is surrendered to the Note Registrar or the
Note Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (2) there is delivered to the Note Registrar such
security or indemnity as may be required by the Note Registrar to save each of
the Issuer, the Note Insurer and the Note Registrar harmless, then, in the
absence of notice to the Issuer or the Note Registrar that such Note has been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Issuer
shall execute and upon its request the Note Registrar shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a new Note or Notes of the same tenor and aggregate initial
principal amount bearing a number not contemporaneously outstanding. If, after
the delivery of such new Note, a bona fide purchaser of the original Note in
lieu of which such new Note was issued presents for payment such original Note,
the Issuer and the Note Registrar shall be entitled to recover such new Note
from the person to whom it was delivered or any person taking therefrom, except
a bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expenses
incurred by the Issuer or the Note Registrar in connection therewith. If any
such mutilated, destroyed, lost or stolen Note shall have become or shall be
about to become due and payable, or shall have become subject to redemption in
full, instead of issuing a new Note, the Issuer may pay such Note without
surrender thereof, except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section, the Issuer or the
Note Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Indenture Trustee or
the Note Registrar) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Issuer, whether or not the 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 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 2.08. Payments of Principal and Interest.
(a) Payments on Notes issued as Book-Entry Notes will be made by or on behalf of
the Indenture Trustee to the Clearing Agency or its nominee to the extent funds
are made available to the Indenture Trustee hereunder. Any installment of
interest or principal payable on any Definitive Notes that is punctually paid or
duly provided for by the Issuer on the applicable Payment Date shall be paid to
the Person in whose name such Note (or one or more Predecessor Notes) is
registered at the close of business on the Record Date for such Payment Date by
either (i) check mailed to such Person's address as it appears in the Note
Register on such Record Date, or (ii) by wire transfer of immediately available
funds to the account of a Noteholder, if such Noteholder (A) is the registered
holder of Definitive Notes having an initial principal amount of
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at least $1,000,000 and (B) has provided the Indenture Trustee with wiring
instructions in writing by five Business Days prior to the related Record Date
or has provided the Indenture Trustee with such instructions for any previous
Payment Date, except for the final installment of principal payable with respect
to such Note (or the Redemption Price for any Note called for redemption, if
such redemption will result in payment of the then entire unpaid principal
amount of such Note), which shall be payable as provided in subsection (b) below
of this Section 2.08. A fee may be charged by the Indenture Trustee to a
Noteholder of Definitive Notes for any payment made by wire transfer. Any
installment of interest or principal not punctually paid or duly provided for
shall be payable as soon as funds are available to the Indenture Trustee for
payment thereof, or if Section 5.07 applies, pursuant to Section 5.07.
(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by payments of installments of principal made on any
Payment Date shall be binding upon all Holders of such Note and of any Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, whether or not such payment is noted on such Note. The final
installment of principal of each Note (including the Redemption Price of any
Note called for optional redemption, if such optional redemption will result in
payment of the entire unpaid principal amount of such Note) shall be payable
only upon presentation and surrender thereof on or after the Payment Date
therefor at the Indenture Trustee's presenting office located within the United
States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire remaining unpaid
principal amount of any Note will become due and payable on the next Payment
Date other than pursuant to a redemption pursuant to Article X, it shall, no
later than two days prior to such Payment Date, telecopy or hand deliver to each
Person in whose name a Note to be so retired is registered at the close of
business on such otherwise applicable Record Date a notice to the effect that:
(i) the Indenture Trustee expects that funds sufficient to pay such
final installment will be available in the related Note Account on such Payment
Date; and
(ii) if such funds are available, (A) such final installment will be
payable on such Payment Date, but only upon presentation and surrender of such
Note at the office or agency of the Note Registrar maintained for such purpose
pursuant to Section 3.02 (the address of which shall be set forth in such
notice) and (B) no interest shall accrue on such Note after such Payment Date.
A copy of such form of notice shall be sent to the Note Insurer by the
Indenture Trustee.
Notices in connection with redemptions of Notes shall be mailed to
Noteholders in accordance with Section 10.02.
(c) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to unpaid principal and
interest that were carried by such other Note. Any checks mailed pursuant to
subsection (a) of this Section 2.08 and returned undelivered shall be held in
accordance with Section 3.03.
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(d) Each Payment Date Statement, prepared by the Indenture Trustee
based on the Master Servicer Remittance Report delivered to the Indenture
Trustee pursuant to the Servicing Agreement, shall be delivered by the Indenture
Trustee to the Note Insurer, the Rating Agencies, the Owner Trustee, the
Underwriter and each Noteholder as the statement required pursuant to Section
8.08. Neither the Indenture Trustee nor the Paying Agent shall have any
responsibility to recalculate, verify or recompute information contained in any
such tape, electronic data file or disk or any such Master Servicer Remittance
Report except to the extent necessary to satisfy all obligations under this
Section 2.08(d).
Within 90 days after the end of each calendar year, the Indenture
Trustee will be required to furnish to each person who at any time during the
calendar year was a Noteholder, if requested in writing by such person, a
statement containing the information set forth in subclauses (i) (such amounts
of principal paid in the aggregate only) and (ii) in the definition of "Payment
Date Statement," aggregated for such calendar year or the applicable portion
thereof during which such person was a Noteholder. Such obligation will be
deemed to have been satisfied to the extent that substantially comparable
information is provided pursuant to any requirements of the Code as are from
time to time in force.
Section 2.09. Persons Deemed Owner.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Indenture Trustee, any Paying Agent and any other agent of the
Issuer, the Note Insurer or the Indenture Trustee may treat the Person in whose
name any Note is registered as the owner of such Note (a) on the applicable
Record Date for the purpose of receiving payments of the principal of and
interest on such Note and (b) on any other date for all other purposes
whatsoever, and neither the Issuer, the Indenture Trustee, any Paying Agent nor
any other agent of the Issuer, the Note Insurer or the Indenture Trustee shall
be affected by notice to the contrary.
Section 2.10. Cancellation.
All Notes surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Note Registrar,
be delivered to the Note Registrar and shall be promptly canceled by it. The
Issuer may at any time deliver to the Note Registrar for cancellation any Note
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Note Registrar. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes held by the Note Registrar shall
be held by the Note Registrar in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.
Section 2.11. Authentication and Delivery of Notes.
The Notes shall be executed by an Authorized Officer of the Owner
Trustee on behalf of the Issuer and delivered to the Authenticating Agent for
authentication, and thereupon the same shall be authenticated and delivered by
the Authenticating Agent, upon Issuer Request and upon receipt by the
Authenticating Agent of all of the following:
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(a) An Issuer Order authorizing the execution, authentication and
delivery of the Notes and specifying the Stated Maturity Date, the principal
amount and the Note Interest Rate (or the manner in which such Note Interest
Rate is to be determined) of such Notes to be authenticated and delivered.
(b) An Issuer Order authorizing the execution and delivery of this
Indenture.
(c) One or more Opinions of Counsel addressed to the Authenticating
Agent and the Note Insurer or upon which the Authenticating Agent and the Note
Insurer is expressly permitted to rely, complying with the requirements of
Section 11.01, reasonably satisfactory in form and substance to the
Authenticating Agent and the Note Insurer.
In rendering the opinions set forth above, such counsel may rely upon
officer's certificates of the Issuer, the Owner Trustee, the Master Servicer and
the Indenture Trustee, without independent confirmation or verification with
respect to factual matters relevant to such opinions. In rendering the opinions
set forth above, such counsel need express no opinion as to (A) the existence
of, or the priority of the security interest created by the Indenture against,
any liens or other interests that arise by operation of law and that do not
require any filing or similar action in order to take priority over a perfected
security interest or (B) the priority of the security interest created by this
Indenture with respect to any claim or lien in favor of the United States or any
agency or instrumentality thereof (including federal tax liens and liens arising
under Title IV of the Employee Retirement Income Security Act of 1974).
The acceptability to the Note Insurer of the Opinion of Counsel
delivered to the Indenture Trustee and the Note Insurer at the Closing Date
shall be conclusively evidenced by the delivery on the Closing Date of the Note
Insurance Policy.
(d) An Officers' Certificate of the Issuer complying with the
requirements of Section 11.01 and stating that:
(i) the Issuer is not in Default under this Indenture and the issuance
of the Notes will not result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Issuer's Certificate of Trust
or any indenture, mortgage, deed of trust or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any order of any court
or administrative agency entered in any proceeding to which the Issuer is a
party or by which it may be bound or to which it may be subject, and that all
conditions precedent provided in this Indenture relating to the authentication
and delivery of the Notes have been complied with;
(ii) the Issuer is the owner of each Home Equity Loan, free and clear
of any lien, security interest or charge, has not assigned any interest or
participation in any such Home Equity Loan (or, if any such interest or
participation has been assigned, it has been released) and has the right to
Grant each such Home Equity Loan to the Indenture Trustee;
(iii) the information set forth in the Schedule of Home Equity Loans
attached as Schedule I to this Indenture is correct;
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(iv) the Issuer has Granted to the Indenture Trustee all of its right,
title and interest in each Home Equity Loan;
(v) as of the Closing Date, no lien in favor of the United States
described in Section 6321 of the Code, or lien in favor of the Pension Benefit
Guaranty Corporation described in Section 4068(a) of the Employee Retirement
Income Security Act of 1974, as amended, has been filed as described in
subsections 6323(f) and 6323(g) of the Code upon any property belonging to the
Issuer; and
(vi) attached thereto is a true and correct copy of letters signed by
each Rating Agency confirming that the Notes have been rated in the highest
rating category of such Rating Agency.
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of the Loan Sale Agreement.
(g) An executed counterpart of the Loan Transfer Agreement.
(h) An executed counterpart of the Deposit Trust Agreement.
Section 2.12. Book-Entry Note.
The Notes will be issued initially as one or more certificates in the
name of the Cede & Co., as nominee for the Clearing Agency maintaining
book-entry records with respect to ownership and transfer of such Notes, and
registration of the Notes may not be transferred by the Note Registrar except
upon Book-Entry Termination. In such case, the Note Registrar shall deal with
the Clearing Agency as representatives of the Beneficial Owners of such Notes
for purposes of exercising the rights of Noteholders hereunder. Each payment of
principal of and interest on a Book-Entry Note shall be paid to the Clearing
Agency, which shall credit the amount of such payments to the accounts of its
Clearing Agency Participants in accordance with its normal procedures. Each
Clearing Agency Participant shall be responsible for disbursing such payments to
the Beneficial Owners of the Book-Entry Notes that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Beneficial Owners of the Book-Entry
Notes that it represents. All such credits and disbursements are to be made by
the Clearing Agency and the Clearing Agency Participants in accordance with the
provisions of the Notes. None of the Indenture Trustee, the Note Registrar, if
any, the Issuer, or any Paying Agent or the Note Insurer shall have any
responsibility therefor except as otherwise provided by applicable law. Requests
and directions from, and votes of, such representatives shall not be deemed to
be inconsistent if they are made with respect to different Beneficial Owners.
Section 2.13. Termination of Book Entry System.
(a) The book-entry system through the Clearing Agency with respect to
the Book-Entry Notes may be terminated upon the happening of any of the
following:
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(i) The Clearing Agency advises the Indenture Trustee that the Clearing
Agency is no longer willing or able to discharge properly its responsibilities
as nominee and depositary with respect to the Notes and the Indenture Trustee is
unable to locate a qualified successor clearing agency satisfactory to the
Issuer;
(ii) The Issuer, in its sole discretion, elects to terminate the
book-entry system by notice to the Clearing Agency and the Indenture Trustee; or
(iii) After the occurrence of an Event of Default (at which time the
Indenture Trustee shall use all reasonable efforts to promptly notify each
Beneficial Owner through the Clearing Agency of such Event of Default), the
Beneficial Owners of no less than 51% of the Note Balance of the Book-Entry
Notes advise the Indenture Trustee in writing, through the related Clearing
Agency Participants and the Clearing Agency, that the continuation of a
book-entry system through the Clearing Agency to the exclusion of any Definitive
Notes being issued to any person other than the Clearing Agency or its nominee
is no longer in the best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection (a) above,
the Indenture Trustee shall use all reasonable efforts to notify all Beneficial
Owners, through the Clearing Agency, of the occurrence of such event and of the
availability of Definitive Notes to Beneficial Owners requesting the same, in an
aggregate Current Note Balance representing the interest of each, making such
adjustments and allowances as it may find necessary or appropriate as to accrued
interest and previous calls for redemption. Definitive Notes shall be issued
only upon surrender to the Indenture Trustee of the global Note by the Clearing
Agency, accompanied by registration instructions for the Definitive Notes.
Neither the Issuer nor the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon issuance of the Definitive
Notes, all references herein to obligations imposed upon or to be performed by
the Clearing Agency shall cease to be applicable and the provisions relating to
Definitive Notes shall be applicable.
ARTICLE III
COVENANTS
Section 3.01. Payment of Notes.
The Issuer will pay or cause to be duly and punctually paid the
principal of, and interest on, the Notes in accordance with the terms of the
Notes and 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
Trust Estate as provided in this Indenture and the Issuer shall not otherwise be
liable for payments on the Notes. No person shall be personally liable for any
amounts payable under the Notes. If any other provision of this Indenture
conflicts or is deemed to conflict with the provisions of this Section 3.01, the
provisions of this Section 3.01 shall control.
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Section 3.02. Maintenance of Office or Agency.
The Issuer will cause the Note Registrar to maintain its corporate
trust office at a location 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 may also from time to time at its own expense designate one
or more other offices or agencies within the United States of America where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided, however, any designation of an
office or agency for payment of Notes shall be subject to Section 3.03. The
Issuer will give prompt written notice to the Indenture Trustee and the Note
Insurer of any such designation or rescission and of any change in the location
of any such other office or agency.
Section 3.03. Money for Note Payments to Be Held In Trust.
All payments of amounts due and payable with respect to any Notes that
are to be made from amounts withdrawn from the related Note Account pursuant to
Section 8.02(c) or Section 5.07 shall be made on behalf of the Issuer by the
Paying Agent, and no amounts so withdrawn from the related Note Account for
payments of Notes shall be paid over to the Issuer under any circumstances
except as provided in this Section 3.03 or in Section 5.07 or Section 8.02.
With respect to Definitive Notes, if the Issuer shall have a Paying
Agent that is not also the Note Registrar, such Note Registrar shall furnish, no
later than the fifth calendar day after each Record Date, a list, in such form
as such Paying Agent may reasonably require, of the names and addresses of the
Holders of Notes and of the number of Individual Notes held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Indenture
Trustee, it will, on or before the Business Day next preceding each Payment Date
direct the Indenture Trustee to deposit with such Paying Agent an aggregate sum
sufficient to pay the amounts then becoming due (to the extent funds are then
available for such purpose in the related Note Account), such sum to be held in
trust for the benefit of the Persons entitled thereto. Any moneys deposited with
a Paying Agent in excess of an amount sufficient to pay the amounts then
becoming due on the Notes with respect to which such deposit was made shall,
upon Issuer Order, be paid over by such Paying Agent to the Indenture Trustee
for application in accordance with Article VIII.
Subject to the prior consent of the Note Insurer, any Paying Agent
other than the Indenture Trustee may be appointed by Issuer Order and at the
expense of the Issuer. The Issuer shall not appoint any Paying Agent (other than
the Indenture Trustee) that is not, at the time of such appointment, a
depository institution or trust company whose obligations would be Eligible
Investments pursuant to clause (c) of the definition of the term Eligible
Investments. The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
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(1) allocate all sums received for payment to the Holders of Notes on
each Payment Date among such Holders in the proportion specified in the
applicable Payment Date Statement, in each case to the extent permitted by
applicable law;
(2) hold all sums held by it for the payment of amounts due with
respect to the 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;
(3) if such Paying Agent is not the Indenture Trustee, immediately
resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums
held by it in trust for the payment of the Notes if at any time the Paying Agent
ceases to meet the standards set forth above required to be met by a Paying
Agent at the time of its appointment;
(4) if such Paying Agent is not the Indenture Trustee, give the
Indenture Trustee notice of any Default by the Issuer (or any other obligor upon
the Notes) in the making of any payment required to be made with respect to any
Notes for which it is acting as Paying Agent;
(5) if such Paying Agent is not the Indenture Trustee, at any time
during the continuance of any such Default, upon the written request of the
Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent; and
(6) comply with all requirements of the Code, and all regulations
thereunder, with respect to 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 any of the Notes, the Issuer has provided
the calculations pertaining thereto to the Indenture Trustee and the Paying
Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Issuer
Order direct any Paying Agent, if other than the Indenture Trustee, to pay to
the Indenture Trustee all sums held in trust by such Paying Agent, such sums to
be held by the Indenture Trustee upon the same trusts as those upon which such
sums were held by such Paying Agent; and upon such payment by any Paying Agent
to the Indenture Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money held by the Indenture Trustee or any Paying Agent in trust
for the payment of any amount due with respect to any Note and remaining
unclaimed for two and one-half years after such amount has become due and
payable to the Holder of such Note (or if earlier, three months before the date
on which such amount would escheat to a governmental entity under applicable
law) shall be discharged from such trust and paid to the Issuer; and the Holder
of such 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.
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The Indenture Trustee may adopt and employ, at the expense of the Issuer, any
reasonable means of notification of such repayment (including, but not limited
to, mailing notice of such repayment to Holders whose 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 any Agent, at the last address of record for each such
Holder).
Section 3.04. Existence of Issuer.
(a) Subject to Sections 3.04(b) and (c), the Issuer will keep in full
effect its existence, rights and franchises as a business trust under the laws
of the State of Delaware or under the laws of any other state or the United
States of America, and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes, the
Servicing Agreement, the Insurance Agreement and the Loan Transfer Agreement.
(b) Subject to Section 3.09(vii) and the prior written consent of the
Note Insurer, any entity into which the Issuer may be merged or with which it
may be consolidated, or any entity resulting from any merger or consolidation to
which the Issuer shall be a party, shall be the successor Issuer under this
Indenture without the execution or filing of any paper, instrument or further
act to be done on the part of the parties hereto, anything in any agreement
relating to such merger or consolidation, by which any such Issuer may seek to
retain certain powers, rights and privileges therefore obtaining for any period
of time following such merger or consolidation to the contrary notwithstanding
(other than Section 3.09(vii)).
(c) Upon any consolidation or merger of or other succession to the
Issuer in accordance with this Section 3.04, the Person formed by or surviving
such consolidation or merger (if other than the Issuer) may exercise every right
and power of, and shall have all of the obligations of, the Issuer under this
Indenture with the same effect as if such Person had been named as the Issuer
herein.
Section 3.05. Protection of Trust Estate.
(a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien of this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iv) enforce any of the Home Equity Loans, the Servicing Agreement, the
Loan Sale Agreement or the Loan Transfer Agreement; or
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(v) preserve and defend title to the Trust Estate and the rights of the
Indenture Trustee, and of the Noteholders, in the Home Equity Loans and the
other property held as part of the Trust Estate against the claims of all
Persons and parties.
(b) The Indenture Trustee shall not remove any portion of the Trust
Estate that consists of money or is evidenced by an instrument, certificate or
other writing from the jurisdiction in which it was held at the date of the most
recent Opinion of Counsel delivered pursuant to Section 3.06 (or from the
jurisdiction in which it was held, or to which it is intended to be removed, as
described in the Opinion of Counsel delivered at the Closing Date pursuant to
Section 2.1l(c), if no Opinion of Counsel has yet been delivered pursuant to
Section 3.06) or cause or permit ownership or the pledge of any portion of the
Trust Estate that consists of book-entry securities to be recorded on the books
of a Person located in a different jurisdiction from the jurisdiction in which
such ownership or pledge was recorded at such time unless the Indenture Trustee
shall have first received an Opinion of Counsel to the effect that the lien and
security interest created by this Indenture with respect to such property will
continue to be maintained after giving effect to such action or actions.
Section 3.06. Opinions as to Trust Estate.
On or before April 30th in each calendar year, beginning in 1999, the
Issuer shall furnish to the Indenture Trustee and the Note Insurer an Opinion of
Counsel reasonably satisfactory in form and substance to the Indenture Trustee
and the Note Insurer either stating that, in the opinion of such counsel, such
action has been taken as is necessary to maintain the lien and security interest
created by this Indenture and reciting the details of such action or stating
that in the opinion of such counsel no such action is necessary to maintain such
lien and security interest. Such Opinion of Counsel shall also describe all such
action, if any, that will, in the opinion of such counsel, be required to be
taken to maintain the lien and security interest of this Indenture with respect
to the Trust Estate until May 1st in the following calendar year.
Section 3.07. Performance of Obligations; Servicing Agreement.
(a) The Issuer shall punctually perform and observe all of its
obligations under this Indenture, the Servicing Agreement and the relevant
sections of the Loan Sale Agreement.
(b) The Issuer shall not take any action and will use its Best Efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's covenants or obligations under any of the Mortgage
Files or under any instrument included in the Trust Estate, or that would result
in the amendment, hypothecation, termination or discharge of, or impair the
validity or effectiveness of, any of the documents or instruments contained in
the Mortgage Files, except as expressly permitted in this Indenture, the
Servicing Agreement or such document included in the Mortgage File or other
instrument or unless such action will not adversely affect the interests of the
Holders of the Notes.
(c) If the Issuer shall have knowledge of the occurrence of a default
under the Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee, the Note Insurer and the Rating Agencies thereof, and shall specify in
such notice the action, if any, the Issuer is taking with respect to such
default.
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(d) Upon any termination of the Master Servicer's rights and powers
pursuant to the Servicing Agreement, the Indenture Trustee shall promptly notify
the Rating Agencies. As soon as any successor Master Servicer (including the
Backup Master Servicer) is appointed, the Indenture Trustee shall notify the
Rating Agencies, specifying in such notice the name and address of such
successor Master Servicer.
Section 3.08. Investment Company Act.
The Issuer shall at all times conduct its operations so as not to be
subject to, or shall comply with, the requirements of the Investment Company Act
of 1940, as amended (or any successor statute), and the rules and regulations
thereunder.
Section 3.09. Negative Covenants.
The Issuer shall not:
(i) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate except as expressly permitted by this
Indenture or the Servicing Agreement;
(ii) claim any credit on, or make any deduction from, the
principal of, or interest on, any of the Notes by reason of the payment
of any taxes levied or assessed upon any portion of the Trust Estate;
(iii) engage in any business or activity other than as
permitted by the Trust Agreement or other than in connection with, or
relating to, the issuance of the Notes pursuant to this Indenture or
amend the Trust Agreement, as in effect on the Closing Date, other than
in accordance with Section 11.01;
(iv) incur, issue, assume or otherwise become liable for a
indebtedness other than the Notes;
(v) incur, assume, guaranty or agree to indemnify any Person
with respect to any indebtedness of any Person, except for such
indebtedness as may be incurred by the Issuer in connection with the
issuance of the Notes pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part (until the
Notes are paid in full);
(vii) (1) permit the validity or effectiveness of this
Indenture or any Grant to be impaired, or permit the lien of this
Indenture to be impaired, amended, hypothecated, Overcollateralization,
terminated or discharged, or permit any Person to be released from any
covenants or obligations under this Indenture, except as may be
expressly permitted hereby, (2) permit any lien, charge, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture or any Permitted Encumbrance) to be created on or extend to
or otherwise arise upon or burden the Trust Estate or any part thereof
or any interest therein or the proceeds thereof, or (3) permit the lien
of this Indenture not to constitute a valid perfected first priority
security interest in the Trust Estate; or
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(viii) take any other action that should reasonably be
expected to, or fail to take any action if such failure should
reasonably be expected to, cause the Issuer to be taxable as (a) an
association pursuant to Section 7701 of the Code or (b) a taxable
mortgage pool pursuant to Section 7701(i) of the Code or (c) a publicly
traded partnership pursuant to Section 7704 of the Code.
Section 3.10. Annual Statement as to Compliance.
On or before March 31, 1999, and each March 31 thereafter, the Issuer
shall deliver to the Indenture Trustee, the Note Insurer and the Underwriters a
written statement, signed by an Authorized Officer of the Owner Trustee, stating
as to the signer thereof, that:
(1) an Officer's Certificate regarding the fulfillment by the Issuer
during such year of its obligations under this Indenture has been received by
the Issuer as contemplated by Section 11.01 (c); and
(2) to the best of such Authorized Officer's knowledge, based solely on
such Officer's Certificate, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has been a
Default in the fulfillment of any such covenant or condition, specifying each
such Default known to such Authorized Officer and the nature and status thereof.
Section 3.11. Restricted Payments.
The Issuer shall not, directly or indirectly, (i) pay any dividend or
make any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to the Owner Trustee or any owner
of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Master
Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Issuer
may make, or cause to be made, distributions to the Master Servicer, the
Indenture Trustee, the Owner Trustee, the Note Insurer and the Noteholders as
contemplated by, and to the extent funds are available for such purpose under
this Indenture, the Servicing Agreement or the Trust Agreement and the Issuer
will not, directly or indirectly, make or cause to be made payments to or
distributions from the Note Account except in accordance with this Indenture.
Section 3.12. Treatment of Notes as Debt for Tax Purposes.
The Issuer shall treat the Notes as indebtedness for all federal and
state tax purposes.
Section 3.13. Notice of Events of Default.
The Issuer shall give the Indenture Trustee, the Note Insurer, the
Rating Agencies and the Underwriters prompt written notice of each Event of
Default hereunder, each default on the part of the Master Servicer of its
obligations under the Servicing Agreement and each default on the part of each
of the Sponsor, the Transferor and FGT of its respective obligations under the
Loan Sale Agreement.
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Section 3.14. Further Instruments and Acts.
Upon request of the Indenture Trustee or the Note Insurer, the Issuer
will execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.
Whenever the following conditions shall have been satisfied:
(1) either
(A) all 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 2.07, and (ii) Notes for
whose payment money has theretofore been deposited in trust and
thereafter repaid to the Issuer, as provided in Section 3.03) have been
delivered to the Note Registrar for cancellation; or
(B) all Notes not theretofore delivered to the Note Registrar
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the Stated
Maturity Date within one year, or
(iii) are to be called for redemption within one year
under irrevocable arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of the
Issuer or the Master Servicer,
and the Issuer or the Master Servicer, in the case of clauses (B)(i),
(B)(ii) or (B)(iii) above, has irrevocably deposited or caused to be
deposited with the Indenture Trustee, in trust for such purpose, an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Indenture Trustee for
cancellation, for principal and interest to the Stated Maturity Date or
to the applicable Redemption Date, as the case may be, and in the case
of Notes that were not paid at the Stated Maturity Date of their entire
unpaid principal amount, for all overdue principal and all interest
payable on such Notes to the next succeeding Payment Date therefor;
(2) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer (including, without limitation, amounts
due the Note Insurer hereunder); and
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(3) the Issuer has delivered to the Indenture Trustee and the
Note Insurer an Officers' Certificate and an Opinion of Counsel
satisfactory in form and substance to the Indenture Trustee and the
Note Insurer each stating that all conditions precedent herein
providing for the satisfaction and discharge of this Indenture have
been complied with;
then, upon Issuer Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Issuer (or of the Master Servicer
in the case of a redemption by the Master Servicer), execute and deliver all
such instruments as may be necessary to acknowledge the satisfaction and
discharge of this Indenture and shall pay, or assign or transfer and deliver, to
the Issuer or upon Issuer Order all cash, securities and other property held by
it as part of the Trust Estate remaining after satisfaction of the conditions
set forth in clauses (1) and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Indenture Trustee and the Paying Agent to the Issuer and the
Holders of Notes under Section 3.03, the obligations of the Indenture Trustee to
the Holders of Notes under Section 4.02 and the provisions of Section 2.07 with
respect to lost, stolen, destroyed or mutilated Notes, registration of transfers
of Notes and rights to receive payments of principal of and interest on the
Notes shall survive.
Section 4.02. Application of Trust Money.
All money deposited with the Indenture Trustee pursuant to Sections
3.03 and 4.01 shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent, as the Indenture Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event of Default.
"Event of Default", wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) if the Issuer shall default in the payment on any Payment Date of
any Required Payment Amount or fail to pay the Notes in full on or before the
Stated Maturity Date (and in the case of any such default, such default or
failure shall continue for a period of 5 days unremedied);
(2) if the Issuer shall breach or default in the due observance of any
one or more of the covenants set forth in clauses (i) through (viii) of Section
3.09;
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(3) if the Issuer shall breach, or default in the due observance or
performance of, any other of its covenants in this Indenture, and such Default
shall continue for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer and the Note Insurer by the
Indenture Trustee at the direction of the Note Insurer, or to the Issuer and the
Indenture Trustee by the Holders of Notes representing at least 25% of the Note
Balance of the Outstanding Notes of both Classes, with the prior written consent
of the Note Insurer, a written notice specifying such Default and requiring it
to be remedied and stating that such notice is a "Notice of Default" hereunder;
(4) if any representation or warranty of the Issuer made in this
Indenture or any certificate or other writing, delivered by the Issuer pursuant
hereto or in connection herewith shall prove to be incorrect in any material
respect as of the time when the same shall have been made and, within 30 days
after there shall have been given, by registered or certified mail, written
notice thereof to the Issuer and the Note Insurer by the Indenture Trustee at
the direction of the Note Insurer, or to the Issuer and the Indenture Trustee by
the Holders of Notes representing at least 25% of the Note Balance of the
Outstanding Notes of both Classes, with the prior written consent of the Note
Insurer, the circumstance or condition in respect of which such representation
or warranty was incorrect shall not have been eliminated or otherwise cured;
provided, however, that in the event that there exists a remedy with respect to
any such breach that consists of a purchase obligation, repurchase obligation or
right to substitute under the Operative Documents, then such purchase
obligation, repurchase obligation or right to substitute shall be the sole
remedy with respect to such breach and shall not constitute an Event of Default
hereunder;
(5) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or
(6) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or the consent by
the Issuer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or of any substantial part of its property or the making by the Issuer of
an assignment for the benefit of creditors or the failure by the Issuer
generally to pay its debts as such debts become due or the taking of corporate
action by the Issuer in furtherance of any of the foregoing.
The payment by the Note Insurer of any Insured Payment in an amount
sufficient to cover the related Required Payment Amount pursuant to the Note
Insurance Policy in respect of any Payment Date shall, at the option of the Note
Insurer, constitute an Event of Default with respect to the Notes.
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Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case, but with the consent of the Note Insurer in the absence of a Note Insurer
Default, the Indenture Trustee may, and on request of the Note Insurer or the
Holders of Notes representing not less than 50% of the Note Balance of the
Outstanding Notes of both Classes (with the consent of Note Insurer), shall,
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 such Notes, in an amount equal to the Note Balance of such
Notes, together with accrued and unpaid interest thereon to the date of such
acceleration, shall become immediately due and payable, all subject to the prior
written consent of the Note Insurer in the absence of a Note Insurer Default.
At any time after such a declaration of acceleration of maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Indenture Trustee as hereinafter in this Article
provided the Note Insurer or the Holders of Notes representing more than 50% of
the Note Balance of the Outstanding Notes of both Classes, with the prior
written consent of the Note Insurer, by written notice to the Issuer and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(1) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of, and interest on,
all 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
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its
agents and counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of Notes that have become due solely by such acceleration,
have been cured or waived as provided in Section 5.14.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
Subject to the provisions of Section 3.01 and the following sentence,
if an Event of Default occurs and is continuing, the Indenture Trustee may, with
the prior written consent of the Note Insurer and shall, at the direction of the
Note Insurer, proceed to protect and enforce its rights and the rights of the
Noteholders and the Note Insurer by any Proceedings the Indenture Trustee deems
appropriate to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or enforce any other proper remedy. Any
proceedings brought by the Indenture Trustee on behalf of the Noteholders and
the Note Insurer or any Noteholder against
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the Issuer shall be limited to the preservation, enforcement and foreclosure of
the liens, assignments, rights and security interests under the Indenture and no
attachment, execution or other unit or process shall be sought, issued or levied
upon any assets, properties or funds of the Issuer, other than the Trust Estate
relative to the Notes in respect of which such Event of Default has occurred. If
there is a foreclosure of any such liens, assignments, rights and security
interests under this Indenture, by private power of sale or otherwise, no
judgment for any deficiency upon the indebtedness represented by the Notes may
be sought or obtained by the Indenture Trustee or any Noteholder against the
Issuer. The Indenture Trustee shall be entitled to recover the costs and
expenses expended by it pursuant to this Article V including reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel.
Section 5.04. Remedies.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Indenture Trustee, at the
direction of the Note Insurer (subject to Section 5.17, to the extent
applicable) may, for the benefit of the Noteholders and the Note Insurer, do one
or more of the following:
(a) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer moneys
adjudged due, subject in all cases to the provisions of Sections 3.01 and 5.03;
(b) in accordance with Section 5.17, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee or the Holders of the Notes and the
Note Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all Monthly
Remittance Amount pursuant to Section 5.07.
Section 5.05. Indenture Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the 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 on the Issuer for the
payment of any overdue principal or interest) shall, at the direction of the
Note Insurer, be entitled and empowered, by intervention in such Proceeding or
otherwise to:
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(i) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel) and of the Noteholders and
the Note Insurer allowed in such Proceeding, and
(ii) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each
Noteholder and the Note Insurer to make such payments to the Indenture
Trustee and, in the event that the Indenture Trustee shall consent to
the making of such payments directly to the Noteholders and the Note
Insurer, to pay to the Indenture Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Notes or the rights of any Holder
thereof, or the Note Insurer, or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder or the Note Insurer in any such
Proceeding.
Section 5.06. Indenture Trustee May Enforce Claims Without Possession
of Notes.
All rights of action and claims under this Indenture or any of the
Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Indenture Trustee,
at the direction of the Note Insurer, shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall be for the
ratable benefit of the Holders of the Notes and the Note Insurer in respect of
which such judgment has been recovered after payment of amounts required to be
paid pursuant to clause (i) Section 5.07.
Section 5.07. Application of Money Collected.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Indenture Trustee with respect to each
Class of Notes pursuant to this Article or otherwise and any other monies that
may then be held or thereafter received by the Indenture Trustee as security for
such Class of Notes shall be applied in the following order, at the date or
dates fixed by the Indenture Trustee and, in case of the payment of the entire
amount due on account of principal of, and interest on, such Class of Notes,
upon presentation and surrender thereof:
(i) first, to the Indenture Trustee, any unpaid Indenture
Trustee's Fees then due with respect to such Class and any other
amounts payable and due to the Indenture Trustee with respect to such
Class under this Indenture, including any costs or expenses incurred by
it in connection with the enforcement of the remedies provided for in
this Article V;
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(ii) second, to the Master Servicer, any amounts required to
pay the Master Servicer for any unpaid Servicing Fees with respect to
such Class then due and, upon the final liquidation of the related Home
Equity Loan or the final liquidation of the Trust Estate, Servicing
Advances with respect to such Class previously made by, and not
previously reimbursed or retained by, the Master Servicer;
(iii) third, to the payment of Note Interest then due and
unpaid upon the Outstanding Notes of such Class through the day
preceding the date on which such payment is made;
(iv) fourth, to the payment of the Note Balance of the
Outstanding Notes of such Class, up to the amount of their respective
Current Note Balances, ratably, without preference or priority of any
kind;
(v) fifth, to the payment to the Note Insurer, as subrogee to
the rights of the Noteholders, (A) the aggregate amount necessary to
reimburse the Note Insurer for any unreimbursed Insured Payments for
such Class paid by the Note Insurer on prior Payment Dates, together
with interest thereon at the "Late Payment Rate" specified in the
Insurance Agreement from the date such Insured Payments were paid by
the Note Insurer to such Payment Date, (B) the amount of any unpaid
Note Insurer Premium for such Class then due, together with interest
thereon at the "Late Payment Rate" specified in the Insurance Agreement
from the date such amounts were due and (C) any other amounts due and
owing to the Note Insurer under the Insurance Agreement;
(vi) sixth, if the other Class is still outstanding, the
remainder to the Reserve Account; and
(vii) seventh, the remainder to the Certificate Distribution
Account for payment to the Certificateholders.
Section 5.08. Limitation on Suits.
No Holder of a Note shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Indenture Trustee and the Note Insurer of a continuing Event of
Default;
(2) the Holders of Notes representing not less than 25% of the
Note Balance of the Outstanding Notes of both Classes shall have made
written request to the Indenture Trustee to institute Proceedings in
respect of such Event of Default in its own name as Indenture Trustee
hereunder;
(3) such Holder or Holders have offered to the Indenture
Trustee indemnity in full against the costs, expenses and liabilities
to be incurred in compliance with such request;
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(4) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute any
such Proceeding;
(5) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes of both Classes; and
(6) the consent of the Note Insurer shall have been obtained;
it being 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 and for the equal and ratable benefit of all the Holders of
Notes.
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 50% of the Note Balances of the Outstanding Notes of
both Classes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken notwithstanding any other provision herein to the
contrary.
Section 5.09. Unconditional Rights of Noteholders to Receive Principal
and Interest.
Subject to the provisions in this Indenture (including Sections 3.01
and 5.03) limiting the right to recover amounts due on a Note to recovery from
amounts in the Trust Estate, the Holder of any Note shall have the right, to the
extent permitted by applicable law, which right is absolute and unconditional,
to receive payment of each installment of interest on such Note on the
respective Payment Date for such installments of interest, to receive payment of
each installment of principal of such Note when due (or, in the case of any Note
called for redemption, on the date fixed for such redemption) and to institute
suit for the enforcement of any such payment, and such right shall not be
impaired without the consent of such Holder.
Section 5.10. Restoration of Rights and Remedies.
If the Indenture Trustee, the Note Insurer 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, the Note Insurer or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee, the
Note Insurer 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, the
Note Insurer and the Noteholders shall continue as though no such Proceeding had
been instituted.
Section 5.11. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Note Insurer or to the Noteholders is intended to be exclusive of
any other right or remedy, and every
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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 5.12. Delay or Omission Not Waiver.
No delay or omission of the Indenture Trustee, the Note Insurer or of
any Holder of any Note to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article or by law to the Indenture Trustee, the Note Insurer or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Note Insurer or by the Noteholders with
the prior consent of the Note Insurer, as the case may be.
Section 5.13. Control by Noteholders.
The Holders of Notes representing more than 50% of the Note Balance of
the Outstanding Notes of both Classes on the applicable Record Date shall, with
the consent of the Note Insurer, have the right to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee or exercising any trust or power conferred on the Indenture Trustee;
provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture;
(2) any direction to the Indenture Trustee to undertake a Sale
of the Trust Estate shall be by the Holders of Notes representing the
percentage of the Note Balance of the Outstanding Notes specified in
Section 5.17(b)(1), unless Section 5.17(b)(2) is applicable; and
(3) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction; provided, however, that, subject to Section 6.01, the
Indenture Trustee need not take any action that it determines might
involve it in liability or be unjustly prejudicial to the Noteholders
not consenting.
Section 5.14. Waiver of Past Defaults.
The Holders of Notes representing more than 50% of the Note Balance of
the Outstanding Notes of both Classes on the applicable Record Date may on
behalf of the Holders of all the Notes, and with the consent of the Note
Insurer, waive any past Default hereunder and its consequences, except a
Default:
(1) in the payment of principal or any installment of interest
on any Note; or
(2) in respect of a covenant or provision hereof that under
Section 9.02 cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
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Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 5.15. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Indenture Trustee for any action
taken, suffered or omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate Notes representing more than 10% of the
Note Balance of the Outstanding Notes, or to any suit instituted by any
Noteholder for the enforcement of the payment of any Required Payment Amount on
any Note on or after the related Payment Date or for the enforcement of the
payment of principal of any Note on or after the Stated Maturity Date (or, in
the case of any Note called for redemption, on or after the applicable
Redemption Date).
Section 5.16. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension of law wherever enacted,
now or at any time hereafter in force, that may affect the covenants in, or the
performance of, this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.17. Sale of Trust Estate.
(a) The power to effect any sale (a "Sale") of any portion of the Trust
Estate pursuant to Section 5.04 shall not be exhausted by any one or more Sales
as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate shall have been sold or all amounts
payable on the Notes and under this Indenture with respect thereto shall have
been paid. The Indenture Trustee may from time to time postpone any public Sale
by public announcement made at the time and place of such Sale.
(b) To the extent permitted by law, the Indenture Trustee shall not in
any private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless the Note Insurer consents to or directs the Indenture Trustee to
make such Sale.
The purchase by the Indenture Trustee of all or any portion of the
Trust Estate at a private Sale shall not be deemed a Sale or disposition thereof
for purposes of this Section 5.17(b). In the
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absence of a Note Insurer Default, no sale hereunder shall be effective without
the consent of the Note Insurer.
(c) Unless the Note Insurer has consented or directed the Indenture
Trustee, at any public Sale of all or any portion of the Trust Estate at which a
minimum bid equal to or greater than the amount described in paragraph (2) of
subsection (b) of this Section 5.17 has not been established by the Indenture
Trustee and no Person bids an amount equal to or greater than such amount, the
Indenture Trustee, acting in its capacity as Indenture Trustee on behalf of the
Noteholders, shall prevent such sale and bid an amount (which shall include the
Indenture Trustee's right, in its capacity as Indenture Trustee, to credit bid)
at least $1.00 more than the highest other bid in order to preserve the Trust
Estate on behalf of the Noteholders.
(d) In connection with a Sale of all or any portion of the Trust
Estate:
(1) any Holder or Holders of Notes may bid for and purchase
the property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money therefor,
deliver any Outstanding Notes or claims for interest thereon in lieu of
cash up to the amount that shall, upon distribution of the net proceeds
of such Sale, be payable thereon, and such Notes, in case the amounts
so payable thereon shall be less than the amount due thereon, shall be
returned to the Holders thereof after being appropriately stamped to
show such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any public Sale thereof, and, in
lieu of paying cash therefor, may make settlement for the purchase
price by crediting the gross Sale price against the sum of (A) the
amount that would be payable to the Holders of the Notes as a result of
such Sale in accordance with Section 5.07 on the Payment Date next
succeeding the date of such Sale and (B) the expenses of the Sale and
of any Proceedings in connection therewith which are reimbursable to
it, without being required to produce the Notes in order to complete
any such Sale or in order for the net Sale price to be credited against
such Notes, and any property so acquired by the Indenture Trustee shall
be held and dealt with by it in accordance with the provisions of this
Indenture;
(3) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of the Trust Estate in connection with a Sale thereof,
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its
interest in any portion of the Trust Estate in connection with a Sale
thereof, and to take all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of
any moneys.
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Section 5.18. Action on Notes.
The Indenture Trustee's right to seek and recover judgment under this
Indenture shall not be affected by the seeking, obtaining or application of any
other relief under or with respect to this Indenture. Neither the lien of this
Indenture nor any rights or remedies of the Indenture Trustee, the Note Insurer
or the Holders of Notes shall be impaired by the recovery of any judgment by the
Indenture Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate.
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the
Issuer.
The Trust Estate Granted to the Indenture Trustee as security for the
Notes serves as security only for the Notes. Holders of the Notes shall have no
recourse against the trust estate granted as security for any other series of
Notes issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Notes may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
Section 5.20. Application of the Trust Indenture Act.
Pursuant to Section 316(a) of the TIA, all provisions automatically
provided for in Section 316(a) are hereby expressly excluded.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default, of which the
Indenture Trustee has actual knowledge or has received written notice:
(1) The Indenture Trustee need perform only those duties that
are specifically set forth in this Indenture and no others and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee;
(2) In the absence of bad faith on its part, the Indenture
Trustee may request and conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture. The Indenture Trustee
shall, however, examine such certificates and opinions to determine
whether they conform on their face to the requirements of this
Indenture; provided, further, that the Indenture Trustee shall not be
responsible for the accuracy or content of any of the aforementioned
documents
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and the Indenture Trustee shall have no obligation to verify, re-compute or
recalculate any numerical information provided to it pursuant to this Agreement
or the Servicing Agreement.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of subsection (b)
of this Section 6.01;
(2) The Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(3) The Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.13 or 5.17 or exercising
any trust or power conferred upon the Indenture Trustee under this
Indenture.
(d) Except with respect to duties of the Indenture Trustee prescribed
by the TIA, as to which this Section 6.01(d) shall not apply, for all purposes
under this Indenture, the Indenture Trustee shall not be deemed to have notice
or knowledge of any Event of Default described in Section 5.01(2), 5.01(5) or
5.01(6) or any Default described in Section 5.01(3) or 5.01(4) or of any event
described in Section 3.05 unless a Responsible Officer assigned to and working
in the Indenture Trustee's corporate trust department and having direct
responsibility for the administration for the actual knowledge thereof or unless
written notice of any event that is in fact such an Event of Default or Default
is received by the Indenture Trustee at the Corporate Trust Office, and such
notice references the Notes generally, the Issuer, the Trust Estate or this
Indenture.
(e) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it under the Servicing Agreement or otherwise and none
of the provisions contained in this Agreement shall in any event require the
Indenture Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Master Servicer or the Issuer, as the case may
be, under this Agreement.
(f) Every provision of this Indenture and the Servicing Agreement that
in any way relates to the Indenture Trustee is subject to the provisions of this
Section.
(g) Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration of the Maturity of the Notes, whether
such extinguishment occurs through a Sale of the Trust Estate to another Person,
the acquisition of the Trust Estate by the Indenture Trustee or otherwise, the
rights, powers and duties of the Indenture Trustee with respect to the Trust
Estate
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(or the proceeds thereof) and the Noteholders and the Note Insurer and the
rights of Noteholders and the Note Insurer shall continue to be governed by the
terms of this Indenture.
(h) The Indenture Trustee shall not be liable in its individual
capacity with respect to any action taken, suffered or omitted to be taken by it
in good faith in accordance with this Agreement or at the direction of the
Insurer, Issuer, Manager or a majority of Noteholders, relating to the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee, or exercising or omitting to exercise any trust or power
conferred upon the Indenture Trustee, under this Agreement.
(i) The Indenture Trustee shall have no duty (A) to see to any
recording, filing, or depositing of this Agreement or any agreement referred to
herein or any financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such recording or filing
or depositing or to any rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, any part of the Trust Estate
other than from funds available in the Note Account, (D) to confirm or verify
the contents of any reports or certificates delivered to the Indenture Trustee
pursuant to this Agreement believed by the Indenture Trustee to be genuine and
to have been signed or presented by the proper party or parties.
(j) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Indenture Trustee be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Indenture Trustee has been advised of the
likelihood of such loss or damage and regardless of form of action.
Section 6.02. Notice of Default.
Immediately after the occurrence of any Default of which the Indenture
Trustee has actual knowledge or has received written notice, the Indenture
Trustee shall transmit by mail to the Note Insurer and the Underwriters notice
of each such Default and, within 90 days after the occurrence of any Default
known to the Indenture Trustee, the Indenture Trustee shall transmit by mail to
all Holders of Notes notice of each such Default, unless such Default shall have
been cured or waived; provided, however, that in no event shall the Indenture
Trustee provide notice, or fail to provide notice of a Default of which the
Indenture Trustee has actual knowledge or has received written notice in a
manner contrary to the requirements of the Trust Indenture Act. Concurrently
with the mailing of any such notice to the Holders of the Notes, the Indenture
Trustee shall transmit by mail a copy of such notice to the Rating Agencies.
Section 6.03. Rights of Indenture Trustee.
(a) Except as otherwise provided in Section 6.01, the Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in any such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel reasonably satisfactory in form
and substance to the
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Indenture Trustee. The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on any such Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may act through agents, attorneys or
custodians and the Indenture Trustee shall not be responsible for the misconduct
or negligence of any agent, attorney or custodian appointed with due care.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within its
rights or powers.
(e) The Indenture Trustee may consult with counsel and any advice or
opinion of counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion of counsel.
(f) The Indenture Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to institute, conduct
or defend any litigation hereunder or in relation hereto at the request, order
or direction of any of the Noteholders, pursuant to the provisions of this
Agreement, unless such Noteholders shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
(g) The Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so by the Note
Insurer or a majority of Noteholders; provided, however, that if the payment
within a reasonable time to the Indenture Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Agreement, the
Indenture Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to taking any such action.
(h) The right of the Indenture Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Indenture
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
(i) The Indenture Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust created hereby or the powers
granted hereunder.
(j) The Indenture Trustee shall not in any way be liable by reason of
any insufficiency in any account (including without limitation, any Note
Account, Pre-Funding Account, Capitalized Interest Account, Reserve Account or
Principal and Interest Account) held by or in the name of Trustee unless it is
determined by a court of competent jurisdiction that the Trustee's negligence or
willful misconduct was the primary cause of such insufficiency.
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Section 6.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the certificates
of authentication on the Notes, shall be taken as the statements of the Issuer,
and the Indenture Trustee and the Authenticating Agent assume no responsibility
for their correctness. The Indenture Trustee makes no representations with
respect to the Trust Estate or as to the validity or sufficiency of this
Indenture or of the Notes. The Indenture Trustee shall not be accountable for
the use or application by the Issuer of the Notes or the proceeds thereof or any
money paid to the Issuer or upon Issuer Order pursuant to the provisions hereof.
Section 6.05. May Hold Notes.
The Indenture Trustee, any Agent, or any other agent of the Issuer, in
its individual or any other capacity, may become the owner or pledgee of Notes
and, subject to Sections 6.07 and 6.13, may otherwise deal with the Issuer or
any Affiliate of the Issuer with the same rights it would have if it were not
Indenture Trustee, Agent or such other agent.
Section 6.06. Money Held in Trust.
Money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds except to the extent required by this Indenture or
by law. The Indenture Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Issuer and
except to the extent of income or other gain on investments that are obligations
of the Indenture Trustee, in its commercial capacity, and income or other gain
actually received by the Indenture Trustee on investments, which are obligations
of others.
Section 6.07. Eligibility, Disqualification.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Indenture Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). The Indenture Trustee shall always have
a combined capital and surplus as stated in Section 6.08. The Indenture Trustee
shall be subject to TIA Section 310(b).
Section 6.08. Indenture Trustee's Capital and Surplus.
The Indenture Trustee shall at all times have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$100,000,000 and shall at all times be rated "BBB" or better by Standard &
Poor's and "Baa2" by Moody's; provided, however, that the Indenture Trustee's
separate capital and surplus shall at all times be at least the amount required
by TIA Section 310(a)(2). If the Indenture Trustee publishes annual reports of
condition of the type described in TIA Section 310(a)(1), its combined capital
and surplus for purposes of this Section 6.08 shall be as set forth in the
latest such report. If at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.08 and TIA Section
310(a)(2), it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
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Section 6.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Indenture
Trustee under Section 6.10.
(b) The Indenture Trustee may resign at any time by giving written
notice thereof to the Issuer, the Note Insurer and each Rating Agency. If an
instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within 30 days after the giving of such
notice of resignation, the resigning Indenture Trustee may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by the Note
Insurer or, with the consent of the Note Insurer, by Act of the Holders
representing more than 50% of the Note Balance of the Outstanding Notes, by
written notice delivered to the Indenture Trustee and to the Issuer.
(d) If at any time:
(1) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 and shall fail to resign or eliminate such
conflicting interest in accordance with Section 6.07 after written
request therefor by the Issuer or by any Noteholder; or
(2) the Indenture Trustee shall cease to be eligible under
Section 6.08 or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent, or a receiver of the Indenture Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Indenture Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, (i) the Issuer by an Issuer Order, with the consent of
the Note Insurer, may remove the Indenture Trustee, and the Issuer shall join
with the Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint a successor Indenture
Trustee acceptable to the Note Insurer and to vest in such successor Indenture
Trustee any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Indenture; provided, however, if the
Issuer and the Note Insurer do not join in such appointment within fifteen (15)
days after the receipt by it of a request to do so, or in case an Event of
Default has occurred and is continuing, the Indenture Trustee may petition a
court of competent jurisdiction to make such appointment, or (ii) subject to
Section 5.15, and, in the case of a conflicting interest as described in clause
(1) above, unless the Indenture Trustee's duty to resign has been stayed as
provided in TIA Section 310(b), the Note Insurer or any Noteholder who has been
a bona fide Holder of a Note for at least six months may, on behalf of himself
and all others similarly situated, with the consent of the Note Insurer,
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Indenture
Trustee for any cause, the Issuer, by an Issuer Order shall promptly appoint a
successor Indenture Trustee acceptable to the Note Insurer.
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If within one year after such resignation, removal or incapability or the
occurrence of such vacancy a successor Indenture Trustee shall be appointed by
the Note Insurer or, with the consent of the Note Insurer, by Act of the Holders
of Notes representing more than 50% of the Note Balance of the Outstanding Notes
delivered to the Issuer and the retiring Indenture Trustee, the successor
Indenture Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Indenture Trustee and supersede the successor
Indenture Trustee appointed by the Issuer. If no successor Indenture Trustee
shall have been so appointed by the Issuer, the Note Insurer or Noteholders and
shall have accepted appointment in the manner hereinafter provided, any
Noteholder who has been a bona fide Holder of a Note for at least six months
may, on behalf of himself and all others similarly situated, with the consent of
the Note Insurer, petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
(f) The Issuer shall give notice of each resignation and each removal
of the Indenture Trustee and each appointment of a successor Indenture Trustee
to the Holders of Notes and the Note Insurer. Each notice shall include the name
of the successor Indenture Trustee and the address of its Corporate Trust
Office.
Section 6.10. Acceptance of Appointment by Successor.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, the Note Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Indenture Trustee. Notwithstanding the foregoing, on request of
the Issuer, the Note Insurer or the successor Indenture Trustee, such retiring
Indenture Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Indenture Trustee all the rights,
powers and trusts of the retiring Indenture Trustee, and shall duly assign,
transfer and deliver to such successor Indenture Trustee all property and money
held by such retiring Indenture Trustee hereunder. Upon request of any such
successor Indenture Trustee, the Issuer shall execute and deliver any and all
instruments for more fully and certainly vesting in and confirming to such
successor Indenture Trustee all such rights, powers and trusts.
No successor Indenture Trustee shall accept its appointment unless at
the time of such acceptance such successor Indenture Trustee shall be qualified
and eligible under this Article.
Section 6.11. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee.
Any corporation into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Indenture Trustee, shall be the successor of
the Indenture Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Notes have been authenticated,
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but not delivered, by the Indenture Trustee then in office, any successor by
merger, conversion or consolidation to such authenticating Indenture Trustee may
adopt such authentication and deliver the Notes so authenticated with the same
effect as if such successor Indenture Trustee had authenticated such Notes.
Section 6.12. Preferential Collection of Claims Against Issuer.
The Indenture Trustee (and any co-trustee or separate trustee) shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 31l(b), and an Indenture Trustee (and any co-trustee or separate
trustee) who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees.
At any time or times, for the purpose of meeting the legal requirements
of the TIA or of any jurisdiction in which any of the Trust Estate may at the
time be located, the Indenture Trustee shall have power to appoint, and, upon
the written request of the Indenture Trustee, of the Note Insurer or of the
Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes of both Classes with respect to which a co-trustee or separate
trustee is being appointed with the consent of the Note Insurer, the Issuer
shall for such purpose jointly with the Indenture Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the Indenture Trustee either to act
as co-trustee, jointly with the Indenture Trustee, of all or any part of the
Trust Estate, or to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions of
this Section. If the Issuer does not join in such appointment within 15 days
after the receipt by it of a request to do so, or in case an Event of Default
has occurred and is continuing, the Indenture Trustee alone shall have power to
make such appointment. All fees and expenses of any co-trustee or separate
trustee shall be payable by the Issuer.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Notes shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Indenture Trustee
hereunder, shall be exercised, solely by the Indenture Trustee.
(2) The rights, powers, duties and obligations hereby
conferred or imposed upon the Indenture Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee or by the Indenture
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in
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the instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular act is to
be performed, the Indenture Trustee shall be incompetent or unqualified to
perform such act, in which event such rights, powers, duties and obligations
shall be exercised and performed by such co-trustee or separate trustee.
(3) The Indenture Trustee at any time, by an instrument in writing,
executed by it, with the concurrence of the Issuer evidenced by an Issuer Order,
may accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section, and, in case an Event of Default has occurred and
is continuing, the Indenture Trustee shall have power to accept the resignation
of, or remove, any such co-trustee or separate trustee without the concurrence
of the Issuer upon the written request of the Indenture Trustee, the Issuer
shall join with the Indenture Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(4) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Indenture Trustee, or any other
such trustee hereunder.
(5) Any Act of Noteholders delivered to the Indenture Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
Section 6.14. Authenticating Agents.
The Issuer shall appoint an Authenticating Agent with power to act on
its behalf and subject to its direction in the authentication and delivery of
the Notes designated for such authentication by the Issuer and containing
provisions therein for such authentication (or with respect to which the Issuer
has made other arrangements, satisfactory to the Indenture Trustee and such
Authenticating Agent, for notation on the Notes of the authority of an
Authenticating Agent appointed after the initial authentication and delivery of
such Notes) in connection with transfers and exchanges under Section 2.06, as
fully to all intents and purposes as though the Authenticating Agent had been
expressly authorized by that Section to authenticate and deliver Notes. For all
purposes of this Indenture (other than in connection with the authentication and
delivery of Notes pursuant to Sections 2.05 and 2.11 in connection with their
initial issuance), the authentication and delivery of Notes by the
Authenticating Agent pursuant to this Section shall be deemed to be the
authentication and delivery of Notes "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 for the Indenture Trustee hereunder and has an
office for presentation of Notes in the United States of America. The Indenture
Trustee shall initially be the Authenticating Agent and shall be the Note
Registrar as provided in Section 2.06. The office from which the Indenture
Trustee shall perform its duties as Note Registrar and Authenticating Agent
shall be the Corporate Trust Office. Any Authenticating Agent appointed pursuant
to the terms of this Section 6.14 or pursuant to the terms of any supplemental
indenture shall deliver to the Indenture Trustee as a condition precedent to the
effectiveness of such appointment an instrument accepting the trusts, duties and
responsibilities of Authenticating Agent and of Note Registrar or co-Note
Registrar
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and indemnifying the Indenture Trustee for and holding the Indenture Trustee
harmless against, any loss, liability or expense (including reasonable
attorneys' fees) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance, administration of the trust or
exercise of authority by such Authenticating Agent, Note Registrar or co-Note
Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Issuer. The Issuer may at any time terminate the
agency of any Authenticating Agent by giving written notice of termination to
such Authenticating Agent and the Issuer. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Issuer
shall promptly appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Indenture Trustee, and shall mail notice of
such appointment to all Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Indenture Trustee shall be entitled to be reimbursed for such payments
pursuant to Section 6.04 of the Servicing Agreement. The provisions of Sections
2.09, 6.04 and 6.05 shall be applicable to any Authenticating Agent.
Section 6.15. Review of Mortgage Files.
(a) Initial Certification. The Indenture Trustee agrees to execute and
deliver on the Closing Day an acknowledgment of receipt of the items delivered
by FGT or the Depositor in the forms attached to the Loan Sale Agreement as
Exhibit C, and declares that it, or its agent, will hold such documents and any
amendments, replacement or supplements thereto, as well as any other assets
included in the definition of Trust Estate and delivered to the Indenture
Trustee, as Indenture Trustee in trust upon and subject to the conditions set
forth herein for the benefit of the Noteholders and the Note Insurer. The
Indenture Trustee agrees, for the benefit of the Noteholders and the Note
Insurer, to review such items within 45 days after the Closing Date (or, with
respect to any document delivered after the Closing Date, within 45 days of
receipt and with respect to any Subsequent Home Equity Loans or Home Equity
Loan, within 45 days after the assignment thereof) and to deliver to the
Depositor, FGT, the Master Servicer and the Note Insurer an initial
certification in the form attached hereto as Exhibit D ("Initial Loan
Certification") to the effect that, as to each Home Equity Loan listed in the
Schedule of Home Equity Loans (other than any Home Equity Loan paid in full or
any Home Equity Loan specifically identified in such Initial Certification as
not covered by such Initial Certification), (i) all documents required to be
delivered to it pursuant to Section 3.01(c)(i) of The Loan Sale Agreement are in
its possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged or torn and relate to such Home Equity Loan and (iii) based
on its
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examination and only as to the foregoing documents, the information set forth on
the Schedule of Home Equity Loans accurately reflects the information set forth
in the Mortgage File. The Indenture Trustee shall have no responsibility for
reviewing any Mortgage File except as expressly provided for herein. Without
limiting the effect of the preceding sentence, in reviewing any Mortgage File,
the Indenture Trustee shall have no responsibility for determining whether any
document is valid and binding, whether the text of any assignment is in proper
form (except to determine if the Indenture Trustee is the assignee), 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, but shall only be required to determine whether a document has
been executed, that it appears to be what it purports to be, and, where
applicable, that it purports to be recorded. The Indenture Trustee shall be
under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face, nor shall the Indenture Trustee be
under any duty to determine independently whether there are any intervening
assignments or assumption or modification agreements with respect to any Home
Equity Loan.
(b) If the Indenture Trustee during such 45-day period finds any
document constituting a part of a Mortgage File which is not executed, has not
been received, or is unrelated to the Home Equity Loans identified in the
Schedule of Home Equity Loans, or that any Home Equity Loan does not conform to
the description thereof as set forth in the Schedule of Home Equity Loans, the
Indenture Trustee shall promptly so notify the Sponsor, Depositor, FGT, the
Noteholders and the Note Insurer. In performing any such review, the Indenture
Trustee may conclusively rely on FGT as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
review of the items delivered by FGT pursuant to Section 3.01(c)(i) of the Loan
Sale Agreement is limited solely to confirming that the documents listed in
Section 3.01(c)(i) of the Loan Sale Agreement have been executed and received,
relate to the Mortgage Files identified in the Schedule of Home Equity Loans and
conform to the description thereof in the Schedule of Home Equity Loans.
(c) Final Certification. In addition to the foregoing, the Indenture
Trustee also agrees to make a review during the 12th month after the Closing
Date and deliver to the Sponsor, the Note Insurer and the Master Servicer a
final certification in the form attached hereto as Exhibit E (the "Final
Certification") indicating the current status of the exceptions previously
indicated on the Home Equity Loan Certification. After delivery of the Final
Certification, the Indenture Trustee shall provide to the Note Insurer no less
frequently than monthly updated certifications indicating the then current
status of exceptions, until all such exceptions have been eliminated.
(d) In giving each of the Initial Certification and the Final
Certification, neither the Indenture Trustee nor the Custodian shall be under
any duty or obligation (1) to inspect, review or examine any such documents,
instruments, securities or other papers to determine that they or the signatures
thereto are genuine, enforceable, or appropriate for the represented purpose or
that they have actually been recorded or that they are other than what they
purport to be on their face or (2) to determine whether any Mortgage File should
include a flood insurance policy, any rider, addenda, surety or guaranty
agreement, power of attorney, buy down agreement, assumption agreement,
modification agreement, written assurance or substitution agreement.
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(e) Recordation Report. In the event that the Home Equity Loans are
required to be recorded in accordance with the provisions of the Loan Sale
Agreement, no later than the fifth Business Day of each third month, commencing
in June 1998, the Indenture Trustee shall cause the Custodian to deliver to the
Master Servicer and the Note Insurer a recordation report dated as of the first
day of such month, identifying those Home Equity Loans for which it has not yet
received (1) an original recorded Mortgage or a copy thereof certified to be
true and correct by the public recording office in possession of such Mortgage
or (2) an original recorded Assignment of the Mortgage to the Indenture Trustee
and any required intervening Assignments or a copy thereof certified to be a
true and correct copy by the public recording office in possession of such
Assignment.
Section 6.16. Indenture Trustee Fees and Expenses.
The Indenture Trustee shall be entitled to receive the Indenture
Trustee Fee (which should not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) on each Payment Date as
provided herein. The Indenture Trustee also shall be entitled, pursuant to the
provisions of Section 4.03 of the Servicing Agreement, to (i) payment of or
reimbursement for expenses, disbursements and advances incurred or made by the
Indenture Trustee in accordance with any of the provisions of this Agreement
(including but not limited to the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ) as
provided in the Servicing Agreement, and (ii) indemnification against losses,
liability and expenses, including reasonable attorney's fees, incurred, arising
out of or in connection with this Agreement and the Notes as provided in the
Servicing Agreement.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders.
(a) The Issuer shall furnish or cause to be furnished to the Indenture
Trustee (i) semiannually, not less than 45 days nor more than 60 days after the
Payment Date occurring closest to six months after the Closing Date and each
Payment Date occurring at six-month intervals thereafter, all information in the
possession or control of the Issuer, in such form as the Indenture Trustee may
reasonably require, as to names and addresses of the Holders of Notes, and (ii)
at such other times, as the Indenture Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
(b) in addition to furnishing to the Indenture Trustee the Noteholder
lists, if any, required under subsection (a), the Issuer shall also furnish all
Noteholder lists, if any, required under Section 3.03 at the times required by
Section 3.03.
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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, if any, furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of the 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 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 Indenture Trustee.
(a) Within 60 days after December 31 of each year (the "reporting
date"), commencing with the year after the issuance of the Notes, (i) the
Indenture Trustee shall, if required by TIA Section 313(a), mail to all Holders
a brief report dated as of such reporting date that complies with TIA Section
313(a); (ii) the Indenture Trustee shall, to the extent not set forth in the
Payment Date Statement pursuant to Section 2.08(d), also mail to Holders of
Notes and the Note Insurer with respect to which it has made advances, any
reports with respect to such advances that are required by TIA Section
313(b)(2); and, the Indenture Trustee shall also mail to Holders of Notes and
the Note Insurer any reports required by TIA Section 313(b)(1). For purposes of
the information required to be included in any such reports pursuant to TIA
Sections 313(a)(2), 313(b)(1) (if applicable), or 313(b)(2), the principal
amount of indenture securities outstanding on the date as of which such
information is provided shall be the Note Balance of the then Outstanding Notes
covered by the report.
(b) A copy of each report required under this Section 7.03 shall, at
the time of such transmission to Holders of Notes and the Note Insurer be filed
by the Indenture Trustee with the Commission and with each securities exchange
upon which the Notes are listed. The Issuer will notify the Indenture Trustee
when the Notes are listed on any securities exchange.
(c) In order that the Issuer may satisfy its reporting requirements set
forth in Section 7.04 in a timely manner, the Indenture Trustee shall provide
the Underwriter and its legal advisors with a copy on diskette of all
information in the possession of the Indenture Trustee and required to be
included in the monthly reports on Form 8-K which the Issuer is obliged to file
with the Commission under the Exchange Act.
Section 7.04. Reports by Issuer.
The Issuer (a) shall deliver to the Indenture Trustee within 15 days
after the Issuer is required to file the same with the Commission copies of the
annual reports, each of the monthly reports on Form 8-K required under the
Exchange Act, and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) that the Issuer is required to file with the Commission
pursuant to
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Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and (b)
shall also comply with the other provisions of TIA Section 314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Collection of Moneys.
Except as otherwise expressly provided herein, the Indenture Trustee
may demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee shall hold all such money and
property received by it as part of the Trust Estate and shall apply it as
provided in this Indenture.
If the Indenture Trustee shall not have received the Monthly Remittance
Amount by close of business on any related Monthly Remittance Date, the
Indenture Trustee shall, unless the Issuer or the Master Servicer shall have
made provisions satisfactory to the Indenture Trustee for delivery to the
Indenture Trustee of an amount equal to such Monthly Remittance Amount, deliver
a notice, with a copy to the Note Insurer, to the Issuer and the Master Servicer
of their failure to remit such Monthly Remittance Amount and that such failure,
if not remedied by the close of business on the Business Day after the date upon
which such notice is delivered to the Master Servicer, shall constitute an event
of default under the Servicing Agreement. If the Indenture Trustee shall
subsequently receive any such Monthly Remittance Amount by 2:00 p.m. Eastern
Time on such Business Day, such Event of Default shall not be deemed to have
occurred. Notwithstanding any other provision hereof, the Indenture Trustee
shall deliver to the Issuer or the Master Servicer, or their respective designee
or assignee, any Monthly Remittance Amount received with respect to a Home
Equity Loan after the related Monthly Remittance Date to the extent that the
Issuer or the Master Servicer, respectively, previously made payment or
provision for payment with respect to such Monthly Remittance Amount in
accordance with this Section 8.01, and any such Monthly Remittance Amount shall
not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and the
Servicing Agreement, if, following delivery by the Indenture Trustee of the
notice described above, the Master Servicer shall fail to remit the Monthly
Remittance Amount on any Monthly Remittance Date, the Indenture Trustee shall
deliver a second notice to the Master Servicer, the Issuer and the Note Insurer
by 2:00 p.m. Eastern Time on the third Business Day prior to the related Payment
Date indicating that an event of default occurred and is continuing under the
Servicing Agreement. Thereupon, the Indenture Trustee shall take such actions as
are required of the Indenture Trustee under Article VI of the Servicing
Agreement. In addition, if a default occurs in any other performance required
under the Servicing Agreement, the Indenture Trustee may, and upon the request
of the Note Insurer or, with the consent of the Note Insurer, the Holders of
Notes representing more than 50% of the Note Balance of the Outstanding Notes
shall, take such action as may be appropriate to enforce such payment or
performance including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right
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to claim a Default or Event of Default under this Indenture and to proceed
thereafter as provided in Article V.
Section 8.02. Establishment of Accounts.
The Issuer hereby directs the Indenture Trustee to establish for each
Class of Notes at the Corporate Trust Office, one or more separate trust
accounts that shall collectively be the "Note Account" for such Class on or
before the Closing Date. The Issuer hereby further directs the Indenture Trustee
to establish, at the Corporate Trust Office, a Reserve Account, a Pre-Funding
Account and a Capitalized Interest Account on or before the Closing Date.
Section 8.03. Note Accounts; Flow of Funds.
(a) The Indenture Trustee shall promptly deposit in the related Note
Account to the extent funds are made available to the Indenture Trustee
hereunder (i) all Monthly Remittance Amounts for the related Group received by
it from the Master Servicer pursuant to the Servicing Agreement, (ii) any other
funds from any deposits for such Group to be made by the Master Servicer
pursuant to the Servicing Agreement, (iii) any amount for such Group required to
be deposited in the Note Account pursuant to Section 8.01, (iv) all amounts
received pursuant to Section 8.04, (v) with respect to Group II, on the Payment
Date occurring in July, 1998, the Pre-Funding Account Earnings transferred by
the Indenture Trustee pursuant to Section 8.05(c) hereof, (vi) with respect to
Group II, the Capitalized Interest Requirement to be transferred on such Payment
Dates from the Capitalized Interest Account, pursuant to Section 8.05(d) hereof,
(vii) with respect to Group II, the portion of the amount, if any, to be
transferred on such Payment Date from the Pre-Funding Account, pursuant to
Section 8.06(b)(vi) hereof and (viii) all other amounts for such Group received
for deposit in the related Note Account, including the payment of any Loan
Purchase for a Home Equity Loan in such Group Price received by the Indenture
Trustee. All amounts that are deposited from time to time in a Note Account are
subject to withdrawal by the Indenture Trustee for the purposes set forth in
subsections (c) and (d) of this Section 8.03. All funds withdrawn from the Note
Account pursuant to subsection (c) of this Section 8.03 for the purpose of
making payments to the Holders of Notes shall be applied in accordance with
Section 3.04.
(b) Amounts held in the Note Accounts shall remain uninvested. All
income, if any, from moneys deposited in the Note Account shall be for the
benefit of the Indenture Trustee and on each Payment Date, any such amounts may
be released from the Note Account and paid to the Indenture Trustee as part of
its compensation for acting as Indenture Trustee. Subject to Section 6.01,
neither the Indenture Trustee nor the Master Servicer shall in any way be held
liable by reason of any insufficiency in the Note Account.
(c) On each Payment Date, the Indenture Trustee shall withdraw amounts
on deposit in each Note Account and pay with respect to each Class of Notes, to
the extent such funds are then on deposit in the related Note Account and
immediately available, the following amounts, in the following order of
priority, and each such payment shall be treated as having occurred only after
all preceding payments have occurred:
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(i) first, on each Payment Date from amounts then on deposit
in the related Note Account, (A) to the Indenture Trustee, the
Indenture Trustee Fee together with the Indenture Trustee Reimbursable
Expenses, (B) to the Owner Trustee, the Owner Trustee Fee, (C) and
provided no Note Insurer Default has occurred and is continuing to the
Note Insurer, the related Note Insurer Premium for such Payment Date;
(ii) second, to the Note Insurer, out of amounts then on
deposit in either Note Account, the aggregate amount necessary to
reimburse the Note Insurer for any unreimbursed payments of Insured
Payments (together with interest thereon at the Late Payment Rate
specified in the Insurance Agreement) in respect of the Notes of either
Class on prior Payment Dates and the amount of any unpaid Note Insurer
Premiums for prior Payment Dates (together with interest thereon at the
Late Payment Rate specified in the Insurance Agreement); provided,
however, that the Note Insurer shall be paid unreimbursed Insured
Payments and unpaid related Note Insurer Premiums (and any interest
thereon) only after each Class of Noteholders has received Note
Interest and any Overcollateralization Deficit with respect to such
Payment Date;
(iii) third, to the Noteholders of a Class, out of amounts
then on deposit in the related Note Account, the related Note Interest
with respect to such Payment Date;
(iv) fourth, to the Noteholders of a Class, out of amounts
then on deposit in the related Note Account, the amount of applicable
Monthly Principal for the Notes of such Class with respect to such
Payment Date, in reduction of the related Note Balance until such Note
Balance is reduced to zero and on the Stated Maturity Date or the
Redemption Date, an amount sufficient to reduce the outstanding
Principal Balance of such Class of Notes to zero;
(v) fifth, to the Noteholders of a Class, out of amounts then
on deposit in the Note Account of the other Class, any Note Interest
for such Class remaining unpaid after application of clause (iii)
above;
(vi) sixth, to the Noteholders of a Class, out of amounts then
on deposit in the related Note Account, in reduction of the related
Note Balance, the amount, if any, equal to the Excess Cash Payment with
respect to the related Group and with respect to such Payment Date;
(vii) seventh, to the Noteholders of a Class, out of amounts
then on deposit in the Note Account of the other Class, an amount equal
to any Overcollateralization Deficit for such Class (after taking into
account payments of related Monthly Principal and Excess Cash for such
Class on such Payment Date) in reduction of the related Note Balance
until such Note Balance is reduced to zero.
(viii) eighth, to the Note Insurer, out of amounts then on
deposit in either Note Account, any amounts due and owing under the
Insurance Agreement that are not described in clause (i) and (ii)
above; and
(ix) ninth, out of amounts then on deposit in the related Note
Account, an amount equal to the Reserve Account Requirement less the
amount then on deposit in the
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Reserve Account for deposit in the Reserve Account until the Reserve
Account Requirement is satisfied.
(d) On or after each Payment Date, so long as the Indenture Trustee
shall have prepared a Payment Date Statement in respect of such Payment Date and
(1) shall have made, or, in accordance with Section 3.03, set aside from amounts
in the Note Account an amount sufficient to make, the payments required to be
made as set forth in Section 8.03(c) as indicated in such Payment Date
Statement, and (2) shall have set aside any amounts that have been deposited in
the Note Account prior to such time that represent amounts that are to be used
to make payments on the Notes on the next succeeding Payment Date, the cash
balance, if any, then remaining in the Note Account shall be withdrawn from the
Note Account by the Indenture Trustee and, so long as no Default or Event of
Default shall have occurred and be continuing, shall be released from the lien
of this Indenture and paid by the Indenture Trustee to the Issuer.
(e) Any payments made by the Indenture Trustee to the Issuer pursuant
to this Section 8.03 shall be remitted to the Certificate Distribution Account
established and maintained pursuant to the Trust Agreement.
(f) The Indenture Trustee shall reinvest amounts in the Principal and
Interest Account at the direction of the Master Servicer in Eligible
Investments. All income or other gains, if any, from investment of moneys
deposited in the Principal and Interest Account shall be for the benefit of the
Master Servicer and the Indenture Trustees shall release any such amounts from
the Principal and Interest Account to the Master Servicer on each Monthly
Remittance Date.
(g) The Indenture Trustee shall, on each Payment Date, withdraw such
amounts from the Reserve Account for payment to the Noteholders as set forth in
Section 8.19 hereof.
Section 8.04. Claims against the Note Insurance Policy.
(a) (i) Upon receipt of Insured Payments from the Note Insurer on
behalf of Noteholders, the Indenture Trustee shall deposit such Insured
Payments in the Policy Payments Account. On each Payment Date, pursuant
to Section 8.18 hereof, such amounts will be transferred from the
Policy Payment Account to the Note Account and the Indenture Trustee
shall distribute such Insured Payments, or the proceeds thereof in
accordance with Section 8.03(c), to the Noteholders.
(ii) The Indenture Trustee shall (i) receive for each
Noteholder any Insured Payment from the Note Insurer and (ii) disburse
the same to the Noteholders as set forth in Section 8.03(c). Insured
Payments disbursed by the Indenture Trustee from proceeds of the Note
Insurance Policy shall not be considered payment by the Issuer, nor
shall such payments discharge the obligation of the Issuer with respect
to such Notes and the Note Insurer shall be entitled to receive the
Reimbursement Amount thereof. Nothing contained in this paragraph shall
be construed so as to impose duties or obligations on the Indenture
Trustee that are different from or in addition to those expressly set
forth in this Agreement. The Note Insurer shall become the owner of
such unpaid amounts due from the Issuer in respect of such Insured
Payments as the deemed assignee and subrogee of such Noteholders and
shall be entitled to receive the reimbursement in respect thereof.
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(iii) The Indenture Trustee shall promptly notify the Note
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Indenture Trustee has actual knowledge,
constituting a Preference Amount in respect of any payment made on the
Notes. Each Noteholder that pays any amount pursuant to a Preference
Amount theretofore received by such Noteholder on account of a Note
will be entitled to receive reimbursement for such amounts from the
Note Insurer in accordance with the terms of the Note Insurance Policy.
Each Noteholder, by its purchase of Notes, and the Indenture Trustee
hereby agree that, the Note Insurer (so long as no Note Insurer Default
exists) may at any time during the continuation of any proceeding
relating to a Preference Amount direct all matters relating to such
Preference Amount, including, without limitation, (i) the direction of
any appeal of any order relating to such Preference Amount and (ii) the
posting of any surety, supersedeas or performance Note pending any such
appeal. In addition and without limitation of the foregoing, the Note
Insurer shall be subrogated to the rights of the Indenture Trustee and
each Noteholder in the conduct of any such Preference Amount,
including, without limitation, all rights of any party to any adversary
proceeding action with respect to any court order issued in connection
with any such Preference Amount.
(iv) Each Noteholder, by its purchase of Notes, and the
Indenture Trustee hereby agree that, unless a Note Insurer Default
exists and is continuing, the Note Insurer shall have the right to
direct all matters relating to the Notes in any proceeding in a
bankruptcy of the Issuer, including without limitation any proceeding
relating to a Preference Amount and the posting of any surety or Note
pending any such appeal.
(v) With respect to a Preference Amount, the Indenture Trustee
shall be responsible for procuring and delivering the items set forth
in the Note Insurance Policy to the Note Insurer.
(b) Unless a Note Insurer Default exists and is continuing, the
Indenture Trustee shall cooperate in all respects with any reasonable request by
the Note Insurer for action to preserve or enforce the Note Insurer's rights or
interests hereunder without limiting the rights or affecting the interests of
the Noteholders as otherwise set forth herein.
(c) The Indenture Trustee shall surrender the Note Insurance Policy to
the Note Insurer for cancellation upon the expiration of the term of the Note
Insurance Policy as provided in the Insurance Agreement.
(d) With respect to any Payment Date on which an Insured Payment is
required to be made, the Indenture Trustee shall deliver to the Note Insurer a
Notice of Claim by no later than noon on the third Business Day prior to such
Payment Date in the manner set forth in the Note Insurance Policy.
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Section 8.05. Pre-Funding Account and Capitalized Interest Account. (a)
On the Closing Date, the Indenture Trustee, will deposit, on behalf of the
Holders of the Class A-2 Notes and the Note Insurer, in the Pre-Funding Account,
the Original Pre-Funded Amount and, on behalf of the Noteholders and the Note
Insurer, in the Capitalized Interest Account, the Original Capitalized Interest
Deposit.
(b) On each Subsequent Transfer Date, the Sponsor shall instruct the
Indenture Trustee to withdraw from the Pre-Funding Account and release to the
Transferor or an affiliate thereof an amount equal to 100% of the Principal
Balance of the Subsequent Home Equity Loans transferred to the Issuer on such
Subsequent Transfer Date upon satisfaction of the conditions set forth in
Section 3.03 of the Loan Sale Agreement with respect to such transfer.
(c) On the final Pre-Funding Payment Date, the Indenture Trustee shall
transfer from the Pre-Funding Account to [the Class A-2 Note Account] the
Pre-Funding Account Earnings, if any, applicable to each such Payment Date.
(d) On each Payment Date occurring during the Funding Period, the
Indenture Trustee shall transfer from the Capitalized Interest Account to the
related Note Account the related Capitalized Interest Requirement, if any, for
such Payment Date.
On the Payment Date which immediately follows the end of the Funding
Period, and following any withdrawals from the Capitalized Interest Account on
such Payment Date, the Capitalized Interest Account shall be closed and any
remaining amount on deposit therein shall be paid to the Transferor.
Section 8.06. General Provisions Regarding the Note Accounts and Home
Equity Loans.
(a) Each Note Account shall relate solely to the Notes of the related
Class and to the Home Equity Loans in the related Group, Eligible Investments
and other property securing the related Notes. Except to the limited extent
permitted by Section ____, funds and other property in each Note Account shall
not be commingled with the other Note Account or any other moneys or property of
the Issuer or any Affiliate thereof. Notwithstanding the foregoing, the
Indenture Trustee may hold any funds or other property received or held by it as
part of a Note Account in collective accounts maintained by it in the normal
course of its business and containing funds or property held by it for other
Persons (which may include the Issuer or an Affiliate), provided that such
accounts are under the sole control of the Indenture Trustee and the Indenture
Trustee maintains adequate records indicating the ownership of all such funds or
property and the portions thereof held for credit to the related Note Account.
(b) The Indenture Trustee shall, at all times while any Notes are
Outstanding, maintain in its possession, or in the possession of an agent whose
actions with respect to such items are under the sole control of the Indenture
Trustee, all certificates or other instruments, if any, evidencing any
investment of funds in the Note Accounts. The Indenture Trustee shall relinquish
possession of such items, or direct its agent to do so, only for purposes of
collecting the final payment receivable on such investment or certificate or, in
connection with the sale of
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any investment held in the Note Accounts, against delivery of the amount
receivable in connection with any sale.
Section 8.07. Releases of Defective Home Equity Loans.
Upon notice or discovery that any of the representations or warranties
of the Sponsor set forth in Section 4(b) and Exhibit B of the Loan Sale
Agreement was materially incorrect or otherwise misleading with respect to any
Home Equity Loan as of the time made, the Indenture Trustee shall direct the
Sponsor to either (i) within 60 days after the Sponsor receives actual knowledge
of such incorrectness, eliminate or otherwise cure the circumstance or condition
in respect of which such representation or warranty was incorrect as of the time
made, (ii) withdraw such Defective Home Equity Loan from the lien of this
Indenture following the expiration of such 60-day period by depositing to the
related Note Account an amount equal to the Loan Purchase Price for such Home
Equity Loan or (iii) substitute a Qualified Replacement Home Equity Loan for
such Defective Home Equity Loan and deposit any Loan Purchase Price required to
be paid in connection with such substitution pursuant to [Section 7] of the Loan
Sale Agreement, all as provided in [Section 7] of the Loan Sale Agreement. Upon
any purchase of or substitution for a Defective Home Equity Loan by the Sponsor
in accordance with [Section 7] of the Loan Sale Agreement, the Indenture Trustee
shall deliver the Mortgage File relating to such Defective Home Equity Loan to
the Sponsor, and the Issuer and the Indenture Trustee shall execute such
instruments of transfer as are necessary to convey title to such Defective Home
Equity Loan to the Sponsor from the lien of this Indenture.
Section 8.08. Reports by Indenture Trustee to Noteholders; Access to
Certain Information.
On each Payment Date, the Indenture Trustee shall deliver the written
report required by Section 2.08(d) to Noteholders of record as of the related
Record Date (including the Clearing Agency, if any).
The Indenture Trustee shall make available at its Corporate Trust
Office, during normal business hours, for review by any Noteholder or any person
identified to the Indenture Trustee as a prospective Noteholder, originals or
copies of the following items: (a) the Indenture and any amendments thereto, (b)
all Payment Date Statements delivered to the Issuer since the Closing Date, (c)
any Officers' Certificates delivered to the Indenture Trustee since the Closing
Date as described in the Indenture and (d) any Accountants' reports delivered to
the Indenture Trustee since the Closing Date as required under the Servicing
Agreement. Copies of any and all of the foregoing items will be available from
the Indenture Trustee upon request; however, the Indenture Trustee will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing such copies and shall not be required to provide such
copies without reasonable assurances that such sum will be paid.
Section 8.09. Trust Estate Mortgage Files.
(a) The Indenture Trustee shall release Mortgage Files or portions
thereof to the Master Servicer on the terms specified in the Servicing
Agreement.
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(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding, release all of the Trust Estate to the Issuer (other than any cash
held for the payment of the Notes pursuant to Section 3.03 or 4.02).
Section 8.10. Amendment to Servicing Agreement.
The Indenture Trustee may, without the consent of any Holder, enter
into or consent to any amendment or supplement to the Servicing Agreement for
the purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Notes. The Indenture Trustee may, in its
discretion, decline to enter into or consent to any such supplement or
amendment: (i) unless the Indenture Trustee receives an Opinion of Counsel that
the position of the Holders would not be materially adversely affected or
written confirmation from the Rating Agencies that the then-current implied
ratings on the Notes (without taking into account the Note Insurance Policy)
would not be adversely affected by such supplement or amendment or (ii) if its
own rights, duties or immunities would be adversely affected.
Section 8.11. Delivery of the Mortgage Files Pursuant to Servicing
Agreement.
As is appropriate for the servicing or foreclosure of any Home Equity
Loan, the Indenture Trustee shall cause the Custodian to deliver to the Master
Servicer of such Mortgage the Mortgage Files for such Home Equity Loan upon
receipt by the Indenture Trustee and the Custodian on or prior to the date such
release is to be made of:
(a) such Officers' Certificates, if any, as are required by the
Servicing Agreement; and
(b) a "Request for Release" in the form prescribed by the Servicing
Agreement, executed by the Master Servicer, providing that the Master Servicer
will hold or retain the Mortgage Files in trust for the benefit of the Indenture
Trustee, the Note Insurer and the Holders of Notes.
Section 8.12. Master Servicer as Agent.
In order to facilitate the servicing of the Home Equity Loans by the
Master Servicer of such Home Equity Loans, the Master Servicer of the Home
Equity Loans has been appointed by the Issuer to retain, in accordance with the
provisions of the Servicing Agreement and this Indenture, all Monthly Remittance
Amount on such Home Equity Loans prior to their deposit into the related Note
Account on or prior to the related Monthly Remittance Date.
Section 8.13. Termination of Master Servicer.
In the event of an event of default specified in Section 2.20 of the
Servicing Agreement, the Indenture Trustee may, with the consent of the Note
Insurer, and shall, upon the direction of the Note Insurer (or as otherwise
provided in the Servicing Agreement), remove the Master Servicer as provided in
Section 2.20 of the Servicing Agreement. Upon the removal or resignation of the
Master Servicer pursuant to Section 2,20 of the Servicing Agreement, the
Indenture Trustee shall, after giving notice to the Note Insurer and the Backup
Master Servicer, appoint the Backup Master Servicer as Master Servicer;
provided, that the Note Insurer may direct the Indenture Trustee to appoint
another party as Master Servicer. In the event the Backup
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Master Servicer is prevented by law from acting as Master Servicer and the Note
Insurer does not direct the appointment of a Master Servicer, the Indenture
Trustee shall take the required steps to have an approved servicer appointed, as
set forth in Section 2.20(g) of the Servicing Agreement, the Indenture Trustee
shall assume all the duties of the Master Servicer (except as otherwise provided
in the Servicing Agreement) until a successor Master Servicer has been
appointed.
Section 8.14. Opinion of Counsel.
The Indenture Trustee shall be entitled to receive at least five
Business Days' notice of any action to be taken pursuant to Sections 8.09(a) and
8.10, accompanied by copies of any instruments involved, and the Indenture
Trustee shall be entitled to receive an Opinion of Counsel, in form and
substance reasonably satisfactory to the Indenture Trustee, stating the legal
effect of any such action, outlining the steps required to complete the same,
and concluding that all conditions precedent to the taking of such action have
been complied with. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.15. Appointment of Custodians.
The Indenture Trustee may, at no additional cost to the Issuer or to
the Indenture Trustee, with the consent of the Issuer and the Note Insurer,
appoint one or more Custodians to hold all or a portion of the Mortgage Files as
agent for the Indenture Trustee. Each Custodian shall (i) be a financial
institution supervised and regulated by the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Office of Thrift
Supervision, or the Federal Deposit Insurance Corporation; (ii) have combined
capital and surplus of at least $10,000,000; (iii) be equipped with secure,
fireproof storage facilities, and have adequate controls on access to assure the
safety and security of the Mortgage Files; (iv) utilize in its custodial
function employees who are knowledgeable in the handling of mortgage documents
and of the functions of a mortgage document custodian; and (v) satisfy any other
reasonable requirements that the Issuer may from time to time deem necessary to
protect the interests of Noteholders and the Note Insurer in the Mortgage Files.
Each Custodian shall be subject to the same obligations and standard of care as
would be imposed on the Indenture Trustee hereunder assuming the Indenture
Trustee retained the Mortgage Files directly. The appointment of one or more
Custodians shall not relieve the Indenture Trustee from any of its obligations
hereunder. If the Master Servicer is appointed as a Custodian in accordance with
this Section 8.15, it shall fulfill its servicing and custodial duties and
obligations through separate departments and, if it maintains a trust
department, shall fulfill its custodial duties and obligations through such
trust department.
Section 8.16. Rights of the Note Insurer to Exercise Rights of
Noteholders.
By accepting its Notes, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall have the right to exercise all
rights of the Noteholders under this Agreement without any further consent of
the Noteholders, including, without limitation:
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(i) the right to require the Master Servicer to effect foreclosures
upon Home Equity Loans upon failure of the Master Servicer to do so;
(ii) the right to require the Sponsor to repurchase or substitute for
Defective Home Equity Loans pursuant to Section 8.07;
(iii) the right to direct the actions of the Indenture Trustee during
the continuance of an Event of Default; and
(iv) the right to vote on proposed amendments to this Indenture.
In addition, each Noteholder agrees that, unless a Note Insurer Default
exists, the rights specifically set forth above may be exercised by the
Noteholders only with the prior written consent of the Note Insurer.
Except as otherwise provided in Section 8.04 and notwithstanding any
provision in this Indenture to the contrary, so long as a Note Insurer Default
has occurred and is continuing, the Note Insurer shall have no rights to
exercise any voting rights of the Noteholders hereunder, nor shall the Indenture
Trustee be required to obtain the consent of, or act at the direction of, the
Note Insurer.
Section 8.17. Trust Estate and Accounts Held for Benefit of the Note
Insurer.
The Indenture Trustee shall hold the Trust Estate and the Mortgage
Files for the benefit of the Noteholders and the Note Insurer and all references
in this Agreement and in the Notes to the benefit of Holders of the Notes shall
be deemed to include the Note Insurer (provided there does not exist a Note
Insurer Default).
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Noteholders shall
also be sent to the Note Insurer.
Section 8.18. Claims Upon the Policy; Policy Payments Account.
(a) If on the third Business Day prior to any Payment Date, the funds
then on deposit in the Note Account, together with amounts to be paid to the
Noteholders from amounts then on deposit in the Reserve Account pursuant to
Section 8.19, are insufficient to pay the Insured Payments on such Payment Date,
the Trustee shall give notice to the Note Insurer by telephone or telecopy of
the amount of such deficiency, confirmed in writing in the form set forth as
Exhibit A to the Endorsement of the Note Insurance Policy, to the Note Insurer
and the Fiscal Agent (as defined in the Note Insurance Policy), if any, at or
before 9:00 a.m., New York City time, on the second Business Day prior to such
Payment Date.
(b) The Indenture Trustee shall establish a separate special purpose trust
account for the benefit of the Noteholders and the Note Insurer referred to
herein as the "Policy Payments Account" over which the Indenture Trustee shall
have exclusive control and sole right of withdrawal. The Indenture Trustee shall
deposit any amount paid under the Note Insurance Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to the
Noteholders of the Insured Payments for which a claim was made and such amount
may
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not be applied to satisfy any costs, expenses or liabilities of the Master
Servicer, the Indenture Trustee or the Issuer. Amounts paid under the Note
Insurance Policy shall be transferred to the Note Account in accordance with the
next succeeding paragraph and disbursed by the Indenture Trustee to Noteholders
in accordance with Section 8.03. It shall not be necessary for such payments to
be made by checks or wire transfers separate from the checks or wire transfers
used to pay the Insured Payments with other funds available to make such
payment. However, the amount of any payment of principal of or interest on the
Notes to be paid from funds transferred from the Policy Payments Account shall
be noted as provided in paragraph (c) below in the Register and in the statement
to be furnished to Noteholders pursuant to Section 8.03(c). Funds held in the
Policy Payments Account shall not be invested by the Indenture Trustee.
On any Payment Date with respect to which a claim has been made under
the Insurance Policy, the amount of funds received by the Indenture Trustee as a
result of any claim under the Insurance Policy, to the extent required to make
the Insured Payment on such Payment Date shall be withdrawn from the Policy
Payments Account and deposited in the Notes Account and applied by the Indenture
Trustee, together with the other funds to be withdrawn from the Note Account,
directly to the payment in full of the Insured Payment due on the Notes. Funds
received by the Indenture Trustee as a result of any claim under the Note
Insurance Policy shall be deposited by the Indenture Trustee in the Policy
Payments Account and used solely for payment to the Noteholders may not be
applied to satisfy any costs, expenses or liabilities of the Master Servicer,
the Indenture Trustee or the Issuer. Any funds remaining in the Policy Payments
Account on the first Business Day following a Payment Date shall be remitted to
the Note Insurer, pursuant to the instructions of the Note Insurer, by the end
of the next Business Day.
(c) The Indenture Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Note from moneys
received under the Note Insurance Policy. The Note Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Indenture Trustee.
Section 8.19. Reserve Account.
(a) On each Payment Date, the Indenture Trustee shall deposit in the
Reserve Account such amounts described in Section 8.03(c)(ix) hereof.
(b) Upon the written request of the Note Insurer, the Indenture Trustee
shall withdraw from the Reserve Account and pay to the Note Insurer the amount
requested, in satisfaction of (and not to exceed) the aggregate unreimbursed
Insured Payments (together with interest thereon at the Late Payment Rate).
(c) The Indenture Trustee shall, on each Payment Date, withdraw from
the Reserve Account and pay to the Noteholders of the related Class, an amount
in satisfaction of the related Note Interest and any Overcollateralization
Deficit for such Class, to the extent such amounts are not paid after payment of
amounts pursuant to Section 8.03(c) hereof; provided, that if amounts are
payable to both classes pursuant to this Section 8.19(c) in an amount greater
than the amount
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then on deposit in the Reserve Account, such amount available will be
distributed pro rata in proportion to the amount of the shortfall for each
Class.
(d) The Indenture Trustee shall, on each Payment Date, and after making
all other transfers to and withdrawals from the Reserve Account, withdraw from
the Reserve Account and deposit in the Certificate Distribution Account the
excess, if any, of (i) the amount then on deposit in the Reserve Account over
(ii) the Reserve Account Requirement for such Payment Date.
(e) Funds on deposit in the Reserve Account shall be invested by the
Indenture Trustee in Eligible Investments, in each selected by the Master
Servicer by a written direction or by oral direction, promptly confirmed in
writing, provided, however, the Indenture Trustee shall not be liable for any
loss arising from such investment in Eligible Investments (other than as obligor
under any Eligible Investment). All such Eligible Investments shall be held by
the Indenture Trustee for the benefit of the beneficiaries of the Reserve
Account. Investment earnings on the Reserve Account shall be credited to the
Reserve Account. Funds on deposit in the Reserve Account shall be invested in
Eligible Investments that will mature so that such funds will be available at
the close of business on the day preceding each Payment Date. Funds deposited in
the Reserve Account on the day which immediately precedes a Payment Date upon
the maturity of any Eligible Investments are not required to be (but may be)
invested overnight in accordance with the investment provisions contained
herein. Earnings on such investments shall remain in the Reserve Fund for the
benefit of the beneficiaries of the Reserve Account.
(f) The Indenture Trustee agrees as follows with respect to the
Eligible Investments, and the proceeds thereof, held from time to time in the
Reserve Account:
(i) any Eligible Investment that is held in deposit accounts
shall be subject to the exclusive custody and control of the Indenture
Trustee, and the Indenture Trustee shall have sole signature authority
with respect thereto;
(ii) any Eligible Investment that constitutes Physical
Property (as defined in the definition of Delivery) shall be delivered
to the Indenture Trustee in accordance with paragraph (a) of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a securities
intermediary (as such term is defined in Section 8-102(14) of the UCC)
acting solely for the Indenture Trustee;
(iii) any Eligible Investment 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" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book entry
registration of such Eligible Investment as described in such
paragraph; and
(iv) any Eligible Investment that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause
(C) above shall be delivered to the Indenture Trustee in accordance
with paragraph (c) of the definition of "Delivery" 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
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security directly or through one or more securities intermediaries
acting solely for the Indenture Trustee.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
With the consent of the Note Insurer and without the consent of the
Holders of any Notes, the Issuer and the Indenture Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(1) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(2) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance,
authentication and delivery of any Notes, as herein set forth,
additional conditions, limitations and restrictions thereafter to be
observed;
(3) to evidence the succession of another Person to the Issuer
to the extent permitted herein, and the assumption by any such
successor of the covenants of the Issuer herein and in the Notes
contained;
(4) to add to the covenants of the Issuer, for the benefit of
the Holders of all Notes and the Note Insurer or to surrender any right
or power herein conferred upon the Issuer;
(5) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any other
provision herein, or to amend any other provisions with respect to
matters or questions arising under this Indenture, which shall not be
inconsistent with the provisions of this Indenture, provided that such
action shall not adversely affect in any material respect the interests
of the Holders of the Notes or the Holders of the Certificates; and
provided, further, that the amendment shall not be deemed to adversely
affect in any material respect the interests of the Holders of the
Notes and the Note Insurer if the Person requesting the amendment
obtains letters from the Rating Agencies that the amendment would not
result in the downgrading or withdrawal of the implied ratings then
assigned to the Notes (without taking into account the Note Insurance
Policy); or
(6) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted, and to add to this Indenture such
other provisions as may be expressly required by the TIA.
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Section 9.02. Supplemental Indentures With Consent of Noteholders.
With the consent of the Note Insurer and with the consent of Holders of
Notes representing not less than a majority of the Note Balance of all
Outstanding Notes of both Classes by Act of said Holders delivered to the Issuer
and the Indenture Trustee, the Issuer and the Indenture Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(1) change any Payment Date or the Stated Maturity Date of the
Notes or reduce the principal amount thereof, the Note Interest Rate
thereon or the Redemption Price with respect thereto, change the
earliest date on which any Note may be redeemed at the option of the
Issuer, change any place of payment where, or the coin or currency in
which, any Note or any interest thereon is payable, or impair the right
to institute suit for the enforcement of the payment of any installment
of interest due on any Note on or after the Stated Maturity Date
thereof or for the enforcement of the payment of the entire remaining
unpaid principal amount of any Note on or after the Stated Maturity
Date (or, in the case of redemption, on or after the applicable
Redemption Date);
(2) reduce the percentage of the Note Balance 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 provisions of this
Indenture or Defaults hereunder and their consequences provided for in
this Indenture;
(3) modify any of the provisions of this Section, Section 5.13
or Section 5.17(b), except to increase any percentage specified therein
or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(4) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(5) permit the creation of any lien other than the lien of
this Indenture with respect to any part of the Trust Estate (except for
Permitted Encumbrances) or terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Note
of the security afforded by the lien of this Indenture;
(6) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the Required Payment Amount for
any Payment Date (including the calculation of any of the individual
components of such Required Payment Amount) or to affect rights of the
Holders of the Notes to the benefits of any provisions for the
mandatory redemption of Notes contained herein; or
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(7) incur any indebtedness, other than the Notes, that would
cause the Issuer or the Trust Estate to be treated as a "taxable
mortgage pool" within the meaning of Code Section 7701(i).
The Indenture Trustee may in its discretion determine whether or not
any 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.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties or immunities under this
Indenture or otherwise. The Issuer shall cause executed copies of any
Supplemental Indentures to be delivered to the Rating Agencies.
Section 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes to which such supplemental indenture relates that have theretofore been
or thereafter are authenticated and delivered hereunder shall be bound thereby.
Section 9.05. Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
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Section 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Indenture Trustee shall, bear a notation in form approved by the Indenture
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer shall so determine, new Notes so modified as to conform, in the opinion
of Indenture Trustee and the Issuer, to any such supplemental indenture may be
prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Governing Documents.
The Indenture Trustee shall, upon Issuer Request, consent to any
proposed amendment to the Issuer's governing documents, or an amendment to or
waiver of any provision of any other document relating to the Issuer's governing
documents, such consent to be given without the necessity of obtaining the
consent of the Holders of any Notes upon receipt by the Indenture Trustee of:
(i) an Officers' Certificate, to which such proposed amendment
or waiver shall be attached, stating that such attached copy is a true
copy of the proposed amendment or waiver and that all conditions
precedent to such consent specified in this Section 9.07 have been
satisfied; and
(ii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their implied ratings of the Notes (without taking into account
the Note Insurance Policy).
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
Nothing in this Section 9.07 shall be construed to require that any
Person obtain the consent of the Indenture Trustee to any amendment or waiver or
any provision of any document where the making of such amendment or the giving
of such waiver without obtaining the consent 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.
(a) Each Class of Notes may be redeemed in whole, but not in part, on
the Payment Date following a Master Servicer Optional Termination Date upon the
exercise by the Master Servicer of its rights under Section 5.01(b) of the
Servicing Agreement; provided, however, that funds in an amount equal to the
Redemption Price, plus any amounts owed to the Note Insurer under the Insurance
Agreement, any unreimbursed Nonrecoverable Advances and any
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unreimbursed amounts due and owing to the Indenture Trustee hereunder, must have
been deposited with the Indenture Trustee prior to the Indenture Trustee's
giving notice of such redemption pursuant to Section 10.02 or the Issuer shall
have complied with the requirements for satisfaction and discharge of the Notes
specified in Section 4.01. Notice of the election to redeem the Notes shall be
furnished to the Indenture Trustee not later than thirty (30) days prior to the
Payment Date selected for such redemption, whereupon all such Notes shall be due
and payable on such Payment Date upon the furnishing of a notice pursuant to
Section 10.02 to each Holder of such Notes and the Note Insurer. Any expenses
associated with the compliance of the provisions hereof in connection with a
redemption of the Notes shall be paid by the Note Insurer or the Master
Servicer, depending upon which party redeems the Notes. In no event shall the
Note Insurer redeem the Notes unless the proceeds received from the Note Insurer
would be not less than the greater of (x) the entire amount that would be
payable to the Holders of the Notes, in full payment thereof on the Payment Date
next succeeding the date of such Sale and (y) the fair market value of the Home
Equity Loans as of the related Payment Date. Upon the redemption of a Class of
Notes, Home Equity Loans for the related Group in the Trust Estate shall be
released and delivered to the party requesting the redemption.
(b) Upon receipt of the notice from the Master Servicer or the Note
Insurer of its election to redeem the Notes pursuant to Section 10.01(a), the
Indenture Trustee shall prepare and deliver to the Issuer, the Master Servicer
and the Note Insurer, no later than the related Redemption Date, a Payment Date
Statement stating therein that it has determined that the conditions to
redemption at the option of the Master Servicer or Note Insurer have been
satisfied and setting forth the amount, if any, to be withdrawn from the related
Note Account and paid to the Master Servicer as reimbursement for Nonrecoverable
Advances and such other information as may be required to accomplish such
redemption.
(c) Promptly following any such purchase, the Indenture Trustee will
release the Mortgage Files to the Master Servicer, or otherwise upon their
order, in a manner similar to that described in Section 3.01 of the Loan Sale
Agreement.
Section 10.02. Form of Redemption Notice.
Notice of redemption shall be given by the Indenture Trustee in the
name of and at the expense of the Issuer by first class mail, postage prepaid,
mailed not less than ten days prior to the Redemption Date to each Holder of
Notes to be redeemed, such Holders being determined as of the Record Date for
such Payment Date, and to the Note Insurer.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Notes of such Series
will be redeemed,
(3) the fact of payment in full on such Notes, the place where
such Notes are to be surrendered for payment of the Redemption Price
(which shall be the office or agency of the Issuer to be maintained as
provided in Section 3.02), and that no interest shall accrue on such
Note for any period after the date fixed for redemption.
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Failure to give notice of redemption, or any defect therein, to any
Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. Notes Payable on Optional Redemption.
Notice of redemption having been given as provided in Section 10.02,
the Notes to be redeemed shall, on the applicable Redemption Date, become due
and payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on such Redemption
Price for any period after such Redemption Date; provided, however, that if such
Redemption Price is not paid on the Redemption Date, the Note Balance shall,
until paid, bear interest from the Redemption Date at the Note Interest Rate.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel, if requested
by the Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
(b) Every certificate, opinion or letter with respect to compliance
with a condition or covenant provided for in this Indenture, including one
furnished pursuant to specific requirements of this Indenture relating to a
particular application or request (other than certificates provided pursuant to
TIA Section 314(a)(4)) shall include and shall be deemed to include (regardless
of whether specifically stated therein) the following:
(1) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate, opinion or letter are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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(c) In furnishing any such certificate, opinion or letter, an
Authorized Officer of the Owner Trustee may, without conducting any independent
investigation, rely solely on a corresponding certificate, opinion or letter of
the Master Servicer, the Depositor, the Sponsor, or any Certificateholder.
Section 11.02. Form of Documents Delivered to Indenture Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
Opinion of Counsel may be based on the written opinion of other counsel, in
which event such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion and shall include a statement to the effect that such counsel
believes that such counsel and the Indenture Trust may reasonably rely upon the
opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 6.01(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request or
direction of the Issuer, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Issuer's right to make such request or
direction, the Indenture Trustee shall be protected in acting in accordance with
such request or direction if it does not have knowledge of the occurrence and
continuation of such Default or Event of Default as provided in Section 6.01(d).
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Section 11.03. Acts of 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 an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
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) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of 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 of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not notation
of such action is made upon such Notes.
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer
and Issuer.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with:
(1) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Indenture
Trustee at its Corporate Trust Office and at The Chase Manhattan Bank,
450 W. 33rd Street, 15th Floor, New York, New York 10001, (212)
946-7148, Telecopy (212) 946-3240 Attention: Structured Finance
Services; or
(2) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder (except as provided in
Section 5.01(3) and (4)) if in writing and mailed, first-class postage
prepaid, to the Issuer addressed to it at First Greensboro Home Equity
Loan Trust 1998-1, in care of Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention:
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Corporate Trust Administration, (302) 651-8882; Telecopy (302)
651-1000, or at any other address previously furnished in writing to
the Indenture Trustee by the Issuer.
(3) the Note Insurer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to Financial Security
Assurance, Inc., 350 Park Avenue, New York, New York 10022, Attention:
Surveillance Department, Re: First Greensboro Home Equity Loan Trust
1998-1, (212) ___-____, Telecopy (212) 339-3518 or (212) 339-3529, or
at any other address previously furnished in writing to the Indenture
Trustee by the Note Insurer; or
(4) the Depositor by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage paid, to Home Equity
Securitization Corp., 301 South College Street, Charlotte, North
Carolina 28202-6001 or at any other address previously furnished in
writing to the Indenture Trustee by the Depositor; or
(5) the Sponsor or the Master Servicer by the Indenture
Trustee or by any Noteholder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class, postage paid, to First
Greensboro Home Equity, Inc., 4830 Koger Blvd., Greensboro, North
Carolina 27407, Attention: Robert Bennett, Jr., (336) 855-4925,
Telecopy (336) 854-8609 or at any other address previously furnished in
writing to the Indenture Trustee by the Sponsor or the Master Servicer;
or
(6) the Underwriters by any party or by any Noteholder shall
be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to (a) First Union Capital Markets, a
division of Wheat First Securities, Inc., 301 South College Street,
Charlotte, North Carolina 28202-6001, (704) 383-4900 Telecopy: (704)
374-3105.
Notices required to be given to the Rating Agencies by the Issuer or
the Indenture Trustee shall be in writing, personally delivered or mailed
first-class postage pre-paid, to (i) in the case of Moody's, at the following
address: Moody's Investors Service, Inc., Residential Mortgage Monitoring
Department, 99 Church Street, New York, New York 10007 and (ii) in the case of
Standard & Poor's, at the following address: Standard & Poor's Ratings Group, 26
Broadway (15th Floor), New York, New York, 10004, Attention: Asset Bankers
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designed by written notice to the other parties.
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices.
Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder 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 or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such
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notice or report, nor any defect in any notice or report so mailed, to any
particular Noteholder shall affect the sufficiency of such notice or report with
respect to other Noteholders, and any notice or report that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given or
provided.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by 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 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.
Section 11.06. Rules by Indenture Trustee.
The Indenture Trustee may make reasonable rules for any meeting of
Noteholders.
Section 11.07. Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of the
provisions of the TIA, such required provision shall control.
Section 11.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
Section 11.10. Separability.
In case any provision in this Indenture or in the 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 11.11. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, the Note Insurer, any separate
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trustee or Co-trustee appointed under Section 6.14 and the Noteholders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 11.12. Legal Holidays.
In any case where the date of any Payment Date, Redemption Date or any
other date on which principal of or interest on any Note is proposed to be paid
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 nominal date of any such Payment Date, Redemption Date or other date for the
payment of principal of or interest on any Note and no interest shall accrue for
the period from and after any such nominal date, provided such payment is made
in full on such next succeeding Business Day.
Section 11.13. Governing Law.
IN VIEW OF THE FACT THAT NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY
STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY
THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL
AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS
INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN.
Section 11.14. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 11.15. Recording of Indenture.
This Indenture is subject to recording in any appropriate public
recording offices, such recording to be effected by the Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.11(c) or 3.06.
Section 11.16. Issuer Obligation.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or 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
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such Person may have expressly 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 the
Trust Agreement.
Section 11.17. No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder and Beneficial Owner, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Transferor or the Issuer,
or join in any institution against the Transferor 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 Operative Documents. In addition, the Indenture Trustee
will on behalf of the holders of the Notes, (a) file a written objection to any
motion or other proceeding seeking the substantive consolidation of the Sponsor
with, the Transferor or the Issuer, (b) file an appropriate memorandum of points
and authorities or other brief in support of such objection, or (c) endeavor to
establish at the hearing on such objection that the substantive consolidation of
such entity would be materially prejudicial to the Noteholders.
This Section 11.17 will survive for one year and one day following the
termination of this Indenture.
Section 11.18. Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee and the Note Insurer, during the
Issuer's normal business hours, to examine all of books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent Accountants selected by the
Indenture Trustee or the Note Insurer, as the case may be, and to discuss its
affairs, finances and accounts with its officers, employees and Independent
Accountants (and by this provision the Issuer hereby authorizes its Accountants
to discuss with such representatives such affairs, finances and accounts), all
at such reasonable times and as often as may be reasonably requested. Any
expense incident to the exercise by the Indenture Trustee of any right under
this Section 11.18 shall be borne by the Issuer.
Section 11.19. Usury.
The amount of interest payable or paid on any Note under the terms of
this Indenture shall be limited to an amount that shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United States
or the State of New York (whichever shall permit the higher rate), that could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Note exceeds the Highest Lawful Rate,
the Issuer stipulates that such excess amount will be deemed to have been paid
as a result
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of an error on the part of both the Indenture Trustee, acting on behalf of the
Holder of such Note, and the Issuer, and the Holder receiving such excess
payment shall promptly, upon discovery of such error or upon notice thereof from
the Issuer or the Indenture Trustee, refund the amount of such excess or, at the
option of the Indenture Trustee, apply the excess to the payment of principal of
such Note, if any, remaining unpaid. In addition, all sums paid or agreed to be
paid to the Indenture Trustee for the benefit of Holders of Notes for the use,
forbearance or detention of money shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such Notes.
Section 11.20. Third Party Beneficiary.
The Note Insurer is intended as a third party beneficiary of this
Indenture shall be binding upon and inure to the benefit of the Note Insurer;
provided that, notwithstanding the foregoing, for so long as a Note Insurer
Default is continuing with respect to its obligations under the Note Insurance
Policy, the Noteholders shall succeed to the Note Insurer's rights hereunder.
Without limiting the generality of the foregoing, all covenants and agreements
in this Indenture that expressly confer rights upon the Note Insurer shall be
for the benefit of and run directly to the Note Insurer, and the Note Insurer
shall be entitled to rely on and enforce such covenants to the same extent as if
it were a party to this Indenture.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee and the have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1998-1,
By: WILMINGTON TRUST COMPANY
Not in its individual capacity,
but solely as Owner Trustee
By: /s/ Don MacKelcan
--------------------------------------
Authorized Signatory
THE CHASE MANHATTAN BANK,
Not in its individual capacity,
but solely as Indenture Trustee
By: /s/ Ann Marie Jose
--------------------------------------
Name: Ann Marie Jose
Title: Trust Officer
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SCHEDULE I
SCHEDULE OF HOME EQUITY LOANS
<PAGE>
EXHIBIT A
FORM OF NOTE
<PAGE>
[SPECIMEN]
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.
THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE NOTE INSURANCE POLICY
AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
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.
Date of Indenture: As of ______________ Original Note Balance: $____________
First Payment Date: _____________ CUSIP No.: __________
Denomination: $_____________________ Note No.: A-1
FIRST GREENSBORO
HOME EQUITY LOAN BACKED NOTES, SERIES 1998-1
First Greensboro Home Equity Loan Trust 1998-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of ________________________________
($___________) payable on each Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is
$________________ and the denominator of which is $________________ (this Note's
"Percentage Interest") by (ii) the aggregate amount, if any, payable from the
related Note Account in respect of principal on the Class A-___ Notes pursuant
to the Indenture dated as of June 1, 1998, between the Issuer and
___________________________________, National Association, a national banking
association, as Indenture Trustee (the "Indenture Trustee"); provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of (i) the Payment Date occurring in _____________ (the "Stated
Maturity Date"), (ii) the Redemption Date, if any, pursuant to Article X of the
Indenture or (iii) the date on which an Event of Default shall have occurred and
be continuing, if the Notes have been declared to be immediately due and payable
in the manner provided in Section 5.02 of the Indenture.
A-2
<PAGE>
Capitalized terms used but not defined herein are defined in Article I of the
Indenture and Appendix 1 attached thereto.
A-3
<PAGE>
[SPECIMEN]
Pursuant to the terms of the Indenture, payments will be made on the
25th day of each month or, if such day is not a Business Day, on the Business
Day immediately following such 25th day (each a "Payment Date"), commencing on
the first Payment Date specified above, to the Person in whose name this Note is
registered at the close of business on the applicable Record Date, in an amount
equal to the product of (a) the Percentage Interest evidenced by this Note and
(b) the sum of the amounts to be paid on the Class A-___ Notes with respect to
such Payment Date, all as more specifically set forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five days prior to the related Record Date with
appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Balance of at least $1,000,000), any payment of principal or
interest, other than the final installment of principal or interest, shall be
made by wire transfer to an account in the United States designated by such
Holder reasonably satisfactory to the Indenture Trustee.
Payments of principal and interest on the Notes will be made on each
Payment Date to Noteholders of record as of the related Record Date. On each
Payment Date, Noteholders will be entitled to receive interest payments in an
aggregate amount equal to the related Note Interest for such Payment Date,
together with principal payments in an aggregate amount equal to the related
Monthly Principal plus, until the related Overcollateralization Amount is equal
to the related Required Overcollateralization Amount, Excess Cash, if any, for
the related Group and such Payment Date. The "Note Balance" of a Note as of any
date of determination is equal to the initial principal balance thereof as of
the Closing Date, reduced by the aggregate of all amounts previously paid with
respect to such Note on account of principal.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Asset Backed Notes, Series 1998-1, Class A-___, 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. Also issued under the Indenture are the Asset Backed Notes, Series
1998-1, Class A-___. To the extent that any provision of this Note contradicts
or is inconsistent with the provisions of the Indenture, the provisions of the
Indenture shall control and supersede such contradictory or inconsistent
provision herein. The Notes are subject to all terms of the Indenture.
The Class A-___ Notes are and will be equally and ratably secured by
Home Equity Loans in the related Group and the other collateral related thereto
pledged as security therefor as provided in the Indenture.
A-4
<PAGE>
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Stated Maturity Date and the
Redemption Date, if any, pursuant to Article X of the Indenture. Notwithstanding
the foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing if the Indenture Trustee, at the direction or upon the prior written
consent of Financial Security Assurance Inc. (the "Note Insurer") in the absence
of a Note Insurer Default, or the Holders of the Notes representing not less
than 50% of the Note Balance of the Outstanding Notes (with the prior written
consent of the Note Insurer in the absence of a Note Insurer Default), shall
have 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 Notes shall be
made pro rata to the Noteholders entitled thereto.
Financial Security Assurance Inc. (the "Note Insurer"), in
consideration of the payment of the premium and subject to the terms of the Note
Guaranty Insurance Policy (the "Note Insurance Policy") thereby has
unconditionally and irrevocably guaranteed the payment of the Insured Payments
as described in the statement of insurance attached hereto.
Pursuant to the Indenture, unless a Note Insurer Default exists (i) the
Note Insurer shall be deemed to be the holder of the Notes for certain purposes
specified in the Indenture and will be entitled to exercise all rights of the
Noteholders thereunder, including the rights of Noteholders relating to the
occurrence of, and the remedies with respect to, an Event of Default, without
the consent of such Noteholders, and (ii) the Indenture Trustee may take actions
which would otherwise be at its option or within its discretion, including
actions relating to the occurrence of, and the remedies with respect to, an
Event of Default, only at the direction of the Note Insurer. In addition, on
each Payment Date, after the Noteholders have been paid all amounts to which
they are entitled, the Note Insurer will be entitled to be reimbursed for any
unreimbursed Insured Payments, unreimbursed Premium Amounts (each with interest
thereon at the "Late Payment Rate" specified in the Insurance Agreement) and any
other amounts owed under the Note Insurance Policy.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate and payments under the Note Insurance Policy will be sole source of
payments on the Notes, and each Holder hereof, by its acceptance of this Note,
agrees that (i) such Note will be limited in right of payment to amounts
available from the Trust Estate and the Note Insurance Policy as provided in the
Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner
Trustee, the Indenture Trustee, the Depositor, the Sponsor, the Master Servicer
or any of their respective affiliates, or to the assets of any of the foregoing
entities, except the assets of the Issuer pledged to secure the Notes pursuant
to the Indenture.
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 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
A-5
<PAGE>
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. Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five days prior to the related Record Date with
appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Balance of at least $1,000,000), any payment of principal or
interest, other than the final installment of principal or interest, shall be
made by wire transfer to an account in the United States designated by such
Holder reasonably satisfactory to the Indenture Trustee. 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 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.
As provided in the Indenture, the Notes may be redeemed in whole, but
not in part, at the option of the Master Servicer, on any Payment Date on and
after the date on which the Aggregate Principal Balance of the Home Equity Loans
is less than 10% of the Aggregate Principal Balance of the Home Equity Loans as
of the respective Cut-off Dates.
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 transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
The Note Registrar shall not register the transfer of this Note unless
the Note Registrar has received a representation letter from the transferee to
the effect that either (i) the transferee is not, and is not acquiring the Note
on behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of this Note by the transferee qualifies for exemptive
relief under a Department of
A-6
<PAGE>
Labor Prohibited Transaction Class Exemption. Each Beneficial Owner, by
acceptance of a beneficial interest herein, shall be deemed to make one of the
foregoing representations.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial 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 Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees by accepting the benefits of the Indenture that such Noteholder or
Beneficial Owner will not at any time institute against the Sponsor or the
Issuer, or join in any institution against the Sponsor 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, the Loan Sale
Agreement, the Loan Transfer Agreement, the Servicing Agreement, the Management
Agreement, the Insurance Agreement and the Indemnification Agreement (the
"Operative Documents").
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Beneficial 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 Note Insurer and the Holders of Notes
representing a majority of the Note Balance of all Outstanding Notes. The
Indenture also contains provisions permitting the (i) Note Insurer or (ii) if a
Note Insurer Default exists, the Holders of Notes representing specified
percentages of the Note
A-7
<PAGE>
Balance of Outstanding 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 Note Insurer or 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 amendment thereof, in certain limited circumstances, or the
waiver of certain terms and conditions set forth in the Indenture, without the
consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
Initially, each Class of Notes will be represented by one Note
registered in the name of CEDE & Co. as nominees of the Clearing Agency. The
Notes will be delivered in denominations as provided in the Indenture and
subject to certain limitations therein set forth. The Notes are exchangeable for
a like aggregate initial Note Balance of Notes of different authorized
denominations, as requested by the Holder surrendering the same.
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.
Unless the certificate of authentication hereon has been executed by
the Authenticating Agent 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.
A-8
<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: June 26, 1998
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1998-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
under the Trust Agreement
By:________________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-___ Notes designated above and referred to in the
within-mentioned Indenture.
Date: June 26, 1998
THE CHASE MANHATTAN BANK,
Authenticating Agent
By:________________________________________
Authorized Signatory
A-9
<PAGE>
STATEMENT OF INSURANCE
<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>
EXHIBIT B
NOTE INSURANCE POLICY
B-1
<PAGE>
EXHIBIT C
FORM OF NOTICE OF CLAIM
C-1
<PAGE>
EXHIBIT D
FORM OF INITIAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of The Chase
Manhattan Bank, in its capacity as Indenture Trustee (the "Indenture Trustee")
under that certain Indenture dated as of June 1, 1998 (the "Indenture") First
Greensboro Home Equity Loan Trust 1998-1, as Issuer and Home Equity
Securitization Corp. as Depositor ("Depositor") and with reference to that
certain Loan Sale Agreement dated as of June 1, 1998 ("Loan Sale Agreement")
among the Depositor, First Greensboro Home Equity, Inc., as Sponsor ("Sponsor")
and Master Servicer, First Owner's Trust, Inc., as Transferor (the
"Transferor"), The Chase Manhattan Bank, as Indenture Trustee and First
Greensboro Trust ("FGT"); and
WHEREAS, the Indenture Trustee is required, pursuant to Section 3.02 of
the Loan Sale Agreement, to review the Mortgage Files within a specified period
following the Closing Day and to notify the Sponsor promptly of any defects with
respect to the Pool, and the Sponsor is required to remedy such defects or take
certain other action, all as set forth in Section 3.02(b) of the Loan Sale
Agreement; and
WHEREAS, Section 3.02 of the Loan Sale Agreement and Section 6.15(a) of
the Indenture require the Indenture Trustee to deliver this Home Equity Loan
Certification upon the satisfaction of certain conditions set forth therein.
NOW, THEREFORE, the Indenture Trustee hereby certifies that it has
determined that all required documents (or certified copies of documents listed
in Section 3.01(c)(i) of the Loan Sale Agreement) have been executed or
received, and that such documents relate to the Home Equity Loans identified in
the Schedule of Home Equity Loans pursuant to Section 3.01(c) of the Loan Sale
Agreement or, in the event that such documents have not been executed and
received or do not so relate to such Home Equity Loans, any remedial action by
the Sponsor pursuant to Section 3.02 of the Loan Sale Agreement has been
completed. The Indenture Trustee makes no certification hereby, however, with
respect to any intervening assignments or assumption and modification
agreements.
<PAGE>
THE CHASE MANHATTAN BANK, as
Indenture Trustee
By:_________________________________
Title:_______________________________
Dated: June 1, 1998
<PAGE>
APPENDIX 1
DEFINITIONS
"Act": With respect to any Noteholder, as defined in Section 11.03 of
the Indenture.
"Accountant": A Person engaged in the practice of accounting who
(except when the Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"Addition Notice": With respect to the transfer of Subsequent Home
Equity Loans to the Trust pursuant to Section 3.03 of the Loan Sale Agreement,
notice given not less than five Business Days prior to the related Subsequent
Transfer Date of the Transferor's designation of Subsequent Home Equity Loans to
be sold to the Trust and the aggregate Loan Balance of such Subsequent Home
Equity Loans.
"Adjustment Date": With respect to an adjustable rate Home Equity Loan,
the date on which a change to the Coupon Rate on a Home Equity Loan becomes
effective.
"Administrative Fee Amount": For each Group and any Payment Date, the
sum of the related Servicing Fee, the related Indenture Trustee Fee, the related
Owner Trustee Fee and the related Note Insurer Premium, each relating to such
Payment Date.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract, relation to individuals or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent": Any Note Registrar, Paying Agent, Authenticating Agent or
Custodian.
"Aggregate Principal Balance": The aggregate of the Principal Balances
of the Home Equity Loans in Group I, Group II or the Trust Estate, as
applicable, as of the related Determination Date.
"Annual Loss Percentage (Rolling Twelve Month)": With respect to each
Class and as of any date of determination, a fraction, expressed as a
percentage, the numerator of which is the aggregate of the Realized Losses in
the related Group as of the last day of the calendar month of each Remittance
Period for the twelve immediately preceding Remittance Periods and the
denominator of which is the outstanding principal balance of the Home Equity
Loans of the related Group as of the first day of the twelfth preceding calendar
month.
"Appraisal": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, FNMA and FHLMC
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<PAGE>
standards, and must meet the appraisal standards of the Uniform Standards of
Professional Appraisal Practice.
"Appraised Value": The appraised value of any Mortgaged Property based
upon the appraisal made at the time of the origination of the related Home
Equity Loan, or, in the case of a Mortgaged Property which was sold within
twelve months of the time of Home Equity Loan origination, the lesser of the
appraisal and the sales price of the Mortgaged Property.
"Assignments": Collectively (i) the original instrument of assignment
of a Mortgage, including any interim assignments, from the originator or any
other holder of any Home Equity Loan to the Indenture Trustee (that in each case
may, to the extent permitted by the laws of the state in which the related
Mortgaged Property is located, be a blanket instrument of assignment covering
other Mortgages and Mortgage Notes as well and that may also be an instrument of
assignment running directly from the mortgagee of record under the related
Mortgage to the Indenture Trustee).
"Authenticating Agent": The Person, if any, appointed as Authenticating
Agent by the Issuer pursuant to Section 6.14 of the Indenture, until any
successor Authenticating Agent for the Notes is named, and thereafter
"Authenticating Agent" shall mean such successor. The initial Authenticating
Agent shall be the Indenture Trustee. Any Authenticating Agent other than the
Indenture Trustee shall sign an instrument under which it agrees to be bound by
all of the terms of this Indenture applicable to the Authenticating Agent.
"Authorized Officer": With respect to (i) the Indenture Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Indenture
Trustee customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of the Indenture, (ii) the Owner Trustee, the president, any vice
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer, any assistant treasurer, any trust officer, any financial
services officer or any other officer or employee of the Owner Trustee
customarily performing functions similar to those performed by the above
officers and (iii) any other Person, any officer assigned to the Corporate Trust
Division (or any successor thereto), including any Vice President, Assistant
Vice President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and having direct
responsibility for the administration of the Indenture.
"Available Funds": With respect to a Home Equity Loan Group and any
Payment Date, the sum of the amounts described in clauses (a) through (h) below,
less (i) the Administrative Fee Amount for such Group in respect of such Payment
Date, (ii) Servicing Advances for such Group previously made that are
reimbursable to the Master Servicer (other than those included in liquidation
expenses for any Liquidated Loan in such Group and reimbursed from the related
Liquidation Proceeds and from Insurance Proceeds) with respect to the related
Remittance Period to the extent permitted by the Servicing Agreement and (iii)
the aggregate amounts (A) deposited into the Principal and Interest Account and
allocable to the related Group, or into the related Note Account that may not be
withdrawn therefrom pursuant to
2
<PAGE>
a final and nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the Bankruptcy Code and
that would otherwise have been included in Available Funds on such Payment Date
and (B) received by the Indenture Trustee that are recoverable and sought to be
recovered from the Issuer as avoidable preference by a trustee in bankruptcy
pursuant to the Bankruptcy Code in accordance with a final nonappealable order
of a court of competent jurisdiction:
(a) all scheduled payments of interest received with respect to the
Home Equity Loans in such Group and due during the related Remittance Period and
all other interest payments on or in respect of such Home Equity Loans received
by or on behalf of the Master Servicer during the related Remittance Period, net
of amounts representing interest due on such Home Equity Loans in respect of any
period prior to the applicable Cut-Off Dates, plus any related Compensating
Interest Payments and Delinquency Advances made by the Master Servicer in
respect of the related Home Equity Loans and any net income from related REO
Properties for such Remittance Period;
(b) all scheduled payments of principal received with respect to the
Home Equity Loans in such Group and due during the related Remittance Period and
all other principal payments (including Prepayments) received or deemed to be
received during the related Remittance Period;
(c) the aggregate of any proceeds from or in respect of any policy of
insurance covering a Mortgaged Property that are received during the related
Remittance Period and applied by the Master Servicer to reduce the Principal
Balance of the related Home Equity Loan ("Insurance Proceeds") (which proceeds
will include any deductible payable by the Master Servicer with respect to a
blanket insurance policy pursuant to the Servicing Agreement and the proceeds
from any fidelity bond or errors and omission policy pursuant to the Servicing
Agreement, net of any component thereof covering any expenses incurred by or on
behalf of the Master Servicer and specifically reimbursable under the Servicing
Agreement);
(d) the aggregate of any Net Liquidation Proceeds for such Group
collected by the Master Servicer during the related Remittance Period;
(e) the aggregate of the Loan Purchase Prices received in respect of
any Home Equity Loans in such Group that are required or permitted to be
repurchased, released, removed or substituted by the Sponsor during or in
respect of the related Remittance Period, to the extent such amounts are
received by the Indenture Trustee on or before the related Monthly Remittance
Date;
(f) the aggregate of amounts deposited in the related Note Account by
the Indenture Trustee, the Issuer or the Note Insurer during such Remittance
Period in connection with redemption of the Notes in the related Class pursuant
to Article X of the Indenture; and
(g) with respect to Group II, the aggregate of amounts deposited in the
Note Account from the Capitalized Interest Account and the Pre-Funding Account.
"Backup Master Servicer": Calmco, Inc.
3
<PAGE>
"Backup Master Servicing Fee": Any amounts that are to be paid to the
Backup Master Servicer by the Sponsor, pursuant to the Backup Servicing Fee
Agreement.
"Backup Master Servicing Standard": The same manner in which the Backup
Master Servicer services and administers home equity loans similar to the Home
Equity Loans for its own portfolio, giving due consideration to customary and
usual standards of practice of prudent mortgage lenders and loan servicers
administering similar home equity loans, but without regard to: (i) any
relationship that the Backup Master Servicer, any Sub-Servicer or any Affiliate
of the Backup Master Servicer or any Sub-Servicer may have with the related
Mortgagor; (ii) the ownership of any Note or Trust Certificate by the Backup
Master Servicer or any Affiliate of the Backup Master Servicer; (iii) the Backup
Master Servicer's obligation to make a Delinquency Advance or Servicing Advance;
or (iv) the Backup Master Servicer's or any Sub-Servicer's right to receive
compensation for its services under the Servicing Agreement or with respect to
any other particular transaction.
"Backup Servicing Fee Agreement": The agreement dated as of June 1,
1998 between the Sponsor and the Backup Master Servicer.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"Beneficial Owner": With respect to a Book-Entry Note, the Person who
is the beneficial owner of such Note as reflected on the books of the Clearing
Agency for the Notes or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"Best Efforts": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer or the
Master Servicer, as the case may be, in its reasonable discretion. Such efforts
do not require the Issuer or the Master Servicer, as the case may be, to enter
into any litigation, arbitration or other legal or quasi-legal proceeding, nor
do they require the Issuer or the Master Servicer, as the case may be, to
advance or expend fees or sums of money in addition to those specifically set
forth in the Indenture and the Servicing Agreement.
"Book-Entry Notes": Any Notes registered in the name of the Clearing
Agency or its nominee, ownership of which is reflected on the books of the
Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"Book-Entry Termination": The time at which the book-entry registration
of the Book-Entry Notes shall terminate, as specified in Section 2.13 of the
Indenture.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in New York, New York, Greensboro, North
Carolina, Austin, Texas (if the Backup Master Servicer becomes the successor
Master Servicer) or the city in which the Corporate Trust Office is located, are
authorized or obligated by law, regulation, executive order or governmental
decree to be closed.
4
<PAGE>
"Capitalized Interest Account": With respect to Group II, the
Capitalized Interest Account established in accordance with the Indenture and
maintained by the Indenture Trustee.
"Capitalized Interest Requirement": With respect to Group II, (i) as to
any Pre-Funding Payment Date, interest for the number of days in the Interest
Period on the Pre-Funded Amount as of the first day of the Remittance Period
related to such Pre-Funding Payment Date at the Note Interest Rate for the
applicable Interest Period(s) related to such Pre-Funding Payment Date and (ii)
and with respect to each Group, as to the Payment Dates in July and August 1998,
interest for the number of days in the Interest Period on the aggregate
Principal Balance of the Home Equity Loans in such Group that do not have a
payment due in June or July 1998, respectively as of the first day of the
related Remittance Period at the related Note Interest Rate.
"Capitalized Interest Amount": With respect to any Determination Date,
the amount on deposit in the Capitalized Interest Account.
"Certificate": A Certificate evidencing the beneficial interest of a
Certificateholder in the Trust, substantially in the form attached as Exhibit A
to the Deposit Trust Agreement.
"Certificate Distribution Account": As defined in the Deposit Trust
Agreement.
"Certificateholder": As defined in the Deposit Trust Agreement.
"Class": The Class A-1 Notes and the Class A-2 Notes.
"Class A-1 Notes": The First Greensboro Home Equity Loan Trust 1998-1
Asset Backed Notes, Series 1998-1, Class A-1.
"Class A-2 Notes": The First Greensboro Home Equity Loan Trust 1998-1
Asset Backed Notes, Series 1998-1, Class A-2.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and Exchange Act of 1934, as amended,
and the regulations of the Commission thereunder and shall initially be The
Depository Trust Company of New York, the nominee for which is Cede & Co.
"Clearing Agency Participants": The entities for whom the Clearing
Agency will maintain book-entry records of ownership and transfer of Book-Entry
Notes, which may include securities brokers and dealers, banks and trust
companies and clearing corporations and certain other organizations.
"Closing Date": June 26, 1998, the date of initial issuance of the
Notes.
"Code": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, as successor statutes thereto, and applicable
U.S. Department of Treasury regulations issued pursuant thereto in temporary or
final form and proposed regulations thereunder to the extent that, by reason of
their proposed effective date, such proposed regulations would apply.
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"Combined Loan-to-Value Ratio": With respect to a Home Equity Loan is
the ratio, expressed as a percentage, equal to the sum of (a) the original
balance of the Home Equity Loan and (b) the outstanding balance of any senior
lien mortgage divided by the lesser of (x) the Appraised Value or (y) the sales
price of such Mortgaged Property if such property was sold within 12 months of
the time of loan origination.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.
"Compensating Interest": With respect to the prepayment in full of a
Home Equity Loan, the difference between (x) the interest collected from the
Mortgagor in connection with such payoff, and (y) the full month's interest at
the Coupon Rate that would be due on the related Due Date for such Home Equity
Loan; provided, however, that such amount shall not exceed the aggregate
Servicing Fee for the related Remittance Period.
"Corporate Trust Office": The principal office of the Indenture Trustee
at which at any particular time its corporate trust business with respect to
this Indenture shall be principally administered, which office at the date of
the execution of this Indenture is located at The Chase Manhattan Bank, 450 W.
33rd Street, New York, NY 10001, Attention: Structured Finance Services.
"Coupon Rate": The rate of interest borne by each Mortgage Note.
"Cram Down Loss": With respect to a Home Equity Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Principal Balance or the Coupon Rate of such Home Equity Loan, the
amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on
the date of issuance of such order.
"Cumulative Loss Percentage": As of any date of determination, the
aggregate of all Realized Losses since the Cut-Off Date as a percentage of the
sum of the Initial Aggregate Principal Balance of the applicable Group and the
aggregate Principal Balances of all Subsequent Home Equity Loans applicable to
such Group.
"Cumulative Loss Test": The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below:
Monthly Remittance Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
December 2000 November 2001 1.00%
December 2001 November 2002 1.60%
December 2002 November 2002 2.10%
December 2003 and thereafter 2.60%
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"Current Note Balance": With respect to any Note as of any date of
determination, the original principal amount of such Note, reduced by all prior
payments (including Insured Payments), if any, made with respect to principal of
such Note.
"Custodian": A Person who is at any time appointed by the Indenture
Trustee pursuant to Section 8.15 of the Indenture as a document custodian for
the Mortgage Files, which Person shall not be the Issuer or an Affiliate of the
Issuer. The Custodian shall initially be The Chase Manhattan Bank, N.A.
"Cut-Off Date": With respect to (i) each Initial Home Equity Loan, June
1, 1998, and (ii) with respect to each Subsequent Home Equity Loan, the later of
(x) the first day of the month in which such Home Equity Loan was transferred to
the Issuer and (y) the date of origination if any such Home Equity Loan is
originated in the month of the related Subsequent Transfer Date.
"Daily Collections": All principal and interest collections on the Home
Equity Loans due after the Cut-Off Date, including any Prepayments and Net
Liquidation Proceeds, other recoveries or amounts related to the Home Equity
Loans received by the Master Servicer and any income from REO Mortgaged
Properties, but net of (i) Net Liquidation Proceeds to the extent such Net
Liquidation Proceeds exceed the sum of (a) the Principal Balance of the related
Home Equity Loan immediately prior to liquidation, (b) accrued and unpaid
interest on such Home Equity Loan (net of the related Servicing Fee) to the date
of such liquidation (c) any Realized Losses incurred during the related
Remittance Period and, (d) any related Servicing Advances, (ii) principal and
interest due (and Prepayments collected) on the Home Equity Loans prior to the
Cut-Off Date, excluding payments received and applied prior to the Cut-Off which
are applicable to periods on and after the Cut-Off Date, (iii) reimbursements
for Delinquency Advances and Servicing Advances pursuant to Section
2.08(d)(i)(D) of the Servicing Agreement and (iv) reimbursements for amounts
deposited in the Principal and Interest Account representing payments of
principal and/or interest on a Mortgage Note by a Mortgagor which are
subsequently returned by a depository institution as unpaid,
"Default": Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Defective Home Equity Loan": Any Home Equity Loan that is required to
be repurchased or substituted by the Sponsor pursuant to the Loan Sale
Agreement.
"Definitive Notes": Notes other than Book-Entry Notes.
"Deleted Home Equity Loan": A Home Equity Loan replaced or to be
replaced by a Qualified Replacement Home Equity Loan.
"Delinquency Advance": Any amount which the Master Servicer shall be
required pursuant to the Servicing Agreement to remit to the Indenture Trustee
for deposit to the Note Account out of the Master Servicer's own funds for any
delinquent payment of interest with respect to each Delinquent Home Equity Loan
in the related Group, which payment was not received on or prior to the related
Monthly Remittance Date and was not theretofore advanced by
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the Master Servicer, unless the Master Servicer has determined, in its
reasonable business judgment, that such advance would not be recoverable.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due
thereon is not made by the Mortgagor by the close of business on the related Due
Date. A Home Equity Loan is "30 days Delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such 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. Similarly for "60 days Delinquent," "90
days Delinquent" and so on.
"Delivery" when used with respect to any Eligible Investments 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(l)(i) of the UCC and are susceptible of
physical delivery, transfer thereof by physical delivery to the Indenture
Trustee endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or endorsed in blank, and, with respect to a certificated security (as
defined in Section 8-102(4) of the UCC) transfer thereof (i) by the acquisition
of possession by the Indenture Trustee of the "security certificate" (as defined
in 8-102(16) of the UCC), or (ii) the Indenture Trustee or some person other
than a "securities intermediary" (as defined in 8-102(14) of the UCC), either
acquires possession of the security certificate on behalf of the Indenture
Trustee or, having previously acquired possession of the certificate,
acknowledges that it holds for the Indenture Trustee, or (iii) a securities
intermediary acting on behalf of the Indenture Trustee acquires possession of
the security certificate, only if the certificate is in "registered form" (as
defined in 8-102(13) of the UCC) and has been specially indorsed to the
Indenture Trustee by an effective "indorsement" (as defined in 8-102(l1) of the
UCC) (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 or a security interest in any such Eligible Investment to the
Indenture Trustee, consistent with changes in applicable law or regulations or
the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association 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, book-entry registration of such Eligible Investment
to an appropriate Participant's Securities Account (as defined in such
applicable federal regulations) maintained with a Federal Reserve Bank by a
financial intermediary which is also a "Participant" pursuant to applicable
federal regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to the
Indenture Trustee of the purchase by the Indenture Trustee of such book-entry
securities; the making by such financial intermediary of entries in its books
and records identifying such book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations as belonging to the
Indenture Trustee and as having been credited to a securities
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account in the name of the Indenture Trustee and indicating that such financial
intermediary holds such Eligible Investment solely as agent for the Indenture
Trustee; and
(c) with respect to any Eligible Investment that is an uncertificated
security under Article 8 of the UCC and that is not governed by clause (b)
above, (i) registration by the issuer of the Indenture Trustee as the registered
owner, upon original issue or registration or transfer, or (ii) another person,
other than a securities intermediary, either becomes the registered owner of the
uncertificated security on behalf of the Indenture Trustee or, having previously
become the registered owner, acknowledges that it holds for the Indenture
Trustee; and such additional or alternative procedures as may be or hereafter
become requisite or appropriate to effect complete transfer of ownership of or a
security interest in any such Eligible Investment to the Indenture Trustee,
consistent with changes in applicable law or regulations or the interpretation
thereof.
"Deposit Trust Agreement" or "Trust Agreement": The Deposit Trust
Agreement, dated as of June 1, 1998, among Home Equity Securitization Corp., as
depositor, Wilmington Trust Company, as Owner Trustee, The Chase Manhattan Bank,
as Trust Paying Agent, and the Master Servicer, pursuant to which the Issuer was
formed and is governed.
"Depositor": Home Equity Securitization Corp., a North Carolina
corporation.
"Designated Depository Institution": With respect to the Principal and
Interest Account, a trust account maintained by the trust department of a
federal or state chartered depository institution acceptable to the Note
Insurer, acting in its fiduciary capacity, having combined capital and surplus
of at least $50,000,000; provided, however, that if the Principal and Interest
Account is not maintained with the Indenture Trustee or Centura Bank, (i) such
institution shall have a long-term debt rating of at least "A" by Standard &
Poor's and "A2" by Moody's and (ii) the Master Servicer shall provide the
Indenture Trustee and the Note Insurer with a statement, which the Indenture
Trustee will send to the Holders of any Note or Certificate, identifying the
location and account information of the Principal and Interest Account upon a
change in the location of such account; provided, further, that at such time, if
any, that Centura Bank, does not have a long-term debt rating of at least "BBB"
by Standard & Poor's and "A3" by Moody's it will not be considered a Designated
Depository Institution.
"Determination Date": As to any Payment Date, the last day of the
Remittance Period relating to such Payment Date.
"Due Date": With respect to any Home Equity Loan, the date on which the
Monthly Payment with respect to such Home Equity Loan is required to be paid
pursuant to the related Mortgage Note exclusive of any days of grace.
"Eligible Investments": The following are Eligible Investments:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States, FHLMC
senior debt obligations, and FNMA senior debt obligations, but
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excluding any of such securities whose terms do not provide for payment of a
fixed dollar amount upon maturity or call for redemption;
(b) Federal Housing Administration debentures;
(c) FHLMC participation certificates which guaranty timely payment of
principal and interest and senior debt obligations;
(d) consolidated senior debt obligations of any Federal Home Loan
Banks;
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations;
(f) federal funds, certificates of deposit, time deposits, and bankers'
acceptances (having original maturities of not more than 365 days) of any
domestic bank, the short-term debt obligations of which have been rated A-1 by
Standard & Poor's and P-1 by Moody's;
(g) deposits of any bank or savings and loan association (the long-term
deposit rating of which is Baa3 or better by Moody's and BBB by Standard &
Poor's) which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are insured by the FDIC and held up to the limits
insured by the FDIC;
(h) repurchase agreements collateralized by securities described in
(a), (c), or (e) above with any registered broker/dealer subject to the
Securities Investors Protection Corporation's jurisdiction and subject to
applicable limits therein promulgated by Securities Investors Protection
Corporation or any commercial bank, if such broker/dealer or bank has an
uninsured, unsecured and unguaranteed short-term or long-term obligation rated
P-1 or Aa2, respectively, or better by Moody's and A-1+ or AA, respectively, or
better by Standard & Poor's, provided:
(i) a master repurchase agreement or specific written
repurchase agreement governs the transaction, and
(ii) the securities are held free and clear of any lien by the
Indenture Trustee or an independent third party acting solely as agent
for the Indenture Trustee, and such third party is (a) a Federal
Reserve Bank, (b) a bank which is a member of the FDIC and which has
combined capital, surplus and undivided profits of not less than $125
million, or (c) a bank approved in writing for such purpose by the Note
Insurer, and the Indenture Trustee shall have received written
confirmation from such third party that it holds such securities, free
and clear of any lien, as agent for the Indenture Trustee, and
(iii) a perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed at 31 CFR 306.1 et
seq. or 31 CFR 350.0 et seq., in such securities is created for the
benefit of the Indenture Trustee, and
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(iv) the repurchase agreement has a term of thirty days or
less and the Indenture Trustee will value the collateral securities no
less frequently than weekly and will liquidate the collateral
securities if any deficiency in the required collateral percentage is
not restored within two business days of such valuation, and
(v) the fair market value of the collateral securities in
relation to the amount of the repurchase obligation, including
principal and interest, is equal to at least 106%.
(i) commercial paper (having original maturities of not more than 270
days) rated in the highest short-term rating categories of Standard & Poor's and
Moody's;
(j) investments in no load money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa by Moody's; and
(k) any other investment permitted by each of the Rating Agencies and
the Note Insurer;
provided that no instrument described above 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 and the interest and principal payments
with respect to such instrument provided a yield to maturity at par greater than
120% of the yield to maturity at par of the underlying obligations; and
provided, further, that all instruments described hereunder shall mature at par
on or prior to the next succeeding Payment Date unless otherwise provided in
this Agreement and that no instrument described hereunder may be purchased at a
price greater than par if such instrument may be prepaid or called at a price
less than its purchase price prior to stated maturity.
"Event of Default": As defined in Section 5.01 of the Indenture.
"Excess Cash Payment": With respect to each Class of Notes and any
Payment Date, the lesser of (i) the related Overcollateralization Deficiency
Amount with respect to such Payment Date and (ii) the aggregate amount of Excess
Cash with respect to the related Group and such Payment Date.
"Excess Cash": With respect to a Group and any Payment Date, an amount
equal to Available Funds for such Group and Payment Date, reduced by the sum of
(i) any amounts payable to the Note Insurer for Insured Payments with respect of
a Group paid on prior Payment Dates and not yet reimbursed and for any unpaid
Insurer Premiums for such Group in prior Payment Dates (in each case with
interest thereon at the Late Payment Rate set forth in the Insurance Agreement)
(and to the extent not covered by Available Funds for the other Group, such
amounts with respect to the other Group), (ii) the Note Interest for the related
Class and Payment Date (and to the extent not covered by Available Funds for the
other Group, such amounts with respect to the other Group), (iii) the Monthly
Principal for the related Class and Payment Date and (iv) with respect to Group
II and the first payment date following the end of the Funding Period, all
amounts remaining in the Pre-Funding Account to the extent not used to purchase
Subsequent Home Equity Loans during such Funding Period.
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"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"FEMA": The Federal Emergency Management Agency and its successors in
interest.
"FGCC": First Greensboro Capital Corporation, a Tennessee corporation,
and Seller pursuant to the Loan Sale Agreement.
"FGT": First Greensboro Trust, a Delaware trust, wholly owned by the
Transferor and formed pursuant to the FGT Trust Agreement.
"FGT Trust Agreement": The trust agreement between the Transferor and
Wilmington Trust Company, dated as of June 1, 1998.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"Final Certification": A certification as to the completeness of each
Mortgage File prepared by the Custodian on behalf of the Indenture Trustee, and
provided by the Indenture Trustee on or before the first anniversary of the
Closing Date pursuant to Section 6.15(b) of the Indenture.
"Final Recovery Determination": With respect to any defaulted Home
Equity Loan or REO Property (other than a Home Equity Loan purchased by the
Sponsor, the Transferor, the Depositor or the Master Servicer), a determination
made by the Master Servicer that all Liquidation Proceeds which the Master
Servicer, in its reasonable business judgment expects to be finally recoverable
in respect thereof have been so recovered or that the Master Servicer believes
in its reasonable business judgment the cost of obtaining any additional
recoveries therefrom would exceed the amount of such recoveries.
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to any Mortgaged Property.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"FNMA Guide": FNMA's Servicing Guide, as the same may be amended by
FNMA from time to time, and the Master Servicer (other than the Backup Master
Servicer) shall elect to apply such amendments in accordance with Section 2.01
of the Loan Sale Agreement.
"FOTI" or "First Owner's Trust, Inc.": First Owner's Trust, Inc., a
Tennessee corporation.
"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 is
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less than $100,000, (ii) the date on which a Master Servicer Termination Event
occurs or (iii) July 31, 1998.
"Grant": To assign, transfer, mortgage, pledge, create and grant a
security interest in, deposit, set-over and confirm. A Grant of a Home Equity
Loan and related Mortgage Files, a Permitted Investment, the Servicing
Agreement, the Loan Sale Agreement, the Loan Transfer Agreement, or any other
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including without limitation the
immediate and continuing right to claim for, collect, receive and give receipts
for principal and interest payments thereunder, insurance proceeds, Loan
Purchase Prices and all other moneys payable thereunder and all proceeds
thereof, to give and receive notices and other communications, to make waivers
or other agreements, to exercise all rights and options, to bring Proceedings in
the name of the Granting party or otherwise, and generally to do and receive
anything that the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.
"Gross Margin": With respect to an adjustable rate Home Equity Loan,
the fixed percentage amount set forth in the related Mortgage Note which is
added to the six-month London Interbank Offered Rate, as provided in the related
Mortgage Note, to determine the Coupon Rate.
"Group" or "Home Equity Loan Group": Group I or Group II, as the case
may be.
"Group I": The group of Home Equity Loans pledged to the Indenture
Trustee and assigned to Group I, as reflected on the Home Equity Loan Schedule.
"Group I Adjustable Rate Initial Home Equity Loan": The Group I Initial
Home Equity Loans with adjustable Coupon Rates.
"Group I Home Equity Loans": The Home Equity Loans assigned to Group I.
"Group I Initial Aggregate Principal Balance": $72,650,717.11, the
aggregate outstanding Principal Balance of the Group I Home Equity Loans as of
the Cut-Off Date.
"Group II": The group of Home Equity Loans pledged to the Indenture
Trustee and assigned to Group II, as reflected on the Home Equity Loan Schedule.
"Group II Adjustable Rate Initial Home Equity Loan": The Group II
Initial Home Equity Loans with adjustable Coupon Rates.
"Group II Home Equity Loans": The Home Equity Loans assigned to Group
II.
"Group II Initial Aggregate Principal Balance": $75,332,394.79, the
aggregate outstanding Principal Balance of the Group II Home Equity Loans as of
the Cut-Off Date.
"Highest Lawful Rate": As defined in Section 11.19 of the Indenture.
"Home Equity Loans": Such home equity loans (including Initial Home
Equity Loans and Subsequent Home Equity Loans) transferred and assigned to the
Depositor pursuant
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to the Loan Sale Agreement, subsequently transferred by the Depositor to the
Issuer pursuant to the Loan Transfer Agreement and Granted to the Indenture
Trustee pursuant to the Indenture, together with any Qualified Replacement Home
Equity Loans substituted therefor in accordance with the Loan Sale Agreement or
the Indenture, as the case may be, the Home Equity Loans originally so held
being identified in the Schedules of Home Equity Loans. The term "Home Equity
Loan" includes the terms "First Mortgage Loan" and "Second Mortgage Loan." The
term "Home Equity Loan" includes any Home Equity Loan which is Delinquent, which
relates to a foreclosure or which relates to a Mortgaged Property which is REO
Property prior to such Mortgaged Property's removal from the Trust Estate. Any
home equity loan which, although intended by the parties to the Loan Sale
Agreement, the Loan Transfer Agreement or the Indenture, as the case may be, to
have been, and which purportedly was, transferred and assigned to the Depositor
by FGT, or Granted to the Indenture Trustee by the Depositor, in fact was not
transferred and assigned to the Depositor or Granted to the Indenture Trustee
for any reason whatsoever, shall nevertheless be considered a "Home Equity Loan"
for all purposes of this Agreement.
"Home Equity Loan Pool": The pool of Home Equity Loans, consisting of
the Home Equity Loans in Group I and the Home Equity Loans in Group II.
"Indemnification Agreement": As defined in the Insurance Agreement.
"Indenture": The indenture, dated as of June 1, 1998, between the
Issuer and the Indenture Trustee pursuant to which the Home Equity Loans and
certain other assets included in the Trust Estate are pledged as collateral for
the Notes, and any supplements or amendments thereto.
"Indenture Trustee": The Chase Manhattan Bank, a New York banking
corporation, not in its individual capacity by solely as Indenture Trustee under
this Indenture, a national banking association, and any Person resulting from or
surviving any consolidation or merger to which it may be a party until a
successor Person shall have become the Indenture Trustee pursuant to the
applicable provisions of the Indenture, and thereafter "Indenture Trustee" shall
mean such successor Person.
"Indenture Trustee Fee": With respect to each Class of Notes, the fee
payable monthly to the Indenture Trustee on each Payment Date at one-twelfth of
0.0125% the Aggregate Principal Balance of the Home Equity Loans in the related
Group as of the first day of the related Remittance Period.
"Indenture Trustee's Reimbursable Expenses": Any amounts payable to the
Indenture Trustee (not to exceed $50,000 in the aggregate from the Initial
Cut-Off Date) pursuant to the Indenture as compensation for any loss, liability,
or "unanticipated out-of-pocket" expense incurred or paid to third parties
(excluding salaries paid to employees or allocable overhead, of the Indenture
Trustee) in connection with the acceptance or administration of its trusts or
the Notes, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of its duties or
by reason of reckless disregard or its obligations and duties.
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"Independent": When used with respect to any specified Person means
such a Person who (i) is in fact independent of the Issuer and any other obligor
upon the Notes, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (iii) is not connected with
the Issuer or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by an Issuer Order and such opinion or certificate shall state that
the signer has read this definition and that the signer is Independent within
the meaning of the Indenture.
"Individual Note": A Note of an original principal amount of $1,000
(provided, however, one Note may be less than that amount); a Note of an
original principal amount in excess of $1,000 shall be deemed to be a number of
Individual Notes equal to the quotient obtained by dividing such original
principal amount by $1,000.
"Initial Aggregate Principal Balance": Collectively, the Group I
Initial Aggregate Principal Balance and the Group II Initial Aggregate Principal
Balance.
"Initial Certification": A certification as to the completeness of each
Mortgage File prepared by the Custodian on behalf of the Indenture Trustee and
provided by the Indenture Trustee on the Closing Date pursuant to Section
6.15(a) of the Indenture.
"Initial Home Equity Loan": Each of the Home Equity Loans to be
conveyed to the Depositor by FGT, and subsequently conveyed to the Trust by the
Depositor on the Closing Date.
"Initial Redemption Date": With respect to Group I and Group II, the
first Payment Date following the Monthly Remittance Date on which the aggregate
Principal Balances of the Home Equity Loans in the related Group, as of the
close of business on the last day of the immediately preceding Remittance
Period, has declined to 10% or less of the Maximum Collateral Amount.
"Initial Required Overcollateralization Amount": With respect to either
Group, the product of 4.75% and the applicable Maximum Collateral Amount.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as
of June 1, 1998, among the Depositor, the Sponsor, the Master Servicer and the
Note Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Home Equity Loan plus any amount remitted under
Section 2.11 of the Servicing Agreement.
"Insurance Proceeds": With respect to each Group and any Monthly
Remittance Date, proceeds paid by any insurer (other than the Note Insurer) and
received by the Master Servicer during the related Remittance Period pursuant to
any insurance policy covering a Home Equity Loan in such Group or the related
Mortgaged Property, including any deductible payable
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by the Master Servicer with respect to a blanket insurance policy pursuant to
Section 2.03 of the Servicing Agreement and the proceeds from any fidelity bond
or errors and omission policy pursuant to Section 2.11 of the Servicing
Agreement, net of any component thereof covering any expenses incurred by or on
behalf of the Master Servicer and specifically reimbursable under the Servicing
Agreement.
"Insured Payment": As to each Class of Notes and any Payment Date, the
sum (without duplication) of (i) any shortfall in the amount required to pay the
related Overcollateralization Deficit for such Payment Date from a source other
than the Note Insurance Policy, (ii) any shortfall in the amount required to pay
the related Note Interest for such Payment Date from a source other than the
Note Insurance Policy (iii) any shortfall in the amount required to pay the
Preference Amount for such Payment Date and such Class from a source other than
the Note Insurance Policy and (iv) on the Stated Maturity Date, the outstanding
Principal Balance on each Class of Notes. Notwithstanding the foregoing, any
amounts that the Note Insurer optionally pays under the Note Insurance Policy
with respect to Realized Losses with respect to each Group shall be deemed to
constitute Insured Payments for purposes of the inclusion thereof in the funds
available for distribution on the related Class of Notes and for calculating the
related Reimbursement Amount.
"Interest Period": With respect to a Payment Date, the calendar month
immediately preceding the month in which such Payment Date occurs. All
calculations of interest on the Notes will be made on the basis of 360-day year
consisting of twelve 30-day months.
"Interest Remittance Amount": As of any Monthly Remittance Date, the
sum, without duplication, of (i) all interest due during the related Remittance
Period with respect to the Home Equity Loans, (ii) all Compensating Interest
paid by the Master Servicer on such Monthly Remittance Date and (iii) the
portion of the Substitution Amount relating to interest on the Home Equity
Loans.
"Issuance Fee": As defined in Section 9.01 of the Loan Sale Agreement.
"Issuer": First Greensboro Home Equity Loan Trust 1998-1, as issuer of
the Notes pursuant to the Indenture.
"Issuer Order" and "Issuer Request": A written order or request of the
Issuer signed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or, in the case of such order or request required by Section 2.11 of the
Indenture, by an Authorized Officer of the holder of the Certificate and
delivered to the Indenture Trustee or the Authenticating Agent, as applicable.
"Letter Agreement": The Letter of Representations to The Depository
Trust Company from the Indenture Trustee and the Issuer dated June 26, 1998.
"Liquidated Loan": A Home Equity Loan as to which a Final Recovery
Determination has been made.
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"Liquidation Date": With respect to any Home Equity Loan, the date of
the final receipt of all Liquidation Proceeds, Insurance Proceeds or other
payments with respect to such Home Equity Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, all
amounts (including the proceeds of any Insurance Policy) recovered by the Master
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Contribution Agreement": That certain agreement, dated
as of June 1, 1998, among the Seller, FOTI and FGT, pursuant to which the Seller
shall contribute the Home Equity Loans to FOTI, and FOTI shall contribute Home
Equity Loans to FGT.
"Loan Documents": As defined in the Loan Sale Agreement and the
Indenture.
"Loan File": As defined in the Loan Sale Agreement.
"Loan Purchase Price": With respect to any Home Equity Loan required to
be repurchased or substituted by the Sponsor pursuant to the Loan Sale Agreement
or purchased by the Master Servicer on or prior to a Monthly Remittance Date
pursuant to Section 2.10(b) of the Servicing Agreement, an amount equal to the
Principal Balance of such Home Equity Loan as of the date of purchase (assuming
that the Monthly Remittance Amount remitted by the Master Servicer on such
Monthly Remittance Date has already been remitted), plus all accrued and unpaid
interest on such Home Equity Loan at the Coupon Rate to but not including the
date of such purchase together with (without duplication) the aggregate amounts
of (i) all unreimbursed Delinquency Advances and Servicing Advances theretofore
made with respect to such Home Equity Loan, (ii) all Delinquency Advances which
the Master Servicer has theretofore failed to remit with respect to such Home
Equity Loan and (iii) all reimbursed Delinquency Advances to the extent that
reimbursement is not made from the Mortgagor or from Liquidation Proceeds from
the respective Home Equity Loan.
"Loan-to-Value Ratio": As of any particular date (i) with respect to
any First Mortgage Loan, the percentage obtained by dividing the Appraised Value
into the original principal balance of the Note relating to such First Mortgage
Loan and (ii) with respect to any Second Mortgage Loan, the percentage obtained
by dividing the Appraised Value as of the date of origination of such Second
Mortgage Loan into an amount equal to the sum of (a) the remaining principal
balance of the Senior Lien note relating to such First Mortgage Loan as of the
date of origination of the related Second Mortgage Loan and (b) the original
principal balance of the Note relating to such Second Mortgage Loan.
"Loan Sale Agreement": That certain agreement, dated as of June 1,
1998, among the Sponsor, the Transferor, FGT and the Depositor pursuant to which
the Home Equity Loans will be acquired from the Sponsor by the Depositor.
"Loan Transfer Agreement": That certain agreement, dated as of June 1,
1998, among the Transferor and the Depositor, pursuant to which the Depositor
conveyed the Home Equity Loans to the Depositor.
"Manager": First Greensboro Home Equity, Inc.
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"Management Agreement": That certain agreement, dated as of June 1,
1998, between the Issuer and First Greensboro Home Equity, Inc. pursuant to
which the Master Servicer, as manager, will perform certain obligations of the
Issuer hereunder.
"Master Servicer": With respect to any Home Equity Loan, First
Greensboro Home Equity, Inc., as Master Servicer under the Servicing Agreement,
and its permitted successors and assigns thereunder, including any successor
Master Servicers appointed pursuant to Section 4.01 of the Servicing Agreement.
"Master Servicer Optional Termination Date": With respect to a Group,
the first Monthly Remittance Date on which the Aggregate Principal balance of
the Home Equity Loans in such Group as at the end of the preceding Remittance
Period has declined to 10% or less of the Maximum Collateral Amount with respect
to such Group.
"Master Servicer Loss Test": The Master Servicer Loss Test for any
period set out below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below (provided,
that for purposes of the calculation of the Master Servicer Loss Test, Realized
Losses attributable solely to Cram Down Losses should be excluded from the
calculation of Cumulative Loss Percentage):
Monthly Remittance Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
July 1998 December 2000 1.65%
January 2001 December 2001 2.50%
January 2002 December 2002 3.35%
January 2003 and thereafter 4.05%
"Master Servicer Remittance Report": As defined in Section 2.08 (d)(ii)
of the Servicing Agreement.
"Master Servicer Termination Event": As defined in Section 4.01(a) of
the Servicing Agreement.
"Master Servicer Termination Test": The Master Servicer Termination
Test is satisfied for any date of determination thereof, if (x) the 60+
Delinquency Percentage (Rolling Three Month) for both Groups is less than
12.35%, (y) the Master Servicer Loss Test for both Groups is satisfied and (z)
the Annual Loss Percentage (Rolling Twelve Month) for the twelve month period
immediately preceding the date of determination for both Groups thereof is not
greater than 1.10%.
"Maturity": With respect to any Note, the date on which the entire
unpaid principal amount of such Note becomes due and payable as therein or
herein provided, whether at the Stated Maturity Date or by declaration of
acceleration, call for redemption or otherwise.
"Maximum Collateral Amount": With respect to either Group, the sum of
the Initial Aggregate Principal Balance of all Home Equity Loans in such Group
and the aggregate
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outstanding Principal Balance of any Subsequent Home Equity Loan as of the
applicable Cut-Off Date with respect to such Group.
"Maximum Rate": With respect to an adjustable rate Home Equity Loan,
any absolute maximum Coupon Rate set by the provisions of the related Mortgage
Note.
"Minimum Rate": With respect to an adjustable rate Home Equity Loan,
any absolute minimum Coupon Rate set by the provisions of the related Mortgage
Note.
"Monthly Payment": With respect to any Home Equity Loan and any
Remittance Period, the payment of principal, if any, and interest due on the Due
Date in such Remittance Period pursuant to the related Mortgage Note.
"Monthly Principal": For each Class of Notes and any Payment Date, an
amount equal to (a) Principal Remittance Amount for such Group reduced by (b)
the amount of any Overcollateralization Reduction Amount with respect to such
Payment Date and the related Class of Notes.
"Monthly Remittance Amount": As of any Monthly Remittance Date, the sum
of (i) the Interest Remittance Amount for such Monthly Remittance Date and (ii)
the Principal Remittance Amount for such Monthly Remittance Date.
"Monthly Remittance Date": With respect to each Class of Notes and any
Payment Date, the 18th day of each month, or if such day is not a Business Day,
on the preceding Business Day, commencing in July 1998.
"Moody's": Moody's Investors Service, Inc. and its successors in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Note.
"Mortgage File": The documents delivered to the Indenture Trustee
pursuant to Section 3.01(c)(i) of the Loan Sale Agreement pertaining to a
particular Home Equity Loan and any additional documents required to be added to
the Mortgage File pursuant to the Loan Sale Agreement.
"Mortgage Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Home Equity Loan.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (x) the
60+ Delinquency Percentage (Rolling Three Month) for both Groups is less than
10.50%, (y) the O/C Loss Test for both Groups is satisfied and (z) the Annual
Loss Percentage (Rolling Twelve Month) for the twelve month period immediately
preceding the date of determination thereof for both Groups is not greater than
or equal to 1.25%.
"Mortgaged Property": The underlying property securing a Home Equity
Loan.
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"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of expenses incurred by the Master Servicer (including unreimbursed
Servicing Advances in connection with the liquidation of any defaulted Home
Equity Loan and unreimbursed Delinquency Advances relating to such Home Equity
Loan). In no event shall Net Liquidation Proceeds with respect to any Liquidated
Loan be less than zero.
"Net Worth": For any fiscal quarter, the sum of the Master Servicer's
assets reflected on a balance sheet for such fiscal quarter prepared in
accordance with GAAP consistently applied minus the sum of the Master Servicer's
liabilities required to be shown as such on a balance sheet for such fiscal
quarter prepared in accordance with GAAP consistently applied.
"Nonrecoverable Advance": Any Servicing Advance or Monthly Advance
that, in the Master Servicer's reasonable judgment, would not be ultimately
recoverable by the Master Servicer from late collections, Insurance Proceeds or
Liquidation Proceeds on the related Home Equity Loan or otherwise, as evidenced
by an Officer's Certificate delivered to the Note Insurer and the Indenture
Trustee no later than the Business Day following the Master Servicer's
determination thereof.
"Note Account": With respect to each Class of Notes, the segregated
trust account established and maintained in accordance with Section 8.02 of the
Indenture and entitled "The Chase Manhattan Bank, as Indenture Trustee for First
Greensboro Home Equity Loan Backed Notes, Series 1998-1, Class A-1 Note Account"
or "The Chase Manhattan Bank, as Indenture Trustee for First Greensboro Home
Equity Loan Backed Notes, Series 1998-1, Class A-2 Note Account" on behalf of
the Noteholders and the Note Insurer.
"Note Balance": With respect to each Class of Notes will equal, as of
any Payment Date, the related Original Note Balance less all Monthly Principal
and Excess Cash paid to the Noteholders of such Class on previous Payment Dates
in reduction of the related Note Balance (exclusive, for the sole purpose of
effecting the Note Insurer's subrogation rights, of payments made by the Note
Insurer in respect of any Overcollateralization Deficit for the related Group
under the Insurance Policy, except to the extent reimbursed to the Note Insurer
pursuant to the Indenture).
"Note Insurance Policy": The Financial Guaranty Insurance Policy (No.
50702-N), dated June 26, 1998, including any endorsements thereto, issued by the
Note Insurer for the benefit of the Noteholders, pursuant to which the Note
Insurer guarantees payment of Insured Payments.
"Note Insurer": Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York and any
successor thereto, as issuer of the Note Insurance Policy.
"Note Insurer Default": The existence and continuance of any of the
following:
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(a) the Note Insurer fails to make a payment required under the Note
Insurance Policy in accordance with its terms; or
(b) the Note Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization, (ii) made a general assignment for the benefit of its creditors
or (iii) had an order for relief entered against it under the United States
Bankruptcy Code, the New York State Insurance law or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent, or receiver for the Note Insurer or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent, or receiver of the Note Insurer of all or any material portion
of its property.
"Note Insurer Parties": The Note Insurer or its respective agents,
representatives, directors, officers or employees.
"Note Interest": As to a Class of Notes and any Payment Date, the
amount of interest payable to Holders of such Notes on such Payment Date, which
amount shall be equal to interest at 1/12th of the related Note Interest Rate on
the related Note Balance as of the preceding Payment Date (after giving effect
to the payment, if any, in reduction of principal made on such Notes on such
preceding Payment Date). All calculations of interest on the Notes will be
computed on the basis of twelve thirty-day months and a year of 360 days.
"Note Interest Rate": For the Class A-1 Notes, with respect to each
Interest Period prior to the Initial Redemption Date, 6.53% per annum, and with
respect to each Interest Period thereafter, a rate equal to 7.03% per annum. For
the Class A-2 Notes, with respect to each Interest Period prior to the Initial
Redemption Date, 6.55% per annum, and with respect to each Interest Period
thereafter, a rate equal to 7.05% per annum.
"Note Register": The register maintained pursuant to Section 2.06 of
the Indenture.
"Note Registrar": As defined in Section 2.06 of the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is registered
in the Note Register, except that, solely for the purpose of taking any action
under Section 5.02 of the Indenture or giving of any consent pursuant to this
Indenture, any Note registered in the name of the Issuer, the Sponsor, the
Master Servicer or the Depositor or any Persons actually known by a Responsible
Officer of the Indenture Trustee to be an Affiliate of the Issuer, the Sponsor,
the Master Servicer or the Depositor shall be deemed not to be Outstanding and
the percentage interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite percentage interests necessary to
take any such action or effect any such consent have
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acted or consented unless the Issuer, the Sponsor, the Master Servicer, the
Depositor or any such Person is an owner of record of all of the Notes.
"Notes": The Class A-1 Notes and the Class A-2 Notes.
"Notice of Claim": The notice required to be furnished by the Indenture
Trustee to the Note Insurer in the event an Insured Payment is required to be
paid under the Note Insurance Policy with respect to any Payment Date, in the
form set forth as Exhibit C of the Indenture.
"O/C Loss Test": The O/C Loss Test for any period set out below is
satisfied if the Cumulative Loss Percentage during such period is satisfied does
not exceed the percentage set out for such period below:
Monthly Remittance Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
July 1998 December 2000 1.30%
January 2001 December 2001 2.00%
January 2002 December 2002 2.60%
January 2003 and thereafter 3.10%
"Officer's Certificate": A certificate signed by any Authorized Officer
of any Person delivering such certificate and delivered to the Indenture
Trustee.
"Operative Documents" or "Basic Documents": Collectively, the
Indenture, the Deposit Trust Agreement, the Servicing Agreement, the Loan Sale
Agreement, the Loan Transfer Agreement, the Loan Contribution Agreement, the
Note Insurance Policy, the Notes, the Certificates, the Management Agreement,
the Insurance Agreement, and the Indemnification Agreement.
"Opinion of Counsel": A written opinion of counsel reasonably
acceptable to the Indenture Trustee and, in the case of opinions delivered to
the Note Insurer, reasonably acceptable to it. Any expense related to obtaining
an Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel, except in such instances where
such opinion is at the request of the Indenture Trustee, in which case such
expense shall be an expense of the Master Servicer.
"Original Capitalized Interest Deposit": $______________.
"Original Group II Pre-Funded Amount": $27,017,605.21, approximately.
"Original Note Balance": The principal balance of the Notes at the
issue date thereof, equal to $72,650,000 for the Class A-1 Notes and
$102,350,000 for the Class A-2 Notes.
"Outstanding": As of the date of determination, all Notes theretofore
authenticated and delivered under the Indenture except:
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(i) Definitive Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent (other than the Issuer) in trust for the Holders of such
Notes; provided, however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to the Indenture or provision therefor,
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 (as defined by the Uniform Commercial Code of the applicable
jurisdiction); and
(iv) Notes alleged to have been destroyed, lost or stolen that have
been paid as provided for in Section 2.07 of the Indenture;
provided, however, that in determining whether the Holders of the requisite
percentage of the Note Balance of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Issuer, any other obligor upon the Notes or any Affiliate of the
Issuer, the Sponsor, the Master Servicer or the Depositor or such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes that the Indenture Trustee knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes or any Affiliate of
the Issuer, the Sponsor, the Master Servicer or the Depositor or such other
obligor; provided, further, however, that Notes that have been paid with the
proceeds of the Note Insurance Policy shall be deemed to be Outstanding for the
purposes of the Indenture, such payment to be evidenced by written notice from
the Note Insurer to the Indenture Trustee, and the Note Insurer shall be deemed
to the Holder thereof to the extent of any payments thereon made by the Note
Insurer.
"Overcollateralization Amount": For each Class of Notes and any Payment
Date, as of any Payment Date, the amount, if any, by which (x) the Aggregate
Principal Balance of the Home Equity Loans in such Group as of the end of the
related Remittance Period (and, with respect to Group II only, any amount on
deposit in the Pre-Funding Account at such time disregarding any related
Pre-Funding Account Earnings) exceeds (y) the Note Balance of the related Class
of Notes as of such Payment Date after taking into account payments of Monthly
Principal made on such Payment Date.
"Overcollateralization Deficiency Amount": For each Class of Notes,
with respect to any Payment Date, the excess, if any, of (i) the related
Required Overcollateralization Amount applicable to such Payment Date over (ii)
the related Overcollateralization Amount applicable to such Payment Date,
(assuming the application of 100% of principal collections
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received during such Remittance Period but prior to taking into account the
payment of any related Excess Cash Payments on such Payment Date).
"Overcollateralization Deficit": With respect to each Class of Notes
and any Payment Date, the amount, if any, by which (x) the related Note Balance,
after taking into account all payments to be made on such Payment Date in
reduction thereof, including any related Excess Cash Payments, exceeds (y) the
sum of (i) the Aggregate Principal Balance of the Home Equity Loans in the
related Group as of the end of the applicable Remittance Period, (ii) any amount
on deposit in the Pre-Funding Account at such time exclusive of any Pre-Funding
Account Earnings, and (iii) the Overcollateralization Amount for the other
Class.
"Overcollateralization Reduction Amount": With respect to each Class of
Notes any Payment Date, an amount equal to the lesser of (x) the related
Principal Remittance Amount with respect to such Payment Date and (y) the amount
by which the applicable Overcollateralization Amount would exceed the Required
Overcollateralization Amount (as specified in the Indenture) assuming that 100%
of the related Principal Remittance Amount were to be applied as a payment of
principal on the Notes.
"Owner Trustee": Wilmington Trust Company, a Delaware banking
corporation acting on behalf of the Issuer, not in its individual capacity, but
solely as owner trustee under the Trust Agreement, and any successor owner
trustee thereunder.
"Owner Trustee Fee": The amounts due to the Owner Trustee under Article
VII of the Trust Agreement.
"Paying Agent": The Indenture Trustee or any other depository
institution or trust company that is authorized by the Issuer pursuant to
Section 3.03 of the Indenture to pay the principal of, or interest on, any Notes
on behalf of the Issuer, which agent, if not the Indenture Trustee, shall have
signed an instrument agreeing to be bound by the terms of the Indenture
applicable to the Paying Agent.
"Payment Date": The 25th day of each month or, if any such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
July 27, 1998.
"Payment Date Statement": The statement prepared pursuant to Section
2.08(d) of the Indenture with respect to collection on or in respect of the Home
Equity Loans in each Home Equity Loan Group and other assets of the Trust Estate
and payments on or in respect of each Class of Notes, based upon the information
contained in the Master Servicer Remittance Report prepared pursuant to the
Servicing Agreement and setting forth the following information with respect to
each Payment Date and each Home Equity Loan Group (to the extent the Master
Servicer has made such information (other than the information described in
clause (ii), (iii), (iv), (v) and (xiv) below) available to the Indenture
Trustee):
(i) the amount of such payment to Noteholders allocable to (x) Monthly
Principal (separately setting forth Prepayments) and (y) any Excess Cash
Payment;
(ii) the amount of such payment to Noteholders of each Class allocable
to Note Interest;
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(iii) the Note Balance for each Class, after giving effect to the
payment of Monthly Principal and any Excess Cash Payment applied to reduce the
Note Balance on such Payment Date;
(iv) the amount of any Insured Payments for such Payment Date;
(v) the Overcollateralization Amount, the then applicable Required
Overcollateralization Amount and the Overcollateralization Deficit, if any, with
respect to such Payment Date;
(vi) the Aggregate Principal Balance of the Home Equity Loans in each
Group as of the end of the related Remittance Period;
(vii) the number and aggregate principal balances of Home Equity Loans
in each Group (a) 30-59 days Delinquent, (b) 60-89 days Delinquent and (c) 90 or
more days Delinquent, as of the close of business on the last Business Day of
the calendar month immediately preceding the Payment Date, (d) the numbers and
aggregate Principal Balances of all Home Equity Loans in each Group as of such
Payment Date, after giving effect to any payment of principal on such Payment
Date, as of the close of business on the last day of the Remittance Period
immediately preceding the Payment Date and (e) the percentage that each of the
amounts represented by clauses (a), (b) and (c) represent as a percentage of the
respective amounts in clause (d);
(viii) the status and the number and dollar amounts of all Home Equity
Loans in each Group in foreclosure proceedings as of the close of business on
the last Business Day of the calendar month immediately preceding such Payment
Date, separately stating, for this purpose, all Home Equity Loans in each Group
with respect to which foreclosure proceedings were commenced in the immediately
preceding calendar month;
(ix) the number of Mortgagors in each Group and the Principal Balances
of the related Mortgages involved in bankruptcy proceedings as of the close of
business on the last Business Day of the calendar month immediately preceding
such Payment Date;
(x) the cumulative Realized Losses for each Group incurred on the Home
Equity Loans in each Group from the Closing Date to and including the Remittance
Period immediately preceding the Payment Date;
(xi) the amount of Net Liquidation Proceeds realized on the Home Equity
Loans in each Group during the Remittance Period immediately preceding the
Payment Date;
(xii) the Annual Loss Percentage (Rolling Twelve Month) with respect to
such Payment Date;
(xiii) the 60+ Delinquency Percentage (Rolling Three Month) for each
Group with respect to such Payment Date;
(xiv) the aggregate amount of the related Monthly Servicing Fee paid to
or retained by the Master Servicer for the related Remittance Period;
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(xv) the aggregate Principal Balance of the three largest outstanding
Home Equity Loans in each Group subject to the Indenture as of the related
Determination Date;
(xvi) the total of any Substitution Amounts and any Loan Purchase Price
amounts included in such distribution;
(xvii) the weighted average Coupon Rate of the Home Equity Loans in
each Group;
(xviii) the amount of any Carry-Forward Amounts;
(xix) during the Funding Period, the Loan Balance of the Subsequent
Home Equity Loans added to the Trust during the related Remittance Period;
(xx) during the Funding Period, the remaining Pre-Funded Amount as of
the last day of the Remittance Period; and
(xxi) such other information as the Note Insurer or any Owner may
reasonably request with respect to Delinquent Home Equity Loans.
In the case of information furnished pursuant to subclauses (i) and
(ii) above, the amounts shall be expressed as a dollar amount per Individual
Note.
"Percentage Interest": With respect to a Note, the undivided percentage
interest (carried to eight places rounded down) obtained by dividing the
original principal balance of such Note by the Original Note Balance and
multiplying the result by 100.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Notes": 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 2.07 of the Indenture in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note.
"Preference Amount": Any amounts previously distributed to a Noteholder
which are recovered from such Holders as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction and which
have not theretofore been repaid to such Holders and for which there has been
full compliance with the provisions of Section 12.02 of the Indenture.
"Pre-Funded Amount": With respect to any Determination Date, the amount
remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 8.05 of the Indenture and maintained by the Indenture
Trustee.
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"Pre-Funding Account Earnings": With respect to each Payment Date
during the Funding Period, the actual investment earnings earned during the
previous calendar month on the Pre-Funding Account during such period as
calculated by the Indenture Trustee pursuant to Section 8.05 of the Indenture.
"Pre-Funding Payment Date": Each Payment Date occurring during the
Funding Period and the Payment Date occurring in the month (i) following the
month in which such Funding Period ends if such period ends after the Payment
Date in a month or (ii) in which such Funding Period ends, if such period ends
prior to the Payment Date in a month.
"Premium Amount": The amount payable monthly to the Note Insurer on
each Payment Date in accordance with the Insurance Agreement.
"Prepayment": Any payment of principal of a Home Equity Loan which is
received by the Master Servicer in advance of the scheduled due date for the
payment of such principal and which is not accompanied by an amount of interest
representing the full amount of scheduled interest due on any Due Date in any
month or months subsequent to the month of prepayment, Substitution Amounts, the
portion of the purchase price of any Home Equity Loan required to be repurchased
or substituted by the Sponsor pursuant to the Loan Sale Agreement or purchased
by the Master Servicer pursuant to 2.10(b) of the Servicing Agreement
representing principal and the proceeds of any Insurance Policy which are to be
applied as a payment of principal on the related Home Equity Loan shall be
deemed to be Prepayments.
"Prepayment Interest Shortfall": As to any Payment Dates, Home Equity
Loan and Prepayment in full, the amount, if any, by which one month's interest
at the related Coupon Rate on such Prepayment exceeds the amount of interest
paid in connection with such Prepayment.
"Preservation Expenses": Expenditures made by the Master Servicer in
connection with a foreclosed Home Equity Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": The principal and interest account(s)
the Master Servicer has created or caused to be created pursuant to Section
2.08(a) of the Servicing Agreement.
"Principal Balance": With respect to each Home Equity Loan and as of
any date of determination, the actual outstanding principal balance thereof on
the related Cut-Off Date excluding payments of principal due prior to the
Cut-Off Date or Subsequent Cut-Off Date, as the case may be, whether or not
received, less any principal payments relating to such Home Equity Loan included
in previous Monthly Remittance Amounts, provided, however, that the Principal
Balance for any Home Equity Loan that has become a Liquidated Loan shall be zero
as of the first day of the Remittance Period following the Remittance Period in
which such Home Equity Loan becomes a Liquidated Loan, and at all times
thereafter.
"Principal Remittance Amount": As of any Monthly Remittance Date and
with respect to each Group of Home Equity Loans, the sum, without duplication,
of (i) the principal
27
<PAGE>
actually collected by the Master Servicer with respect to Home Equity Loans
during the related Remittance Period, (ii) the Principal Balance of each such
Home Equity Loan that was purchased from the Issuer during the related Monthly
Remittance Period, to the extent such Principal Balance was actually deposited
in the Principal and Interest Account, (iii) any Substitution Amounts relating
to principal delivered by the Sponsor or Seller in connection with a
substitution of a Home Equity Loan, to the extent such Substitution Amounts were
actually deposited in the Principal and Interest Account during the related
Monthly Remittance Period, (iv) the principal portion of all Net Liquidation
Proceeds actually collected by the Master Servicer with respect to such Home
Equity Loans during the related Remittance Period (to the extent such Net
Liquidation Proceeds related to principal) and (v) with respect to Group II
only, on the first Payment Date following the end of the Funding Period, all
amounts remaining in the Pre-Funding Account to the extent not used to purchase
Subsequent Home Equity Loans during such Funding Period.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Prospectus": The registration statement dated June 9, 1998, the
Preliminary Prospectus Supplement and the Prospectus Supplement.
"Prospectus Supplement": That prospectus supplement dated June 22,
1998.
"Qualified Replacement Home Equity Loan": A Home Equity Loan
substituted for another pursuant to Section 6.01(a) and 3.02 of the Loan Sale
Agreement, which (i) has a Coupon Rate at least equal to the Coupon Rate of the
Home Equity Loan being replaced; (ii) is of the same property type or is a
single family dwelling and the same occupancy status or is a primary residence
as the Home Equity Loan being replaced, (iii) shall mature no later than
_________ (iv) has a Loan-to-Value Ratio as of the Replacement Cut-Off Date no
higher than the Loan-to-Value Ratio of the replaced Home Equity Loan at such
time, (v) shall be of the same or higher credit quality classification
(determined in accordance with the Sponsor's credit underwriting guidelines set
forth in the Sponsor's underwriting manual) as the Home Equity Loan which such
Qualified Replacement Home Equity Loan replaces, (vi) shall be a Home Equity
Loan if the Home Equity Loan which such Qualified Replacement Home Equity Loan
replaces was a First Home Equity Loan, (vii) has a Principal Balance as of the
related Replacement Cut-Off Date equal to or less than the Principal Balance of
the replaced Home Equity Loan as of such Replacement Cut-Off Date, (viii) shall
not provide for a "balloon" payment if the related Home Equity Loan did not
provide for a "balloon" payment (and if such related Home Equity Loan provided
for a "balloon" payment, such Qualified Replacement Home Equity Loan shall have
an original maturity of not less than the original maturity of such related Home
Equity Loan). In the event that one or more home equity loans are proposed to be
substituted for one or more Home Equity Loans, the Note Insurer may allow the
foregoing tests to be met on a weighted average basis or other aggregate basis
acceptable to the Note Insurer, as evidenced by a written approval delivered to
the Indenture Trustee by the Note Insurer, except that the requirements of
clauses (i) and (iv) of the Indenture must be satisfied as to each Qualified
Replacement Home Equity Loan.
28
<PAGE>
"Rating Agencies": Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Master Servicer, notice of
which designation shall be given to the Indenture Trustee.
"Realized Loss": As to any Liquidated Loan (or, in the case of a Cram
Down Loss a Home Equity Loan that is not a Liquidated Loan), the amount (not
less than zero), if any, by which (A) the sum of (x) the Principal Balance
thereof as of the date of liquidation, (y) the amount of accrued but unpaid
interest thereon (to the extent that there are no outstanding advances for such
interest by the Master Servicer) and (z) the amount of any Cram Down Loss with
respect thereto is in excess of (B) the Net Liquidation Proceeds realized
thereon applied in reduction of such Principal Balance.
"Record Date": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Notes
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the last Business Day preceding such
Payment Date or, with respect to Definitive Notes, the last Business Day of the
month preceding the month of such Payment Date. With respect to a vote of
Noteholders required or allowed under the Indenture, the Record Date shall be
the later of (i) 30 days prior to the first solicitation of consents or (ii) the
date of the most recent list of Noteholders furnished to the Indenture Trustee
pursuant to Section 7.01(a) of the Indenture prior to such solicitation.
"Redemption Date": The Payment Date, if any, on which the Notes are
redeemed pursuant to Article X of the Indenture.
"Redemption Price": With respect to any Note to be redeemed in whole or
in part, an amount equal to 100% of the Current Note Balance of the Note to be
so redeemed, together with accrued and unpaid interest on such amount at the
Note Interest Rate.
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission (Registration Number
333-44409), including all amendments thereto and including the Prospectus
relating to the Class A-1 and Class A-2 Notes.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
Insured Payments previously paid to the Indenture Trustee by the Note Insurer
and not previously repaid to the Note Insurer pursuant to Section 8.02(c) of the
Indenture plus (ii) interest accrued on each such Insured Payment not previously
repaid calculated pursuant to the terms of the Insurance Agreement and (y) any
amounts then due and owing to the Note Insurer under the Insurance Agreement
(including, without limitation, any unpaid Premium Amount relating to such
Payment Date). The Note Insurer shall notify the Indenture Trustee, the
Depositor, the Sponsor and the Seller of the amount of any Reimbursement Amount.
"Relief Act Shortfalls": With respect to any Payment Date and any Home
Equity Loan as to which ended calendar month as a result of the application of
the Soldiers' and Sailors' Civil Relief Act of 1940, the amount, if any, by
which (i) interest collectible on such Home
29
<PAGE>
Equity Loan for the most recently ended calendar month is less than (ii)
interest accrued thereon for such month pursuant to the Note.
"Remittance Period": As to each Class of Notes and any Payment Date,
the calendar month immediately preceding the month in which such Payment Date
occurs.
"REO Property": A Mortgaged Property acquired by the Master Servicer on
behalf of the Trust through foreclosure or deed-in-lieu of foreclosure in
connection with a defaulted Home Equity Loan.
"Replacement Cut-Off Date": With respect to any Home Equity Loan, the
first day of the calendar month in which such Home Equity Loan is conveyed to
the Issuer.
"Required Overcollateralization Amount": With respect to each Class of
Notes and a Payment Date (x) prior to the Stepdown Date, the amount which is
equal to the Initial Required Overcollateralization Amount and (y) after the
Stepdown Date (i) if the Stepdown Requirement is satisfied, the lesser of (A)
the greater of (i) an amount equal to the Stepped Down Required
Overcollateralization Amount for such Payment Date and (ii) 0.50% of the Maximum
Collateral Amount or (B) the Initial Required Overcollateralization Amount or
(ii) if the Stepdown Requirement is not satisfied, the amount which is equal to
the Initial Required Overcollateralization Amount; provided, however, that if on
any Payment Date the Mortgage Portfolio Performance Test is not satisfied, then
the Required Overcollateralization Amount for each Class of Notes will be
unlimited during the period that such Mortgage Portfolio Performance Test is not
satisfied; provided, further, however, that on the Payment Date in July, 1998,
the Note Insurer may in a written notice provided to the Indenture Trustee, the
Transferor, the Depositor and the Noteholders increase the amounts provided for
in this definition to maintain the rating assigned to the Notes by the Rating
Agencies without regard to the Note Insurance Policy as of the Closing Date;
provided, further, that the Required Overcollateralization Amount may be amended
by the Note Insurer and the Servicer without the consent of the Indenture
Trustee or any Noteholder.
"Required Payment Amount": With respect to each Class of Notes and any
Payment Date, the Note Interest for such Payment Date plus the amount of any
related Overcollateralization Deficit for such Payment Date.
"Reserve Account": That certain agreement established pursuant to
Section ___ of the Indenture for the benefit of the Note Insurer.
"Reserve Account Requirement": On any Payment Date, an amount, which
shall not be less than zero, equal to the excess of (x) the sum of (i) the
Required Overcollateralization Amount for each Class and (ii) the sum of the
Overcollateralization Deficit, if any, (without regard to clause (iii) in the
definition of "Overcollateralization Deficit") for each Class of Notes over (y)
the Overcollateralization Amount for each Class of Notes, provided, that the
Required Overcollateralization Amount may be amended by the Note Insurer and the
Servicer without the consent of Indenture Trustee or any Noteholder.
"Responsible Officer": When used with respect to the Indenture Trustee,
the Chairman or Vice Chairman of the Board of Directors or Trustees, the
Chairman or Vice
30
<PAGE>
Chairman of the Executive or Standing Committee of the Board of Directors or
Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or
Assistant Trust Officer, the Controller and any Assistant Controller or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and having direct
responsibility for the administration of the Indenture.
"Sale": The meaning specified in Section 5.17 of the Indenture.
"Schedule of Home Equity Loans": The schedules of Home Equity Loans,
with respect to the Initial Home Equity Loans listing each Initial Home Equity
Loan to be conveyed by the Depositor to the Trust on the Closing Date, and, with
respect to Subsequent Home Equity Loans, listing each Subsequent Home Equity
Loans conveyed to the Trust as of each Subsequent Transfer Date. The initial
schedule of Home Equity Loans as of the Cut-Off Dates therefor is attached to
the Servicing Agreement as Schedule 1. The Schedule of Home Equity Loans shall
be amended from time to time by the Master Servicer to reflect the addition of
Home Equity Loans to, and the removal of Home Equity Loans from, the Trust
Estate pursuant to the Indenture. Such Schedules of Home Equity Loans shall
identify each Home Equity Loan by the Master Servicer's loan number, borrower's
name and address (including the state and zip code) of the Mortgaged Property
and shall set forth as to each Home Equity Loan the lien status thereof, the
Loan-to-Value Ratio and the Principal Balance as of the Cut-Off Date, the Coupon
Rate thereof, the original Principal Balance thereof, the current scheduled
monthly payment of principal and interest and the maturity date of the related
Mortgage Note, occupancy status, Appraised Value and the original
term-to-maturity thereof and whether or not such Home Equity Loan (including
related Mortgage Note) has been modified. The Schedule of Home Equity Loans
shall break out the Home Equity Loans according to Home Equity Loan Group.
"Second Mortgage Loan": A Home Equity Loan which constitutes a second
priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act': The Securities Act of 1933, as amended.
"Seller": First Greensboro Capital Corporation, a Tennessee corporation
and Seller pursuant to the Loan Sale Agreement.
"Seller Lien": With respect to any Second Mortgage Loan, the home
equity loan relating to the corresponding Property having a first priority lien.
"Servicing Advance": All "out-of-pocket" costs and expenses incurred in
the performance of its servicing obligations, including, but not limited to, (i)
Preservation Expenses, (ii) the cost of any enforcement or judicial proceedings,
including foreclosures, (iii) the cost of the management and liquidation of REO
Property (including broker's fees) and (iv) advances required by Section 2.13(a)
of the Servicing Agreement, except to the extent that such amounts are
determined by the Master Servicer in its reasonable business judgment not to be
recoverable.
"Servicing Agreement": The servicing agreement, dated as of June 1,
1998, among the Issuer, the Master Servicer, the Master Backup Servicer and the
Indenture Trustee, as
31
<PAGE>
indenture trustee, providing, among other things, for the servicing of the Home
Equity Loans, as such agreement may be amended or supplemented from time to time
as permitted hereby and thereby. Such term shall also include any servicing
agreement entered into with a successor Master Servicer.
"Servicing Fee": With respect to each Group, an amount retained by the
Master Servicer as compensation for servicing and administration duties relating
to each Home Equity Loan in the related Group pursuant to Section 2.15 of the
Servicing Agreement and equal to one month's interest at 0.50% per annum of the
then outstanding principal balance of such Home Equity Loan as of the first day
of each Remittance Period (or which respect to an REO Property, on an assumed
unpaid principal balance as of the date the applicable Home Equity Loan was
foreclosed on) payable on a monthly basis, calculated on the basis of a 360 day
year of 30-day months; provided, however, that if a successor Master Servicer is
appointed pursuant to Section 4.01 of the Servicing Agreement, the Servicing Fee
shall be the amount as agreed upon by the Indenture Trustee, the successor
Master Servicer and the Note Insurer, such amount not to exceed 0.50% per annum.
"Servicing Officer": Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Home Equity Loans whose
name and specimen signature appear on a list of servicing officers annexed to an
Officer's Certificate furnished to the Indenture Trustee by the Master Servicer,
as such list may from time to time be amended.
"60-Day Delinquent Loan": With respect to any Determination Date, all
REO Properties and each Home Equity Loan, with respect to which any portion of a
Monthly Payment is, as of the last day of the prior Remittance Period, two
months (calculated from Due Date with respect to such Home Equity Loan to Due
Date) or more past due (without giving effect to any grace period).
"60+ Delinquency Percentage (Rolling Three Month)": With respect to any
Determination Date and either Group, the average of the percentage equivalents
of the fractions determined for each of the three immediately preceding
Remittance Periods the numerator of each of which is equal to the aggregate
Principal Balance of 60-Day Delinquent Loans with respect to such Group as of
the end of such Remittance Period and the denominator of which is the Principal
Balance of all of the Home Equity Loans in such Group as of the end of such
Remittance Period.
"Sponsor": First Greensboro Home Equity, Inc., a North Carolina
corporation.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc., and its successors in interest.
"Stated Maturity Date": With respect to the Class A-1 Notes and the
Class A-2 Notes, the Payment Date in December 2029.
"Stepdown Date": The Payment Date occurring in December, 2000.
32
<PAGE>
"Stepdown Requirement": The Stepdown Requirement is satisfied on any
date of determination thereof if, as of such date of determination, (x) the 60+
Delinquency Percentage (Rolling Three Month) for both Groups is less than 9.0%,
(y) the Cumulative Loss Test for both Groups is satisfied and (z) the Annual
Loss Percentage (Rolling Twelve Month) for the twelve month period immediately
preceding the date of determination thereof for both Groups is not greater than
or equal to 0.75%.
"Stepped Down Required Overcollateralization Amount" means, with
respect to any Payment Date after the Stepdown Date, the Stepped Down Required
Overcollateralization Amount Percentage multiplied by the aggregate Principal
Balance of the Home Equity Loans in the applicable Group as of the end of the
immediately preceding Remittance Period.
"Stepped Down Required Overcollateralization Percentage" means, with
respect to any Payment Date and each Class of Notes after the Stepdown Date, a
percentage equal to (i) the percentage equivalent of a fraction, the numerator
of which is 4.75% of the applicable Maximum Collateral Amount and the
denominator of which is the aggregate Principal Balance of the Home Equity Loans
in the applicable Group as of the end of the immediately preceding Remittance
Period, minus (ii) the percentage equivalent of a fraction, the numerator of
which is the product of (A) the percentage calculated under clause (i) above
minus 9.50% multiplied by (B) the number of consecutive Payment Dates through
and including the Payment Date for which the Stepped Down Required
Overcollateralization Amount is being calculated, up to a maximum of six, from
and including the Payment Date immediately following the Stepdown Date, and the
denominator of which is six.
"Sub-Servicer": Any Person with whom the Master Servicer has entered
into a Sub-Servicing Agreement and who satisfies any requirements set forth in
Section 2.03 of the Servicing Agreement in respect of the qualification of a
Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Master
Servicer and any Sub-Servicer relating to servicing and/or administration of
certain Home Equity Loans as permitted by Section 2.03 of the Servicing
Agreement.
"Subsequent Cut-Off Date": The beginning of business on the date
specified in a Subsequent Transfer Agreement with respect to those Subsequent
Home Equity Loans which are transferred and assigned to the Issuer pursuant to
the related Subsequent Transfer Agreement.
"Subsequent Home Equity Loans": The Home Equity Loans sold to the
Issuer pursuant to Section 3.03 of the Loan Sale Agreement, which shall be
listed on the Schedule of Home Equity Loans attached to a Subsequent Transfer
Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement
dated as of a Subsequent Transfer Date executed by the Indenture Trustee the
Depositor and the Seller substantially in the form of Exhibit E to the Loan Sale
Agreement, by which Subsequent Home Equity Loans are sold and assigned to the
Issuer.
"Subsequent Transfer Date": The date specified in each Subsequent
Transfer Agreement.
33
<PAGE>
"Substitution Amount": As defined in the Loan Sale Agreement.
"Transferor": First Owner's Trust, Inc., a Tennessee corporation.
"Trust Estate": All money, instruments and other property subject or
intended to be subject to the lien of the Indenture for the benefit of the
Noteholders and the Note Insurer as of any particular time (including, without
limitation, all property and interests Granted to the Indenture Trustee,
including all proceeds thereof).
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939 as it
may be amended from time to time.
"Trust Paying Agent": The entity appointed to act as paying agent
pursuant to the Trust Agreement with respect to amounts on deposit from time to
time in the Certificate Distribution Account and distributions thereof to
Certificateholders. The initial Trust Paying Agent is The Chase Manhattan Bank.
"UCC": The Uniform Commercial Code as in effect in the State of New
York.
"Underwriter": First Union Capital Markets Corp. (a division of Wheat
First Securities, Inc.).
"Underwriting Agreement": The underwriting agreement, dated as of June
22, 1998, among the Depositor and the Underwriter.
"U.S. Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
U.S.C. Sections 101, et seq., as amended or supplemented from time to time.
"Vice President": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
"Voting Interest": With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Notes evidencing specified
Voting Interests in the Trust Estate, the Noteholders will collectively be
entitled to 100% of the aggregate Voting Interests represented by all Notes.
Voting Interests allocated to the Notes shall be allocated in proportion to the
Note Balance. With respect to any provision in any of the Operative Documents
providing for action, consent or approval of the holders of the Notes, each
Holder of the Notes will have a Voting Interest in the Notes equal to such
Holder's Percentage Interest in the Notes.
34
June 26, 1998
To the Parties Listed on
the Attached Annex A:
Re: First Greensboro Home Equity Loan Trust 1998-1
Asset Backed Notes, Series 1998-1
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the
issuance and delivery of certain notes denominated as First Greensboro Home
Equity Loan Trust 1998-1 Asset Backed Notes, Series 1998-1, Class A-1 and Class
A-2 (the "Notes") pursuant to the terms of the Indenture (the "Indenture"),
dated as of June 1, 1998, between the First Greensboro Home Equity Loan Trust
1998-1 (the "Issuer") and The Chase Manhattan Bank, as indenture trustee (the
"Indenture Trustee"). Capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Indenture.
As special tax counsel, we have examined such documents as we
have deemed appropriate for the purposes of rendering the opinions set forth
below, including the following: (a) an executed copy of the Indenture and the
exhibits attached thereto and (b) certain representations and warranties made to
us by the Sponsor and certain information provided by the Underwriter.
In our examination we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such latter
documents.
We have examined the question of whether the Notes will be
treated as indebtedness for federal income tax purposes. Our analysis is based
on the provisions of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder as in effect on the date hereof and
on existing judicial and administrative interpretations thereof. These
authorities are subject to change and to differing interpretations, which could
apply retroactively. The opinion of special tax counsel is not binding on the
courts or the Internal Revenue Service (the "IRS").
<PAGE>
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
The IRS and the courts have set forth various factors to be taken into account
in determining whether or not a transaction constitutes the issuance of
indebtedness for federal income tax purposes, which we have reviewed as they
apply to this transaction.
Based on the foregoing, and such legal and factual
investigations as we have deemed appropriate, while no transaction closely
comparable to that contemplated in the Operative Documents has been the subject
to any Treasury regulation, revenue ruling or judicial decision, and therefore
the matter is subject to interpretation, we are of the opinion that for federal
income tax purposes:
(1) The Notes will properly be treated as indebtedness for
federal income tax purposes;
(2) The Trust will not constitute an association (or a
publicly traded partnership) taxable as a corporation or a taxable
mortgage pool.
We express no opinion on any matter not discussed in this
letter. This opinion is rendered as of the Closing Date, for the sole benefit of
the addressees hereof and it may not be relied on by any other party or quoted
without our express consent in writing.
Very truly yours,
/s/ Dewey Ballantine LLP
2
<PAGE>
ANNEX A
First Union Capital Markets Financial Security Assurance, Inc.
301 South College Street, TW-06 350 Park Avenue
Charlotte, North Carolina 28288-0610 New York, New York 10022
First Greensboro Home Equity, Inc. The Chase Manhattan Bank
4830 Koger Blvd. 450 W. 33rd Street
Greensboro, North Carolina 27407 15th Floor
New York, New York 10001
Standard & Poor's Ratings Services Moody's Investors Service, Inc.
25 Broadway 99 Church Street
New York, New York 10004 New York, New York 10007
3
CONSENT of INDEPENDENT ACCOUNTANTS
---------
We consent to the incorporation by reference in the Prospectus Supplement of
Home Equity Securitization Corp. relating to First Greensboro Home Equity Loan
Trust 1998-1 of our report dated January 26, 1998, on our audits of the
consolidated financial statements of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997. We also consent to the reference to our
Firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
June 22, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FNMA Pool
Original Amount
TERMS A B
- ---------------------------------------------------------------------------------------------------------------------
< 15 YR 172200.00 82987.00
15 YR 9269456.27 2932652.70
20 YR 6628911.00 2819997.93
30 YR 29474084.84 11803525.00
BALLOON 1618644.00 589125.00
- ---------------------------------------------------------------------------------------------------------------------
Total $47,163,296.11 $18,228,287.63
Principal Balance
TERMS A B
- ---------------------------------------------------------------------------------------------------------------------
< 15 YR 169736.89 81636.64
15 YR 9232019.11 2922640.40
20 YR 6616029.43 2815870.78
30 YR 29450922.62 11795136.11
BALLOON 1615985.73 588683.80
- ---------------------------------------------------------------------------------------------------------------------
Total $47,084,693.78 $18,203,967.73
Counts
TERMS A B
- ---------------------------------------------------------------------------------------------------------------------
< 15 YR 7 4
15 YR 210 68
20 YR 108 48
30 YR 371 174
BALLOON 22 8
- ---------------------------------------------------------------------------------------------------------------------
Total 718 302
Weighted Average Coupon
TERMS A B
- ---------------------------------------------------------------------------------------------------------------------
< 15 YR 10.517 11.544
15 YR 10.151 10.764
20 YR 9.765 10.564
30 YR 9.700 10.607
BALLOON 10.305 11.136
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FNMA Pool
Original Amount
TERMS C D
- -------------------------------------------------------------------------------------------------------
< 15 YR 44000.00 0.00
15 YR 1281943.10 430158.00
20 YR 870935.00 176977.01
30 YR 3304597.58 1116850.00
BALLOON 146000.00 0.00 Total Original Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Total $5,647,475.68 $1,723,985.01 $72,763,044.43
Principal Balance
TERMS C D
- -------------------------------------------------------------------------------------------------------
< 15 YR 43586.47 0.00
15 YR 1279221.21 429188.85
20 YR 869544.40 176794.97
30 YR 3301669.47 1116225.92
BALLOON 145824.31 0.00 Total Current Balance
- ------------------------------------------------------------------------------------------------------------------------------------
Total $5,639,845.86 $1,722,209.74 $72,650,717.11
Counts
TERMS C D
- -------------------------------------------------------------------------------------------------------
< 15 YR 2 0
15 YR 38 13
20 YR 19 5
30 YR 58 20
BALLOON 2 0 Total Count
- ------------------------------------------------------------------------------------------------------------------------------------
Total 119 38 1177
Weighted Average Coupon
TERMS C D
- -------------------------------------------------------------------------------------------------------
< 15 YR 12.101 0.000
15 YR 11.820 14.106
20 YR 11.971 13.634
30 YR 12.007 13.485
BALLOON 11.845 0.000 Pool WAC
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Average WAC 9.822 10.647
Weighted Average Remaining Term
TERMS A B
- ---------------------------------------------------------------------------------------------------------------------
< 15 YR 80.696 70.415
15 YR 169.800 170.310
20 YR 237.880 238.780
30 YR 331.190 322.210
BALLOON 177.250 178.030
- ---------------------------------------------------------------------------------------------------------------------
Average WAM 280.245 279.128
Weighted Average Original Term
TERMS A B
- ---------------------------------------------------------------------------------------------------------------------
< 15 YR 82.711 72.701
15 YR 171.170 171.670
20 YR 239.380 240.000
30 YR 332.560 323.440
BALLOON 180.000 180.000
- ---------------------------------------------------------------------------------------------------------------------
Average Weighted Average Original Term 281.683 280.406
Total Count
First Liens with Original Amount > $227,150: $0.00 0
Second liens with Original Amount > $113,575: $0.00 0
Second liens with Combined Original Amount > $227,150: $0.00 0
Average Count
Wgt Avg Fico Score for entire Pool for loans with scores: 626.47 1177
Weighted Average CLTV for entire Pool: 80.24 1177
% of Principal Balance with grade of A: 64.8097
% of Principal Balance with grade of B: 25.0568
% of Principal Balance with grade of C: 7.7630
% of Principal Balance with grade of D: 2.3705
--------------------------
100.0000
Current Principal Balance of Fixed-rate loans $69,729,875.15 95.98%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Average WAC 11.955 13.655 10.28
Weighted Average Remaining Term
TERMS C D
- --------------------------------------------------------------------------------------------------------
< 15 YR 64.736 0.000
15 YR 172.040 170.390
20 YR 238.530 238.830
30 YR 317.920 322.760
BALLOON 176.000 0.000 Pool WAM
- ------------------------------------------------------------------------------------------------------------------------------------
Average WAM 266.963 276.174 278.84
Weighted Average Original Term
TERMS C D
- --------------------------------------------------------------------------------------------------------
< 15 YR 65.506 0.000
15 YR 173.000 171.820
20 YR 240.000 240.000
30 YR 319.220 324.520
BALLOON 180.000 0.000 Pool Weighted Average
Original Term
- ------------------------------------------------------------------------------------------------------------------------------------
Average Weighted Average Original Term 268.280 277.787 280.23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Current Principal Balance of Adjustable-rate loans $2,920,841.96 4.02%
Total Current Principal Balance $72,650,717.11
</TABLE>
