<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
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) May 27, 1999
Residential Asset Funding Corporation
- -------------------------------------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<S> <C> <C>
North Carolina 333-64775 56-2064715
- ------------------------------------------------- -------------------------- -----------------------------------
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
301 South College Street
Charlotte, North Carolina 28202-6001
(Address of Principal Executive Offices) ------------------
(Zip Code)
Registrant's telephone number, including area code (704) 374-4868
----------------------------
No Change
- -------------------------------------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 2. Acquisition or Disposition of Assets
Description of the Notes and the Mortgage Loans
Residential Asset Funding Corporation registered issuances of
up to $500,000,000 principal amount of Mortgage Pass-Through 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. 333-64775) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, Mortgage Lenders Network Home Equity
Loan Trust 1999-1 (the "Trust") issued $100,538,000 in aggregate principal
amount of its Asset Backed Notes, Series 1999-1, Class A-1 and $44,572,000 in
aggregate principal amount of its Asset Backed Notes, Series 1999-1, Class A-2
(together, the "Notes"), on June 4, 1999. 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, 1999, between
Mortgage Lenders Network Home Equity Loan Trust 1999-1 and Norwest Bank
Minnesota, National Association, in its capacity as indenture trustee (the
"Indenture Trustee"). The Notes represent obligations of the Trust, which
obligations are secured by a pledge of mortgage loans and certain related
property to the Indenture Trustee on behalf of the Noteholders. Norwest Bank
Minnesota, National Association, will serve as indenture trustee with respect to
the Notes and the Registrant is filing herewith as Exhibit 25.1 to this Form
8-K, the Form T-1 Statement of Eligibility for the Indenture Trustee.
The assets of the Trust consist primarily of fixed-rate and
adjustable rate, closed-end, conventional, monthly pay, mortgage loans (the
"Mortgage Loans") secured by first or second lien mortgages or deeds of trust
(the "Mortgages") on real properties (the "Mortgage Properties"). The Mortgaged
Properties securing the Mortgage Loans consist of one- to four-family residences
(which may be detached, attached, part of a two-to four-family dwelling, a
condominium unit, a townhouse, a mixed use property or a unit in a planned unit
development). The Mortgage Loans are held in two separate groups. The Group I
Mortgage Loans support the Class A-1 Notes and the Group II Mortgage Loans
support the Class A-2 Notes.
Interest distributions on the Notes are based on the aggregate
principal balance thereof and the then applicable Note Interest Rate for that
Class of Note. The Note Interest Rate for the Class A-1 Notes is 6.945% for each
Interest Period prior to the Initial Redemption Date and 7.445% for each
Interest Period thereafter. The Note Interest Rate for the Class A-2 Notes is
6.995% for each Interest Period prior to the Initial Redemption Date and 7.495%
for each Interest Period thereafter.
As of May 20, 1999, the Mortgage Loans possessed the
characteristics described in the Prospectus dated November 10, 1998 and the
Prospectus Supplement dated May 27, 1999 filed pursuant to Rule 424(b)(5) of the
Act on June 21, 1998.
1
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
------------------------------------------------------
(a) Not applicable
(b) Not applicable
(c) Exhibit 1.1. Underwriting Agreement, dated May 27, 1999,
between Residential Asset Funding Corporation
("RAFC") and First Union Capital Markets Corp. ("FUCM").
Exhibit 1.2. Indemnity Agreement, dated May 27, 1999, from
Mortgage Lenders Network USA, Inc. ("MLN") to RAFC, FUCM
and Prudential Securities Incorporated ("PSI").
Exhibit 2.1. Mortgage Loan Sale Agreement, dated June 1, 1999
among MLN, Norwest Bank Minnesota, National Association
("Norwest") and RAFC.
Exhibit 2.2. Mortgage Loan Contribution Agreement, dated June
1, 1999, between Mortgage Lenders Network Home Equity Loan
Trust, Series 1999-1 (the "Issuer") and RAFC.
Exhibit 4.1. Indenture, dated as of June 1, 1999, between the
Issuer and Norwest.
Exhibit 4.2. Deposit Trust Agreement, dated as of June 1,
1999, among RAFC, MLN, Norwest and Wilmington Trust Company,
as Owner Trustee.
Exhibit 5.1. Opinion of Dewey Ballantine LLP regarding
legality.
Exhibit 5.2. Opinion of Dewey Ballantine LLP regarding tax
matters.
Exhibit 23.1 Consent of PricewaterhouseCoopers LLP regarding
financial statements of MBIA Insurance Corporation and their
report.
2
<PAGE>
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.
RESIDENTIAL ASSET FUNDING CORPORATION,
--------------------------------------
as Depositor and on behalf of Mortgage Lenders
Network Home Equity Loan Trust 1999-1 Registrant
By: /s/ Carolyn Eskridge
-------------------------------
Name: Carolyn Eskridge
Title: Vice President
Dated: June 4, 1999
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 1.1. Underwriting Agreement, dated May 27, 1999, between Residential Asset Funding
Corporation ("RAFC") and First Union Capital Markets Corp. ("FUCM").
Exhibit 1.2. Indemnity Agreement, dated May 27, 1999, from Mortgage Lenders Network USA, Inc.
("MLN") to RAFC, FUCM and Prudential Securities Incorporated ("PSI").
Exhibit 2.1. Mortgage Loan Sale Agreement, dated June 1, 1999 among MLN, Norwest Bank
Minnesota, National Association ("Norwest") and RAFC.
Exhibit 2.2. Mortgage Loan Contribution Agreement, dated June 1, 1999, between Mortgage Lenders
Network Home Equity Loan Trust, Series 1999-1 (the "Issuer") and RAFC.
Exhibit 4.1. Indenture, dated as of June 1, 1999, between the Issuer and Norwest.
Exhibit 4.2. Deposit Trust Agreement, dated as of June 1, 1999, among RAFC, MLN, Norwest and
Wilmington Trust Company, as Owner Trustee.
Exhibit 5.1. Opinion of Dewey Ballantine LLP regarding legality.
Exhibit 5.2. Opinion of Dewey Ballantine LLP regarding tax matters.
Exhibit 23.1. Consent of PricewaterhouseCoopers LLP regarding financial statements of MBIA
Insurance Corporation and their report.
</TABLE>
4
EXHIBIT 1.1
UNDERWRITING AGREEMENT
<PAGE>
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
ASSET BACKED NOTES
SERIES 1999-1
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
First Union Capital Markets
as Representative of the several Underwriters
301 South College Street
Charlotte, North Carolina 28202-6001
May 27, 1999
Dear Sirs:
Residential Asset Funding Corporation (the "Depositor")
proposes, subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated May 27, 1999 (the "Standard
Provisions"), between the Depositor and First Union Capital Markets Corp.
("First Union") as representative of the several underwriters to issue and sell
to you and Prudential Securities Incorporated ("Prudential" and, together with
First Union, the "Underwriters") 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 First Union. 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 Underwriters, and each 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 in the amounts set forth in
Schedule I hereto with respect to each Underwriter.
[Remainder of Page Intentionally Left Blank]
<PAGE>
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 Underwriters and the Depositor.
Yours truly,
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ Carolyn Eskridge
---------------------------------
Name: Carolyn Eskridge
Title: SVP
Accepted as of the date hereof:
FIRST UNION CAPITAL MARKETS CORP.
By: /s/ Carolyn Eskridge
------------------------------
Name: Carolyn Eskridge
Title: SVP
[Underwriting Agreement]
2
<PAGE>
SCHEDULE I
Issuer: Mortgage Lenders Network Home Equity Loan Trust
1999-1.
Title of Offered Securities: Mortgage Lenders Network Home Equity Loan Trust
1999-1, Asset Backed Notes, Series 1999-1,
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, 1999 among the Issuer and Norwest Bank
Minnesota, National Association, as indenture
trustee.
Purchase Commitment: First Union Capital Markets Corp.
Class A-1: $70,376,600
Class A-2: $31,200,400
Prudential Securities Incorporated:
Class A-1: $30,161,400
Class A-2: $13,371,600
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 (i) 6.945%
per annum on the aggregate principal balance of
the Class A-1 Notes from May 1, 1999 to but not
including June 4, 1999 and (ii) 6.995% per
annum on the aggregate principal balance of the
Class A-2 Notes from May 1, 1999 to but not
including June 4, 1999
Specified funds for payment of
Purchase Price: Federal Funds (immediately available funds).
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about June 4, 1999 at 10:00 A.M. eastern
standard time or at such other time as the
Depositor and the Underwriters shall agree.
I-1
<PAGE>
Closing Location: Offices of Dewey Ballantine LLP, 1301 Avenue of
the Americas, New York, New York 10019.
Representative: Designated Representative: First Union Capital
Markets Corp.
Address for Notices, etc.: First Union Capital Markets Corp.
One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6001
Attn: Will Stevens
I-2
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
May 27, 1999
From time to time, Residential Asset Funding Corporation, 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 "Underwriter" 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
Underwriter or Underwriters named therein, two classes of asset backed notes
(the "Securities") representing obligations of the Issuer, which obligations are
secured by a pledge of mortgage loans (the "Mortgage Loans") and certain related
property. The Securities will be issued pursuant to an indenture (the
"Indenture") dated as of June 1, 1999 by and between the Issuer and Norwest Bank
Minnesota, National Association, as indenture trustee (the "Indenture Trustee").
The underlying loans were originated or acquired by Mortgage Lenders Network
USA, Inc. ("MLN"). MLN has conveyed its interest in the Mortgage Loans to the
Depositor which will in turn convey the Mortgage Loans to the Issuer. The
Mortgage Loans are to be serviced pursuant to a Servicing Agreement dated as of
June 1, 1999 by and among the Issuer, MLN, as servicer (in such capacity, the
"Servicer"), Norwest Bank Minnesota, National Association, as master servicer
(in such capacity, the "Master Servicer") and the Indenture Trustee.
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."
The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-64775), 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
<PAGE>
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 UNDERWRITER' 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, 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
2
<PAGE>
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
substantially to the effect set forth in Exhibit E hereto[missing exhibit E].
(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 Brown and Wood LLP, counsel for MLN, dated the Closing Date,
in form and substance satisfactory to the Representative and counsel for the
Underwriters 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
Underwriters and containing opinions substantially to the effect set forth in
Exhibit C hereto.
(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 Underwriters may reasonably require, and the
3
<PAGE>
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 Underwriters 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 Servicer in form and substance reasonably satisfactory to the
Representative;
(m) The Master 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;
(n) 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.
(o) The Representative shall have received, on the Closing
Date, an opinion of counsel to MBIA Insurance Corporation. (the "Note Insurer"),
dated the Closing Date, in form and substance satisfactory to the Representative
and counsel for the Underwriters and containing opinions substantially to the
effect set forth in Exhibit D hereto.
(p) 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.
(q) 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.
4
<PAGE>
(r) 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, 1999;
(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, 1998 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
PricewaterhouseCoopers 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.
5
<PAGE>
(vii) to the best knowledge of such officer, since December
31, 1998 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.
(s) 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 Underwriter, 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
6
<PAGE>
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.
7
<PAGE>
(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
8
<PAGE>
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 Mortgage Loan Contribution 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, dated as of
June 1, 1999, among the Depositor, the Owner Trustee and MLN Capital Corporation
I (the "Deposit Trust Agreement"), Mortgage Loan Sale Agreement, dated as of
June 1, 1999, between MLN and the Depositor (the "Loan Sale Agreement) and the
Mortgage Loan Contribution Agreement, dated as of June 1, 1999, between the
Depositor and the Issuer (the "Mortgage Loan Contribution Agreement)
(collectively, the "Depositor Agreements") are within the corporate power of the
Depositor and neither the
9
<PAGE>
execution and delivery by the Depositor of the Depositor Agreements, 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 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 Sale Agreement and the Mortgage Loan
Contribution Agreement will have been, duly authorized, executed and delivered
by the Depositor.
(i) At the Closing Date, each of the Depositor Agreements 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 the Depositor Agreements, 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.
10
<PAGE>
(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.
(n) At the Closing Date, the representations and warranties
made by the Depositor in such Mortgage Loan Contribution Agreement will be true
and correct.
(o) At the time of execution and delivery of the Mortgage Loan
Contribution Agreement, the Depositor will have good and marketable title to the
Mortgage Loans being transferred to the Issuer pursuant to the Mortgage Loan
Contribution Agreement, 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 Mortgage Loans or in such Mortgage Loan
Contribution Agreement, the Depositor will have the power and authority to
transfer such Mortgage Loans 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 Mortgage Loan Contribution Agreement and delivery
to each of the Underwriters of the Offered Securities, the Issuer will have good
and marketable title to the Mortgage Loans, 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 and delivery of the Depositor Agreements, and
issuance of 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 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 MLN or the
11
<PAGE>
Mortgage Loans, except to the extent that the Depositor has been indemnified by
MLN or (3) information supplied by the Note Insurer. 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 Underwriter's 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 Underwriter 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 Underwriter were 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
12
<PAGE>
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, MLN, First Union Capital
Markets Corp. and Prudential Securities Incorporated, 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 5 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 UNDERWRITER. If any Underwriter
defaults in its obligation to purchase Offered Securities which it has agreed to
purchase under the Underwriting Agreement and the aggregate principal amount of
the Offered Securities which such defaulting Underwriter agreed but failed to
purchase is ten percent or less of the aggregate principal amount, notional
amount or stated amount, as applicable, of the Offered Securities to be sold
under the Underwriting Agreement, as the case may be, the other Underwriter
shall be obligated severally in proportion to their respective commitments under
the Underwriting Agreement to purchase the
13
<PAGE>
Offered Securities which such defaulting Underwriter agreed but failed to
purchase. If any Underwriter so defaults and the aggregate principal amount of
the Offered Securities with respect to which such default 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 Underwriter
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 Underwriter 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
Underwriter 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.
14
<PAGE>
SECTION 12. NOTICES. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriter, 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 Residential Asset Funding Corporation, 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 Underwriter.
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.
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]
15
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return two counterparts hereof.
Yours truly,
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ Shanker Merchant
----------------------------------
Name:
Title:
Accepted as of the date hereof:
FIRST UNION CAPITAL MARKETS CORP.
By: /s/ Shanker Merchant
-----------------------------
Name:
Title:
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine LLP,
special counsel for the Depositor
---------------------------------
(1) Each of the Depositor 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.
A-1
<PAGE>
Exhibit B
Form of Opinions of Counsel to
Mortgage Lenders Network, USA, Inc.
-----------------------------------
(1) Mortgage Lenders Network, USA, Inc. (the "Company") has
been duly organized and is validly existing as a corporation in good standing
under the State of Delaware 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 (as defined in the Indenture) to
which it is a party (collectively referred to herein as the "Company
Agreements").
(3) The Company 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 Mortgage Loans to the
Depositor, nor the execution, delivery or performance by the Company of the
Company 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
Delaware, for the execution, delivery and performance of the Company 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' 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 Company 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
B-1-1
<PAGE>
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.
B-2
<PAGE>
Exhibit C
Opinions 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
Opinions 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" in the Prospectus insofar as such statements constitute a description
of the Note Insurance Policy, accurately summarizes the Note Insurance Policy.
EXHIBIT 1.2
INDEMNITY AGREEMENT
<PAGE>
INDEMNITY AGREEMENT
Reference is made to the Prospectus Supplement dated May 27,
1999 (the "Prospectus Supplement") relating to the Asset Backed Notes, Series
1999-1 Class A-1 and Class A-2 (together, the "Notes"), which Notes will be
issued by Mortgage Lenders Network Home Equity Loan Trust, Series 1999-1.
Capitalized terms used but not defined herein shall have the meanings assigned
to them in the Prospectus Supplement.
Mortgage Lenders Network USA, Inc., a Delaware corporation
(the "Company"), hereby represents and warrants to Residential Asset Funding
Corporation ("RAFC") and First Union Capital Markets, a division of Wheat First
Securities, Inc. ("First Union") and Prudential Securities Incorporated,
(together with First Union, the "Underwriters") that (a) it provided to RAFC the
information relating to the Company, the Mortgage Loans and the servicing of
such loans set forth in the Prospectus Supplement under "Summary of Terms--The
Mortgage Loan Pool," "Issuer--Mortgage Lenders Network USA, Inc.," "Description
of the Mortgage Pool," "Servicing of the Mortgage Loans--General" and "Servicing
of the Mortgage Loans--Customary Servicing Procedures" (collectively, the
"Company Information"), and (b) such Company Information does not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company acknowledges and understands that RAFC is relying on the aforesaid
representation and warranty and is causing the issuance of the Notes in partial
reliance thereon and the Company agrees, in consideration for RAFC facilitating
the financing of the Company's Mortgage Loans and in consideration of the
Underwriters' purchase of the Notes, to indemnify and hold harmless RAFC, each
of RAFC's directors, each of RAFC's officers who signed the Registration
Statement and each person if any who controls RAFC within the meaning of the
Securities Act of 1933, as amended, and the Underwriters and each person who
controls the Underwriters within the meaning of the Securities Act of 1933, as
amended, for any losses, claims, damages or liabilities joint or several it
incurs as a result of (i) a breach of such representation and warranty or (ii)
as a result of a Mortgage Pool Error from which any Computational or ABS Term
Sheets were derived, and will reimburse any legal or other expenses incurred by
RAFC or any such director, officer or controlling person and the Underwriters or
any such controlling person in connection with investigating any such loss,
claim, damage, liability or action. "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 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
<PAGE>
the filing of such material is a condition of the relief granted in such letter.
For purposes hereof, a "Mortgage Pool Error" shall mean an error in information
regarding the characteristics of the Mortgage Loans provided by the Company to
the Underwriters for the preparation of Computational Materials or ABS Term
Sheets.
Each obligation of the Company to indemnify RAFC and the
Underwriters (each, an "Indemnified Party") is conditioned upon the following:
the related Indemnified Party shall promptly notify the Company in writing of
the existence of any fact or circumstance known to such Indemnified Party giving
rise to the Company's obligation of indemnity and in the case of any claim or
litigation which may give rise to such an obligation, the Indemnified Party
shall promptly notify the Company in writing of the making of such claim or the
commencement of such litigation when the same become known to such Indemnified
Party. The Company shall have the option of defending the Indemnified Party in
connection with any such claim or litigation using the Company's own counsel,
which counsel shall be reasonably satisfactory to the Indemnified Party: if the
Company exercises such option, the Company shall not be responsible for the
Indemnified Party's attorneys' fees incurred after the Indemnified Party
receives notification of the Company's exercise of such option and the
Indemnified Party has acknowledged its approval of the selected counsel. The
Company shall have the right to settle any such claim or litigation with the
approval the Indemnified Party, which approval shall not be unreasonably
withheld. If the Indemnified Party recovers from any third party any amount paid
by the Company to the Indemnified Party in satisfaction of the Company's
obligations to indemnify the Indemnified Party, the Indemnified Party shall
promptly pay to the Company the full amount so recovered. The Company shall have
no obligation to indemnify each Indemnified Party for any claims, liabilities,
losses, costs, damages, attorneys' fees, or other expenses which would have been
avoided had the Indemnified Party taken reasonable action to mitigate such
claims, liabilities, losses, costs, damages, attorneys' fees, or other expenses.
The Company shall have no obligation to indemnify each Indemnified Party from
any claim, liability, loss, cost, damage, attorneys' fees or other expenses
arising from the negligence or willful misconduct of such Indemnified Party or
its officers, employees, or agents.
The obligations of the Company hereunder shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the related
Indemnified Party and to each person, if any, who controls such Indemnified
Party within the meaning of the Securities Act of 1933, as amended.
The agreement shall be construed in accordance with the
substantive laws of the State of New York (without regard to conflicts of laws
principles).
2
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Indemnity
Agreement as of May 27, 1999
MORTGAGE LENDERS NETWORK USA, INC.
BY: /s/ Marion H. Mathes
-------------------------------
Name: Marion H. Mathes
Title: Senior Vice President
[Indemnity Agreement]
EXHIBIT 2.1
MORTGAGE LOAN SALE AGREEMENT
<PAGE>
- -------------------------------------------------------------------------------
MORTGAGE LOAN SALE AGREEMENT
DATED AS OF JUNE 1, 1999
BETWEEN
MORTGAGE LENDERS NETWORK USA, INC.
AND
RESIDENTIAL ASSET FUNDING CORPORATION
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. Sale and Purchase...........................................2
SECTION 2. Pool Purchase Price.........................................2
SECTION 3. Transfer of the Mortgage Loans..............................3
SECTION 4. Representations and Warranties of the Seller................5
SECTION 5. Representations and Warranties of the Depositor.............8
SECTION 6. Covenants of the Seller.....................................9
SECTION 7. Repurchase Obligations.....................................10
SECTION 8. Indemnification............................................11
SECTION 9. Conditions to Obligation of the Depositor..................12
SECTION 10. Fees and Deposits..........................................13
SECTION 11. Mandatory Delivery; Grant of Security Interest.............13
SECTION 12. Notices....................................................14
SECTION 13. Severability of Provisions.................................15
SECTION 14. GOVERNING LAW..............................................15
SECTION 15. Agreement of the Seller....................................15
SECTION 16. Survival...................................................15
SECTION 17. Assignment; Third Party Beneficiaries......................15
SECTION 18. Miscellaneous..............................................16
EXHIBITS
A. Bill of Sale...........................................................A-1
B. Mortgage Loans Representations and Warranties..........................B-1
C. Defined Terms..........................................................C-1
D. Special Power of Attorney..............................................D-1
E. Assignment of Mortgage Notes...........................................E-1
<PAGE>
MORTGAGE LOAN SALE AGREEMENT
----------------------------
THIS MORTGAGE LOAN SALE AGREEMENT (this "Agreement"), made as
of June 1, 1999, by and between MORTGAGE LENDERS NETWORK USA, INC., a Delaware
corporation ("MLN" or the "Seller"), and RESIDENTIAL ASSET FUNDING CORPORATION,
a Delaware corporation (the "Depositor"), recites and provides as follows:
RECITALS
Schedule I attached hereto (the "Mortgage Loan Schedule") and
made a part hereof lists fixed-rate and adjustable rate mortgage loans secured
by first and second liens on real properties (the "Mortgage Loans"). The
Mortgage Loans are currently owned by the Seller and the Seller desires to sell
such Mortgage Loans to the Depositor.
The Depositor desires to purchase the Mortgage Loans and
intends immediately after its purchase to transfer the Mortgage Loans to
Mortgage Lenders Network Home Equity Loan Trust 1999-1 (the "Issuer"), which
will be formed pursuant to the terms of a deposit trust agreement (the "Trust
Agreement"), dated as of June 1, 1999, by and between the Depositor, as
depositor, and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the "Owner Trustee").
The Issuer will in turn pledge the Mortgage Loans to Norwest
Bank Minnesota, National Association, as trustee (the "Indenture Trustee"),
under an indenture to be dated as of June 1, 1999 (the "Indenture"), by and
between the Issuer and the Indenture Trustee, pursuant to which the Issuer's
Asset Backed Notes, Series 1999-1 Class A-1 and Class A-2 (together, the
"Notes") will be issued.
The Notes shall be sold pursuant to an underwriting agreement
dated May 27, 1999 (the "Underwriting Agreement"), among First Union Capital
Markets Corp. ("First Union"), as representative of First Union and Prudential
Securities Incorporated ("Prudential", and together with First Union, the
"Underwriters"), and the Depositor, and will be offered publicly for sale by the
Underwriters pursuant to a prospectus supplement dated May 27, 1999 (the
"Prospectus Supplement"), and the related prospectus, dated November 10, 1998
(together with the Prospectus Supplement, the "Prospectus").
The certificates of beneficial ownership of the Issuer (the
"Trust Certificates") will be issued at the direction of the Depositor to MLN
Depository Corp., a subsidiary of the Seller.
Capitalized terms used and not defined herein shall have the
meanings assigned to them in Exhibit C attached hereto or, if not defined
therein, in the Indenture.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the above premises, the mutual
promises herein made and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. SALE AND PURCHASE.
(a) Subject to the terms and conditions of this Agreement, the Seller
agrees to sell, and the Depositor agrees to purchase, on the date of the
issuance of the Notes (the "Closing Date"), which is expected to be on or about
June 4, 1999, Mortgage Loans having an aggregate principal balance as of the
close of business on June 1, 1999 or, in the case of those Mortgage Loans which
were funded after June 1, 1999 but before the Closing Date, as of their
respective origination dates, of approximately $100,608,230 in Group I and
approximately $44,614,705 in Group II. The "Cut-off Date" is the close of
business on June 1, 1999.
(b) The Seller has prepared the schedule attached hereto as Schedule I
identifying all of the Mortgage Loans to be purchased by the Depositor on the
Closing Date and describing such Mortgage Loans. The Seller shall, with the
Depositor's consent, amend or modify Schedule I on or prior to the Closing Date
if necessary to reflect the inclusion of additional Mortgage Loans and the
withdrawal of certain of the Mortgage Loans currently listed on the attached
Schedule I. Schedule I, as so amended or modified (the "Mortgage Loan
Schedule"), shall conform to the requirements of the Depositor as set forth in
this Agreement and shall be used as the definitive mortgage loan schedule
attached as an exhibit to the Indenture identifying all of the Mortgage Loans
actually transferred by the Seller and accepted by the Depositor on the Closing
Date.
(c) The sale of the Mortgage Loans shall be effected pursuant to the
Bill of Sale substantially in the form attached hereto as Exhibit A (the "Bill
of Sale").
SECTION 2. POOL PURCHASE PRICE.
(a) On the Closing Date, as full consideration for the Seller's sale of
the Mortgage Loans to the Depositor, the Depositor will (1) pay to the Seller
cash, in immediately available funds, equal to the proceeds of the sale of the
Notes by the Issuer, net of underwriting discounts and the Issuance Fee
described in Section 10 below, and (2) direct the issuance of the Trust
Certificates (collectively, the "Pool Purchase Price").
(b) The Depositor or any assignee or transferee of the Depositor (which
will include the Issuer and the Indenture Trustee) shall be entitled to all
Monthly Payments due after the Cut-off Date and all Principal Prepayments and
other unscheduled collections of principal collected in respect of the Mortgage
Loans on or after the Cut-off Date. All Monthly Payments due on or before the
Cut-off Date and collected on or after the Cut-off Date shall belong to the
Seller.
2
<PAGE>
(c) The Depositor will transfer and assign all of its right, title and
interest in and to the Mortgage Loans to the Issuer, which will in turn pledge
all of its right, title and interest in and to the Mortgage Loans to the
Indenture Trustee pursuant to the Indenture for the benefit of the holders of
the Notes and the Note Insurer.
SECTION 3. TRANSFER OF THE MORTGAGE LOANS.
(a) TRANSFER OF OWNERSHIP. Upon the sale of the Mortgage Loans, the
ownership of each Mortgage Loan and the related Mortgage Loan Documents shall be
vested in the Depositor, and the ownership of all other records and documents
with respect to any Mortgage Loan prepared by or which come into the possession
of the Seller shall immediately vest in the Depositor upon such preparation or
possession. The Seller shall promptly deliver to the Custodian, on behalf of the
Indenture Trustee, any documents that come into its possession with respect to
the Mortgage Loans following the sale of the Mortgage Loans to the Depositor.
Prior to such delivery, the Seller shall hold any such documents for the benefit
of the Depositor, its successors and assigns.
All documents with respect to any Mortgage Loan in the possession of
MLN following the execution by MLN of the Servicing Agreement shall be held by
MLN, in its capacity as Servicer, as bailee and agent for the Depositor, its
successors and assigns (including particularly the Issuer and the Indenture
Trustee), and shall only be released in accordance with the terms of the
Servicing Agreement.
(b) DELIVERY OF MORTGAGE LOAN FILES. Not later than two Business Days
prior to the Closing Date, the Seller shall deliver to the Custodian, on behalf
of the Indenture Trustee, each of the Mortgage Loan Documents required to be
included in the Mortgage File for each Mortgage Loan and an assignment of
Mortgage endorsed in blank substantially in the form of Exhibit E hereto. In the
event that the assignment of mortgage is recorded in accordance with Section
3(d) hereof, the Mortgage Note for each Mortgage Loan shall be endorsed by the
Custodian without recourse to the Indenture Trustee and the Mortgage for each
Mortgage Loan shall be assigned to the Indenture Trustee. Each endorsement of a
Mortgage Note to the Indenture Trustee shall be in the following form:
WITHOUT RECOURSE,
PAY TO THE ORDER OF
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
AS INDENTURE TRUSTEE
Each assignment of a Mortgage relating to a Mortgage Loan shall be made
to "NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE under an
Indenture with Mortgage Lenders Network Home Equity Loan Trust 1999-1 dated as
of June 1, 1999."
The Seller shall deliver the Mortgage Notes and the assignments of
Mortgage in recordable form to the Custodian, on behalf of the Indenture
Trustee, endorsed and assigned in blank, and in the event that the assignment of
mortgage is recorded in
3
<PAGE>
accordance with Section 3(d) hereof, the Custodian, on behalf of the Indenture
Trustee, shall fill in the endorsements and assignments as specified above by
stamp. The Indenture Trustee shall return the completed assignments of Mortgage
to the Custodian as soon as possible after the Closing Date so the Custodian can
send them out for recording as appropriate.
Prior to the transfer and sale of the Mortgage Loans pursuant to this
Agreement, all Mortgage Loan Documents delivered to the Custodian, on behalf of
the Indenture Trustee, shall be held by the Custodian, on behalf of the
Indenture Trustee, for the benefit of the Seller, and the possession by the
Custodian, on behalf of the Indenture Trustee, of such Mortgage Loan Documents
will be at the will of the Seller and will be in a custodial capacity only.
Following the transfer and sale of the Mortgage Loans from the Seller to the
Depositor in accordance with the terms and upon satisfaction of the conditions
of this Agreement and until transfer of the Mortgage Loans to the Issuer, the
Custodian, on behalf of the Indenture Trustee, will hold all Mortgage Loan
Documents delivered to it hereunder for the benefit of the Depositor, as its
agent and bailee. The Custodian will act on the Depositor 's behalf as a
custodian for the receipt and custody of all Mortgage Files during the period
described in the preceding sentence and, after the transfer of the Mortgage
Loans to the Issuer, the Custodian will hold all Mortgage Loan Documents
delivered to it hereunder as the agent of and custodian for the Issuer until the
Mortgage Loans are pledged by the Issuer to the Indenture Trustee.
(c) EXAMINATION OF MORTGAGE LOAN DOCUMENTS; ACCEPTANCE OF MORTGAGE LOANS.
Prior to the Closing Date, the Seller shall either (1) deliver to the Depositor
or its designee in escrow, for examination, the Mortgage Loan Documents
pertaining to each Mortgage Loan, or (2) make such Mortgage Loan Documents
available to the Depositor or its designee for examination at the Seller's
offices or at such other place as the Seller shall specify. The Depositor, the
Issuer, the Custodian, the Indenture Trustee, or a designee of any such entity
may review the Mortgage Loan Documents.
Prior to the Closing Date, the Custodian shall review the documents
delivered pursuant to Section 3(b) hereof as provided in Section 6.15(a) of the
Indenture. An additional review shall be conducted by the Custodian, on behalf
of the Indenture Trustee prior to the first anniversary of the Closing Date as
provided in Section 6.15(b) of the Indenture. If at any time the Depositor, the
Custodian or the Indenture Trustee discovers or receives notice that any
Mortgage Loan Document is missing or defective in any material respect with
respect to any Mortgage Loan, or that there exists any material discrepancy
between the Mortgage Loan Documents and the Mortgage Loan Schedule, it shall
promptly notify the Seller and the Note Insurer in writing thereof. Upon its
receipt of notice of such incompleteness, defect or discrepancy, the Seller
shall cure, repurchase or substitute for the affected Mortgage Loan to the
extent provided in Section 7(b) hereof. At the time of any such repurchase or
substitution, the Custodian shall release documents in its possession relating
to such Mortgage Loan to the Seller. The fact that the Depositor, the Custodian,
the Indenture Trustee or a designee of either entity has conducted or has failed
to conduct any partial or complete examination of the Mortgage Loan Documents
shall not affect the rights of the Depositor, the Indenture Trustee (or any
5
<PAGE>
assignee or successor of either of them) to demand repurchase or other relief as
provided herein.
(d) RECORDATION OF ASSIGNMENTS OF MORTGAGE. Subject to the sale of the
Mortgage Loans by the Seller to the Depositor in accordance with the terms of
this Agreement, the Depositor hereby authorizes and instructs the Seller, and
the Seller hereby agrees, to record (or to cause one of its affiliates to
record) all assignments with respect to each Mortgage Loan required to be
contained in the Mortgage File pursuant to the Indenture in the public recording
office for the jurisdiction in which the related Mortgaged Property is located;
PROVIDED, HOWEVER, that, for administrative convenience and facilitation of
servicing and to reduce closing costs, assignments of mortgage shall not be
required to be submitted for recording with respect to any Mortgage Loan, unless
a Recordation Trigger Event shall have occurred and be continuing; and PROVIDED,
FURTHER, that no recordation of the assignment of mortgage shall be required
upon the occurrence of a Recordation Trigger Event, if the Indenture Trustee,
the Note Insurer and each Rating Agency has received an Opinion of Counsel,
satisfactory in form to the Note Insurer and each Rating Agency, to the effect
that the recordation of such assignments in any specific jurisdiction is not
necessary to protect the Indenture Trustee's interest in the related Mortgage.
All recording fees relating to the recordation of the assignments as described
above shall be paid by the Seller or an affiliate of the Seller. Such
assignments with respect to each Mortgage Loan must be delivered to the
recording office of the appropriate jurisdiction within 60 days after the
Closing Date, and the failure of the related assignment to contain evidence of
recording thereon within one year after the Closing Date will constitute a
defect for purposes of Section 7 below.
(e) On or before the Closing Date, the Seller shall deliver to the
Indenture Trustee original executed powers of attorney, from the current
recordholders of the related Mortgage substantially in the form of Exhibit D,
authorizing the Indenture Trustee to record the assignments of mortgage as
provided in (d) above, if necessary. Pursuant to such powers of attorney, the
Indenture Trustee also may authorize the Servicer to execute a new assignment of
mortgage for any Mortgage Loan if the original assignment of mortgage delivered
by the Seller to the Indenture Trustee is not in recordable form at such time as
the assignment of mortgage is to be recorded by the Custodian.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
(a) The Seller hereby represents and warrants to the Depositor as of the
date of this Agreement, or as of such other date as is specifically provided, as
follows:
(1) The Seller has been duly incorporated and is validly existing and
in good standing under the laws of the State of Delaware and is duly
qualified to do business and in good standing under the laws of each
jurisdiction that requires such qualification wherein it owns or leases
any material properties (except where the failure so to qualify would
not have a material adverse effect on the Seller). The Seller has the
full power and authority (corporate and other) to own its properties
and conduct its business as its business is presently conducted.
5
<PAGE>
(2) The Seller has the full power, authority and legal right to
transfer and convey the Mortgage Loans to the Depositor, and has the
full power, authority (corporate and other) and legal right to execute
and deliver, engage in the transactions contemplated by, and perform
and observe the terms and conditions of, this Agreement.
(3) This Agreement has been duly and validly authorized, executed and
delivered by the Seller and (assuming the due authorization, execution
and delivery hereof by the Depositor) constitutes the valid, legal and
binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws
affecting creditors' rights generally and to general principles of
equity, regardless of whether such enforcement is sought in a
proceeding in equity or at law.
(4) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance
by the Seller with this Agreement or the consummation by the Seller of
any other transaction contemplated hereby except for those that have
been obtained by the Seller and are in full force and effect.
(5) Neither the execution and delivery of this Agreement by the
Seller, nor the consummation by the Seller of the transactions herein
contemplated, nor compliance with the provisions hereof by the Seller,
will (A) conflict with or result in a breach of, or constitute a
default under, any of the provisions of the Seller's articles of
incorporation or by-laws, or any law, governmental rule or regulation,
or any judgment, decree or order binding on the Seller or any of its
properties, or any of the provisions of any indenture, mortgage, deed
of trust, contract or other instrument to which the Seller is a party
or by which the Seller is bound or (B) result in the creation or
imposition of any lien, charge or encumbrance which would have a
material adverse effect upon any of the Seller's properties pursuant to
the terms of any such indenture, mortgage, deed of trust, contract or
other instrument.
(6) The Seller is not, and with passage of time does not expect to
become, insolvent or bankrupt.
(7) There are no actions, suits, proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller
that should reasonably be expected to affect adversely the transfer of
the Mortgage Loans, the issuance of the Notes, or the execution,
delivery, performance or enforceability of this Agreement or have a
material adverse effect on the financial condition of the Seller.
(8) The Seller is, and, immediately prior to the sale of the Mortgage
Loans to the Depositor, the Seller will be, the sole owner of, and will
have good,
6
<PAGE>
indefeasible and marketable title to, the Mortgage Loans, subject to no
prior lien, mortgage, security interest, pledge, charge or other
encumbrance, except any lien to be released prior to or concurrently
with the purchase of the Mortgage Loans by the Depositor. Following the
sale of the Mortgage Loans, the Depositor or the Issuer as the
Depositor's transferee will own such Mortgage Loans, free and clear of
any prior lien, mortgage, security interest, pledge, charge or other
encumbrance (assuming that an Assignment of the related Mortgage from
the Seller to the Depositor, or its designee, is recorded), except the
lien created by the Indenture.
(9) Neither this Agreement, nor any statement, report or other
document prepared by MLN and furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
(b) As to each Mortgage Loan, the Seller hereby represents and warrants
to the Depositor as of the date of this Agreement, or as of such other date as
is specifically provided, that each representation and warranty set forth in
Exhibit B hereto is true and correct.
(1) The Seller has not dealt with any broker, investment banker,
agent or other person that may be entitled to any commission or
compensation in connection with the sale of the Mortgage Loans to the
Depositor.
(2) The Seller will treat the transfer of the Mortgage Loans to the
Depositor as a sale on its books and records in accordance with
generally accepted accounting principles.
(3) With respect to each Mortgage Loan, the Seller is in possession
of each of the Mortgage Loan Documents required to be included in the
related Mortgage File (except to the extent such Mortgage File has been
delivered to the Indenture Trustee or the Custodian as described in
this Agreement).
(4) The transfer, assignment and conveyance of the Mortgage Loans by
the Seller pursuant to this Agreement are not subject to the bulk
transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
(5) The Seller used no adverse selection procedures in selecting the
Mortgage Loans that identified the Mortgage Loans as being less
desirable or valuable than other mortgage loans in its portfolio as to
which the representations and warranties required by this Agreement
could truthfully be made. The Mortgage Loans are representative of the
Seller's portfolio of fixed-rate residential mortgage loans.
(6) The description of those Mortgage Loans that had been identified
as of May 20, 1999 (the "Mortgage Loans") set forth in the Offering
Documents and the Prospectus Supplement under the heading "Summary of
Terms - The
7
<PAGE>
Mortgage Loans" and "Description of the Mortgage Pool" does not contain
any untrue statement of any material fact or omit any material fact
required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which
they are made, not misleading.
(7) The information set forth in the Mortgage Loan Schedule hereto is
true and correct in all material respects in the case of each Mortgage
Loan, as of its respective Cut-off Date.
(8) The consideration received by the Seller upon the sale of the
Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans.
(9) The Seller is solvent, and the sale of the Mortgage Loans as
contemplated hereby will not cause the Seller to become insolvent. The
sale of the Mortgage Loans is not undertaken with the intent to hinder,
delay or defraud any of the Seller's creditors.
(10) The Seller intends to relinquish all rights to possess, control
and monitor the Mortgage Loans sold pursuant to this Agreement (except
such rights as are entailed in its serving as the Servicer of the
Mortgage Loans under the Servicing Agreement). After the Closing Date,
the Seller will have no right to modify or alter the terms of the sale
of the Mortgage Loans (except such rights as are entailed in its
serving as the Servicer of the Mortgage Loans under the Servicing
Agreement), and the Seller will have no right or obligation to
repurchase any Mortgage Loan or substitute another mortgage loan for
any Mortgage Loan sold hereunder, except as provided in Sections 3 and
7 hereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor
hereby represents and warrants to the Seller as of the date of this Agreement,
or as of such other date as is specifically provided, as follows:
(a) The Depositor is a corporation duly organized and validly existing in
good standing under the laws of the State of North Carolina.
(b) The Depositor has the full power, authority (corporate and other) and
legal right to execute and deliver, engage in the transactions contemplated by,
and perform and observe the terms and conditions of, this Agreement.
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, and (assuming the due authorization, execution and
delivery hereof by the Seller) constitutes the valid, legal and binding
agreement of the Depositor, enforceable against the Depositor in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws affecting creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is sought
in a proceeding in equity or at law.
8
<PAGE>
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required, for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any other transaction
contemplated hereby except for those which have been obtained by the Depositor
and are in full force and effect.
(e) Neither the execution and delivery of this Agreement by the Depositor,
nor the consummation by the Depositor of the transactions hereby contemplated,
nor compliance with the provisions hereof by the Depositor, will (i) conflict
with or result in a breach of, or constitute a default under, any of the
provisions of the Depositor's certificate of incorporation or by-laws, or any
law, governmental rule or regulation, or any judgment, decree or order binding
on the Depositor or any of its properties, or any of the provisions of any
contract or other instrument to which the Depositor is a party or by which it is
bound or (ii) result in the creation or imposition of any lien, charge or
encumbrance which would have a material adverse effect upon the Notes.
(f) There are no actions, suits, proceedings or investigations pending or, to
the Depositor's knowledge, threatened against the Depositor that should
reasonably be expected to affect adversely the execution, delivery, performance
or enforceability of this Agreement or have a material adverse effect on the
financial condition of the Depositor.
SECTION 6. COVENANTS OF THE SELLER. The Seller hereby covenants to the
Depositor as follows:
(a) On or before the Closing Date, the Seller shall execute and deliver a
Secretary's or Assistant Secretary's Certificate evidencing the Seller's
authority to enter into the transactions contemplated by this Agreement.
(b) On or before the Closing Date, the Seller shall take all steps
reasonably required of it to effect the transfer of the Mortgage Loans to the
Depositor, the transfer of the Mortgage Loans to the Issuer and the pledge of
the Mortgage Loans to the Indenture Trustee, free and clear of any lien, charge,
or encumbrance except the lien evidenced by the Indenture.
(c) The Seller shall use its best efforts to make available to counsel for
the Depositor in executed form each of the Closing Documents (as defined in
Section 9(b) below) on or before the Closing Date, it being understood that such
documents are to be released and delivered only on the closing of the
transaction contemplated hereby and the sale of the Notes.
(d) In the event the Seller fails to take all actions necessary to effect
the conveyance of the Mortgage Loans to the Depositor on or before the Closing
Date as contemplated hereby, the Seller hereby constitutes and appoints the
Depositor and its officers and representatives as the Seller's true and lawful
attorneys-in-fact to do all acts and transactions and to execute and deliver all
agreements, documents, instruments and papers by and on behalf of the Seller as
may be necessary to consummate the transfer of
9
<PAGE>
the Mortgage Loans to the Depositor. The foregoing grant of authority shall be
deemed to be irrevocable and a power coupled with an interest.
(e) The Seller covenants that it shall operate in such a manner that MLN
Depository Corp., would not be substantively consolidated in the bankruptcy
estate of the Seller, such that the separate existence of MLN Depository Corp.,
would be disregarded in the event of the bankruptcy or insolvency of the Seller.
SECTION 7. REPURCHASE OBLIGATIONS.
(a) Each of the representations and warranties made by the Seller herein
shall survive the purchase by the Depositor of the Mortgage Loans and shall
continue in full force and effect, notwithstanding any restrictive or qualified
endorsement on the Mortgage Notes and notwithstanding subsequent termination of
this Agreement, the Trust Agreement or the Indenture. The Seller's
representations and warranties shall not be impaired by any review or
examination of Mortgage Loan Documents or other documents evidencing or relating
to the Mortgage Loans or any failure on the part of the Depositor to review or
examine such documents and shall inure to the benefit of the Issuer and the
Indenture Trustee (as the assignees of the Depositor) for the benefit of the
Noteholders and the Note Insurer. With respect to the representations and
warranties contained herein that are made to the best of the Seller's knowledge
or as to which the Seller has no knowledge, if it is discovered by either the
Seller, the Depositor, or the Indenture Trustee that the substance of any such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan, then notwithstanding
the Seller's lack of knowledge with respect to the substance of such
representation and warranty being inaccurate at the time the representation and
warranty was made, the Seller shall take action in accordance with the following
paragraph in respect of such Mortgage Loan.
(b) Upon discovery or receipt of notice by the Seller, the Depositor or the
Indenture Trustee of any missing or materially defective document in any
Mortgage File, a breach of any of the representations and warranties set forth
in Section 4 hereof or in Exhibit B hereto, or a default in the performance of
any of the covenants or other obligations of the Seller under this Agreement,
that in any of the foregoing cases materially and adversely affects the value of
any Mortgage Loan or the interest therein of the Depositor, the Issuer, the
Indenture Trustee, the Noteholders or the Note Insurer, the party discovering or
receiving notice of the missing or materially defective document, breach, or
default shall give prompt written notice to the other parties and to the
Underwriters. Upon its discovery or its receipt of notice of any such missing or
materially defective documentation or any such breach of a representation and
warranty or covenant, the Seller shall, within 60 days after such discovery or
receipt of such notice, either (i) cure such defect or breach in all material
respects, or (ii) either repurchase the affected Mortgage Loan at the Purchase
Price therefor or substitute one or more Qualified Replacement Mortgage Loans
for the related Mortgage Loan. The Seller shall amend the Mortgage Loan Schedule
to reflect the withdrawal of any Mortgage Loan from the terms of this Agreement,
the Trust Agreement and the Indenture and the addition, if any, of any Qualified
Replacement Mortgage Loan(s). In order to effect a substitution pursuant to
10
<PAGE>
this Section 7(b), the Seller will deliver to the Indenture Trustee or the
Custodian (i) each of the Mortgage Loan Documents required to be contained in
the Mortgage File with respect to the Qualified Replacement Mortgage Loan(s) and
(ii) if the aggregate Principal Balance on the date of substitution of the
Qualified Replacement Mortgage Loan(s) is less than the Principal Balance of the
replaced Mortgage Loan (after application of Monthly Payments due in the month
of substitution), cash in an amount equal to such shortfall plus 30 days'
interest at the Mortgage Interest Rate for the replaced Mortgage Loan on the
amount of such shortfall. The Indenture Trustee shall deposit any such cash into
the Note Account. Any repurchase of a Mortgage Loan pursuant to this Section
7(b) shall be accomplished by the delivery to the Indenture Trustee, on (or
determined as of) the last day of the calendar month in which such repurchase is
made, of the Purchase Price for such Mortgage Loan (such delivery may be made on
or before the Deposit Date in the month following such calendar month).
(c) It is understood and agreed that the obligations of the Seller set forth
in this Section 7 to cure, repurchase or substitute for a Mortgage Loan and to
indemnify the Depositor as provided in Section 8 of this Agreement constitute
the sole remedies of the Depositor, the Issuer and the Indenture Trustee against
the Seller with respect to a missing or materially defective document in any
Mortgage File, a breach of representations and warranties of the Seller set
forth in Section 4 hereof or in Exhibit B hereto, or a default in the
performance by the Seller of any of its covenants or other obligations under
this Agreement.
SECTION 8. INDEMNIFICATION.
(a) In the event the Seller breaches its representations, warranties,
covenants or obligations set forth herein or in the event of Mortgage Pool
Error, the Seller shall indemnify and hold harmless the Depositor (and its
assignees in accordance with Section 17 hereof) (the "Indemnified Parties") from
and against any losses, damages, penalties, fines, forfeitures, legal fees and
related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, such
breach or such Mortgage Pool Error. Promptly after receipt by an Indemnified
Party of notice of the commencement of any such action, such Indemnified Party
will notify the Seller in writing of the commencement thereof if a claim in
respect of such action is to be made against the Seller under this Section 8,
but the omission so to notify the Seller will not relieve the Seller from any
liability hereunder unless such omission materially prejudices the rights and
positions of the Seller. If any such action is brought against an Indemnified
Party, and it notifies the Seller of the commencement thereof, the Seller will
be entitled to participate therein, and to assume the defense thereof, with
counsel selected by the Seller and reasonably satisfactory to such Indemnified
Party, and after notice from the Seller to the Indemnified Party of its election
so to assume the defense thereof, the Seller will not be liable to the
Indemnified Party under this Section 8 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
of such action; PROVIDED, HOWEVER, that this sentence shall not be in effect if
(1) the Seller shall not have employed counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action or (2) the Seller shall have
11
<PAGE>
authorized the employment of counsel for the Indemnified Party at the expense of
the Seller. If the Seller assumes the defense of any such proceeding, it shall
be entitled to settle such proceeding with the consent of any Indemnified Party
that is also subject to such proceeding or, if such settlement provides for
release of any such Indemnified Party in connection with all matters relating to
the proceeding which have been asserted against such Indemnified Party in such
proceeding by the other parties to such settlement, without the consent of such
Indemnified Party.
(b) The Seller shall reimburse the Underwriters upon demand for all amounts
otherwise payable by the Depositor pursuant to the indemnification provisions in
the Underwriting Agreement, in the event that any breach referred to in the
preceding paragraph or any of the following results in the inability of the
parties hereto to consummate the transactions contemplated herein: (1) failure
to obtain any consent or authorization, if any, required under federal or
applicable state law for the Seller to perform the transactions contemplated
herein; or (2) the Seller's failure to perform any of the obligations of the
Seller under Section 9(a), (b), (c) or (d) hereof.
(c) In the event of a breach by an Underwriter of its obligation to purchase
the Notes pursuant to the Underwriting Agreement, subject to payment in full of
the Issuance Fee (as defined in Section 10 below) to the Depositor, the
Depositor hereby assigns to the Seller any and all rights of action or other
claims the Depositor may have against any Underwriter pursuant to the
Underwriting Agreement (other than the Depositor's right to receive payment due
the Depositor from the Underwriters for the Depositor's expenses related to the
proposed issuance of the Notes); PROVIDED, HOWEVER, that the Depositor expressly
reserves, and does not hereby assign, its rights to indemnification and
contribution under the Underwriting Agreement and any other rights to
indemnification or contribution it may have at law or in equity.
SECTION 9. CONDITIONS TO OBLIGATION OF THE DEPOSITOR. The obligation of the
Depositor hereunder to purchase the Mortgage Loans is subject to the following
conditions:
(a) The accuracy in all material respects of all of the representations and
warranties of the Seller under this Agreement and the non-occurrence of any
event which, with notice or the passage of time, would constitute a default
under this Agreement;
(b) the Depositor shall have received, or the Depositor's attorneys shall
have received, in escrow (to be released from escrow at the time of closing),
the following documents (collectively, the "Closing Documents") in such forms as
are agreed upon and acceptable to the Depositor, duly executed by all
signatories other than the Depositor as required pursuant to the respective
terms thereof:
(i) A Bill of Sale substantially in the form of Exhibit A hereto;
(ii) An opinion of counsel for the Seller as to various corporate
matters and such other opinions of counsel as are necessary in
order to obtain the ratings set forth in Section 9(f) below, each
of which shall be
12
<PAGE>
acceptable to the Depositor, its counsel, the Seller, its counsel,
and Moody's Investors Service, Inc. ("Moody's"), Fitch IBCA
("Fitch") and Standard & Poor's Ratings Services, a Division of
The McGraw-Hill Companies, Inc. ("S&P" and together with Moody's
and Fitch, the "Rating Agencies") (it being understood that such
opinions shall expressly provide that the Indenture Trustee shall
be entitled to rely on such opinions of counsel); and
(iii) From Deloitte & Touche LLP, certified public accountants, comfort
letters as required by the Underwriting Agreement.
(c) The Seller shall have delivered to the Indenture Trustee, in escrow, all
documents required to be delivered hereunder and shall have released its
interest therein to the Depositor or its designee;
(d) Compliance by the Seller with all other terms and conditions of this
Agreement;
(e) The purchase by the Underwriters of the Notes pursuant to the terms of
the Underwriting Agreement; and
(f) The receipt of written confirmation from Moody's, Fitch and S&P that
they have assigned ratings of "Aaa", "AAA" and "AAA" to the Notes, respectively.
SECTION 10. FEES AND DEPOSITS. The Seller shall be responsible for payment
of (1) all fees and expenses of accountants, printers, the Note Insurer, the
Owner Trustee and the Indenture Trustee in connection with the issuance of the
Notes, including the fees of their respective attorneys, including such fees and
expenses associated with loan file due diligence review, (2) the fees incurred
by the Depositor in connection with the establishment of the registration
statement with respect to the Notes, including fees payable to the Securities
and Exchange Commission with respect to the Notes, the payment of an issuance
fee (the "Issuance Fee") of 287,313 to or at the direction of the Depositor for
the use of its services in connection with the issuance of the Notes and the
Depositor's related fees and expenses for attorneys and accountants, and (3) the
fees and expenses payable to the Rating Agencies for their initial ratings of
the Notes, including the fees of their respective attorneys. In addition, the
Seller shall pay the fees and expenses of its and the Depositor's attorneys and
accountants in connection with the issuance of the Notes.
SECTION 11. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale and
delivery on the Closing Date of the Mortgage Loans described in the Mortgage
Loan Schedule are mandatory, it being specifically understood and agreed that
each Mortgage Loan is unique and identifiable on the Closing Date and that an
award of money damages would be insufficient to compensate the Depositor for the
losses and damages that would be incurred by the Depositor in the event of the
Seller's failure to deliver the Mortgage Loans on or before the Closing Date.
The Seller hereby grants to the Depositor a first lien on and a continuing first
priority security interest in (i) each Mortgage Loan and each
13
<PAGE>
document and instrument evidencing each Mortgage Loan to secure the performance
by the Seller of its obligation to deliver such Mortgage Loans hereunder, (ii)
Seller's rights under this Mortgage Loan Sale Agreement, (iii) all insurance
policies insuring any Mortgage Loans or Mortgaged Property, (iv) Seller's rights
under the Servicing Agreement, (v) all cash, instruments, or other property held
or required to be deposited in the Collection Account, 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 Collection
Account, which income shall belong to and be for the account of the Seller and
(vi) 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. All rights and remedies of the
Depositor under this Agreement are distinct from, and cumulative with, any other
rights or remedies under this Agreement or afforded by law or equity, and all
such rights and remedies may be exercised concurrently, independently or
successively.
SECTION 12. NOTICES. All demands, notices and communications hereunder shall
be in writing and shall be deemed to have been duly given if personally
delivered or mailed by registered mail, postage prepaid, or transmitted by
telecopier, telex or telegraph and confirmed by a similar mailed writing, to the
following:
a. If to the Depositor:
Residential Asset Funding Corporation
c/o First Union Capital Markets
301 South College Street, TW-09
Charlotte, North Carolina 28288-0610
Attention: Shanker Merchant
Telecopy: (704) 383-8121
b. If to the Seller:
Mortgage Loan Network USA, Inc.
Middlesex Corporate Center, 11th Floor
213 Court Street
Middletown, Connecticut 06487
Attention: General Counsel
Telecopy: (860) 344-5707
c. If to the Note Insurer:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
Structured Finance (IMP-SF) (Mortgage
Lenders Network Home Equity Loan Trust
1999-1)
Telecopy: (914) 765-3810
14
<PAGE>
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section 12 for the giving of notice.
SECTION 13. SEVERABILITY OF PROVISIONS. Any part, provision, representation,
warranty or covenant contained in this Agreement that is prohibited or
unenforceable or that is held to be void or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction as to any Mortgage
Loan shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law that prohibits or renders void or unenforceable any
provision hereof.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
NOTWITHSTANDING ANY NEW YORK OR OTHER CONFLICT OF LAWS PROVISION TO THE
CONTRARY.
SECTION 15. AGREEMENT OF THE SELLER. The Seller agrees to execute and
deliver such instruments and take such actions as the Depositor, the Issuer or
the Indenture Trustee may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement, including,
without limitation, the execution and filing of any UCC financing statements to
evidence the interests of the Depositor and any of its transferees in the
Mortgage Loans and other assets pledged to the Indenture Trustee.
SECTION 16. SURVIVAL. The Seller agrees that the representations, warranties
and agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to have been relied upon by the
Depositor, notwithstanding any investigation heretofore or hereafter made by the
Depositor or on the Depositor's behalf, and that the representations, warranties
and agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans.
SECTION 17. ASSIGNMENT; THIRD PARTY BENEFICIARIES. The Seller hereby
acknowledges that the Depositor will assign all its rights hereunder (except
those rights set forth in Section 8(b) and Section 10 hereof) to the Issuer,
which will in turn pledge all of the rights hereunder to the Indenture Trustee.
The Seller agrees that, upon the execution of the Indenture, the Indenture
Trustee will have all such rights and remedies provided to the Depositor
hereunder (except those rights set forth in Section 8(b) and Section 10 hereof)
and this Agreement will inure to the benefit of the Indenture Trustee for the
benefit of the Noteholders and the Note Insurer.
The Indenture Trustee shall constitute not only an assignee of the
Depositor's rights in accordance with this Section 17 but also an intended
third-party beneficiary of
15
<PAGE>
this Agreement to the extent necessary to enforce such rights and to obtain the
benefit of such remedies. The Note Insurer is an intended third-party
beneficiary of this Agreement, and this Agreement 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 Agreement 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 Agreement.
SECTION 18. MISCELLANEOUS.
(a) This Agreement may be executed in two or more counterparts, each of which
when so executed and delivered shall be an original, but all of which together
shall constitute one and the same instrument. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
successors and assigns.
(b) Any person into which the Seller may be merged or consolidated or any
person resulting from a merger or consolidation involving the Seller or any
person succeeding to the business of the Seller shall be considered the
successor of the Seller hereunder, without the further act or consent of either
party hereto. Except as provided above, this Agreement cannot be assigned,
pledged or hypothecated by any party without the written consent of each other
party to this Agreement and the Note Insurer.
(c) This Agreement supersedes all prior agreements and understandings between
the parties hereto relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning of the provisions of this Agreement.
(d) The Depositor shall immediately deliver the Mortgage Loans and all
related Mortgage Loan Documents to the Seller or the Seller's designee and any
security interest created by Section 11 hereof shall be deemed to have been
released if, on the Closing Date, each of the conditions set forth in Section 9
hereof shall not have been satisfied or waived.
(e) It is the express intent of the parties hereto that the conveyance of the
Mortgage Loans by the Seller to the Depositor as contemplated by this Agreement
be construed as a sale of the Mortgage Loans by the Seller to the Depositor. It
is, further, not the intention of the parties that such conveyance be deemed a
pledge of the Mortgage Loans by the Seller to the Depositor or any assignee of
the Depositor, including, but not limited to, the Indenture Trustee, to secure a
debt or other obligation of the Seller. However, in the event that,
notwithstanding the intent of the parties hereto, the Mortgage Loans are held to
be property of the Seller, then (i) this Agreement shall also be deemed
16
<PAGE>
to be a security agreement within the meaning of Article 9 of the New York
Uniform Commercial Code; (ii) the conveyance provided for herein shall be deemed
to be a grant by the Seller to the Depositor of a first priority security
interest in all of the Seller's right, title and interest in and to the Mortgage
Loans and all amounts payable to the holder of the Mortgage Loans in accordance
with the terms thereof and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities, or other
property, including, without limitation, all amounts, other than investment
earnings, from time to time held or invested in the Note Account or the
Collection Account, whether in the form of cash, instruments, securities or
other property; (iii) the possession by the Depositor or its agents of items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the New York
Uniform Commercial Code, and (iv) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Depositor for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Depositor pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Depositor shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and would be maintained
as such throughout the terms of this Agreement and the Indenture.
17
<PAGE>
IN WITNESS WHEREOF, the Seller and the Depositor have caused
this Mortgage Loan Sale Agreement to be executed and delivered by their
respective officers thereunto duly authorized as of the date first above
written.
MORTGAGE LENDERS NETWORK USA, INC.
By: /s/ Marion H. Mathes
-----------------------------
Name: Marion H. Mathes
Title: Senior Vice President
RESIDENTIAL ASSET FUNDING CORPORATION
By:/s/ Shanker Merchant
--------------------------------
Name:
Title:
FOR THE LIMITED PURPOSE OF ACKNOWLEDGING ITS OBLIGATIONS UNDER SECTIONS 3 AND 7
HEREOF:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By:/s/ Amy Wahl
--------------------------------
Name: Amy Wahl
Title: Assistant Vice President
[Mortgage Loan Sale Agreement]
18
<PAGE>
EXHIBIT A
BILL OF SALE
BILL OF SALE, made as of the 1st day of June, 1999, by
Mortgage Lenders Network USA, Inc., a Delaware corporation ("MLN" or the
"Seller"), to Residential Asset Funding Corporation, a North Carolina
corporation (the "Depositor").
WHEREAS, the Seller and the Depositor are parties to that
certain Mortgage Loan Sale Agreement, dated as of June 1, 1999, with respect to
the sale by the Seller and purchase by the Depositor of certain Mortgage Loans
(the "Sales Agreement");
WHEREAS, the Depositor intends to transfer the Mortgage Loans
and certain related assets to Mortgage Lenders Network Home Equity Loan Trust
1999-1 (the "Issuer"), and the Issuer intends in turn to pledge the Mortgage
Loans and certain related assets to Norwest Bank Minnesota, National
Association, as trustee (the "Indenture Trustee") pursuant to an Indenture (the
"Indenture"), dated as of June 1, 1999, between the Issuer and the Indenture
Trustee.
NOW, THEREFORE, the Seller, for and in consideration of the
consideration set forth in the Sales Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, does
hereby bargain, sell, convey, assign and transfer to the Depositor, without
recourse, free and clear of any liens, claims or other encumbrances, all of its
right, title and interest in and to each of the Mortgage Loans identified on
Schedule I to the Indenture, together with the Mortgage Loan Documents and other
documents maintained as part of the related Mortgage Files and the Seller's
interest in any Mortgaged Properties which secure a Mortgage Loan but are
acquired by repossession, foreclosure or deed in lieu of foreclosure after the
Closing Date, and all scheduled payments due on the Mortgage Loans after their
respective Cut-off Dates, and all principal prepayments and other unscheduled
collections collected in respect of the Mortgage Loans on or after the Cut-off
Date, and Seller's rights under the Mortgage Loan Sale Agreement, all insurance
policies insuring any Mortgage Loans or Mortgaged Property, Seller's rights
under the Servicing Agreement, all cash, instruments, or other property held or
required to be deposited in the Collection Account, 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 Collection
Account, which income shall belong to and be for the account of the Seller and
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 and all proceeds of the conversion,
voluntary or involuntary, of the foregoing.
The Seller hereby acknowledges receipt from the Depositor of
the Pool Purchase Price referred to in Section 2 of the Sales Agreement.
<PAGE>
Nothing in this Bill of Sale shall be construed to be a
modification of, or limitation on, any provision of the Sales Agreement,
including the representations, warranties and agreements set forth therein.
Unless otherwise defined herein, capitalized terms used in
this Bill of Sale shall have the meanings assigned to them in the Sales
Agreement, or if not assigned in the Sales Agreement, the Indenture.
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to
be executed and delivered by its respective officer thereunto duly authorized as
of the date above written.
MORTGAGE LENDERS NETWORK USA, INC.
By:_______________________________________
Name:
Title:
2
<PAGE>
EXHIBIT B
MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
The Seller makes the following representations, warranties and
covenants as to each Mortgage Loan as of its Cut-off Date and as of the Closing
Date.
(i) MORTGAGE LOANS AS DESCRIBED. The information set forth in the
Mortgage Loan Schedule (as to the Mortgage Loans) and in the Closing
Schedule (with respect to all of the Mortgage Loans) is true and
correct in all material respects.
(ii) PAYMENTS CURRENT; NO FIRST PAYMENT DEFAULT. No payment required
under the Mortgage Note is more than two payments past due as of the
Cut-off Date.
(iii) NO OUTSTANDING CHARGES. There are no defaults in complying with
the terms of the Mortgage, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold
payments and ground rents which previously became due and owing have
been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which
has been assessed but is not yet due and payable.
(iv) ORIGINAL TERMS UNMODIFIED. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any
respect, except by a written instrument which has been recorded, if
necessary to protect the interests of the mortgagee and which has been
delivered to the Depositor or its designee as part of the related
Mortgage File. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent
required by the policy. The mortgagor has not been released, in whole
or in part, except in connection with an assumption agreement approved
by the title insurer, to the extent required by the policy, and which
assumption agreement is included in the Mortgage File delivered to the
Depositor or its designee.
(v) NO DEFENSES. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including, without
limitation, the defense of usury, nor will the operation of any of the
terms of the Mortgage Note or the Mortgage, or the exercise of any
right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including, without
limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto.
(vi) INSURANCE POLICIES IN EFFECT. Pursuant to the terms of the
Mortgage, all improvements upon the related Mortgaged Property are
insured by
<PAGE>
an insurer rated B/III, A/II or better by BEST'S KEY RATING GUIDE
against loss by fire and such other risks as are usually insured
against in the broad form of extended coverage hazard insurance
available in the jurisdiction where that Mortgaged Property is located,
including flood hazards if the Mortgaged Property is in an area
identified in the Federal Register by the Federal Emergency Management
Agency as subject to special flood hazards (and if flood insurance was
required by federal regulation and flood insurance has been made
available in the jurisdiction where the related Mortgaged Property is
located). All such insurance policies (collectively, the "hazard
insurance policy") meet the requirements of the current guidelines of
the Federal Insurance Administration and are standard policies of
insurance for the locale where the related Mortgaged Property is
located. The coverage amount of the insurance provided by any such
insurance policy is at least equal to the lesser of (a) the full
insurable value of the Mortgaged Property on a replacement cost basis
or (b) the unpaid balance of the Mortgage Loan. Each such insurance
policy names (and will name) the present owner of the Mortgaged
Property as the insured and contains a standard mortgagee loss payable
clause naming the loan's originator or the Seller and its successors
and assigns as Mortgagee, and all premiums thereon have been paid.
The Mortgage obligates the mortgagor thereunder to maintain the hazard
insurance policy at the mortgagor's cost and expense, and on the mortgagor's
failure to do so, authorizes the holder of the Mortgage to obtain and maintain
such insurance at such mortgagor's cost and expense, and to seek reimbursement
therefor from the mortgagor. Where required by state law or regulation, the
mortgagor has been given an opportunity to choose the carrier of any required
hazard or flood insurance, provided the policy is not a "master" or "blanket"
hazard insurance policy covering a condominium, or a hazard insurance policy
covering the common facilities of a planned unit development. Any such hazard or
flood insurance policy is the valid and binding obligation of the related
insurer, is in full force and effect, and will be in full force and effect and
inure to the benefit of the Depositor and its successors and assigns upon the
consummation of the sale of the Mortgage Loan to the Depositor and its
assignees. In connection with the issuance of any hazard or flood insurance
policy, no unlawful fee, commission, kickback or other unlawful compensation or
value of any kind has been or will be received, retained or realized by any
attorney, firm or other person or entity, and no such unlawful items have been
received, retained or realized by the Seller. The Seller has not engaged in, and
has no knowledge of the mortgagor having engaged in, any act or omission which
should reasonably be expected to impair the coverage of any such policy, the
benefits of the endorsement provided for therein, or the validity and binding
effect of either.
(vii) COMPLIANCE WITH APPLICABLE LAW. Any and all requirements of
any federal, state or local law, rules and regulations, including,
without limitation, usury laws, TILA and Regulation Z relating thereto,
RESPA and related regulations, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act and Regulation B relating thereto, the Debt
Collection Practices Act, the Home Mortgage Disclosure Act, and any and
all consumer credit protection laws and disclosure laws applicable to
the Mortgage Loan, and all rules and regulations relating thereto, have
been complied with.
B-2
<PAGE>
(viii) NO SATISFACTION OF MORTGAGE OR MORTGAGE NOTE. Neither the
Mortgage nor the Mortgage Note has been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the related
Mortgaged Property has not been released from the lien of the Mortgage,
in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission. The
Seller has not waived the performance by the mortgagor of any action,
if the mortgagor's failure to perform such action would cause the
Mortgage Loan to be in default, nor has the Seller waived any default
resulting from any action or inaction by the mortgagor.
(ix) LOCATION AND TYPE OF MORTGAGED PROPERTY. The related Mortgaged
Property consists of a parcel of real property with a single family
residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit in a low-rise or mid-rise condominium
project, or an individual unit in a planned unit development, or a unit
of manufactured housing, or a mixed use property, provided that no
residence or dwelling is a cooperative or a mobile home attached to a
foundation or otherwise constitutes other than real property under
applicable state law.
(x) VALID LIEN. The Mortgage creates a valid, subsisting and
enforceable first or second lien on the related Mortgaged Property,
including all buildings on the Mortgaged Property and all installations
and mechanical, electrical, plumbing, heating and air conditioning
systems located in or annexed to such buildings, and all additions,
alterations and replacements made at any time with respect to the
foregoing. With respect to the first Mortgage Loans, the lien of the
Mortgage is subject only to Permitted Exceptions and with respect to
junior Mortgage Loans, the lien of the Mortgage is subject only to the
senior lien on the related Mortgaged Property and to Permitted
Exceptions. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting and enforceable first lien
and first priority security interest on the property described therein
with respect to each first Mortgage Loan and a valid, subsisting and
enforceable lien and security interest on the property described
therein with respect to each junior Mortgage Loan and the Seller has
the full right and authority to pledge and assign the same to the
Depositor or its designee.
(xi) VALIDITY AND ENFORCEABILITY OF MORTGAGE DOCUMENTS. The Mortgage
Note and the Mortgage and each other agreement, if any, executed and
delivered by the mortgagor in connection with the Mortgage Loan is
genuine, and each is the legal, valid and binding obligation of the
maker thereof enforceable in accordance with its terms. All parties to
the Mortgage Note, the Mortgage and each other such related agreement
had legal capacity to enter into the Mortgage Loan and to execute and
deliver the Mortgage Note, the Mortgage and any such agreement, and the
Mortgage Note, the Mortgage and each such agreement has been duly and
properly executed by such parties.
B-3
<PAGE>
(xii) FULL DISBURSEMENT OF PROCEEDS. Each Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully disbursed,
there is no requirement for future advances thereunder, and there was
no commitment to make future advances in effect with respect to the
Mortgage Loan as of the date of its origination except in the case of a
Mortgage Loan, a portion of the proceeds of which has been disbursed to
an escrow account in connection with improvements to be made to the
related Mortgaged Property where (i) the Mortgage Loan bears interest
on the entire principal amount thereof as if it had been fully
disbursed, (ii) any proceeds of such Mortgage Loan have not been held
in such an escrow account for more than 60 days, and (iii) the deposit
of such funds into such an escrow account has been effected in
accordance with the Seller's holdback policies. Any and all
requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been complied
with. All costs, fees and expenses incurred in making or closing the
Mortgage Loan and the recording of the Mortgage were paid, and the
mortgagor is not entitled to any refund of any amounts paid or due
under the Mortgage Note or Mortgage.
(xiii) DOING BUSINESS. All parties who have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise,
are (or, during the period in which they held and disposed of such
interest, were) (a) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the related Mortgaged
Property is located, and (b) (i) organized under the laws of such
state, or (ii) qualified to do business in such state, or federal
savings and loan associations, or national banks or (iii) federal
credit unions having principal offices in such state, or (iv) not doing
business in such state.
(xiv) LOAN-TO-VALUE (LTV). The initial Loan-to-Value Ratio ("LTV")
or Combined Loan-to-Value Ratio ("CLTV"), if applicable, of the
Mortgage Loan was as set forth in the Mortgage Loan Schedule. The
weighted average CLTV of the Mortgage Loans as of the Cut-off Date is
no greater than 79.15% for Group I and is no greater than 79.57% for
Group II.
(xv) TITLE INSURANCE. The Mortgage Loan is covered by either (a) an
attorney's opinion of title and abstract of title the form and
substance of which is acceptable to Fannie Mae (if the related
Mortgaged Property is located in Iowa) or (b) an ALTA lender's title
insurance policy or other generally acceptable form of policy of
insurance, issued by a title insurer qualified to do business in the
jurisdiction where the related Mortgaged Property is located, in either
case insuring the Seller and its successors and assigns as to the first
or second priority lien, as the case may be, of the Mortgage in the
amount of 100% of the outstanding principal amount of the Mortgage
Loan, subject only to Permitted Exceptions and the lien of any senior
mortgagee, and against any loss by reason of the invalidity or
unenforceability of the lien resulting from any provisions of the
Mortgage proving for adjustment to the mortgage interest rate and
Monthly Payment. Where required by state law or regulation, the
mortgagor has been
B-4
<PAGE>
given the opportunity to choose the carrier of such lender's title
insurance policy. Immediately prior to the sale of the Mortgage Loan to
the Depositor under this agreement, the Seller, together with its
successors or assigns, was the sole insured under such lender's title
insurance policy, and such lender's title insurance policy is full
force and effect and will be in full force and effect upon the sale of
the Mortgage Loan to the Depositor. No claims have been made under such
lender's title insurance policy, and no prior holder of the Mortgage,
including the Seller, has done, by act or omission, anything which
should reasonably be expected to impair the coverage provided by such
lender's title insurance policy. In connection with the issuance of
such lender's title insurance policy, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind has been
or will be received, retained or realized by any attorney, firm or
other person or entity, and no such unlawful items have been received,
retained or realized by the Seller.
(xvi) NO DEFAULTS. There is no material default, breach, violation or
event of acceleration existing under the Mortgage or the Mortgage Note
or related documents and no event which, with the passage of time or
with notice and the expiration of any applicable grace or cure period
(other than payment delinquencies of not more than 30 days), would
constitute a default, breach, violation or event of acceleration, and
neither the Seller nor any of its predecessors has waived any such
default, breach, violation or event of acceleration.
(xvii) NO MECHANICS' LIEN. There are no mechanics' or similar liens
or claims which have been filed for work, labor or material (and no
rights are outstanding that under the law could give rise to such
liens) affecting the related Mortgaged Property which are or may be
liens prior or equal to, or coordinate with, the lien of the Mortgage.
(xviii) LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. All improvements
which were considered in determining the Appraised Value of the related
Mortgaged Property in the Initial Appraisal lay wholly within the
boundaries and building restriction lines of the Mortgaged Property and
no improvements on adjoining properties encroach upon the Mortgaged
Property. No improvement located on or constituting part of the
Mortgaged Property is in violation of any applicable zoning law or
regulation.
(xix) RESERVED.
(xx) CUSTOMARY PROVISIONS. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related
Mortgaged Property of the benefits of the security provided thereby,
including, (a) in the case of a Mortgage denominated as a deed of
trust, by trustee's sale, and (b) otherwise by judicial foreclosure.
There is no homestead or other exemption available to a mortgagor
B-5
<PAGE>
which would interfere with the right to sell the Mortgaged Property at
a trustee's sale or the right to foreclose the Mortgage.
(xxi) CONFORMANCE WITH SELLER'S UNDERWRITING GUIDELINES. With the
exception of Certain Exception Loans, each Mortgage Loan was
underwritten in accordance with, and the Mortgage Loan and Mortgaged
Property conform to, the Seller's applicable underwriting guidelines.
(xxii) OCCUPANCY OF THE MORTGAGED PROPERTY. All inspections,
licenses and certificates required to be made or issued with respect
to all occupied portions of the Mortgaged Property and with respect to
the use and occupancy of the same, including, but not limited to,
certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities. Except with
respect to no more than 6.60% of the Mortgage Loans in Group I and
5.53% of the Mortgage Loans in Group II, each by principal balance as
of the Cut-off Date, the Mortgagor represented at the time of
origination of each Mortgage Loan that the Mortgagor would occupy the
related Mortgaged Property as the Mortgagor's primary residence.
(xxiii) NO ADDITIONAL COLLATERAL. The Mortgage Note is not and has
not been secured by any collateral except the lien of the corresponding
Mortgage and the security interest of any applicable security agreement
or chattel mortgage referred to in representation (x) above.
(xxiv) DEEDS OF TRUST. In the event the Mortgage is a deed of trust,
a trustee, authorized and duly qualified under applicable law to serve
as such, has been properly designated and currently serves as trustee
and is named in the Mortgage, and no fees or expenses are or will
become payable by the Depositor or its successors and assignees to the
trustee under the deed of trust, except in connection with a trustee's
sale after default by the mortgagor on the Mortgage.
(xxv) DUE ON SALE. The Mortgage contains an enforceable provision
for the acceleration of the payment of the unpaid principal balance of
the Mortgage Note in the event that the related Mortgaged Property is
sold or transferred without the prior written consent of the mortgagee
or its assignee thereunder.
(xxvi) NO BUYDOWN PROVISIONS; NO GRADUATED PAYMENTS OR CONTINGENT
INTEREST. The Mortgage Loan is not subject to any provisions pursuant
to which Monthly Payments are paid or partially paid with funds
deposited in any separate account established by the originator, the
Servicer, the Seller, the mortgagor or anyone on behalf of the
mortgagor, or pursuant to which Monthly Payments are paid by anyone
other than the mortgagor, nor does it contain any other similar
provisions which may constitute a "buydown" provision. The Mortgage
Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest
feature.
B-6
<PAGE>
(xxvii) RESERVED.
(xxviii) MORTGAGED PROPERTY UNDAMAGED. The Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty (causing damages thereto in excess of
any insurance coverage therefor less any deductible) so as to affect
adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended. The
Mortgaged Property is in good repair in all material respects. There
have been no condemnation proceedings with respect to the Mortgaged
Property and the Seller has no knowledge of any such proceedings
pending.
(xxix) COLLECTION PRACTICES; ESCROW DEPOSITS. The collection and
servicing practices used with respect to the Mortgage Loan have been in
all respects in compliance with Accepted Servicing Practices,
applicable laws and regulations, and have been in all respects legal
and consistent with industry standards for the servicing of
non-conforming Mortgage loans similar to the Mortgage Loan. All
servicing of the Mortgage Loan has been conducted in accordance with
Accepted Servicing Practices. With respect to escrow deposits and
escrow payments, all such payments are in the possession or under the
control of the Seller and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have
not been made. All escrow payments, if any, have been collected in full
compliance with state and federal law. An escrow of funds is not
prohibited by applicable law and has been established in an amount
sufficient to pay for every material item that remains unpaid and that
has been assessed but is not yet due and payable. No escrow deposits or
escrow payments or other charges or payments due to the Seller or to
the applicable servicer have been capitalized under the Mortgage or the
Mortgage Note. Any interest required to be paid with respect to any
escrow deposits pursuant to state and local law has been properly paid
and credited.
(xxx) SELLER APPRAISAL. The Servicer Mortgage File (as defined in the
Servicing Agreement) contains an appraisal of the related Mortgaged
Property signed prior to the approval of the Mortgage Loan application
by a qualified appraiser, duly appointed by or on behalf of the Seller,
who had no interest, direct or indirect in the Mortgaged Property or in
any loan made on the security thereof, and whose compensation was not
affected by the approval or disapproval of the Mortgage Loan.
(xxxi) COMPUTER TAPE. The Seller's computer tape or electronic data
file describing the Mortgage Loans was made available to the
accountants that are providing a comfort letter to the Note Insurer and
the Underwriters in connection with any information contained in the
Prospectus Supplement, and such information was complete and accurate
as of its date and includes a description of the same Mortgage Loans
that are described on the Mortgage Loan Schedule and the payments due
thereunder as of the Closing Date.
B-7
<PAGE>
(xxxii) OBLIGATIONS FULFILLED. The Seller has fulfilled all
obligations to be fulfilled on the lender's part under or in connection
with the origination, acquisition and assignment of the Mortgage Loans
and the related Mortgages and Mortgage Notes, including, without
limitation, giving any notices or consents necessary to effect the
acquisition of each Mortgage Loan and the related Mortgage and Mortgage
Note by the Depositor and its assignees, and has done nothing to impair
the rights of the Depositor, the Issuer, the Indenture Trustee, the
Note Insurer or the Noteholders in payments with respect thereto.
(xxxiii) AMORTIZATION; BALLOON LOANS. With respect to 66.85% of the
Initial Mortgage Loans in Group I and 64.46% of the Initial Mortgage
Loans in Group II, each by principal balance as of the Cut-off Date,
the payments required of the related of the Mortgagor are and will be
such that the Mortgage Loan will fully amortize over its term. 33.15%
of the Mortgage Loans in Group I and 35.04% of the Mortgage Loans in
Group II, each by principal balance as of the Cut-off Date, require a
balloon payment at the end of its term.
(xxxiv) FIRST PAYMENT DATE. The first date on which the applicable
Mortgagor must make a payment on each Mortgage Loan is no later than
July 1, 1999 for Group I and July 1, 1999 for Group II.
(xxxv) TIMING OF PAYMENTS. Each Mortgage Note is payable on the same
day of each month.
(xxxvi) CURRENT SERVICING. The Mortgage Loan is being serviced by
the Servicer.
(xxxvii) FEE SIMPLE, RESIDENTIAL. Each property securing a Mortgage
Loan consists of a fee simple estate (or a leasehold estate if the
related Mortgaged Property is located in a jurisdiction where title to
real property is typically held through leasehold estates) in a single
parcel of real property improved by a one- to four-family residential
dwelling,
(xxxviii) CIVIL RELIEF ACT. To the Seller's knowledge, no Mortgagor
has requested relief under the Soldiers' and Sailors' Civil Relief Act
of 1940.
(xxxix) NO TRANSFER TAXES. The sale, transfer, assignment and
conveyance of Mortgage Loans by the Seller pursuant to the Mortgage
Loan Sale Agreement is not subject to and will not result in any tax,
fee or governmental charge payable by the Seller, the Depositor, the
Issuer or the Indenture Trustee to any federal, state or local
government ("Transfer Taxes") other than Transfer Taxes which have or
will be paid by the Seller as due. In the event that the Depositor, the
Issuer or the Indenture Trustee receives actual notice of any Transfer
Taxes arising out of the transfer, assignment and conveyance of the
Mortgage Loans, on written demand by the Depositor, the Issuer or the
Indenture Trustee, or upon the Seller's otherwise being given notice
thereof by the Depositor, the Issuer or the Indenture Trustee, the
Seller shall pay, and otherwise
B-8
<PAGE>
indemnify and hold the Depositor, the Issuer, the Indenture Trustee,
and the Note Issuer harmless, on an after-tax basis, from and against
any and all such Transfer Taxes (it being understood that the
Noteholders, the Indenture Trustee, the Depositor, the Issuer, and the
Note Insurer shall have no obligation to pay such Transfer Taxes).
(xl) ENVIRONMENTAL COMPLIANCE. To the Seller's knowledge, the
Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation with respect to such property.
(xli) NO ADVERSE CIRCUMSTANCES. There do not exist any circumstances
or conditions with respect to the Mortgage, the property securing the
same, the Mortgagor or the Mortgagor's credit standing that reasonably
can be expected to cause private institutional investors to regard the
related Mortgage Loan as an unacceptable investment, cause the Mortgage
Loan to become delinquent, or adversely affect the value or
marketability of the Mortgage Loan, it being understood that the
Mortgage Loans are sub-prime credit Mortgage Loans and the Mortgagors
do not meet FNMA or FHLMC credit underwriting standards.
(xlii) RESERVED.
(xliii) FINAL PAYMENT. No Mortgage Loan in Group I has a final
payment date later than July 1, 2029 and no Mortgage Loan in Group II
has a final payment date later than July 1, 2029.
(xliv) PURCHASE MONEY MORTGAGE LOANS. As of the respective Cut-off
Dates, at least 17.91% of the Group I Mortgage Loans and 13.77% of the
Group II Mortgage Loans, by principal balance as of the Cut-off Date
are purchase money mortgage loans.
(xlv) CHARACTERISTICS OF NON-FIRST LIENS. With respect to each
Mortgage Loan that is not a first mortgage loan:
(a) At the time of origination, the related prior lien was not more than 30
days delinquent.
(b) Either (i) no consent for the Mortgage Loan is required by the holder of
the related prior lien or (ii) such consent has been obtained and has been
delivered to the Indenture Trustee.
(c) The related prior lien does not provide for negative amortization.
(d) The Seller has not received, and is not aware of, a notice of default of
any senior mortgage loan which has not been cured.
B-9
<PAGE>
(e) No more than 4.27% of the Mortgage Loans in Group I and 5.00% of the
Mortgage Loans in Group II, each by principal balance as of the Cut-off
Date, are second mortgage loans.
B-10
<PAGE>
EXHIBIT C
DEFINED TERMS
"ABS TERM SHEET": Those materials (attached as Exhibits F-1 and F-2
hereto) 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.
"ACCEPTED SERVICING PRACTICES": With respect to any Mortgage Loan,
written servicing procedures that the Seller would follow in servicing
residential and mixed- use mortgage loans held for its own account, which shall
be consistent with mortgage servicing practices of prudent mortgage lending
institutions that service mortgage loans of the same type, as such Mortgage
Loan.
"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 standards, and must meet the
appraisal standards of the Uniform Standards of Professional Appraisal Practice.
"APPRAISED VALUE": With respect to any Mortgaged Property, the lesser
of (a) the value thereof as determined by an Appraisal and (b) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the proceeds
of the related Mortgage Loan; PROVIDED, HOWEVER, that in the case of a
Refinanced Mortgage Loan, the Appraised Value of the Mortgaged Property shall be
equal to the value thereof as determined by an Appraisal.
"BUSINESS DAY": Any Day other than (i) a Saturday or Sunday or (ii) a
day on which the Note Insurer or banking institutions in the State of
Connecticut, the State of Maryland, the State of Delaware, the State of New York
or the city in which the corporate trust office of the Indenture Trustee are
authorized or obligated by law, regulation, executive order or governmental
decree to be closed.
"COLLECTION ACCOUNT": As defined in the Indenture.
"COMBINED LOAN-TO-VALUE RATIO": As of any date for any Mortgage Loan
with respect to which the related Mortgaged Property is subject to a mortgage,
deed of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage, the fraction, expressed as a
percentage, (a) the numerator of which is the sum of (1) the outstanding
principal amount of the indebtedness secured by such subordinate lien, plus (2)
the outstanding principal balance of the Mortgage Loan, and (b) the denominator
of which is the Appraised Value of the related Mortgaged Property.
"COMPUTATIONAL MATERIALS": Those materials (attached as Exhibits F-1
and F-2 hereto) 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
<PAGE>
Corporation I, Kidder, Peabody & Co., Incorporated, and Kidder Structured Asset
Corporation and the no-action letter 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.
"CUSTODIAL AGREEMENT": The Custodial Agreement, dated as of June 1,
1999, among MLN, the Custodian and the Indenture Trustee.
"CUSTODIAN": The custodian appointed pursuant to the Custodial
Agreement, which shall initially be BankBoston.
"ESCROW PAYMENT":. An amount escrowed by a mortgagor consisting of
amounts necessary to pay taxes, assessments, hazard and flood insurance premiums
and other similar payments anticipated to be made with respect to the related
Mortgage Loan, which is to be held in escrow by the servicer of such Mortgage
Loan for future payment on behalf of the related mortgagor.
"EXCEPTION LOAN":.A Mortgage Loan originated or re-underwritten
generally pursuant to, but which does not fully comply with, the Seller's
underwriting guidelines, but as to which variances from such guidelines have
been specifically approved by the Seller's chief credit officer or chief
underwriter after making a determination that mitigating factors in respect
thereof justified such approval.
"INITIAL APPRAISAL": With respect to any Mortgage Loan, the Appraisal
made for the Mortgage Loan's originator in connection with its origination,
which must be included in the related Mortgage File.
"LOAN-TO-VALUE RATIO" OR "LTV": With respect to any Mortgage Loan as of
its date of origination, the ratio on such date borne by the outstanding
principal amount of the Mortgage Loan to the Appraised Value of the related
Mortgaged Property.
"MONTHLY PAYMENT": As defined in the Servicing Agreement.
"MORTGAGE": With respect to a Mortgage Loan, the mortgage, deed of
trust, deed to secure debt or other instrument securing the related Mortgage
Note which creates a valid and enforceable first (or in the case of junior
mortgages, second) lien on or ownership interest in the related Mortgaged
Property, subject only to Permitted Exceptions and the lien of any senior
mortgagee if applicable.
"MORTGAGE FILE": As to each Mortgage Loan, a file containing all of the
related Mortgage Loan Documents.
"MORTGAGE LOAN": Any of the mortgage loans identified on the Mortgage
Loan Schedule.
"MORTGAGE LOAN DOCUMENTS": With respect to each Mortgage Loan, the
following documents:
C-2
<PAGE>
(a) The original Mortgage Note bearing all intervening endorsements,
endorsed in blank.
(b) The original of the guarantee executed in connection with the Mortgage
Note (if any).
(c) The original Mortgage with evidence of recording thereon, or a copy
thereof together with an officer's certificate of MLN or of the title company,
escrow company, or attorney that closed the related Mortgage Loan (the
"Settlement Agent") certifying that such represents a true and correct copy of
the original and that such original has been submitted for recordation in the
appropriate governmental recording office of the jurisdiction where the Mortgage
Property is located.
(d) The originals of all assumption, modification, consolidation or
extension agreements (if any) with evidence of recording thereon, or copies
thereof together with an officer's certificate of MLN or the Settlement Agent
certifying that such represent true and correct copies of the originals and that
such originals have each been submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.
(e) The originals of all intervening assignments of mortgage (if any) with
evidence of recording thereon, or copies thereof together with an officer's
certificate of MLN or the Settlement Agent certifying that such represent true
and correct copies of the originals and that such originals have been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located.
(f) The original attorney's opinion of title and abstract of title or the
original mortgagee title insurance policy, or if the original mortgagee title
insurance policy has not been issued, the irrevocable commitment to issue the
same (which may have been marked-up by the title company or its authorized
agent), or the preliminary title report for appropriate jurisdictions.
(g) The original of any security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage Loan.
(h) The original power of attorney or other authorizing instrument (if any)
with evidence of recording thereon, if the Mortgage Note or Mortgage or any
other material document relating to the Mortgage Loan has been signed by a
person on behalf of the Mortgagor (or a copy thereof together with an officer's
certificate of MLN or the Settlement Agent certifying that such represent true
and correct copies of the originals and that such originals have been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located).
"MORTGAGE NOTE": With respect to a Mortgage Loan, note or other
evidence of the indebtedness secured by the related Mortgage.
C-3
<PAGE>
"MORTGAGE POOL ERROR": Shall mean an error in information regarding the
characteristics of the Mortgage Loans provided by the Company to the
Underwriters for the preparation of Computational Materials or ABS Term Sheets.
"MORTGAGED PROPERTY": With respect to a Mortgage Loan, the real
property, together with the improvements thereon, subject to the lien of the
related Mortgage.
"NOTE ACCOUNT": As defined in the Indenture.
"NOTEHOLDER": As defined in the Indenture.
"NOTE INSURER": As defined in the Indenture.
"OFFERING DOCUMENTS": Collectively, the Prospectus and the Prospectus
Supplement, together with other information and documents specifically approved
by MLN for distribution to prospective holders of the Notes.
"OPINION OF COUNSEL": A written opinion of counsel, which counsel is
satisfactory to the Servicer, the Note Insurer and the Indenture Trustee.
Whenever an Opinion of Counsel is required hereunder, the renderer of such
Opinion may rely on other Opinions of Counsel. Any Opinion of Counsel relating
to tax matters must be an opinion of independent counsel.
"PERMITTED EXCEPTIONS": Any of the following encumbrances on a
Mortgaged Property: (1) the lien of current real property taxes and assessments
not yet due and payable; (2) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the originator
of the related Mortgage Loan and referred to or otherwise considered in the
appraisal made for the originator of such Mortgage Loan; and (3) other matters
to which like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the related
Mortgage or the use, enjoyment, value or marketability of the Mortgaged
Property.
"PRINCIPAL BALANCE": As defined in the Indenture.
"PRINCIPAL PREPAYMENT": Any mortgagor payment or other recovery in
respect of principal on a Mortgage Loan (including Net Liquidation Proceeds (as
defined in the Indenture)) which, in the case of a mortgagor payment, is
received in advance of its scheduled due date and is not accompanied by an
amount as to interest representing scheduled interest for any month subsequent
to the month of such payment, or that was accompanied by instructions from the
related mortgagor directing the Servicer to apply such payment to the Principal
Balance of such Mortgage Loan currently.
"PURCHASE PRICE": As defined in the Indenture.
"QUALIFIED REPLACEMENT MORTGAGE LOAN": As defined in the Indenture.
C-4
<PAGE>
"RECORDATION TRIGGER EVENT": The occurrence of any of the following:
(i) the occurrence and continuation of an Event of Default under the Servicing
Agreement, (ii) the request of the Note Insurer, if, in the reasonable judgment
of the Note Insurer, recordation is required to preserve the Trust Estate (as
defined in the Indenture), or (iii) with respect to a particular Mortgage Loan,
the institution of foreclosure proceedings or the insolvency of the related
Mortgagor.
"REFINANCED MORTGAGE LOAN": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
"SERVICER": MLN, or any successor thereto, in its capacity as servicer
under the Servicing Agreement.
"SERVICING AGREEMENT": The Servicing Agreement, dated as of June 1,
1999, between MLN, as servicer of the Mortgage Loans, the Issuer and the
Indenture Trustee.
C-5
<PAGE>
EXHIBIT D
SPECIAL POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that I, ______________________,
authorized officer of Mortgage Lenders Network USA, Inc. (the "Seller"), do
hereby constitute and appoint Norwest Bank Minnesota, National Association as
the true and lawful attorney, for the Issuer, and in its name, place and stead,
to record the assignments of mortgage with respect to the Mortgage Loans
transferred to the Norwest Bank Minnesota, National Association as indenture
trustee (the "Indenture Trustee"), under that Indenture dated as of June 1, 1999
between Mortgage Lenders Network Home Equity Loan Trust 1999-1 (the "Issuer")
and the Indenture Trustee, but only under the circumstances in which such
recording is required under the Sale Agreement dated as of June 1, 1999 between
the Seller and Residential Asset Funding Corporation, and to do and perform all
other things and acts relating to such assignments of mortgage as may be
necessary to effectuate the transfer of such Mortgage Loans to the Indenture
Trustee, including the execution and delivery of new assignments of mortgage
where necessary to comply with applicable real estate recording laws at the time
of recordation.
This power of attorney is irrevocable and is coupled with an interest
in the Mortgage Loans, and it may at all times be relied upon by any person,
firm or corporation dealing with the attorney named herein as remaining in full
force and effect, and such person, firm or corporation shall have no liability
to the Issuer with respect thereto.
WITNESS the following signature this 1st day of June, 1999
MORTGAGE LENDERS NETWORK USA, INC.
By: _____________________________________
Name:
Title:
D-1
<PAGE>
EXHIBIT E
BLANKET ASSIGNMENT OF THE NOTES
-------------------------------
The undersigned, _____________________, an authorized officer of
Mortgage Lenders Network USA, Inc. (the "Seller"), hereby assigns and conveys
all right, title and interest in the Notes listed on Schedule I to the
Indenture, dated as of June 1, 1999, between Mortgage Lenders Network Home
Equity Loan Trust, Series 1999-1 (the "Issuer") and Norwest Bank Minnesota,
National Association as indenture trustee (the "Indenture Trustee") (except for
the undersigned's right, title and interest in and to principal received prior
to and on after the Cut-off Date) to the Indenture Trustee for the Issuer
pursuant to the Mortgage Loan Sale Agreement, dated as of June 1, 1999 (the
"Sale Agreement"), between the Seller and Residential Asset Funding Corporation,
to have and to hold the same unto the successors, legal representatives and
assigns of the assignee forever.
Capitalized terms not defined herein shall have their respective
meanings as set forth in the Sale Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this assignment
this 1st day of June, 1999.
MORTGAGE LENDERS NETWORK USA, INC.
By: ________________________________
Name:
Title:
- --------------------------------------------------------------------------------
i
EXHIBIT 2.2
MORTGAGE LOAN CONTRIBUTION AGREEMENT
<PAGE>
- --------------------------------------------------------------------------------
MORTGAGE LOAN CONTRIBUTION AGREEMENT
BETWEEN
RESIDENTIAL ASSET FUNDING CORPORATION
AND
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
- --------------------------------------------------------------------------------
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
ASSET BACKED NOTES SERIES 1999-1, CLASS A-1 AND CLASS A-2
DATED AS OF JUNE 1, 1999
<PAGE>
MORTGAGE LOAN CONTRIBUTION AGREEMENT
This MORTGAGE LOAN CONTRIBUTION AGREEMENT (this "Agreement"),
dated as of June 1, 1999, is made and entered into by and between RESIDENTIAL
ASSET FUNDING CORPORATION, a Delaware corporation (the "Depositor"), and
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1 (the "Issuer"), a
Delaware business trust formed pursuant to a Deposit Trust Agreement, dated as
of June 1, 1999 (the "Deposit Trust Agreement"), among the Depositor, Wilmington
Trust Company, as Owner Trustee, Norwest Bank Minnesota, National Association,
as Trust Paying Agent and Mortgage Lenders Network USA, Inc., as Servicer.
RECITALS
On the terms and conditions hereinafter provided, the
Depositor intends to contribute and convey, and the Issuer intends to accept and
acquire, certain Mortgage Loans (hereinafter defined) which the Depositor
acquired from Mortgage Lenders Network USA, Inc. (the "Seller") pursuant to that
certain Mortgage Loan Sale Agreement, dated as of June 1, 1999 (the "Sale
Agreement"). The Issuer intends to pledge the Mortgage Loans to Norwest Bank
Minnesota, National Association, a national banking association, as trustee (in
such capacity, the "Indenture Trustee"), under an indenture, to be dated as of
June 1, 1999 (the "Indenture"), by and between the Issuer and the Indenture
Trustee, pursuant to which the Issuer's Asset Backed Notes, Series 1999-1 Class
A-1 and Class A-2 (the "Notes") will be issued. Pursuant to the Deposit Trust
Agreement, the Issuer will issue one or more certificates evidencing a 100%
beneficial interest in the Issuer (the "Certificates"). The Issuer will deliver
the net proceeds from the sale of the Notes and issue the Certificates to or
upon the order of the Depositor in consideration of the transfer of the Mortgage
Loans and the related rights thereunder and the rights pursuant to the Sale
Agreement (collectively, the "Consideration").
Capitalized terms used but not defined herein shall have the
meanings given such terms in the Indenture.
Now, therefore, in consideration of the premises and the
mutual agreements set forth herein, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO CONTRIBUTE AND CONVEY. As and for the
Consideration and subject to the terms and conditions set forth herein, the
Depositor agrees to contribute and convey, and the Issuer agrees to accept and
acquire, all of the Depositor's right, title and interest in and to the fixed
rate and adjustable rate mortgage loans identified on the schedule (the
"Mortgage Loan Schedule") annexed hereto as Exhibit A (such loans, together with
all related rights, interests and obligations, are collectively referred to
herein as the "Mortgage Loans"). The Mortgage Loans will be divided into two
groups. Those Mortgage Loans in Group I (the "Group I Mortgage Loans") will
secure the Class A-1 Notes and those Mortgage Loans in Group II (the
1
<PAGE>
"Group II Mortgage Loans") will secure the Class A-2 Notes. The Mortgage Loan
Schedule will set forth as to each Mortgage Loan the items specified in the
definition of "Mortgage Loan Schedule" in the Indenture.
The aggregate of the principal balances of the Mortgage Loans
being contributed and conveyed pursuant to this Agreement as of the close of
business on the Cut-off Date, after application of all payments of principal
received in respect of such Mortgage Loans on or before the Cut-off Date (the
"Initial Mortgage Pool Balance"), is set forth on the Cross Receipt executed
concurrently herewith in the form of Exhibit B attached hereto (the "Cross
Receipt"). Simultaneously with and in consideration of the Depositor's
contribution and conveyance of the Mortgage Loans to the Issuer, the Issuer
shall cause the Notes to be issued and delivered and shall transfer the net
proceeds received from the sale of the Notes to be delivered to the Depositor
and the Issuer shall cause the Certificates to be issued to or upon the order of
the Depositor. The Depositor shall be deemed automatically and for all purposes
to have made a contribution to the capital of the Issuer (which contribution
shall be reflected in the value assigned to the certificates evidencing equity
interests in the Issuer) in an aggregate amount specified on the Cross Receipt.
The transfer and conveyance of the Mortgage Loans shall take place on June 4,
1999 or such other date as shall be mutually acceptable to the parties hereto
(the "Closing Date").
SECTION 2. CONVEYANCE OF MORTGAGE LOANS.
(a) Effective as of the Closing Date, subject only to delivery
of the Mortgage File (as defined in the Sale Agreement) for each Mortgage Loan
pursuant to subsection (c) below, the Depositor does hereby contribute, assign,
transfer and otherwise convey to the Issuer, without recourse, representation or
warranty (other than as expressly set forth in Section 3(a) hereof), and the
Issuer does hereby accept, assume and acquire, all of the Depositor's right,
title and interest in and to the Mortgage Loans identified on the Mortgage Loan
Schedule, and the Issuer hereby assumes and agrees to perform and be bound by
each and all of the covenants, agreements, duties and obligations of the
Depositor arising under or relating to such Mortgage Loans.
(b) The Issuer and its assignees shall be entitled to receive
all payments of principal and interest due on or with respect to the Mortgage
Loans after the Cut-off Date, and all other recoveries of principal and interest
collected after the Cut-off Date (other than in respect of interest that accrued
on such Mortgage Loan during periods prior to the Cut-off Date), and each of the
rights of the Depositor pursuant to representations, warranties and indemnities
in favor of the Depositor contained in the Sale Agreement. All payments of
interest and principal due on or before the Cut-off Date, but collected after
the Cut-off Date, and recoveries of principal and interest collected on or
before the Cut-off Date (other than amounts representing interest that accrued
on the Mortgage Loans during any period on or after the Cut-off Date), shall
belong to, and be promptly remitted to the Seller.
(c) In connection with its contribution and conveyance of the
Mortgage Loans pursuant to subsection (a) above, the terms of the Sale Agreement
govern the
2
<PAGE>
delivery of the Mortgage Files to the Custodian, as the Issuer's designee, and
the Depositor assigns all of its rights under the Sale Agreement to the Issuer.
(d) In connection with its conveyance of the Mortgage Loans
pursuant to subsection (a) above, the Depositor shall deliver to the Issuer or
its designee in respect of such Mortgage Loans, on or before the Closing Date,
all amounts, if any, received on each Mortgage Loan after the applicable Cut-off
Date (other than amounts representing interest and principal due on or prior to
the applicable Cut-off Date) held by or on behalf of the Depositor.
(e) The Depositor shall, at any time upon the request of the
Issuer, without limiting the obligations of the Depositor under this Agreement,
execute, acknowledge and deliver all such additional documents and instruments
and all such further assurances and will do or cause to be done all such further
acts and things as may be proper or reasonably necessary to carry out the intent
of this Agreement.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
DEPOSITOR.
(a) The Depositor hereby represents and warrants to and
covenants with the Issuer, as of the date hereof, and shall be deemed to have
represented and warranted to and covenanted with the Issuer, as of the Closing
Date, that:
(i) the Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(ii) the execution and delivery of this Agreement by the
Depositor, the consummation of the transactions contemplated in this
Agreement by the Depositor and the performance and compliance with the
terms of this Agreement by the Depositor will not violate the
Depositor's certificate of incorporation or bylaws or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any
material agreement or other instrument to which it is a party or which
is applicable to it or any of its assets, or result in the imposition
of any lien, charge or encumbrance upon any of its assets pursuant to
any such agreement, and all board resolutions and consents of
shareholders necessary for the Depositor to enter into and consummate
all transactions contemplated by this Agreement have been obtained;
(iii) the Depositor has the full corporate power and authority
to enter into and consummate all transactions contemplated by this
Agreement, has duly authorized the execution, delivery and performance
of this Agreement, and has duly executed and delivered this Agreement;
(iv) this Agreement, assuming due authorization, execution and
delivery by the Issuer, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against the Depositor in
accordance with the terms hereof, subject to (A) applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
the enforcement of creditors' rights generally and (B)
3
<PAGE>
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(v) the Depositor is not in violation of, and its execution
and delivery of this Agreement and its performance and compliance with
the terms of this Agreement will not constitute a violation of, any
law, any order or decree of any court or arbiter, or any order,
regulation or demand of any federal, state or local governmental or
regulatory authority, which violation is likely to affect materially
and adversely either the ability of the Depositor to perform its
obligations under this Agreement or the financial condition of the
Depositor;
(vi) the assignment of the Mortgage Loans to the Issuer as
contemplated herein is not subject to any bulk transfer or similar law
in effect in any applicable jurisdiction;
(vii) no action, suit, proceeding or investigation is pending
or, to the best of the Depositor's knowledge, threatened against the
Depositor which, if determined adversely to the Depositor, would
prohibit the Depositor from entering into this Agreement or is likely
to materially and adversely affect either the ability of the Depositor
to perform its obligations under this Agreement or the financial
condition of the Depositor;
(viii) the Depositor has no knowledge of any recent adverse
financial condition or event with respect to itself that is likely to
materially and adversely affect its ability to perform its obligations
under this Agreement;
(ix) the Depositor has not failed to obtain any consent,
approval, authorization or order of, and has not failed to cause any
registration or qualification with, any court or regulatory authority
or other governmental body having jurisdiction over the Depositor,
which consent, approval, authorization, order, registration or
qualification is required for, and the absence of which would
materially and adversely affect, the legal and valid execution,
delivery and performance of this Agreement by the Depositor. No consent
or approval of any other person or entity is necessary for the
Depositor to transfer the Mortgage Loans to the Issuer as contemplated
herein, or, if any such consent or approval is necessary, such consent
or approval has previously been obtained;
(x) immediately prior to the transfer and assignment herein
contemplated, the Depositor held good, marketable and indefeasible
title to, and was the sole owner of, each Mortgage Loan conveyed by the
Depositor subject to no liens, charges, mortgages, encumbrances or
rights of others, except with respect to liens that will be released
simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Issuer will hold
good, marketable and indefeasible title to, and be the sole owner of,
each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others and the assignment of the Mortgage
Loans contemplated hereby is valid and effective.
4
<PAGE>
(b) The representations and warranties of the Seller with
respect to the Mortgage Loans set forth in Section 4(b) of and Exhibit B to the
Sale Agreement are hereby incorporated by reference in their entirety and are
assigned to the Issuer in lieu of any other representations and warranties of
the Depositor in respect of the Mortgage Loans. Nothing herein shall be deemed
to limit in any respect either the representations and warranties of the Seller
or the rights and remedies assigned by the Depositor to the Issuer against the
Seller on account of a breach thereof under the Sale Agreement.
(c) Except for the representations and warranties of the
Depositor in Section 3(a) hereof, the Depositor is contributing and conveying
the Mortgage Loans, without recourse to the Depositor and without
representations or warranties of any kind, express or implied, by the Depositor,
whether statutory or otherwise, including, without limitation, any warranties of
transfer, merchantability or fitness for a particular, or the Issuer's intended,
use or purposes.
SECTION 4. ASSIGNMENT OF RELATED RIGHTS AND REMEDIES.
(a) Effective as of the Closing Date, subject only to delivery
of the Mortgage File for each Mortgage Loan pursuant to Section 2(c) hereof, the
Depositor does hereby assign, transfer and otherwise convey to Issuer, without
recourse, representation or warranty (other than as expressly set forth in
Section 3(a) hereof), and the Issuer does hereby accept, assume and acquire, to
be held jointly and severally with the Depositor, all of the Depositor's rights
and remedies under the Sale Agreement and the Issuer hereby assumes and agrees
to perform and be bound by each and all of the covenants and agreements of the
Depositor arising under the Sale Agreement relating to such rights and remedies
and the exercise or enforcement thereof.
(b) Simultaneously with the exercise of any rights and
remedies or any notices given to the Seller by the Issuer under the Sale
Agreement, the Issuer shall give the Depositor and the Note Insurer notice
thereof, including, without limitation, copies of all notices given to the
Seller.
(c) This Section 4 provides the sole remedies available to the
Issuer, its successors and assignees, respecting any breach (i) of
representations and warranties with respect to the Mortgage Loans to which
reference is made in Section 3(c) or (ii) on the part of the Depositor under
Section 2(c) hereof.
SECTION 5. CLOSING. The closing of the conveyance of the
Mortgage Loans (the "Closing") shall be held at the offices of Dewey Ballantine
LLP, 1301 Avenue of the Americas, New York, New York 10019 at 10:00 a.m.,
Eastern time, on the Closing Date.
The Closing shall be subject to each of the following
conditions:
(a) All terms and conditions of this Agreement required to be
complied with on or before the Closing Date shall have been complied with and
the Depositor shall
5
<PAGE>
have the ability to comply with all terms and conditions and perform all duties
and obligations required to be complied with or performed after the Closing
Date.
(b) The Issuer shall have paid all costs and expenses payable
by it to the Depositor or otherwise pursuant to this Agreement.
Both parties shall use their best efforts to perform their
respective obligations hereunder in a manner that will enable the Issuer to
acquire the Mortgage Loans on the Closing Date. Notwithstanding the foregoing,
satisfaction by the Depositor or Issuer of its respective obligations under the
foregoing provisions of this Section 5 shall not be conditions precedent to the
obligation of the Depositor or Issuer, respectively, to close the transactions
contemplated by this Agreement.
SECTION 6. SERVICING. As of the Cut-off Date, the Mortgage
Loans will be serviced by Mortgage Lenders Network USA (in such capacity, the
"Servicer") pursuant to the terms of a Servicing Agreement, to be dated as of
June 1, 1999 (the "Servicing Agreement"), by and among the Issuer, the Servicer
and the Indenture Trustee.
SECTION 7. GRANT OF A SECURITY INTEREST. It is the express
intent of the parties hereto that the conveyance of the Mortgage Loans by the
Depositor to the Issuer as provided in Section 2(a) hereof be, and be construed
as, a complete and absolute transfer by the Depositor to the Issuer of all of
the Depositor's right, title and interest in and to the Mortgage Loans and not
as a pledge of the Mortgage Loans by the Depositor to the Issuer to secure a
debt or other obligation of the Depositor. However, if, notwithstanding the
aforementioned intent of the parties, the Mortgage Loans are held to be property
of the Depositor, then (a) it is the express intent of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by the Depositor to the
Issuer to secure a debt or other obligation of the Depositor, and (b) (i) this
Agreement shall also be deemed to be a security agreement within the meaning of
Article 9 of the New York Uniform Commercial Code; (ii) the conveyance provided
for in Section 2(a) hereof shall be deemed to be a grant by the Depositor to the
Issuer of a security interest in all of the Depositor's right, title and
interest in and to the Mortgage Loans, and all amounts payable to the holder of
the Mortgage Loans in accordance with the terms thereof, and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property, including, without limitation, all such amounts,
other than investment earnings from time to time held or invested pursuant to
and in accordance with the provisions of the Servicing Agreement or the
Indenture, as applicable, whether in the form of cash, instruments, securities
or other property; (iii) the subsequent pledge of the Mortgage Loans by the
Issuer to the Indenture Trustee as contemplated by the preamble hereto shall be
deemed to be an assignment of any security interest created hereunder; (iv) the
possession by the Depositor or the Issuer or any of their respective agents,
including, without limitation, the Indenture Trustee or its agent, of the notes
or other instruments evidencing the indebtedness of the mortgagors under the
related Mortgage Loans (the "Mortgage Notes") and such other items of property
relating to the Mortgage Loans as constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be "possession by the secured
party" for purposes of perfecting the security interest pursuant to Section
9-305 of the New York Uniform Commercial
6
<PAGE>
Code; and (v) notifications to persons (other than the Indenture Trustee)
holding such property, and acknowledgments, receipts or confirmations from
persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the secured party for the purpose of
perfecting such security interest under applicable law. The Depositor and the
Issuer shall, to the extent consistent with this Agreement, take such actions as
may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of this Agreement and the
Indenture.
SECTION 8. NOTICES. All communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if (a) personally delivered, (b) mailed by registered or certified mail,
postage prepaid and received by the addressee, (c) sent by express courier
delivery service and received by the addressee, or (d) transmitted by telex or
facsimile transmission (or any other type of electronic transmission agreed upon
by the parties) and confirmed by a writing delivered by any of the means
described in (a), (b) or (c), if to the Issuer, addressed to the Issuer in care
of Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration;
Reference: Mortgage Lenders Network Home Equity Loan Trust 1999-1, facsimile:
(302) 651-8882 (or to such other address as may hereafter be furnished to the
Depositor in writing by the Issuer), if to the Depositor, addressed to the
Depositor at 301 South College Street, TW-06, Charlotte, North Carolina
28288-0610, facsimile: (704) 383-8121 (or to such other address as may hereafter
be furnished to the Issuer in writing by the Depositor), and, if to the Note
Insurer, to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management - Structured Finance (IPMSF) (Mortgage
Lenders Network Home Equity Loan Trust 1999-1); facsimile: (914) 765-3810 (or to
such other address previously furnished in writing to the Depositor and Issuer).
SECTION 9. REPRESENTATIONS, WARRANTIES, INDEMNITIES AND
AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties, indemnities and
agreements contained in this Agreement, incorporated herein by reference or
contained in the certificates of officers of the Depositor submitted pursuant
hereto, shall remain operative and in full force and effect and shall survive
delivery of the Mortgage Loans by the Depositor to the Issuer.
SECTION 10. SEVERABILITY OF PROVISIONS. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement that is prohibited or unenforceable or is held to be void or
unenforceable in any particular jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any particular jurisdiction shall not invalidate or render
unenforceable
7
<PAGE>
such provision in any other jurisdiction. To the extent permitted by applicable
law, the parties hereto waive any provision of law which prohibits or renders
void or unenforceable any provision hereof.
SECTION 11. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but which
together shall constitute one and the same agreement.
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 13. FURTHER ASSURANCES. The Depositor and the Issuer
shall execute and deliver such instruments and take such further actions as the
other party may, from time to time, reasonably request in order to effectuate
the purposes and to carry out the terms of this Agreement.
SECTION 14. SUCCESSORS AND ASSIGNS. The rights and obligations
of the Depositor under this Agreement shall not be assigned by the Depositor
without the prior written consent of the Issuer, except as provided in Section
15 hereof. The Issuer shall assign all of its right, title and interest herein
to the Indenture Trustee for the benefit of the Noteholders and the Note
Insurer, to which the Depositor hereby expressly consents. The Depositor agrees
to perform its obligations hereunder for the benefit of the Issuer, the Note
Insurer and the Noteholders and that the Indenture Trustee may enforce the
provisions of this Agreement, exercise the rights of the Issuer and enforce the
obligations of the Depositor hereunder without the consent of the Issuer.
SECTION 15. MERGER, CONSOLIDATION, ETC. The Depositor may be
merged or consolidated with or into any person or entity, or transfer all or
substantially all of its assets to any person or entity; PROVIDED that the
person or entity resulting from any merger or consolidation to which the
Depositor shall be a party, or the person or entity which is the Issuer of all
or substantially all of the assets of the Depositor, shall be the successor to
the Depositor hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
SECTION 16. AMENDMENTS. This Agreement may be amended from
time to time by the parties hereto, with the consent of the Note Insurer, to
cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to add any other provision with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Trust Agreement, the
Indenture and the Servicing Agreement; PROVIDED, HOWEVER, that such action shall
not, as evidenced by an Opinion of Counsel to the Issuer delivered to the
Indenture Trustee and the Note Insurer, adversely affect in any material respect
the interests of the Indenture Trustee on behalf of the Noteholders.
8
<PAGE>
SECTION 17. WAIVERS. No failure or delay on the part of the
Issuer or its assignees in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other or further
exercise thereof or the exercise of any other power, right or remedy.
SECTION 18. THIRD PARTY BENEFICIARIES. The Note Insurer is an
intended third-party beneficiary of this Agreement, and this Agreement 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
Agreement 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 Agreement.
SECTION 19. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the parties hereto and by any Person claiming
by, through or under the parties hereto and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any other related documents.
*****
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Issuer have caused
their names to be signed hereto by their respective duly authorized officers as
of the date first above written.
RESIDENTIAL ASSET FUNDING CORPORATION,
a Delaware corporation
By: /s/ Shanker Merchant
---------------------------------
Name:
Title:
MORTGAGE LENDERS NETWORK HOME EQUITY
LOAN TRUST 1999-1, a Delaware business trust
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner
Trustee of the Issuer
By: /s/ Norma Closs
-----------------------
Name: Norma P. Closs
Title: Vice President
[Signature Page to Mortgage Loan Contribution Agreement]
<PAGE>
EXHIBIT A
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT B
CROSS RECEIPT
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
ASSET BACKED NOTES SERIES 1999-1, CLASS A-1 AND CLASS A-2
CROSS RECEIPT BETWEEN RESIDENTIAL ASSET FUNDING CORPORATION AND
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
ACKNOWLEDGING RECEIPT OF MORTGAGE NOTES
Reference is made to that certain Mortgage Loan Contribution
Agreement, between Residential Asset Funding Corporation (the "Depositor") and
Mortgage Lenders Network Home Equity Loan Trust 1999-1 (the "Issuer"), dated as
of June 1, 1999 (the "Mortgage Loan Contribution Agreement"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to such
terms in the Mortgage Loan Contribution Agreement.
The Issuer hereby acknowledges receipt from the Depositor of
the Mortgage Notes relating to the Mortgage Loans identified on the Mortgage
Loan Schedule annexed as Exhibit A to the Mortgage Loan Contribution Agreement
(the "Mortgage Loans"). The Group I Mortgage Loans have an Initial Pool Balance
of $100,538,000 and the Group II Mortgage Loans have an Initial Pool Balance of
$44,572,000.
MORTGAGE LENDERS NETWORK
HOME EQUITY LOAN TRUST 1999-1
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee of the Issuer
By:
------------------------------------
Authorized Signatory
The Depositor hereby acknowledges receipt of the Consideration
for the contribution of the Mortgage Loans by the Depositor to the Issuer as
specified in the Mortgage Loan Contribution Agreement. The Consideration
consists of (a) $________, in immediately available funds, representing the
aggregate net proceeds from the sale of the Notes delivered to the Underwriters
pursuant to the Underwriting Agreement, and (b) a Certificate, delivered to MLN
Depository Corp., a Delaware corporation, representing a 100% beneficial
interest in the Issuer.
RESIDENTIAL ASSET FUNDING CORPORATION
By:
----------------------------------
Name:
Title:
Dated: June ___, 1999
EXHIBIT 4.1
INDENTURE
<PAGE>
INDENTURE
BETWEEN
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE
Dated as of June 1, 1999
Relating to
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
ASSET BACKED NOTES, SERIES 1999-1, CLASS A-1 AND CLASS A-2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I DEFINITIONS ...........................................................................................2
Section 1.01. General Definitions.......................................................................2
ARTICLE II THE NOTES ...........................................................................................25
Section 2.01. Forms Generally..........................................................................25
Section 2.02. Forms of Certificate of Authentication...................................................26
Section 2.03. General Provisions With Respect to Principal and Interest Payment........................26
Section 2.04. Denominations............................................................................27
Section 2.05. Execution, Authentication, Delivery and Dating...........................................27
Section 2.06. Registration, Registration of Transfer and Exchange......................................27
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes...............................................28
Section 2.08. Payments of Principal and Interest.......................................................29
Section 2.09. Persons Deemed Owner.....................................................................31
Section 2.10. Cancellation.............................................................................31
Section 2.11. Authentication and Delivery of Notes.....................................................31
Section 2.12. Book-Entry Note..........................................................................33
Section 2.13. Termination of Book Entry System.........................................................33
ARTICLE III COVENANTS ..........................................................................................34
Section 3.01. Payment of Notes.........................................................................34
Section 3.02. Maintenance of Office or Agency..........................................................34
Section 3.03. Money for Note Payments to Be Held In Trust..............................................34
Section 3.04. Existence of Issuer......................................................................36
Section 3.05. Protection of Trust Estate...............................................................37
Section 3.06. [Reserved]...............................................................................38
Section 3.07. Performance of Obligations; Servicing Agreement..........................................38
Section 3.08. Investment Company Act...................................................................38
Section 3.09. Negative Covenants.......................................................................38
Section 3.10. Annual Statement as to Compliance........................................................39
Section 3.11. Restricted Payments......................................................................39
Section 3.12. Treatment of Notes as Debt for Tax Purposes..............................................40
Section 3.13. Notice of Events of Default..............................................................40
Section 3.14. Further Instruments and Acts.............................................................40
ARTICLE IV SATISFACTION AND DISCHARGE...........................................................................40
Section 4.01. Satisfaction and Discharge of Indenture..................................................40
Section 4.02. Application of Trust Money...............................................................41
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V DEFAULTS AND REMEDIES.................................................................................42
Section 5.01. Event of Default.........................................................................42
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......................................43
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee................44
Section 5.04. Remedies.................................................................................44
Section 5.05. Indenture Trustee May File Proofs of Claim...............................................45
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes.........................46
Section 5.07. Application of Money Collected...........................................................46
Section 5.08. Limitation on Suits......................................................................47
Section 5.09. Unconditional Rights of Noteholders to Receive Principal and Interest....................48
Section 5.10. Restoration of Rights and Remedies.......................................................48
Section 5.11. Rights and Remedies Cumulative...........................................................48
Section 5.12. Delay or Omission Not Waiver.............................................................48
Section 5.13. Control by Noteholders...................................................................48
Section 5.14. Waiver of Past Defaults..................................................................49
Section 5.15. Undertaking for Costs....................................................................49
Section 5.16. Waiver of Stay or Extension Laws.........................................................50
Section 5.17. Sale of Trust Estate.....................................................................50
Section 5.18. Action on Notes..........................................................................51
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the Issuer.........................51
Section 5.20. Application of the Trust Indenture Act...................................................52
ARTICLE VI THE INDENTURE TRUSTEE................................................................................52
Section 6.01. Duties of Indenture Trustee..............................................................52
Section 6.02. Notice of Default........................................................................53
Section 6.03. Rights of Indenture Trustee..............................................................53
Section 6.04. Not Responsible for Recitals or Issuance of Notes........................................54
Section 6.05. May Hold Notes...........................................................................54
Section 6.06. Money Held in Trust......................................................................54
Section 6.07. Eligibility, Disqualification............................................................54
Section 6.08. Indenture Trustee's Capital and Surplus..................................................55
Section 6.09. Resignation and Removal; Appointment of Successor........................................55
Section 6.10. Acceptance of Appointment by Successor...................................................56
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.........57
Section 6.12. Preferential Collection of Claims Against Issuer.........................................57
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees....................................57
Section 6.14. Authenticating Agents....................................................................58
Section 6.15. Review of Mortgage Files.................................................................59
Section 6.16. Indenture Trustee Fees and Expenses......................................................61
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.......................................................................62
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders...................62
Section 7.02. Preservation of Information; Communications to Noteholders...............................62
Section 7.03. Reports by Indenture Trustee.............................................................62
Section 7.04. Reports by Issuer........................................................................63
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES.........................................63
Section 8.01. Collection of Moneys.....................................................................63
Section 8.02. Note Accounts............................................................................64
Section 8.03. Claims against the MBIA Insurance Policy.................................................66
Section 8.04. General Provisions Regarding the Note Accounts and Mortgage Loans........................68
Section 8.05. Releases of Defective Mortgage Loans.....................................................69
Section 8.06. Reports by Indenture Trustee to Noteholders; Access to Certain Information...............69
Section 8.07. Trust Estate Mortgage Files..............................................................69
Section 8.08. Amendment to Servicing Agreement.........................................................70
Section 8.09. Delivery of the Mortgage Files Pursuant to Servicing Agreement...........................70
Section 8.10. Servicer as Agent........................................................................70
Section 8.11. Termination of Servicer..................................................................70
Section 8.12. Opinion of Counsel.......................................................................71
Section 8.13. Appointment of Custodians................................................................71
Section 8.14. Rights of the Note Insurer to Exercise Rights of Noteholders.............................71
Section 8.15. Trust Estate and Accounts Held for Benefit of the Note Insurer...........................72
Section 8.16. Reserve Account..........................................................................72
ARTICLE IX SUPPLEMENTAL INDENTURES..............................................................................73
Section 9.01. Supplemental Indentures Without Consent of Noteholders...................................73
Section 9.02. Supplemental Indentures With Consent of Noteholders......................................74
Section 9.03. Execution of Supplemental Indentures.....................................................75
Section 9.04. Effect of Supplemental Indentures........................................................76
Section 9.05. Conformity With Trust Indenture Act......................................................76
Section 9.06. Reference in Notes to Supplemental Indentures............................................76
Section 9.07. Amendments to Governing Documents........................................................76
ARTICLE X REDEMPTION OF NOTES...................................................................................77
Section 10.01. Redemption..............................................................................77
Section 10.02. Form of Redemption Notice...............................................................77
Section 10.03. Notes Payable on Optional Redemption....................................................78
ARTICLE XI MISCELLANEOUS........................................................................................78
Section 11.01. Compliance Certificates and Opinions....................................................78
Section 11.02. Form of Documents Delivered to Indenture Trustee........................................79
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 11.03. Acts of Noteholders.....................................................................80
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer and Issuer........................80
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices...................................82
Section 11.06. Rules by Indenture Trustee..............................................................82
Section 11.07. Conflict With Trust Indenture Act.......................................................82
Section 11.08. Effect of Headings and Table of Contents................................................82
Section 11.09. Successors and Assigns..................................................................82
Section 11.10. Separability............................................................................83
Section 11.11. Benefits of Indenture...................................................................83
Section 11.12. Legal Holidays..........................................................................83
Section 11.13. Governing Law...........................................................................83
Section 11.14. Counterparts............................................................................83
Section 11.15. Recording of Indenture..................................................................83
Section 11.16. Issuer Obligation.......................................................................84
Section 11.17. No Petition.............................................................................84
Section 11.18. Inspection..............................................................................84
Section 11.19. Usury...................................................................................85
Section 11.20. Third Party Beneficiary.................................................................85
</TABLE>
SCHEDULES AND EXHIBITS
Schedule l........Mortgage Loan Schedule
Exhibit A.........Form of Note
Exhibit B.........MBIA Insurance Policy
Exhibit C.........Form of Notice of Claim
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.*
<TABLE>
<CAPTION>
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
Section 310
<S> <C> <C>
(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).................................................................... 11.01(b)
Section 315
</TABLE>
- --------
* This Cross-Reference Table is not part of the Indenture.
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(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
</TABLE>
vi
<PAGE>
THIS INDENTURE, dated as of June 1, 1999 (as amended or supplemented
from time to time as permitted hereby, this "Indenture"), is between MORTGAGE
LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1, a Delaware business trust
(together with its permitted successors and assigns, the "Issuer") and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, 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 1999-1 (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 Mortgage Loans listed in Schedule I
to this Indenture (including property that secures a Mortgage Loan that becomes
an REO Property), including the related Mortgage Files delivered or to be
delivered to the Custodian, on behalf of the Indenture Trustee, pursuant to the
Mortgage Loan Sale Agreement, all payments of principal received, collected or
otherwise recovered after the Cut-off Date for each Mortgage Loan, all payments
of interest accruing on each Mortgage Loan after the Cut-off Date therefor
whenever received and all other proceeds received in respect of such Mortgage
Loans, and any Qualified Replacement Mortgage Loan, (b) the Servicing Agreement,
(c) the Mortgage Loan Sale Agreement, (d) the Mortgage Loan Contribution
Agreement, (e) the Management Agreement, (f) the Insurance Policies, (g) all
cash, instruments or other property held or required to be deposited in the
Collection Account, the Reserve Account and the Note 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 Collection
Account, the Reserve Account and the Note Accounts, which income shall belong to
and be for the account of the 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 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.
<PAGE>
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 MBIA Insurance Policy in trust and that it will
hold any proceeds of any claim upon the MBIA Insurance Policy, solely for the
use and benefit of the Noteholders in accordance with the terms hereof and the
MBIA Insurance Policy.
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL DEFINITIONS.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Indenture, and the definitions of such terms are applicable to
the singular as well as to the plural forms of such terms and to the masculine
as well as to the feminine 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.
"ACCOUNTANT": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the
Issuer.
"ACT": With respect to any Noteholder, as defined in Section 11.03.
"ADMINISTRATIVE FEE AMOUNT": For each Class of Notes and any Payment
Date, the sum of the related Monthly Servicing Fee, the related Indenture
Trustee's 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": With respect to a Mortgage Loan Group
and any Payment Date, the aggregate of the Principal Balance of the Mortgage
Loans in such Group as of the related Determination Date (or other specified
date). With respect to the Mortgage Loan
2
<PAGE>
Pool and any Payment Date, the aggregate of the Principal Balances of the
Mortgage Loans as of the related Determination Date (or other specified date).
"ASSIGNMENTS": The original instrument of assignment of a Mortgage,
including any interim assignments, from the originator or any other holder of
any Mortgage 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, until any successor Authenticating
Agent for the Notes is named, and thereafter "Authenticating Agent" shall mean
such successor. The 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
Responsible Officer, (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 of the Owner Trustee customarily performing
functions similar to those performed by the above officers and (iii) any other
Person, the Chairman, Chief Operating Officer, President or any Vice President
of such Person.
"AVAILABLE FUNDS": With respect to a Mortgage Loan Group and any
Payment Date, the sum of the amounts described in clauses (a) through (g) below,
less (i) the Administrative Fee Amount for such Group in respect of such Payment
Date, (ii) Monthly Advances and Servicing Advances for such Group previously
made that are reimbursable to the Servicer (other than those included in
liquidation expenses for any Liquidated Mortgage Loan in such Group and
reimbursed from the related Liquidation Proceeds and from Insurance Proceeds)
with respect to the related Collection Period to the extent permitted by the
Servicing Agreement and (iii) the aggregate amounts (A) deposited into the
Collection Account or the related Note Account that may not be withdrawn
therefrom pursuant to 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 a voidable
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 Mortgage Loans in such Group and due during the related Due Period
and all other interest payments on or in respect of such Mortgage Loans
received by or on behalf of the Servicer during the related Collection
Period (including Payments Ahead that are allocable to interest for the
related Due Period), net of amounts representing interest accrued on
such Mortgage Loans in respect of any period prior to the applicable
Cut-off
3
<PAGE>
Dates, plus any Compensating Interest payments made by the Servicer in
respect of the related Mortgage Loans and any net income from related
REO Properties for such Collection Period;
(b) all scheduled payments of principal received with respect to
the Mortgage Loans in such Group and due during the related Due Period
and all other principal payments (including Principal Prepayments)
received or deemed to be received during the related Collection Period
(including Payments Ahead that are allocable as principal for the
related Due Period) in respect of such Mortgage Loans;
(c) the aggregate of any Trust Insurance Proceeds for such Group
collected by the Servicer during the related Collection Period;
(d) the aggregate of any Net Liquidation Proceeds for such Group
collected by the Servicer during the related Collection Period;
(e) the aggregate of the Purchase Prices received in respect of
any Mortgage Loans in such Group that are required or permitted to be
repurchased, released, removed or substituted by the Seller during or
in respect of the related Collection Period, to the extent such amounts
are received by the Indenture Trustee on or before the related Deposit
Date;
(f) the amount of any Monthly Advances for such Group made by the
Servicer for such Payment Date; and
(g) the aggregate of amounts deposited in the related Note
Account during such Collection Period in connection with redemption of
the Notes in the related Class pursuant to Article X.
"BANKRUPTCY CODE": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"BASIC DOCUMENTS": This Agreement, the Trust Agreement, the Servicing
Agreement, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Management Agreement, the Insurance Agreement and the
Indemnification Agreement.
"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
Servicer, as the case may be, in its reasonable discretion. Such efforts do not
require the Issuer or the 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 Servicer, as the case may be, to advance or expend
fees or sums of money in addition to those specifically set forth in this
Indenture and the Servicing Agreement.
4
<PAGE>
"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.
"BUSINESS DAY": Any day other than (i) a Saturday or Sunday or (ii) a
day that is either a legal holiday or a day on which the Note Insurer is closed
or on which banking institutions in the State of Connecticut, the State of New
York, the State of Minnesota, the State of Maryland, the State of North Carolina
the state in which the Corporate Trust Office is located or the State of
Delaware are authorized or obligated by law, regulation or executive order to be
closed.
"CERTIFICATE": As defined in the Trust Agreement.
"CERTIFICATE DISTRIBUTION ACCOUNT": As defined in the Trust Agreement.
"CERTIFICATEHOLDERS": As defined in the Trust Agreement.
"CLASS": The Class A-1 Notes and/or the Class A-2 Notes, as applicable.
"CLASS A-1 NOTE BALANCE": With respect to all of the Notes of Class
A-1, the aggregate of the Current Note Balances of all Class A-1 Notes
Outstanding at the time of determination.
"CLASS A-1 NOTE INTEREST RATE": With respect to each Interest Period
prior to the Initial Redemption Date, 6.945% per annum, and for each Interest
Period thereafter, 7.445% per annum.
"CLASS A-1 NOTES": The Mortgage Lenders Network Home Equity Loan Trust
1999-1 Asset Backed Notes, Series 1999-1, Class A-1.
"CLASS A-1 ORIGINAL NOTE BALANCE": The aggregate principal balance of
the Class A-1 Notes at the issue date thereof, equal to $100,538,000.
"CLASS A-2 NOTE BALANCE": With respect to all of the Notes of Class
A-2, the aggregate of the Current Note Balances of all Class A-2 Notes
Outstanding at the time of determination.
"CLASS A-2 NOTE INTEREST RATE": With respect to each Interest Period
prior to the Initial Redemption Date, 6.995% per annum, and for each Interest
Period thereafter, 7.495% per annum.
"CLASS A-2 NOTES": The Mortgage Lenders Network Home Equity Loan Trust
1999-1 Asset Backed Notes, Series 1999-1, Class A-2.
"CLASS A-2 ORIGINAL NOTE BALANCE": The aggregate principal balance of
the Class A-1 Notes at the issue date thereof, equal to $44,572,000.
5
<PAGE>
"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 4, 1999, 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.
"COLLECTION ACCOUNT": The segregated trust account established by the
Servicer and maintained pursuant to Section 2.02(b) of the Servicing Agreement.
"COLLECTION PERIOD": As to any Payment Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Payment Date occurs (except that, in the case of the first Payment Date,
the related Collection Period will commence on the Cut-off Date for each
Mortgage Loan) and ending on the last day of such calendar month.
"COMBINED LOAN-TO-VALUE RATIO": As defined in the Mortgage Loan Sale
Agreement.
"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": As defined in the Servicing Agreement.
"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 Sixth Street and Marquette Avenue,
Minneapolis, MN 55479, Attention: Mortgage Lenders Network Home Equity Loan
Trust 1999-1, Series 1999-1, with a copy to the Indenture Trustee at 11000
Broken Land Parkway, Columbia, Maryland 21044, Attention: Mortgage Lenders
Network Home Equity Loan Trust 1999-1, Series 1999-1.
"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.
6
<PAGE>
"CUSTODIAN": A Person who is at any time appointed by the Indenture
Trustee pursuant to Section 8.13 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 BankBoston, N.A.
"CUT-OFF DATE": June 1, 1999.
"DEFAULT": Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"DEFECTIVE MORTGAGE LOAN": Any Mortgage Loan that is required to be
repurchased or substituted by the Seller pursuant to the Mortgage Loan Sale
Agreement.
"DEFINITIVE NOTES": Notes other than Book-Entry Notes.
"DEFICIENCY AMOUNT": With respect to any Class of Notes and Payment
Date, the related Note Interest and Overcollateralization Deficit for such
Payment Date minus (a) Available Funds for such Group, (b) any amounts
transferred to the Note Account with respect to such Class as provided in
Section 8.02(c)(vi) hereof and (c) any amounts transferred to the Note Account
with respect to such Class as provided in Section 8.16 hereof.
"DELETED MORTGAGE LOAN": A Mortgage Loan replaced or to be replaced by
a Qualified Replacement Mortgage Loan.
"DELINQUENCY AMOUNT": As of any Payment Date with respect to a Mortgage
Loan Group, the product of the Delinquency Percentage for such Group and Payment
Date and the Aggregate Principal Balance of the Mortgage Loans in such Group as
of the Determination Date relating to such Payment Date.
"DELINQUENCY PERCENTAGE": For any Payment Date and a Mortgage Loan
Group, the rolling three month average of the fraction, expressed as a
percentage, (i) the numerator of which is the aggregate of the Principal
Balances as of the related Determination Date of all Mortgage Loans in such
Group that were 90 or more days contractually delinquent, in foreclosure, REO
Property or for which the related Mortgagor was in a bankruptcy proceeding or
paying a reduced Monthly Payment as a result of a bankruptcy workout as of end
of the related Collection Period and the denominator of which is the Aggregate
Principal Balance of all Mortgage Loans in such Group as of the related
Determination Date.
"DEPOSIT DATE": The date each month on which funds on deposit in the
Collection Account are remitted by the Servicer to the Indenture Trustee for
deposit into the applicable Note Account, which date shall be with respect to
any Payment Date, the 18th day of the month in which such Payment Date occurs,
or the next succeeding Business Day, if such 18th day is not a Business Day.
"DEPOSITOR": Residential Asset Funding Corporation.
"DETERMINATION DATE": As to any Payment Date, the last day of the Due
Period relating to such Payment Date.
7
<PAGE>
"DUE PERIOD": With respect to any Payment Date, the period commencing
on the second day of the calendar month immediately preceding the calendar month
in which such Payment Date occurs (or, with respect to the first Payment Date,
commencing the day following the Cut-off Date for each Mortgage Loan) and ending
on the first day of the calendar month in which such Payment Date occurs.
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by Standard & Poor's and "Aa2" or better by Moody's and in the highest
short term rating category by Standard & Poor's and Moody's, and that is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) which is approved in writing by the
Note Insurer or (B) a trust account maintained with the trust department of a
federal or state chartered depository institution or trust company, having
capital and surplus of not less than $50,000,000, acting in its fiduciary
capacity, the unsecured and uncollateralized debt obligations of which shall be
rated "Baa3" or better by Moody's. Any Eligible Accounts maintained with the
Indenture Trustee shall conform to the preceding clause (B).
"EVENT OF DEFAULT": As defined in Section 5.01.
"EXCESS CASH": With respect to each Class of Notes and any Payment
Date, the amount, if any, by which Available Funds in the related Group for such
Payment Date exceed the sum of (i) any amounts payable to the Note Insurer for
Insured Payments with respect to such Class paid on prior Payment Dates and not
yet reimbursed and for any unpaid Note Insurer Premiums with respect to such
Class for prior Payment Dates and any other amounts due and owing with respect
to such Class of Notes under the Insurance Agreement (in each case with interest
thereon at the "Late Payment Rate" (as defined in the Insurance Agreement)),
(ii) the related Note Interest for such Payment Date, (iii) the related Monthly
Principal for such Payment Date and (iv) the related Overcollateralization
Deficit for such Payment Date.
"EXCESS CASH PAYMENT". As defined in clause fourth of Section 8.02(c).
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"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).
"FINAL MATURITY DATE": The Payment Date in June 2030.
"FITCH": Fitch IBCA, and its successors in interest.
"FULL PREPAYMENT": With respect to any Mortgage Loan, when any one of
the following occurs: (i) payment is made by the Mortgagor to the Servicer of
100% of the outstanding
8
<PAGE>
principal balance of such Mortgage Loan, together with all accrued and unpaid
interest thereon at the Mortgage Interest Rate on such Mortgage Loan, (ii)
payment is made to the Indenture Trustee of the Purchase Price of such Mortgage
Loan in connection with the purchase of such Mortgage Loan by the Seller or the
Servicer or (iii) payment is made to the Servicer of all Insurance Proceeds and
Liquidation Proceeds, and other payments, if any, that have been determined by
the Servicer in accordance with the provisions of the Servicing Agreement to be
finally recoverable, in the Servicer's reasonable judgment, in respect of such
Mortgage Loan.
"GRANT": To assign, transfer, mortgage, pledge, create and grant a
security interest in, deposit, set-over and confirm. A Grant of a Mortgage Loan
and related Mortgage Files, a Permitted Investment, the Servicing Agreement, the
Mortgage Loan Sale Agreement, the Mortgage Loan Contribution 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,
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.
"GROUP" or "MORTGAGE LOAN GROUP": Group I or Group II, as the case may
be.
"GROUP I": The group of Mortgage Loans pledged to the Indenture Trustee
and assigned to Group I, as reflected on the Mortgage Loan Schedule.
"GROUP I REQUIRED OVERCOLLATERALIZATION AMOUNT" means with respect to
the Class A-1 Notes:
(a) for any Payment Date occurring during the period commencing
on the Closing Date and ending on the later of the 30th Payment Date
following the Closing Date and the date upon which principal of the
Class A-1 Notes in the amount of one-half of the Aggregate Principal
Balance of the Mortgage Loans in Group I as of the Cut-off Date has
been received by the Class A-1 Noteholders, the greater of: (i) 6.40%
of the Aggregate Principal Balance of the Mortgage Loans in Group I as
of the Cut-off Date and (ii) 98% of the Delinquency Amount for Group I.
(b) for any Payment Date occurring after the end of the period
described in clause (a) above, the greatest of (i) 12.80% of the
Aggregate Principal Balance of the Mortgage Loans in Group I as of the
Determination Date relating to such Payment Date, (ii) 98% of the
Delinquency Amount for Group I, (iii) 0.75% of the Aggregate Principal
Balance of the Mortgage Loans in Group I as of the Cut-Off Date and
(iv) three times the Principal Balance of the largest Mortgage Loan
then outstanding in such Group.
(c) provided, however, for any Payment Date occurring after the
end of the period described in clause (a) above, if the related
Delinquency Percentage exceeds 10.00% of the Aggregate Principal
Balance of the Mortgage Loans in Group I as of the
9
<PAGE>
related Determination Date, the Group I Required Overcollateralization
Amount shall be no less than the Group I Required Overcollateralization
Amount as of the previous Payment Date.
The Note Insurer may, in its sole discretion, at the request of the
holders of 50% or more of the ownership interests of the Issuer, modify clause
(a)(ii) or (b)(ii) above for the purpose of reducing or eliminating, in whole or
in part, the application of clause (a)(ii) or (b)(ii) above, if the Indenture
Trustee and each Rating Agency shall have been notified in writing of such
modification prior to the related Payment Date and each Rating Agency shall have
confirmed that such modification shall not result in a downgrading of the
then-current implied ratings on the Notes (without regard to the MBIA Insurance
Policy).
"GROUP II": The group of Mortgage Loans pledged to the Indenture
Trustee and assigned to Group II, as reflected on the Mortgage Loan Schedule.
"GROUP II REQUIRED OVERCOLLATERALIZATION AMOUNT" means with respect to
the Class A-2 Notes:
(a) for any Payment Date occurring during the period
commencing on the Closing Date and ending on the later of the 30th
Payment Date following the Closing Date and the date upon which
principal of the Class A-2 Notes in the amount of one-half of the
Aggregate Principal Balance of the Mortgage Loans in Group II as of the
Cut-off Date has been received by the Class A-2 Noteholders, the
greater of: (i) 6.40 % of the Aggregate Principal Balance of the
Mortgage Loans in Group II as of the Cut-off Date and (ii) 98% of the
Delinquency Amount for Group II.
(b) for any Payment Date occurring after the end of the period
described in clause (a) above, the greatest of (i) 12.80% of the
Aggregate Principal Balance of the Mortgage Loans in Group II as of the
Determination Date relating to such Payment Date, (ii) 98% of the
Delinquency Amount for Group II, (iii) 0.75% of the Aggregate Principal
Balance of the Mortgage Loans in Group II as of the Cut-Off Date and
(iv) three times the Principal Balance of the largest Mortgage Loan
then outstanding in such Group.
(c) provided, however, for any Payment Date occurring after
the end of the period described in clause (a) above, if the related
Delinquency Percentage exceeds 10.00% of the Aggregate Principal
Balance of the Mortgage Loans in Group II as of the related
Determination Date, the Group II Required Overcollateralization Amount
shall be no less than the Group II Required Overcollateralization
Amount as of the previous Payment Date.
The Note Insurer may, in its sole discretion, at the request of the
holders of 50% or more of the ownership interests of the Issuer, modify clause
(a)(ii) or (b)(ii) above for the purpose of reducing or eliminating, in whole or
in part, the application of clause (a)(ii) or (b)(ii) above, if the Indenture
Trustee and each Rating Agency shall have been notified in writing of such
modification prior to the related Payment Date and each Rating Agency shall have
confirmed that such modification shall not result in a downgrading of the
then-current implied ratings on the Notes (without regard to the MBIA Insurance
Policy).
10
<PAGE>
"HIGHEST LAWFUL RATE": As defined in Section 11.19.
"INDEMNIFICATION AGREEMENT": As defined in the Insurance Agreement.
"INDENTURE": This instrument as originally executed and, if from time
to time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented or
amended. All references in this instrument to designated "Articles", "Sections",
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed.
The words "herein", "hereof', "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.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National Association, 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
this Indenture, and thereafter "Indenture Trustee" shall mean such successor
Person.
"INDENTURE TRUSTEE'S FEE": With respect to each Class of Notes, the
Indenture Trustee's monthly fee, equal to 1/12th of 0.02% of the Aggregate
Principal Balance of the Mortgage Loans in the related Group as of the first day
of the applicable Due Period.
"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 hereof.
"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 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).
"INITIAL REDEMPTION DATE": The first Payment Date on which the
aggregate Note Balance is less than 10% of the Original Note Balance.
"INSURANCE AGREEMENT": The Insurance Agreement, dated as of June 1,
1999, among the Note Insurer, the Issuer, the Servicer, the Seller, the
Depositor, and the Indenture Trustee.
11
<PAGE>
"INSURANCE POLICIES": All insurance policies insuring any Mortgage Loan
or Mortgaged Property, to the extent the Issuer or the Indenture Trustee has any
interest therein.
"INSURED PAYMENTS": As to each Class of Notes and any Payment Date, the
amount required to be paid by the Note Insurer under the MBIA Insurance Policy
pursuant to a Notice of Claim presented by the Indenture Trustee (in the manner
described in Section 8.03). The Insured Payment for the related Class of Notes
is (i) for any Payment Date, the related Deficiency Amount and (ii) any
Preference Amount due and then owing under the MBIA Insurance Policy for such
Class of Notes.
"INSURANCE PROCEEDS": As defined in the Servicing Agreement.
"INTEREST PERIOD": With respect to a Payment Date, the calendar month
immediately preceding the month in which such Payment Date occurs.
"ISSUER": Mortgage Lenders Network Home Equity Loan Trust 1999-1, a
Delaware business trust.
"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, 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 3, 1999.
"LIQUIDATED MORTGAGE LOAN": As defined in the Servicing Agreement.
"LIQUIDATION DATE": With respect to any Mortgage Loan, the date of the
final receipt of all Liquidation Proceeds, Insurance Proceeds or other payments
with respect to such Mortgage Loan.
"LIQUIDATION PROCEEDS": As defined in the Servicing Agreement.
"LOAN-TO-VALUE RATIO": As defined in the Mortgage Loan Sale Agreement.
"MANAGEMENT AGREEMENT": That certain agreement, dated as of June 1,
1999, between the Issuer and the Indenture Trustee pursuant to which the
Indenture Trustee, as manager, will perform certain obligations of the Issuer
hereunder.
"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 Final Maturity Date or by declaration of
acceleration, call for redemption or otherwise.
"MBIA": MBIA Insurance Corporation, its successors and assigns.
"MBIA INSURANCE POLICY": The note guaranty insurance policy No. 29358,
dated June 4, 1999, issued by the Note Insurer to the Indenture Trustee for the
benefit of the Noteholders,
12
<PAGE>
pursuant to which the Note Insurer guarantees payment of Insured Payments. A
specimen of the MBIA Insurance Policy is attached hereto as Exhibit C.
"MBIA PAYMENT DEFAULT": Failure and continued failure by the Note
Insurer to make an Insured Payment required under the MBIA Insurance Policy in
accordance with its terms.
"MONTHLY ADVANCE": As defined the Servicing Agreement.
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of
each monthly payment payable under such Mortgage Note by the Mortgagor in
accordance with its terms, including, one month's accrued interest on the
related Principal Balance at the then applicable Mortgage Interest Rate, but net
of any portion of such monthly payment that represents late payment charges,
prepayment or extension fees or collections allocable to payments to be made by
Mortgagors for payment of insurance premiums or similar items.
"MONTHLY PRINCIPAL": For each Group and any Payment Date, an amount
equal to (a) the aggregate of (i) all scheduled payments of principal received
(or advanced or to be advanced on the related Deposit Date) with respect to the
Mortgage Loans in such Group and due during the related Due Period and all other
amounts collected, received or otherwise recovered in respect of principal on
such Mortgage Loans (including Principal Prepayments, but not including Payments
Ahead that are not allocable to principal for the related Due Period) during or
in respect of the related Collection Period, and (ii) the aggregate of the
amounts allocable to principal deposited in the related Note Account on the
related Deposit Date by the Issuer, the Depositor, the Servicer or the Note
Insurer in connection with a repurchase, release, removal or substitution of any
Mortgage Loans in such Group pursuant to this Indenture, reduced by (b) the
amount of any Overcollateralization Surplus with respect to such Group and
Payment Date.
"MONTHLY SERVICING FEE": As defined in the Servicing Agreement.
"MOODY'S": Moody's Investors Service, Inc. and its successors in
interest.
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"MORTGAGE FILE": As defined in the Mortgage Loan Sale Agreement.
"MORTGAGE INTEREST RATE": With respect to each Mortgage Loan, the rate
per annum set forth in the related Mortgage Note at which interest accrues on
such Mortgage Loan, in each case after giving effect to any modification of a
Mortgage Loan for any period in connection with a bankruptcy or similar
proceeding involving the related Mortgagor or a modification, waiver or
amendment of such Mortgage Loan granted or agreed to by the Servicer in
accordance with the Servicing Agreement.
"MORTGAGE LOAN": Each of the mortgage loans Granted to the Indenture
Trustee under this Indenture as security for the Notes and that from time to
time comprise part of the Trust Estate, including any property that secures a
Mortgage that becomes REO Property. The Mortgage Loans are listed on the
Mortgage Loan Schedule annexed hereto as Schedule I.
13
<PAGE>
"MORTGAGE LOAN CONTRIBUTION AGREEMENT": That certain agreement, dated
as of May 1, 1999, between the Depositor and the Issuer pursuant to which the
Mortgage Loans will be acquired from the Depositor by the Issuer for inclusion
in the Trust Estate.
"MORTGAGE LOAN POOL": The pool of Mortgage Loans consisting of the
Mortgage Loans in Group I and the Mortgage Loans in Group II.
"MORTGAGE LOAN SALE AGREEMENT": That certain agreement, dated as of
June 1, 1999, between the Seller and the Depositor pursuant to which the
Mortgage Loans will be acquired from the Seller by the Depositor.
"MORTGAGE LOAN SCHEDULE": As of any date, the schedule of mortgage
loans included in the Trust Estate, Schedule I hereto identifies the Mortgage
Loans being Granted to the Indenture Trustee on the Closing Date. The Mortgage
Loan Schedule shall be amended by the Servicer as appropriate from time to time
to reflect the deletion and substitution of Mortgage Loans in accordance with
the terms of the Basic Documents. The Mortgage Loan Schedule shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the related Mortgaged Property and shall set forth as to each Mortgage Loan the
initial Loan-to-Value Ratio or Combined Loan-to-Value Ratio, the Principal
Balance as of the Cut-off Date, the Mortgage Interest Rate, the currently
Monthly Payment amount and the stated maturity date of the related Mortgage
Note. The Mortgage Loan Schedule shall break out the Mortgage Loans according to
Mortgage Loan Group. The Issuer shall cause the initial Mortgage Loan Schedule
to be delivered by the Seller to the Indenture Trustee in both physical and
computer-readable form.
"MORTGAGE NOTE": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Mortgage Note.
"MORTGAGOR": The obligor under a Mortgage Note.
"NET LIQUIDATION PROCEEDS": As defined in the Servicing Agreement.
"NONRECOVERABLE ADVANCE": As defined in the Servicing Agreement.
"NOTE ACCOUNT": With respect to each Class of Notes, the segregated
trust account, which shall be an Eligible Account, established and maintained
pursuant to Section 8.02 and entitled "Norwest Bank Minnesota, National
Association, as Indenture Trustee for Mortgage Lenders Network Home Equity Loan
Trust 1999-1 Home Equity Loan Backed Notes, Series 1999-1, Class A-1 Note
Account," or "Norwest Bank Minnesota National Association, as Indenture Trustee
for Mortgage Lenders Network Home Equity Loan Trust 1999-1 Home Equity Loan
Backed Notes, Series 1999-1, Class A-2, Note Account" on behalf of the
Noteholders and the Note Insurer.
"NOTE BALANCE": The Class A-1 Note Balance and/or the Class A-2 Note
Balance, as applicable.
14
<PAGE>
"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 or giving of any consent pursuant to this
Indenture, any Note registered in the name of the Issuer, the Seller, the
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 Seller, the
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 acted or consented unless
the Issuer, the Seller, the Servicer, the Depositor or any such Person is an
owner of record of all of the Notes.
"NOTE INSURER": MBIA Insurance Corporation, a New York stock insurance
company, and successors thereto.
"NOTE INSURER COMMITMENT LETTER": The commitment letter dated June 3,
1999, from the Note Insurer to the Seller regarding the issuance of a financial
guaranty insurance policy.
"NOTE INSURER DEFAULT": The existence and continuance of any of the
following-
(a) a MBIA Payment Default;
(b) the entry by a court having jurisdiction in the premises of
(i) a final and nonappealable decree or order for relief in respect of
the Note Insurer in an involuntary case or proceeding under any
applicable United States federal or state bankruptcy, insolvency,
rehabilitation, reorganization or other similar law of (ii) a final and
nonappealable decree or order adjudging the Note Insurer bankrupt or
insolvent, or approving, as properly filed a petition seeking
reorganization, rehabilitation, arrangement, adjustment or composition
of or in respect of the Note Insurer under any applicable United States
federal or state law, or appointing a custodian, receiver, liquidator,
rehabilitator, assignee, trustee, sequestrator or other similar
official of the Note Insurer or of any substantial part of its
property, or ordering, the winding-up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 90
consecutive days; or
(c) the commencement by the Note Insurer of a voluntary case or
proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated bankrupt or insolvent, or
the consent of the Note Insurer to the entry of a decree or order for
relief in respect of the Note Insurer in an involuntary case or
proceeding under any applicable United States federal or state
bankruptcy, insolvency case or proceeding against the Note Insurer, or
the filing by the Note Insurer of a petition or answer or consent
seeking reorganization or relief under any applicable United States
federal or state law, or the consent by the Note Insurer to the filing
of such petition or to the appointment of or the taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Note Insurer or of any substantial part of its
property, or the failure by the Note Insurer to pay debts generally as
they become due, or the admission by the Note Insurer in writing of its
inability to pay its debts generally as they become due.
15
<PAGE>
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Note Insurer Default, the consent by the Note
Insurer shall not be required to any action or inaction hereunder and the Note
Insurer shall not have any rights with respect thereto; provided, however, that
such rights shall be immediately reinstated following cure of such Note Insurer
Default.
"NOTE INSURER PREMIUM": On the Closing Date, the premium due to the
Note Insurer in paragraph 1(a)(i) of the Note Insurer Commitment Letter and
thereafter, with respect to each Class of Notes the premium due to the Note
Insurer on each Payment Date, which amount shall be equal to the product of the
Note Insurer Premium Rate and the related Note Balance immediately prior to such
Payment Date.
"NOTE INSURER PREMIUM RATE": On the Closing Date, the Premium
Percentage specified in paragraph 1(a)(i) of the Note Insurer Commitment Letter
and beginning on July 26, 1999 and on each Payment Date thereafter, the Premium
Percentage specified in paragraph l(b) thereof.
"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": The Class A-1 Note Interest Rate or the Class A-2
Note Interest Rate, as applicable.
"NOTE REGISTER": As defined in Section 2.06.
"NOTE REGISTRAR": As defined in Section 2.06.
"NOTES": The Class A-1 Notes and 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 MBIA Insurance Policy with respect to any Payment Date, in the
form set forth as Exhibit C hereto.
"OFFICERS' CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Seller, the Depositor, the Servicer or, in the case of
the Issuer, an Authorized Officer of the Owner Trustee, as the case may be, and
delivered to the Indenture Trustee, Note Insurer or each Rating Agency, as the
case may be.
"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
16
<PAGE>
opinion is at the request of the Indenture Trustee, in which case such expense
shall be an expense of the Servicer.
"ORIGINAL NOTE BALANCE": The Class A-1 Original Note Balance or the
Class A-2 Original Note Balance, as applicable.
"OUTSTANDING": As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(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 this 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;
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 Seller, the 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
Seller, the Servicer or the Depositor or such other obligor; provided, further,
however, that Notes that have been paid with the proceeds of the MBIA Insurance
Policy shall be deemed to be Outstanding for the purposes of this 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, as to any
Payment Date, the amount, if any, by which (x) the Aggregate Principal Balance
of the Mortgage Loans in the related Group as of the end of the related Due
Period exceeds (y) the related Note Balance for such Payment Date, after taking
into account Monthly Principal with respect to such Group
17
<PAGE>
(disregarding any permitted reduction thereof in such Monthly Principal due to
an Overcollateralization Surplus made on such Payment Date) to be applied in
reduction of the related Note Balance on such Payment Date. If the Aggregate
Principal Balance of the Mortgage Loans in the related Group is less than the
related Note Balance for such Payment Date, determined as provided above, the
Overcollateralization Amount for such Class and Payment Date shall be zero.
"OVERCOLLATERALIZATION DEFICIT": For each Class of Notes, as to any
Payment Date, the amount, if any, by which the related Note Balance on such
Payment Date (after taking into account any payments to be paid on such Payment
Date in reduction of the related Note Balance) exceeds the Aggregate Principal
Balance of the Mortgage Loans in the related Group as of the end of the related
Due Period. If the Aggregate Principal Balance of the Mortgage Loans in the
related Group as determined pursuant to the preceding sentence is greater than
the related Note Balance for such Payment Date determined as provided above, the
Overcollateralization Deficit for such Class and Payment Date shall be zero.
"OVERCOLLATERALIZATION SURPLUS": For each Class of Notes, as to any
Payment Date, the amount, if any, by which (x) the related Overcollateralization
Amount on such Payment Date exceeds (y) the related Required
Overcollateralization Amount on such Payment Date.
"OWNER TRUSTEE": Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity, but solely as owner trustee under
the Trust Agreement, and any successor owner trustee thereunder.
"OWNER TRUSTEE FEE": As defined in 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 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 this Indenture applicable to the
Paying Agent.
"PAYMENT AHEAD": As defined in the Servicing Agreement.
"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 26, 1999.
"PAYMENT DATE STATEMENT": The statement prepared pursuant to Section
2.08(d) with respect to collection on or in respect of the Mortgage Loans and
other assets of the Trust Estate and payments on or in respect of the Notes,
based upon the information contained in the Servicer Remittance Report prepared
pursuant to the Servicing Agreement and setting forth the following information
with respect to each Payment Date (to the extent the 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 of each Class and
in the aggregate allocable to (x) Monthly Principal (separately setting
forth Principal Prepayments) and (y) any principal payments made
pursuant to Section 8.02(c)(5) hereof;
18
<PAGE>
(ii) the amount of such payment to Noteholders of each Class and
in the aggregate allocable to Note Interest;
(iii) the Note Balance for each Class and in the aggregate, after
giving effect to the payment of Monthly Principal and any principal
payment made pursuant to Section 8.02(c)(5) hereof applied to reduce
such Note Balance on such Payment Date;
(iv) the Aggregate Principal Balance of the Mortgage Loans in
each Group and in the aggregate as of the end of the related Due
Period;
(v) the amount of Monthly Advances made with respect to each
Class and such Payment Date and the aggregate amount of unreimbursed
Monthly Advances and Servicing Advances, with respect to each Class, if
any;
(vi) the number and aggregate of the Principal Balances of
Mortgage Loans in each Group and in the aggregate (including the
Principal Balances of all Mortgage Loans in foreclosure) contractually
delinquent (i) one month, (ii) two months and (iii) three or more
months, as of the end of the related Collection Period;
(vii) the number and aggregate of the Principal Balances of the
Mortgage Loans in each Group and in the aggregate in foreclosure or
subject to other similar proceedings, and the number and aggregate of
the Principal Balance of Mortgage Loans by Group and in the aggregate,
the Mortgagor of which is known by the Servicer to be in bankruptcy as
of the end of the related Collection Period and the book value of any
real estate acquired through foreclosure, grant of a deed in lieu of
foreclosure or other similar proceedings during the related Collection
Period;
(viii) the aggregate of the Principal Balances of the Mortgage
Loans in each Group and in the aggregate repurchased by the Seller or
purchased by the Servicer, separately setting forth the aggregate of
the Principal Balances of Mortgage Loans in each Group and in the
aggregate delinquent for three consecutive monthly installments
purchased by the Servicer at its option pursuant to the Servicing
Agreement;
(ix) the amount of any Insured Payments for each Class and in the
aggregate and such Payment Date;
(x) the aggregate amount of the Monthly Servicing Fee for each
Class and in the aggregate paid to or retained by the Servicer for the
related Collection Period;
(xi) the Overcollateralization Amount, the then applicable
Required Overcollateralization Amount, the Overcollateralization
Surplus, if any, and the Overcollateralization Deficit, if any, with
respect to each Class and in the aggregate and such Payment Date;
(xii) the aggregate Principal Balance of the three largest
outstanding Mortgage Loans in each Group and in the aggregate as of the
related Determination Date;
19
<PAGE>
(xiii) the aggregate amount of Realized Losses for each Class and
in the aggregate incurred during the related Collection Period and the
cumulative amount of Realized Losses for each Class and in the
aggregate since the respective Cut-off Dates;
(xiv) the Delinquency Percentage and the Rolling Loss Percentage
for each Group and in the aggregate (as defined in the Servicing
Agreement) relating to such Payment Date and
(xv) the number of Mortgage Loan modifications made by the
Servicer during the Collection Period for each Group, and in the
aggregate and the type of modification made with respect to each such
Mortgage Loan.
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 for such
class and multiplying the result by 100.
"PERMITTED INVESTMENTS": One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully
guaranteed by, the United States of America, the Federal Home Loan
Mortgage Corporation, Federal National Mortgage Corporation, the
Federal Home Loan Banks or any agency or instrumentality of the United
States of America rated Aa3 or higher by Moody's, the obligations of
which are backed by the full faith and credit of the United States of
America;
(b) (i) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its
agent acting in their respective commercial capacities) incorporated
under the laws of the United States of America or any state thereof and
subject to supervision and examination by federal and/or state
authorities, so long as, at the time of such investment or contractual
commitment providing for such investment, such depository institution
or trust company or its ultimate parent has a short-term uninsured debt
rating in one of the two highest available rating categories of
Standard & Poor's, Fitch and of Moody's and provided that each such
investment has an original maturity of no more than 365 days and (ii)
any other demand or time deposit or deposit which is fully insured by
the FDIC;
(c) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (a) above and entered into
with a depository institution or trust company (acting as a principal)
rated A or higher by S&P, rated A or higher by Fitch and rated A2 or
higher by Moody's; provided, however, that collateral transferred
pursuant to such repurchase obligation must be of the type described in
clause (a) above and must (i) be valued daily at current market price
plus accrued interest, (ii) pursuant to such valuation, be equal, at
all times, to 105% of the cash transferred by the Indenture Trustee in
exchange for such collateral and (iii) be delivered to the Indenture
Trustee or,
20
<PAGE>
if the Indenture Trustee is supplying the collateral, an agent for the
Indenture Trustee, in such a manner as to accomplish perfection of a
security interest in the collateral by possession of certified
securities.
(d) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States of
America or any state thereof which has a long-term unsecured debt
rating in the highest available rating category of each of the Rating
Agencies at the time of such investment;
(e) commercial paper having an original maturity of less than 365
days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating
Agencies at the time of such investment;
(f) a guaranteed investment contract approved by each of the
Rating Agencies and the Note Insurer and issued by an insurance company
or other corporation having a long-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the
time of such investment;
(g) money market funds having ratings in the two highest
available rating category of Moody's and one of the two highest
available rating categories of S&P at the time of such investment which
invest only in other Permitted Investments (any such money market funds
which provide for demand withdrawals being conclusively deemed to
satisfy any maturity requirements for Permitted Investments set forth
herein) including money market funds of the Indenture Trustee and any
such funds that are managed by the Indenture Trustee or its affiliates
or which Indenture Trustee or any affiliate acts as advisor as long as
such money market funds satisfy the criteria of this subparagraph (g);
and
(h) any investment approved in writing by the Note Insurer and
written evidence that any such investment will not result in a
downgrading or withdrawal of the rating by each Rating Agency on the
Notes.
The Indenture Trustee may purchase from or sell to itself or an
affiliate, as principal or agent, the Permitted Investments listed above. All
Permitted Investments in a trust account under the Indenture shall be made in
the name of the Indenture Trustee for the benefit of the Noteholders and the
Note Insurer.
"PERSON": Any individual, corporation, limited liability company,
partnership, joint venture, association joint-stock company, trust (including
any beneficiary thereof), 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 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note.
21
<PAGE>
"PREFERENCE AMOUNT": With respect to a Class of Notes, any amount
previously distributed to a Noteholder on the related Notes that is recoverable
and sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the Bankruptcy Code in accordance with a final nonappealable order
of a court having competent jurisdiction.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any Determination
Date, the actual outstanding principal amount thereof as of the close of
business on the Determination Date in the preceding month (or, in the case of
the first Payment Date, as of the Cut-off Date) less (i) all scheduled payments
of principal received or advanced (or to be advanced on the related Deposit
Date) with respect to the Mortgage Loan and due during the related Due Period
and all other amounts collected, received or otherwise recovered in respect of
principal on the Mortgage Loan (including Principal Prepayments, but not
including Payments Ahead that are not allocable to principal for the related Due
Period) during or in respect of the related Collection Period, Net Liquidation
Proceeds and Trust Insurance Proceeds allocable to principal recovered or
collected in respect of such Mortgage Loan during the related Collection Period,
(ii) the portion of the Purchase Price allocable to principal to be remitted by
the Seller or the Servicer to the Indenture Trustee on or prior to the related
Deposit Date in connection with a repurchase of such Mortgage Loan pursuant to
the Mortgage Loan Sale Agreement, the Servicing Agreement or Section 8.05
hereof, to the extent such amount is actually remitted on or prior to such
Deposit Date, and (iii) the amount to be remitted by the Seller to the Indenture
Trustee on the related Deposit Date in connection with a substitution of a
Qualified Replacement Mortgage Loan for such Mortgage Loan pursuant to the
Mortgage Loan Sale Agreement and Section 8.05 hereof, to the extent such amount
is actually remitted on or prior to such Deposit Date; provided, however, that
Mortgage Loans that have become Liquidated Mortgage Loans since the end of the
preceding Determination Date (or, in the case of the first Determination Date,
since the Cut-off Date) will be deemed to have a Principal Balance of zero on
the current Determination Date.
"PRINCIPAL PREPAYMENT": As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds and Trust Insurance Proceeds)
that, in the case of a payment by a Mortgagor, is received in advance of its
scheduled due date and is not a Payment Ahead.
"PROCEEDING": Any suit in equity, action at law or other judicial or
administrative proceeding.
"PURCHASE PRICE": With respect to any Defective Mortgage Loan, an
amount equal to (i) the sum of (A) the Principal Balance of such Defective
Mortgage Loan as of the beginning of the Due Period next preceding the Deposit
Date on which such repurchase or purchase is required to occur, (B) interest
computed at the applicable Mortgage Interest Rate on such Principal Balance from
the date to which interest was last paid by the Mortgagor to the last day of the
Due Period immediately preceding the Deposit Date on which such repurchase
occurs and (C) any previously unreimbursed Servicing Advances made on or in
respect of such Defective Mortgage Loan, less (ii) any payments of principal and
interest in respect of such Defective Mortgage Loan made by or on behalf of the
related Mortgagor during such Due Period. With respect to any Qualified
Replacement Mortgage Loan, the amount remitted by the Seller to the Indenture
Trustee on or prior to the Deposit Date relating to a Payment Date in connection
with a
22
<PAGE>
substitution of such Qualified Replacement Mortgage Loan for a Mortgage Loan
pursuant to the Mortgage Loan Sale Agreement or Section 8.05 hereof.
"QUALIFIED REPLACEMENT MORTGAGE LOAN": A Mortgage Loan that is
substituted for a Deleted Mortgage Loan pursuant to Section 8.05 that must, at
the end of the Due Period preceding the date of such substitution, (i) have an
outstanding principal balance (when taken together with any other Qualified
Replacement Mortgage Loan being substituted for such Deleted Mortgage Loan), not
in excess of and not substantially less than the unpaid principal balance of the
Deleted Mortgage Loan at the end of the Due Period preceding the date of
substitution, (ii) be of the same type of Mortgage Interest Rate (i.e. fixed or
adjustable) and have the Mortgage Interest Rate not less than the Mortgage
Interest Rate on the Deleted Mortgage Loan, and, with respect to Mortgage Loans
which have an adjustable Mortgage Rate, have maximum rates, minimum rates,
margin indices, gross margins, and caps no more than 1% greater than or less
than those of the Deleted Mortgage Loan, (iii) have a remaining term to maturity
not greater than (and not more than one year less than) that of the Deleted
Mortgage Loan, (iv) have a Loan-to-Value Ratio or Combined Loan-to-Value Ratio
equal to or lower than the Loan-to-Value Ratio or Combined Loan-to-Value Ratio
of the Deleted Mortgage Loan, (v) have the same or better lien priority as the
Deleted Mortgage Loan, (vi) comply as of the date of substitution with each
representation and warranty set forth in Section 4(b) and Exhibit B of the
Mortgage Loan Sale Agreement, (vii) have the same or better property type as the
Deleted Mortgage Loan and (viii) have the same or better occupancy status. In
the event that one or more mortgage loans are proposed to be substituted for one
or more Deleted Mortgage Loans, the foregoing tests may be met on a weighted
average basis or other aggregate basis acceptable to the Note Insurer, except
that the requirements of clauses (v), (vi), (vii) and (viii) hereof must be
satisfied as to each Qualified Replacement Mortgage Loan.
"RATING AGENCIES": Standard & Poor's, Fitch and Moody's (each, a
"Rating Agency"). If any 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 Servicer, notice of which
designation shall be given to the Indenture Trustee.
"REALIZED LOSS": As defined in the Servicing Agreement.
"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 hereunder, 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) prior to such solicitation.
"REDEMPTION DATE": With respect to the Notes, the Payment Date, if any,
on which the Notes are redeemed pursuant to Article X hereof which date may
occur on or after the Initial Redemption Date.
23
<PAGE>
"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.
"REMITTABLE FUNDS": As defined in the Servicing Agreement.
"REO PROPERTY": As defined in the Servicing Agreement.
"REQUIRED OVERCOLLATERALIZATION AMOUNT": The Group I Required
Overcollateralization Amount and/or the Group II Required Overcollateralization
Amount, as applicable.
"REQUIRED PAYMENT AMOUNT": With respect to each Class of Notes and any
Payment Date, the related Note Interest for such Payment Date plus the amount of
any related Overcollateralization Deficit for such Payment Date.
"RESERVE ACCOUNT": That certain segregated account, which shall be an
Eligible Account, established pursuant to Section 8.16 of this Indenture.
"RESPONSIBLE OFFICER": With respect to the Indenture Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, any assistant vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
trust officer or assistant trust officer, the controller, 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
also, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"SALE": The meaning specified in Section 5.17.
"SELLER": Mortgage Lenders Network USA, Inc., a Delaware corporation.
"SERVICER": With respect to any Mortgage Loan, Mortgage Lenders Network
USA, Inc., a Delaware corporation, as Servicer under the Servicing Agreement,
and its permitted successors and assigns thereunder, including any successor
servicers appointed pursuant to Section 6.02 of the Servicing Agreement.
"SERVICER REMITTANCE REPORT": As defined in the Servicing Agreement.
"SERVICING ADVANCE": As defined in the Servicing Agreement.
"SERVICING AGREEMENT": The Servicing Agreement, dated as of June 1,
1999, among the Issuer, the Servicer and the Indenture Trustee, as indenture
trustee, providing, among other things, for the servicing of the Mortgage 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 servicer.
"SERVICING FEE RATE": 0.50% per annum.
24
<PAGE>
"STANDARD & POOR'S": Standard & Poor's Rating Services, a Division of
The McGraw-Hill Companies, Inc., and its successors in interest.
"TRANSITION EXPENSES": As defined in the Servicing Agreement.
"TRUST AGREEMENT": That certain Deposit Trust Agreement, dated as of
June 1, 1999, among the Depositor, the Owner Trustee, Norwest Bank Minnesota,
National Association and the Servicer.
"TRUST ESTATE": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
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 INSURANCE PROCEEDS": As defined in the Servicing Agreement.
"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 Norwest Bank Minnesota,
National Association.
"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".
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.
The Definitive Notes may be produced in any manner determined by the
Issuer, as evidenced by its execution thereof.
25
<PAGE>
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.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, 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 1999-1" of the Issuer.
The aggregate principal amount of Notes that may be authenticated and
delivered under the Indenture is limited to $100,538,000 Class A-1 Notes and
$44,572,000 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 a Note Interest Rate and Final Maturity Date
as follows:
<TABLE>
<CAPTION>
Designation Original Note Balance Note Interest Rate Final Maturity Date
- ----------- --------------------- ------------------ -------------------
<S> <C> <C> <C>
Class A-1 100,538,000 6.945% June 25, 2030
Class A-2 44,572,000 6.995% June 25, 2030
</TABLE>
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 Final 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 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.
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.
26
<PAGE>
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 $1,000 and integral multiples 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.
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
27
<PAGE>
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.
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
28
<PAGE>
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. 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 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.
29
<PAGE>
(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.
(d) Each Payment Date Statement, prepared by the Indenture Trustee
based on the 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 Underwriters
(as defined in the Insurance Agreement) and each Noteholder as the statement
required pursuant to Section 8.06. 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
Servicer Remittance Report except to the extent necessary to satisfy all
obligations under this Section 2.08(d) and under Article III of the Servicing
Agreement.
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
30
<PAGE>
in writing by such person, a statement containing the information set forth in
subclauses (i) 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:
(a) An Issuer Order authorizing the execution, authentication and
delivery of the Notes and specifying the Final 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.
31
<PAGE>
In rendering the opinions set forth above, such counsel may rely upon
officer's certificates of the Issuer, the Owner Trustee, the 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 MBIA
Insurance Policy.
(d) Pursuant to the authorization of the Depositor, 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 Mortgage Loan, free and
clear of any lien, security interest or charge, has not assigned any
interest or participation in any such Mortgage Loan (or, if any such
interest or participation has been assigned, it has been released) and
has the right to Grant each such Mortgage Loan to the Indenture
Trustee;
(iii) the information set forth in the Mortgage Loan Schedule
attached as Schedule I to this Indenture is correct;
(iv) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in each Mortgage 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.
32
<PAGE>
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of the Mortgage Loan Sale Agreement.
(g) An executed counterpart of the Mortgage Loan Contribution
Agreement.
(h) An executed counterpart of the 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:
(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
33
<PAGE>
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.
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
34
<PAGE>
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 Permitted
Investments pursuant to clause (c) of the definition of the term Permitted
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:
(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;
35
<PAGE>
(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. 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) and Section 6.2(a)(ii) of the
Deposit Trust Agreement, 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 Mortgage Loan Contribution Agreement.
(b) Subject to Section 3.09(vii), the prior written consent of the Note
Insurer, and written notice to the Rating Agencies, 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
36
<PAGE>
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 Mortgage Loans, the Servicing Agreement,
the Mortgage Loan Sale Agreement or the Mortgage Loan Contribution
Agreement; or
(v) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee, and of the Noteholders, in the Mortgage 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, 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), 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.
37
<PAGE>
SECTION 3.06. [RESERVED]
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT.
(a) The Issuer shall punctually perform and observe all of its
obligations under this Indenture and the Servicing 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, subordination, 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.
(d) Upon any termination of the Servicer's rights and powers pursuant
to the Servicing Agreement, the Indenture Trustee shall promptly notify the
Rating Agencies. As soon as any successor Servicer is appointed, the Indenture
Trustee shall notify the Rating Agencies, specifying in such notice the name and
address of such successor 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;
38
<PAGE>
(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, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby, (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
(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.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.
On or before December 31, 1999, and each December 31 thereafter and
upon receipt of instruction pursuant to the terms of the Management Agreement,
the Issuer shall deliver to the Indenture Trustee, the Note Insurer, the Rating
Agencies and the Underwriters a written statement, signed by an Authorized
Officer of the Owner Trustee, stating that:
(1) a review of the fulfillment by the Issuer during such year of
its obligations under this Indenture has been made under such
Authorized Officer's supervision; and
(2) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
Default in 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 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,
39
<PAGE>
however, that the Issuer may make, or cause to be made, distributions to the
Servicer, the Indenture Trustee, the Owner Trustee, the Note Insurer and the
Certificateholders 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 either 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 Servicer of its obligations
under the Servicing Agreement and each default on the part of the Seller of its
obligations under the Mortgage Loan Sale Agreement.
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 Final Maturity Date
within one year, or
40
<PAGE>
(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 Servicer,
and the Issuer or the 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 Final 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 Final 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
(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 Servicer in the
case of a redemption by the 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.
41
<PAGE>
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 Final 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;
(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 Basic 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
42
<PAGE>
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 MBIA
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.
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 in each case only with the consent of the Note Insurer in the absence
of a Note Insurer Default, the Indenture Trustee may, and on request of the
Holders of Notes representing not less than 50% of the Note Balance of the
Outstanding Notes of both Classes, 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
43
<PAGE>
(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, 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 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;
44
<PAGE>
(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 Remittable
Funds 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, with the prior written
consent of the Note Insurer, be entitled and empowered, by intervention in such
Proceeding or otherwise to:
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the 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.
45
<PAGE>
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, the Notes, upon
presentation and surrender thereof:
(i) first, to the Indenture Trustee, any unpaid Indenture
Trustee's Fees with respect to such Class then due 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;
(ii) second, to the Servicer, any amounts required to pay the
Servicer for any unpaid Servicing Fees with respect to such Class then
due and to reimburse the Servicer for related Monthly Advances
previously made by, and not previously reimbursed or retained by, the
Servicer and, upon the final liquidation of the related Mortgage 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 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 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
46
<PAGE>
Agreement from the date such amounts were due and (C) any other amounts
due and owing to the Note Insurer for such Class under the Insurance
Agreement; and
(vi) sixth, 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;
(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.
47
<PAGE>
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 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 of both Classes representing more than 50% of the
Note Balance of the Outstanding Notes 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
48
<PAGE>
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.
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
49
<PAGE>
for the enforcement of the payment of principal of any Note on or after the
Final 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:
(1) the Holders of Notes representing not less than 50% of
the Note Balance of the Notes of both Classes then Outstanding
consent to or direct the Indenture Trustee to make such Sale; or
(2) the proceeds of such Sale would be not less than the
entire amount that would be payable to the Holders of the Notes,
in full payment thereof in accordance with Section 5.07, on the
Payment Date next succeeding the date of 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 absence of a Note Insurer Default,
no sale hereunder shall be effective without the consent of the Note Insurer.
(c) Unless the Holders of all Outstanding Notes have otherwise
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.
50
<PAGE>
(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.
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
51
<PAGE>
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:
(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; and
(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.
(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.
52
<PAGE>
(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 has 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.
(f) Every provision of this Indenture 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 (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 or any Custodian appointed pursuant to
Section 8.13 shall at all times retain possession of the Mortgage Files in the
State of Minnesota or the State of Massachusetts, except for those Mortgage
Files or portions thereof released to the Servicer or the Note Insurer pursuant
to this Indenture or the Servicing Agreement.
SECTION 6.02. NOTICE OF DEFAULT.
Immediately after the occurrence of any Default known to the Indenture
Trustee, 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 known to the Indenture Trustee 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
53
<PAGE>
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 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) With the consent of the Note Insurer, which consent shall not be
unreasonably withheld, the Indenture Trustee may act through agents and shall
not be responsible for the misconduct or negligence of any agent 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.
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).
54
<PAGE>
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, "BBB" or better by Fitch and "Baa2" or better 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.
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,
55
<PAGE>
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. 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 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.
56
<PAGE>
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, 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 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
57
<PAGE>
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 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
58
<PAGE>
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 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 shall, for the benefit
of the Noteholders and the Note Insurer, cause the Custodian to review each
Mortgage File prior to the Closing Date to ascertain that all documents required
to be included in the Mortgage File are included therein, and shall cause the
Custodian to deliver to the Seller, the Note Insurer, the Indenture Trustee and
59
<PAGE>
the Servicer on the Closing Date an Initial Certification in the form attached
as Exhibit E-1 to the Custodial Agreement with respect to each Mortgage Loan to
the effect that, except as specifically noted on a schedule of exceptions
thereto, (A) all documents required to be contained in the Mortgage File are in
its possession, (B) such documents have been reviewed by it and appear regular
on their face and relate to such Mortgage Loan, and (C) based on its examination
and only as to the foregoing documents, the information set forth on the related
Mortgage Loan Schedule accurately reflects information set forth in the Mortgage
File.
It is understood that before making the Initial Certification, the
Indenture Trustee shall cause the Custodian to examine the related Mortgage Loan
Documents to confirm that:
(1) each Mortgage Note and Mortgage bears an original signature
or signatures purporting to be that of the Person or Persons named as
the maker and mortgagor/trustor or, if photocopies are permitted, that
such copies bear a reproduction of such signature or signatures;
(2) except for the endorsement in blank, neither the Mortgage nor
any Assignment, on the face or the reverse side(s) thereof, contains
evidence of any unsatisfied claims, liens, security interests,
encumbrances or restrictions on transfer;
(3) the principal amount of the indebtedness secured by the
related Mortgage is identical to the original principal amount of the
related Mortgage Note;
(4) the Assignment of the related Mortgage from the Seller to the
Indenture Trustee is in the form required pursuant to clause (e) of the
definition of "Mortgage Loan Documents" in the Mortgage Loan Sale
Agreement, and bears an original signature of the Seller and any other
necessary party (or signatures purporting to be that of the Seller and
any such other party) or, if photocopies are permitted, that such
copies bear a reproduction of such signature or signatures;
(5) if intervening Assignments are included in the Mortgage File,
each such intervening Assignment bears an original signature of the
related mortgagee and/or the assignee (and any other necessary party)
(or signatures purporting to be that of each such party) or, if
photocopies are permitted, that such copies bear a reproduction of such
signature or signatures;
(6) if either a title insurance policy, a preliminary title
report or a written commitment to issue a title insurance policy is
delivered, the address of the real property set forth in such policy,
report or written commitment is identical to the real property address
contained in the related Mortgage; and
(7) if any of a title insurance policy, certificate of title
insurance or a written commitment to issue a title insurance policy is
delivered, such policy, certificate or written commitment is for an
amount not less than the original principal amount of the related
Mortgage Note and such title insurance policy insures that the related
Mortgage creates a first or second lien, senior in priority to all
other deeds of trust, mortgages, deeds to secure debt, financing
statements and security agreements and to any mechanics' liens,
judgment liens or writs of attachment other than the related senior
lien, if
60
<PAGE>
applicable, (or if the title insurance policy or certificate of title
insurance has not been issued, the written commitment for such
insurance obligates the insurer to issue such policy for an amount not
less than the original principal amount of the related Mortgage Note).
(b) FINAL CERTIFICATION. On or before one year following the Closing
Date, the Indenture Trustee shall cause the Custodian to deliver to the Seller,
the Note Insurer, the Indenture Trustee and the Servicer a Final Certification
in the form attached as Exhibit E-2 to the Custodial Agreement evidencing the
completeness of the Mortgage File for each Mortgage Loan, except as specifically
noted on a schedule of exceptions thereto.
(c) 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.
(d) RECORDATION REPORT. In the event that the Mortgage Loans are
required to be recorded in accordance with the provisions of the Mortgage Loan
Sale Agreement, no later than the fifth Business Day of each third month,
commencing in September 1999, the Indenture Trustee shall cause the Custodian to
deliver to the Servicer and the Note Insurer a recordation report dated as of
the first day of such month, identifying those Mortgage 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 on each Payment Date as provided herein. The Indenture Trustee also
shall be entitled, pursuant to the provisions of Section 6.04 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.
61
<PAGE>
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.
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
62
<PAGE>
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.
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 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 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 Remittable Funds
for a Group by close of business on any related Deposit Date, the Indenture
Trustee shall, unless the Issuer or the Servicer shall have made provisions
satisfactory to the Indenture Trustee for delivery to the Indenture Trustee of
an amount equal to such Remittable Funds, deliver a notice, with a copy to the
Note Insurer, to the Issuer and the Servicer of their failure to remit such
Remittable Funds 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
Servicer, shall constitute an event of default under the Servicing Agreement. If
the Indenture Trustee shall subsequently receive any such Remittable Funds 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 Servicer, or their
respective designee or assignee, any Remittable Funds received with respect to a
Mortgage Loan after the related Deposit Date to the extent that the Issuer or
the Servicer, respectively, previously made payment or provision for payment
with respect to such Remittable Funds in accordance with this Section 8.01, and
any such Remittable Funds 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 Servicer shall fail
63
<PAGE>
to remit the Remittable Funds for a Group on any Deposit Date, the Indenture
Trustee shall deliver a second notice to the 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 to claim a
Default or Event of Default under this Indenture and to proceed thereafter as
provided in Article V.
SECTION 8.02. NOTE ACCOUNTS; DISTRIBUTIONS.
(a) 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 Indenture Trustee shall promptly deposit in the
related Note Account (i) all Remittable Funds for the related Group received by
it from the Servicer pursuant to the Servicing Agreement, (ii) any other funds
from any deposits for such Group to be made by the 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 for such Group
received pursuant to Section 8.03, (v) any amount for such Group withdrawn from
the Reserve Account and deposited into the related Note Account pursuant to
Section 8.16 and (vi) all other amounts for such Group received for deposit in
the related Note Account, including the payment of any Purchase Price for a
Mortgage Loan in such Group 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 8.02. All funds withdrawn from a Note Account pursuant to
subsection (c) of this Section 8.02 for the purpose of making payments to the
Holders of Notes shall be applied in accordance with Section 3.03.
(b) So long as no Default or Event of Default shall have occurred and
be continuing, amounts held in the Note Accounts shall be invested in Permitted
Investments, which Permitted Investments shall mature no later than the Business
Day preceding the immediately following Payment Date.
All income or other gains, if any, from investment of moneys deposited
in the Note Accounts shall be for the benefit of the Servicer and on each
Payment Date, any such amounts may be released from the Note Accounts and paid
to the Servicer as part of its compensation for acting as Servicer. Any loss
resulting from such investment of moneys deposited in a Note Account shall be
reimbursed immediately as incurred to the related Note Account by the Servicer.
Subject to Section 6.01 and the preceding sentence, neither the Indenture
Trustee nor the Servicer shall in any way be held liable by reason of any
insufficiency in the Note Accounts.
(c) On each Payment Date, the Indenture Trustee shall withdraw amounts
on deposit in each Note Account and pay on a pari passu basis the Note Insurer
Premium for the related
64
<PAGE>
Group, the Indenture Trustee Fee for such Group, Transition Expenses for such
Group, if any not paid by the Servicer pursuant to the Servicing Agreement (not
to exceed $50,000 in the aggregate), any gains or income from investments on the
related Note Account to the Servicer and, provided notice is given to the
Indenture Trustee no later than the 4th Business Day prior to the Payment Date
and to the extent such amounts have not been withdrawn pursuant to Sections 2.02
and 4.01 of the Servicing Agreement, amounts required to pay the Servicer any
unpaid Servicing Fees for such Group then due and to reimburse the Servicer for
Monthly Advances and Servicing Advances for such Group previously made by, and
not previously reimbursed to or retained by, the Servicer, which are so
reimbursable to the Servicer pursuant to the Servicing Agreement (as reported in
writing by the Servicer to the Indenture Trustee). After payment of such
amounts, unless the Notes have been declared due and payable pursuant to Section
5.02 and moneys collected by the Indenture Trustee are being applied in
accordance with Section 5.07, Available Funds on deposit in the related Note
Account on any Payment Date or Redemption Date shall be withdrawn from such Note
Account, in the amounts required, for application with respect to a Class of
Notes on such Payment Date as follows:
(i) FIRST, to the Note Insurer, as subrogee to the rights of the
Noteholders, the aggregate amount necessary to reimburse the Note
Insurer for any unreimbursed payments of (i) Insured Payments (together
with interest thereon at the Late Payment Rate specified in the
Insurance Agreement from the date of such Insured Payments were made by
the Note Insurer to such Payment Date) in respect of the Notes of such
class on prior Payment Dates, (ii) the amount of any unpaid Note
Insurer Premiums for such Class for prior Payment Dates (together with
interest thereon at the Late Payment Rate specified in the Insurance
Agreement from the date such amounts were due) and (iii) any other
amounts due and owing with respect to such Class of Notes under the
Insurance Agreement (together with interest thereon at the Late Payment
Rate specified in the Insurance Agreement from the date such amounts
were due); PROVIDED, HOWEVER, that the Note Insurer shall be paid such
amounts only after the Noteholders of the related Class have received
the Required Payment Amount for such Class and Payment Date;
(ii) SECOND, to the Noteholders of such Class, the related Note
Interest with respect to such Payment Date;
(iii) THIRD, to the Noteholders of such Class, the amount of
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;
(iv) FOURTH, to the Noteholders of such Class, as a reduction of
the Note Balance, the amount, if any, of the Overcollateralization
Deficit for the Notes of such Class with respect to such Payment Date;
(v) FIFTH, to the Noteholders of such Class the amount, if any,
necessary for the Overcollateralization Amount for such Class to equal
the Required Overcollateralization Amount for such Class on such
Payment Date (after giving effect to application of Monthly Principal
for such Payment Date) in the amount necessary to reduce the related
Note Balance until such Note Balance is reduced to zero;
65
<PAGE>
(vi) SIXTH, to the Note Account for the other Class for
allocation to the Noteholders of such other Class, an amount, if any,
equal to the deficiency in the payment on such Payment Date of the sum
of the full amounts of (a) the amounts due to the Note Insurer with
respect to such other class as described in clause (i) above, (b) the
Note Interest for such other Class with respect to such Payment Date
and (c) any Overcollateralization Deficit for such other Class for such
Payment Date, after taking into account the allocation of 100% of the
Available Funds for such other Class on such Payment Date;
(viii SEVENTH, for application in accordance with Section 8.16
hereof, to the Reserve Account, an amount, if any, equal to the excess
of the Required Overcollateralization Amount with respect to both
Classes of Notes over the Overcollateralization Amount with respect to
both Classes on such Payment Date, after taking into account the
allocation of 100% of the Available Funds for both Classes on such
Payment Date in accordance with the priorities set forth above; and
(viii) EIGHTH, pursuant to the terms of the Servicing Agreement,
Transition Expenses in excess of $50,000, if any, and other costs and
expenses, if not paid by the Servicer pursuant to the Servicing
Agreement or the Custody Agreement.
(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 each Note Account an amount sufficient to make, the payments required to be
made as set forth in Section 8.02(c) as indicated in such Payment Date
Statement, and (2) shall have set aside any amounts that have been deposited in
a Note Account prior to such time that represent amounts that are to be used to
make payments on the related Notes on the next succeeding Payment Date, the cash
balance, if any, then remaining in such Note Account shall be withdrawn from
such 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 8.02 shall be remitted to the Certificate Distribution Account
established and maintained pursuant to the Trust Agreement.
(f) In the event the Indenture Trustee is required to establish a
Collection Account pursuant to the Servicing Agreement, the Indenture Trustee
shall establish and maintain such account in the manner required under the
Servicing Agreement. The Indenture Trustee shall reinvest amounts in the
Collection Account at the direction of the Servicer in Permitted Investments.
All income or other gains, if any, from investment of moneys deposited in the
Collection Account shall be for the benefit of the Servicer, and the Indenture
Trustee shall release any such amounts from the Collection Account to the
Servicer on each Deposit Date.
SECTION 8.03. CLAIMS AGAINST THE MBIA INSURANCE POLICY.
(a) 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
66
<PAGE>
noon on the third Business Day prior to such Payment Date in the manner set
forth in the MBIA Insurance Policy.
(b)
(i) The Indenture Trustee shall (A) receive as attorney-in-fact
of each Noteholder any Insured Payment from the Note Insurer or on
behalf of the Note Insurer and (B) disburse such Insured Payment to
such Noteholders in accordance with Section 8.02(c) hereof for the
benefit of the Noteholders. Any Insured Payment received by the
Indenture Trustee shall be held by the Indenture Trustee uninvested.
Insured Payments disbursed by the Indenture Trustee from proceeds of
the MBIA Insurance Policy shall not be considered payment by the Issuer
with respect to the Notes, nor shall such payments discharge the
obligation of the Issuer with respect to such Notes, and 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. The Indenture Trustee hereby agrees
on behalf of each Noteholder for the benefit of the Note Insurer that
it recognizes that to the extent the Note Insurer makes Insured
Payments for the benefit of the Noteholders, the Note Insurer will be
entitled to receive the related reimbursement in accordance with the
priority of distributions referenced in Section 8.02(c) hereof.
(ii) 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 MBIA Insurance Policy.
Each Noteholder, by its purchase of Notes, and the Indenture Trustee
hereby agree that, the Note Insurer (so long as no MBIA Payment 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, supersedes 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.
(iii) Each Noteholder, by its purchase of Notes, and the
Indenture Trustee hereby agree that, unless an MBIA Payment 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.
67
<PAGE>
(iv) With respect to a Preference Amount, the Indenture Trustee
shall be responsible for procuring and delivering the items set forth
in the MBIA Insurance Policy to the Note Insurer.
(c) 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.
(d) The Indenture Trustee shall surrender the MBIA Insurance Policy to
the Note Insurer for cancellation upon the expiration of the term of the MBIA
Insurance Policy as provided in the Insurance Agreement.
SECTION 8.04. GENERAL PROVISIONS REGARDING THE NOTE ACCOUNTS AND MORTGAGE
LOANS.
(a) Each Note Account shall relate solely to the Notes of the related
Class and to the Mortgage Loans in the related Group, Permitted Investments and
other property securing the related Notes. Funds and other property in each Note
Account shall not be commingled with the other Note Account or with any other
moneys or property of the Issuer or any Affiliate thereof except as otherwise
expressly provided for herein. 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 a Note Account.
(b) If any amounts are needed for payment from a Note Account and
sufficient uninvested funds are not available therein to make such payment, the
Indenture Trustee shall cause to be sold or otherwise converted to cash a
sufficient amount of the investments in such Note Account.
(c) 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 any investment held in the Note Accounts, against
delivery of the amount receivable in connection with any sale.
(d) The Indenture Trustee shall not invest any part of the Trust Estate
in Permitted Investments that constitute uncertificated securities (as defined
in Section 8-102 of the Uniform Commercial Code, as enacted in the relevant
jurisdiction) or in any other book-entry securities unless it has received an
Opinion of Counsel reasonably satisfactory in form and substance to the
Indenture Trustee setting forth, with respect to each type of security for which
authority to invest
68
<PAGE>
is being sought, the procedures that must be followed to maintain the lien and
security interest created by this Indenture with respect to the Trust Estate.
SECTION 8.05. RELEASES OF DEFECTIVE MORTGAGE LOANS.
Upon notice or discovery that any of the representations or warranties
of the Seller set forth in Section 4(b) and Exhibit B of the Mortgage Loan Sale
Agreement was materially incorrect or otherwise misleading with respect to any
Mortgage Loan as of the time made, the Indenture Trustee shall direct the Seller
to either (i) within 60 days after the Seller 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 Mortgage 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 Purchase Price for such Mortgage Loan or (iii)
substitute a Qualified Replacement Mortgage Loan for such Defective Mortgage
Loan and deposit any Purchase Price required to be paid in connection with such
substitution pursuant to Section 7 of the Mortgage Loan Sale Agreement, all as
provided in Section 7 of the Mortgage Loan Sale Agreement. Upon any purchase of
or substitution for a Defective Mortgage Loan by the Seller in accordance with
Section 7 of the Mortgage Sale Agreement, the Indenture Trustee shall deliver
the Mortgage File relating to such Defective Mortgage Loan to the Seller, and
the Issuer and the Indenture Trustee shall execute such instruments of transfer
as are necessary to convey title to such Defective Mortgage Loan to the Seller
from the lien of this Indenture.
SECTION 8.06. 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 8.07. TRUST ESTATE MORTGAGE FILES.
(a) The Indenture Trustee shall release Mortgage Files or portions
thereof to the Servicer on the terms specified in the Servicing Agreement.
69
<PAGE>
(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 8.08. 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 MBIA 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 8.09. DELIVERY OF THE MORTGAGE FILES PURSUANT TO SERVICING AGREEMENT.
As is appropriate for the servicing or foreclosure of any Mortgage
Loan, the Indenture Trustee shall cause the Custodian to deliver to the Servicer
of such Mortgage the Mortgage Files for such Mortgage 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 Servicer, providing that the 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 8.10. SERVICER AS AGENT.
In order to facilitate the servicing of the Mortgage Loans by the
Servicer of such Mortgage Loans, the Servicer of the Mortgage Loans has been
appointed by the Issuer to retain, in accordance with the provisions of the
Servicing Agreement and this Indenture, all Remittable Funds on such Mortgage
Loans prior to their deposit into the related Note Account on or prior to the
related Deposit Date.
SECTION 8.11. TERMINATION OF SERVICER.
In the event of an event of default specified in Section 6.01 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), terminate the Servicer as provided in
Section 6.01 and Section 6.02 of the Servicing Agreement. If the Indenture
Trustee terminates the Servicer, the Indenture Trustee shall, pursuant to
Sections 6.01 and 6.02 of the Servicing Agreement, assume the duties of the
Servicer or appoint a successor servicer acceptable to the Issuer, the Note
Insurer and the Rating Agencies and meeting the requirements set forth in the
Servicing Agreement.
70
<PAGE>
SECTION 8.12. 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 8.07(a)
(other than in connection with releases of Mortgage Loans that were the subject
of a Full Prepayment of the type described in clause (i) of the definition of
the term "Full Prepayment") and 8.08, 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 8.13. APPOINTMENT OF CUSTODIANS.
The Indenture Trustee may, at the written direction of the Issuer and
at no additional cost to the Issuer or to the Indenture Trustee, with the
consent of 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 Servicer is appointed as a Custodian in accordance
with this Section 8.14, 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 8.14. 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:
(i) the right to require the Servicer to effect foreclosures upon
Mortgage Loans upon failure of the Servicer to do so;
(ii) the right to require the Seller to repurchase or substitute
for Defective Mortgage Loans pursuant to Section 8.05;
71
<PAGE>
(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 8.03 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 8.15. 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 8.16. RESERVE ACCOUNT.
(a) The Issuer hereby directs the Indenture Trustee to establish at the
Corporate Trust Office one or more accounts with respect to both Classes of
Notes that shall collectively be the "Reserve Account". On each Payment Date the
Indenture Trustee shall deposit to the Reserve Account the amounts, if any,
described in Section 8.02(c)(vii) hereof.
(b) If, on any Payment Date, and after taking into account the
application with respect to each Class of (i) the Available Funds with respect
to such Class and (b) any amount of Available Funds transferred from the Note
Account relating to the other Class to the Note Account relating to the first
Class pursuant to Section 8.02(c)(vi) hereof (but not the proceeds of any
Insured Payment), the full amount of the Note Interest with respect such Class
has not been paid, and/or an Overcollateralization Deficit with respect such
Class would result, and/or any amounts then owing to the Note Insurer have not
been paid, the Indenture Trustee shall withdraw from Reserve Account and deposit
in the Note Account related to such Class an amount equal to the lesser of (x)
the amount then on deposit in the Reserve Account and (y) the amount of such
shortfall.
(c) If, on any Payment Date, (A) the sum of (x) the
Overcollateralization Amount with respect to both Classes of Notes, after taking
into account all distributions on such Payment Date, plus (y) all amounts then
on deposit in the Reserve Account with respect to both Classes of Notes, after
taking into account any withdrawals therefrom pursuant to paragraph (b) above
exceeds (B) the Required Overcollateralization Amount for both Classes of Notes,
the amount of
72
<PAGE>
such excess shall be withdrawn from the amounts then on deposit in the Reserve
Account and distributed to the Certificateholders.
(d) So long as no Default or Event of Default shall have occurred and
be continuing, amounts held in the Reserve Account shall be invested in
Permitted Investments, which Permitted Investments shall mature no later than
the Business Day preceding the immediately following Payment Date.
All income or other gains, if any, from investment of moneys deposited
in the Reserve Account shall be for the benefit of the Certificateholders and
the Note Insurer and on each Payment Date, any such amounts may be released from
the Reserve Account and paid to the Certificateholders. Subject to Section 6.01,
the Indenture Trustee shall not in any way be held liable by reason of
insufficiency in the Reserve Account resulting from any loss on any Eligible
Investment included therein.
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
73
<PAGE>
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 MBIA 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.
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 the consent of Holders
of Notes of a Class shall not be required if such supplemental indenture affects
only the other Class of Notes and provided, further, 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 Final 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 Final Maturity Date thereof
or for the enforcement of the payment of the entire remaining unpaid
principal amount of any Note on or after the Final 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;
74
<PAGE>
(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
(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 and the Note
Insurer.
75
<PAGE>
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.
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, subject to Sections 9.01 and 9.02 hereof,
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 MBIA 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
76
<PAGE>
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) All the Notes may be redeemed in whole, but not in part, on or
after the Initial Redemption Date at the Redemption Price at the option of the
holders of a majority of the ownership interest of the Issuer (the "Residual
Majority"), or at the option of the Servicer if the Residual Majority shall not
have exercised its option to direct the Servicer to redeem the Notes on such
Redemption Date or, if such option is not exercised by the Servicer, at the
option of the Note Insurer; 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
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 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 Mortgage
Loans as of the related Payment Date. Upon the redemption of the Notes, Mortgage
Loans in the Trust Estate shall be released and delivered to the owners of the
Trust Certificate.
(b) Upon receipt of the notice from the 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 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 Servicer or Note Insurer have been satisfied and setting forth the
amount, if any, to be withdrawn from each Note Account and paid to the Servicer
as reimbursement for Nonrecoverable Advances and such other information as may
be required to accomplish such redemption.
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
77
<PAGE>
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.
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 and the Note Insurer an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel (with a copy to the Note Insurer), 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:
78
<PAGE>
(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.
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
79
<PAGE>
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).
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 11000 Broken Land Parkway,
Columbia, Maryland 21044-3562; or
80
<PAGE>
(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 Mortgage Lenders Network Home
Equity Loan Trust 1999-1), in care of Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer; or
(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 MBIA Insurance
Corporation addressed to it at 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management-SF (IPM-SF) (Mortgage Lenders
Network Home Equity Loan Trust 1999-1), 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 Residential Asset Funding
Corporation c/o First Union Capital Markets, 301 South College Street,
Charlotte, North Carolina 28288-0610 or at any other address previously
furnished in writing to the Indenture Trustee by the Depositor; or
(5) the Seller or the 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 Mortgage Lenders
Network USA, Inc., Middlesex Corporate Center, 11th Floor, 213 Court
Street, Middletown, Connecticut 06457, Attention: General Counsel or at
any other address previously furnished in writing to the Indenture
Trustee by the Seller or the 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, 301
South College Street, Charlotte, North Carolina 28288-0610 Shanker
Merchant, fax: 704-383-8121, and (b) Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention:
Mary Alice Kohs, fax (212) 778-7401.
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, (ii) in the case of
Fitch, at the following address: Fitch IBCA, One State Street Plaza, New York,
New York 10004, and (iii) 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.
81
<PAGE>
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 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.
82
<PAGE>
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, any separate 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.
83
<PAGE>
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
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 MLN Depository Corp. or the
Issuer, or join in any institution against MLN Depository Corp. or the Issuer
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Basic Documents. 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
Seller with, MLN Capital Corporation I 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.
84
<PAGE>
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 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 MBIA 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.
85
<PAGE>
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.
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
By: Wilmington Trust Company,
not in its individual capacity,
but solely as Owner Trustee
By: /s/ Norma Closs
--------------------------------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Amy Wahl
---------------------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT A FORM OF NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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 June 1, 1999 Original Note Balance: $___________
First Payment Date: July 26, 1999 CUSIP No.: ___________
Denomination: $____________ Note No.: A-__
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
HOME EQUITY LOAN BACKED NOTES, SERIES 1999-1, CLASS A-__
Mortgage Lenders Network Home Equity Loan Trust 1999-1, 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, 1999, between the
Issuer and Norwest Bank Minnesota, 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 June 2030 (the "Final 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. Capitalized terms used but
not defined herein are defined in Article I of the Indenture.
<PAGE>
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 1999-1, 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
1999-1, 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 the
Mortgage Loans in the related Group and the other collateral related thereto
pledged as security therefor as provided in the Indenture.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Maturity Date and the
Redemption Date, if any, pursuant to Article X of the Indenture. Notwithstanding
the foregoing, the entire unpaid principal amount of
A-2
<PAGE>
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 MBIA Insurance Corporation (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.
MBIA Insurance Corporation (the "Note Insurer"), in consideration of
the payment of the premium and subject to the terms of the Note Guaranty
Insurance Policy (the "MBIA 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 MBIA 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 MBIA 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 MBIA 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 Seller, the 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 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
A-3
<PAGE>
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 Issuer, on any Payment Date on and after the
date on which the Note Balance is less than 10% of the Original Note Balance.
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 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.
A-4
<PAGE>
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 MLN Depository Corp.
or the Issuer, or join in any institution against the MLN Depository Corp. 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 Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Servicing Agreement, the Management Agreement, the Insurance
Agreement and the Indemnification Agreement (the "Basic Documents").
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
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 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
A-5
<PAGE>
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-6
<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 4, 1999
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
By: WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee under
the Trust Agreement
By:
-----------------------------------------
Authorized Signatory
A-7
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-__ Notes designated above and referred to in the
within-mentioned Indenture.
Date: June 4, 1999
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Authenticating Agent
By:
--------------------------------------------
Authorized Signatory
A-8
<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 MBIA INSURANCE POLICY
<PAGE>
EXHIBIT C FORM OF NOTICE OF CLAIM
EXHIBIT 4.2
DEPOSIT TRUST AGREEMENT
<PAGE>
- --------------------------------------------------------------------------------
DEPOSIT TRUST AGREEMENT
BETWEEN
RESIDENTIAL ASSET FUNDING CORPORATION,
AS DEPOSITOR,
WILMINGTON TRUST COMPANY,
AS OWNER TRUSTEE
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS TRUST PAYING AGENT,
AND
MORTGAGE LENDERS NETWORK USA, INC.,
AS SERVICER
- --------------------------------------------------------------------------------
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
ASSET BACKED NOTES, SERIES 1999-1, CLASS A-1 AND CLASS A-2
DATED AS OF JUNE 1, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article I DEFINITIONS....................................................................................1
Section 1.1 Capitalized Terms...............................................................1
Section 1.2 Other Definitional Provisions...................................................5
Article II ORGANIZATION..................................................................................6
Section 2.1 Name............................................................................6
Section 2.2 Office..........................................................................6
Section 2.3 Purposes and Powers.............................................................6
Section 2.4 Appointment of Owner Trustee....................................................7
Section 2.5 Initial Capital Contribution of Owner Trust Estate..............................7
Section 2.6 Declaration of Trust............................................................7
Section 2.7 Liability of the Holders........................................................8
Section 2.8 Title to Trust Property.........................................................8
Section 2.9 Situs of Trust..................................................................8
Section 2.10 Representations and Warranties of the Depositor; Covenant of the Depositor......9
Section 2.11 Federal Income Tax Provisions..................................................10
Article III CERTIFICATES AND TRANSFER OF INTERESTS......................................................13
Section 3.1 Initial Ownership..............................................................13
Section 3.2 The Certificates...............................................................13
Section 3.3 Execution, Authentication and Delivery of Trust Certificates...................13
Section 3.4 Registration of Transfer and Exchange of Trust Certificates....................13
Section 3.5 Mutilated, Destroyed, Lost or Stolen Certificates..............................14
Section 3.6 Persons Deemed Owners..........................................................15
Section 3.7 Access to List of Holders' Names and Addresses.................................15
Section 3.8 Maintenance of Office or Agency................................................15
Section 3.9 Appointment of Trust Paying Agent..............................................15
Section 3.10 Restrictions on Transfer of Certificates.......................................16
Article IV ACTIONS BY OWNER TRUSTEE.....................................................................18
Section 4.1 Prior Notice to Holders with Respect to Certain Matters........................18
Section 4.2 Action by Holders with Respect to Bankruptcy...................................20
Section 4.3 Restrictions on Holders' Power.................................................20
Section 4.4 Majority Control...............................................................20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES....................................................21
Section 5.1 Establishment of Certificate Distribution Account..............................21
Section 5.2 Application Of Trust Funds.....................................................21
Section 5.3 Method of Payment..............................................................23
Section 5.4 Segregation of Moneys; No Interest.............................................23
Article VI AUTHORITY AND DUTIES OF OWNER TRUSTEE........................................................23
Section 6.1 General Authority..............................................................23
Section 6.2 General Duties.................................................................24
Section 6.3 Action upon Instruction........................................................24
Section 6.4 No Duties Except as Specified in this Agreement, the Basic Documents or any
Instructions.........................................................25
Section 6.5 No Action Except Under Specified Documents or Instructions.....................26
Section 6.6 Restrictions...................................................................26
Article VII CONCERNING THE OWNER TRUSTEE................................................................26
Section 7.1 Acceptance of Trusts and Duties................................................26
Section 7.2 Furnishing of Documents........................................................28
Section 7.3 Representations and Warranties.................................................28
Section 7.4 Reliance; Advice of Counsel....................................................29
Section 7.5 Not Acting in Individual Capacity..............................................29
Section 7.6 Owner Trustee Not Liable for Certificates or Mortgage Loans....................29
Section 7.7 Owner Trustee May Own Certificates and Notes...................................30
Section 7.8 Licenses.......................................................................30
Article VIII COMPENSATION OF OWNER TRUSTEE..............................................................30
Section 8.1 Owner Trustee's Fees and Expenses..............................................30
Section 8.2 Indemnification................................................................31
Section 8.3 Payments to the Owner Trustee..................................................31
Section 8.4 Servicer Liability.............................................................32
Article IX TERMINATION OF TRUST AGREEMENT...............................................................32
Section 9.1 Termination of Trust Agreement.................................................32
Article X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES........................................33
Section 10.1 Eligibility Requirements for Owner Trustee.....................................33
Section 10.2 Resignation or Removal of Owner Trustee........................................33
Section 10.3 Successor Owner Trustee........................................................34
Section 10.4 Merger or Consolidation of Owner Trustee.......................................34
Section 10.5 Appointment of Co-Trustee or Separate Trustee..................................35
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article XI MISCELLANEOUS................................................................................36
Section 11.1 Supplements and Amendments.....................................................36
Section 11.2 No Legal Title to Owner Trust Estate in Holders................................37
Section 11.3 Limitations on Rights of Others................................................37
Section 11.4 Notices........................................................................38
Section 11.5 Severability...................................................................38
Section 11.6 Separate Counterparts..........................................................38
Section 11.7 Successors and Assigns.........................................................38
Section 11.8 No Petition....................................................................39
Section 11.9 No Recourse....................................................................39
Section 11.10 Headings.......................................................................39
Section 11.11 GOVERNING LAW..................................................................39
Section 11.12 Grant of Certificateholder Rights to Note Insurer..............................39
Section 11.13 Third-Party Beneficiary........................................................40
Section 11.14 Suspension and Termination of Note Insurer's Rights............................40
</TABLE>
iii
<PAGE>
DEPOSIT TRUST AGREEMENT
This DEPOSIT TRUST AGREEMENT, dated as of June 1, 1999, among
RESIDENTIAL ASSET FUNDING CORPORATION, a Delaware corporation, as depositor (the
"Depositor"), WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner
trustee (the "Owner Trustee"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trust paying agent (the "Trust Paying Agent"),
and MORTGAGE LENDERS NETWORK USA, INC., as servicer (the "Servicer"), for the
limited purposes set forth herein.
ARTICLE I
DEFINITIONS
SECTION 1.1 CAPITALIZED TERMS. For all purposes of this Agreement, the following
terms shall have the meanings set forth below:
"ACCOUNTS" shall mean, collectively, the Collection Account
and the Note Accounts.
"AGREEMENT" shall mean this Deposit Trust Agreement, as may be
amended and supplemented from time to time.
"ANNUAL TAX REPORTS" shall have the meaning assigned thereto
in Section 2.11(k).
"AUTHORIZED OFFICER" shall have the meaning assigned thereto
in the Indenture.
"BASIC DOCUMENTS" shall mean this Agreement, the Servicing
Agreement, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Management Agreement, the Insurance Agreement and the Indenture.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day that is either a legal holiday or a day on which the Note
Insurer or banking institutions in the State of New York, the State of
Connecticut, the State of Maryland, the State of Delaware, the State of North
Carolina, or the state in which the Trust Paying Agent's office from which
payments will be made to Certificateholders are authorized or obligated by law,
regulation or executive order to be closed.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of
I the Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended
from time to time.
"CAPITAL ACCOUNT" shall have the meaning assigned thereto in
Section 2.1l(a).
<PAGE>
"CERTIFICATE" shall mean a certificate evidencing the
beneficial interest of a Certificateholder in the Trust, substantially in the
form attached hereto as Exhibit A.
"CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning
assigned to such term in Section 5.1.
"CERTIFICATE OF TRUST" shall mean the Certificate of Trust in
the form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean
the register mentioned and the registrar appointed pursuant to Section 3.4.
"CERTIFICATEHOLDER" or "HOLDER" shall mean a Person in whose
name a Certificate is registered.
"CLASS" shall mean the Class A-1 Notes and/or the Class A-2
Notes, as applicable.
"CLASS A-1 NOTES" shall mean the Mortgage Lenders Network Home
Equity Loan Trust 1999-1 Asset Backed Notes, Series 1999-1, Class A-1.
"CLASS A-2 NOTES" shall mean the Mortgage Lenders Network Home
Equity Loan Trust 1999-1 Asset Backed Notes, Series 1999-1, Class A-2.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and, where appropriate in context, Treasury Regulations promulgated
thereunder.
"COLLECTION ACCOUNT" shall have the meaning assigned thereto
in the Servicing Agreement.
"COMPANY" shall mean MLN Capital Corporation I, a Delaware
corporation.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration; or at such other address in the State
of Delaware as the Owner Trustee may designate by notice to the
Certificateholders and the Depositor, or the principal corporate trust office of
any successor Owner Trustee (the address (which shall be in the State of
Delaware) of which the successor owner trustee will notify the Certificateholder
and the Depositor).
"DEPOSITOR" shall mean Residential Asset Funding Corporation,
a Delaware corporation.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
2
<PAGE>
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"EXPENSES" shall have the meaning assigned to such term in
Section 8.2.
"HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning
set forth for "partner nonrecourse debt minimum gain" in Treasury Regulations
Section 1.704-2(i)(2). A Holder's share of Holder Nonrecourse Debt Minimum Gain
shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(5).
"INDENTURE" shall mean the Indenture, dated as of June 1,
1999, by and between the Issuer and the Indenture Trustee.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National
Association, as Indenture Trustee under the Indenture.
"INSURANCE AGREEMENT" means the Insurance Agreement, dated as
of June 1, 1999, among MBIA Insurance Corporation, as insurer, the Issuer,
Mortgage Lenders Network USA, Inc., as Seller and Servicer, the Depositor and
the Indenture Trustee.
"INSURANCE POLICY" shall mean the policy issued by the Note
Insurer for the benefit of the holders of the Notes.
"ISSUER" shall mean Mortgage Lenders Network Home Equity Loan
Trust 1999-1, the Delaware business trust created pursuant to this Agreement.
"MANAGEMENT AGREEMENT" shall mean the Management Agreement
dated as of June 1, 1999, between the Trust and Norwest Bank Minnesota, National
Association, as Manager.
"MORTGAGE LENDERS NETWORK" shall mean Mortgage Lenders Network
USA, Inc. a Delaware corporation.
"MORTGAGE LOAN CONTRIBUTION AGREEMENT" shall mean that certain
Mortgage Loan Contribution Agreement, dated as of June 1, 1999, between the
Depositor and the Issuer.
"MORTGAGE LOAN SALE AGREEMENT" shall mean that certain
Mortgage Loan Sale Agreement, dated as of June 1, 1999, between Mortgage Lenders
Network USA, Inc., as seller, and the Depositor, as purchaser.
"NON-U.S. PERSON" shall mean an individual, corporation,
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate that is subject to U.S. federal income tax regardless of the source of
its income or a trust if (i) a court in the United States is able to
3
<PAGE>
exercise primary supervision over the administration of the trust and (ii) one
or more United States fiduciaries have the authority to control all substantial
decisions of the trust.
"NOTE ACCOUNT" shall have the meaning assigned thereto in the
Indenture.
"NOTE INSURER" shall mean MBIA Insurance Corporation, a New
York stock insurance company.
"NOTE INSURER DEFAULT" shall have the meaning assigned to such
term in the Indenture.
"NOTES" shall mean the Mortgage Lenders Network Home Equity
Loan Trust 1999-1, Asset Backed Notes, Series 1999-1 Class A-1 and Class A-2.
"OWNER TRUST ESTATE" shall mean the Trust Estate (as defined
in the Indenture), including the contribution of $1 referred to in Section 2.5
hereof.
"OWNER TRUSTEE" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor owner trustee hereunder.
"PAYMENT DATE" shall mean the twenty-fifth day of each month
or, if such twenty-fifth day is not a Business Day, the next succeeding Business
Day, commencing July 26, 1999.
"PERCENTAGE INTEREST" shall mean with respect to any
Certificate the percentage portion of all of the Trust Interest evidenced
thereby as stated on the face of such Certificate.
"PERMITTED INVESTMENTS" shall have the meaning assigned to
such term in the Indenture.
"PROSPECTIVE HOLDER" shall have the meaning set forth in
Section 3.1 l(a).
"RATING AGENCY CONDITION" means, with respect to any action to
which a Rating Agency Condition applies, that each Rating Agency shall have been
given 10 days (or such shorter period as is acceptable to each Rating Agency)
prior notice thereof and that each of the Rating Agencies shall have notified
the Depositor, the Servicer, the Note Insurer, the Owner Trustee and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current "implied" rating of the Notes that it maintains without taking into
account the Note Insurance.
"RECORD DATE" shall mean as to each Payment Date the last
Business Day of the month immediately preceding the month in which such Payment
Date occurs.
4
<PAGE>
"SERVICING AGREEMENT" shall mean the Servicing Agreement dated
as of June 1, 1999, among the Trust, as Issuer, the Indenture Trustee and
Mortgage Lenders Network USA, Inc., as Servicer.
"SECRETARY OF STATE" shall mean the Secretary of State of the
State of Delaware.
"TAXABLE YEAR" shall have the meaning assigned thereto in
Section 2.11(j).
"TAX MATTERS PARTNER" shall have the meaning assigned thereto
in Section 2.11(l).
"TREASURY REGULATIONS" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"TRUST" shall mean the trust established by this Agreement.
"TRUST INTEREST" shall mean the right to receive, on each
Payment Date, distributions of the amounts, if any, released to the Issuer
pursuant to Section 8.02(d) of the Indenture or pursuant to Section 2.05 of the
Servicing Agreement.
"TRUST MINIMUM GAIN" shall have the meaning set forth for
"partnership minimum gain" in Treasury Regulations 1.704-2(b)(2) and 1.704-2(d).
In accordance with Treasury Regulations Section 1.704-2(d), the amount of Trust
Minimum Gain is determined by first computing, for each nonrecourse liability of
the Trust, any gain the Trust would realize if it disposed of the property
subject to that liability for no consideration other than full satisfaction of
the liability, and then aggregating the separately computed gains. A Holder's
share of Trust Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(g)(1).
"TRUST PAYING AGENT" shall mean any paying agent or co-paying
agent appointed pursuant to Section 3.9 and authorized by the Owner Trustee to
make payments to and distributions from the Certificate Distribution Account.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Servicing Agreement or, if not
defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
5
<PAGE>
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 NAME. The Trust created hereby shall be known as "Mortgage Lenders
Network Home Equity Loan Trust 1999-1," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 OFFICE. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in Delaware as
the Owner Trustee may designate by written notice to the Certificateholders, the
Note Insurer and the Depositor.
SECTION 2.3 PURPOSES AND POWERS. The purpose of the Trust is to engage in the
following activities:
(i) to issue the Notes pursuant to the Indenture and to sell
such Notes;
6
<PAGE>
(ii) with the proceeds of the sale of the Notes, to pay the
organizational, startup and transactional expenses of the Trust and to
pay the balance to the Depositor pursuant to the Mortgage Loan
Contribution Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Owner Trust Estate pursuant to the Indenture and to hold, manage
and distribute to the Holders any portion of the Owner Trust Estate
released from the lien of, and remitted to the Trust pursuant to, the
Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is or is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith;
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
and payments to the Holders and the Noteholders; and
(vii) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial Certificateholders to engage in
the foregoing activities. The Trust shall not engage in any activity other than
in connection with the foregoing or other than as required or authorized by the
terms of this Agreement or the Basic Documents.
SECTION 2.4 APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein.
SECTION 2.5 INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The Depositor
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt
in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Distribution Account. The Certificateholders shall
pay organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
SECTION 2.6 DECLARATION OF TRUST. The Owner Trustee hereby declares that it will
hold the Owner Trust Estate in trust upon and subject to the conditions set
forth herein for the use and benefit of the Holders, subject to the obligations
of the Trust under the Basic Documents. It is the intention of the parties
hereto that the Trust constitute a business trust under the Business Trust
Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, after issuance of the Certificates, the Trust
7
<PAGE>
shall be treated as a partnership, with the assets of the partnership being the
Mortgage Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Certificates and the Notes being
non-recourse debt of the partnership (or, if there is only one
Certificateholder, that the Trust shall be disregarded as an entity separate
from such Holder, with the assets held by the Trust being treated as assets of
the Holder and the Notes being treated as non-recourse debt of the Holder). The
parties agree that, unless otherwise required by appropriate tax authorities or
unless the Trust is disregarded as an entity separate from its sole
Certificateholder for income and franchise tax purposes, the Owner Trustee will
file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Trust as a partnership for
such tax purposes pursuant to Section 2.11(k). The parties agree that no
election will be made to treat the Trust or the Owner Trust Estate as a real
estate mortgage investment conduit as defined in Section 860D of the Code.
Effective as of the date hereof, the Owner Trustee shall have all rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust. The Owner Trustee shall file the
Certificate of Trust with the Secretary of State.
SECTION 2.7 LIABILITY OF THE HOLDERS. No Holder shall have any personal
liability for any liability or obligation of the Trust. The Certificates shall
be fully paid and nonassessable.
SECTION 2.8 TITLE TO TRUST PROPERTY
(a) Legal title to all of the Owner Trust Estate shall be
vested at all times in the Trust as a separate legal entity except where
applicable law in any jurisdiction requires title to any part of the Owner Trust
Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee and/or a separate trustee, as the case
may be.
(b) The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. No transfer by operation of law or otherwise of
any interest of the Certificateholders shall operate to terminate this Agreement
or the trusts hereunder or entitle any transferee to an Accounting or to the
transfer to it of any part of the Owner Trust Estate.
SECTION 2.9 SITUS OF TRUST. The Trust will be located and administered in the
state of Delaware. All accounts maintained at a bank by the Owner Trustee or the
Indenture Trustee on behalf of the Trust shall be located in the State of
Delaware, the State of Minnesota or the State of Connecticut. The Trust shall
not have any employees; provided, however, nothing herein shall restrict or
prohibit the Owner Trustee from having employees within or without the State of
Delaware. Payments will be received by the Trust only in Delaware, Minnesota or
Connecticut, and payments will be made by the Trust only from Delaware,
Minnesota or Connecticut. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
8
<PAGE>
SECTION 2.10 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR; COVENANT OF THE
DEPOSITOR. (a) The Depositor hereby represents and warrants to the Owner Trustee
and the Note Insurer that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(ii) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to transfer and assign the property to be
transferred and assigned to and deposited with the Trust and the
Depositor has duly authorized such transfer and assignment and deposit
to the Trust by all necessary corporate action; and the execution,
delivery and performance of this Agreement has been duly authorized by
the Depositor by all necessary corporate action.
(iii) The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or by-laws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the
Depositor of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(iv) There are no proceedings or investigations pending or
notice of which has been received in writing before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties: (x) asserting the invalidity of this Agreement, (y) seeking
to prevent the consummation of any of the transactions contemplated by
this Agreement or (z) seeking any determination or ruling that should
reasonably be expected to materially and adversely affect the
performance by the Depositor of its obligations under, or the validity
or enforceability of, this Agreement.
(v) The representations and warranties of the Depositor in
Section 3(a) of the Mortgage Loan Contribution Agreement are true and
correct.
(vi) The Depositor has duly executed and delivered this
Agreement, and this Agreement constitutes the legal, valid and binding
obligation of the Depositor, enforceable against the Depositor, in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency,
9
<PAGE>
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by the application of equitable principles.
(b) Each Certificateholder covenants with the Owner Trustee
and the Note Insurer that during the continuance of this Agreement, and while it
holds Certificates, it will comply in all respects with the provisions of its
Certificate of Incorporation in effect from time to time.
SECTION 2.11 FEDERAL INCOME TAX PROVISIONS. If the Trust is treated as a
partnership (rather than disregarded as a separate entity) for federal income
tax purposes pursuant to Section 2.6, the following provisions shall apply:
(a) A separate capital account (a "Capital Account") shall be
established and maintained for each Certificateholder in accordance with
Treasury Regulations Section 1.704-1 (b)(2)(iv). No Certificateholder shall be
entitled to interest on its Capital Account or any capital contribution made by
such Holder to the Trust.
(b) Upon termination of the Trust pursuant to Article IX, any
amounts available for distribution to Holders shall be distributed to the
Holders with positive Capital Account balances in accordance with such balances.
For purposes of this Section 2.1l(b), the Capital Account of each Holder shall
be determined after all adjustments made in accordance with this Section 2.11
resulting from the Trust's operations and from all sales and dispositions of all
or any part of the assets of the Trust. Any distributions pursuant to this
Section 2.1l(b) shall be made by the end of the Taxable Year in which the
termination occurs (or, if later, within 90 days after the date of the
termination).
(c) No Certificateholder shall be required to restore any
deficit balance in its Capital Account. Furthermore, no Holder shall be liable
for the return of the Capital Account of, or of any capital contribution made to
the Trust by, another Holder.
(d) Profit and loss of the Trust for each Taxable Year shall
be allocated to the Certificateholders in accordance with their respective
Percentage Interests.
(e) Notwithstanding any provision to the contrary, (i) any
expense of the Trust that is a "nonrecourse deduction" within the meaning of
Treasury Regulations Section 1.704-2(b)(1) shall be allocated in accordance with
the Holders' respective Percentage Interests, (ii) any expense of the Trust that
is a "partner nonrecourse deduction" within the meaning of Treasury Regulations
Section 1.704-2(i)(2) shall be allocated in accordance with Treasury Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Trust Minimum Gain
within the meaning of Treasury Regulations Section 1.704-2(f)(1) for any Taxable
Year, items of gain and income shall be allocated among the Holders in
accordance with Treasury Regulations Section 1.704-2(f) and the ordering rules
contained in Treasury Regulations Section 1.704-2(i), and (iv) if there is a net
decrease in Holder Nonrecourse Debt Minimum Gain within the meaning of Treasury
Regulations Section 1.704-2(i)(4) for any Taxable Year, items of gain and income
shall be allocated among the Holders in accordance with Treasury Regulations
Section 1.704-
10
<PAGE>
2(i)(4) and the ordering rules contained in Treasury Regulations Section
1.704-2(j). A Holder's "interest in partnership profits" for purposes of
determining its share of the nonrecourse liabilities of the Trust within the
meaning of Treasury Regulations Section 1.752-3(a)(3) shall be such Holder's
Percentage Interest.
(f) If a Holder receives in any Taxable Year an adjustment,
allocation, or distribution described in subparagraphs (4), (5), or (6) of
Treasury Regulations Section 1.704-l(b)(2)(ii)(d) that causes or increases a
negative balance in such Holder's Capital Account that exceeds the sum of such
Holder's shares of Trust Minimum Gain and Holder Nonrecourse Debt Minimum Gain,
as determined in accordance with Treasury Regulations Sections 1.704-2(g) and
1.704-2(i), such Holder shall be allocated specially for such Taxable Year (and,
if necessary, later Taxable Years) items of income and gain in an amount and
manner sufficient to eliminate such negative Capital Account balance as quickly
as possible as provided in Treasury Regulations Section 1.704-l(b)(2)(ii)(d).
After the occurrence of an allocation of income or gain to a Holder in
accordance with this Section 2.11(f), to the extent permitted by Regulations
Section 1.704-l(b), items of expense or loss shall be allocated to such Holder
in an amount necessary to offset the income or gain previously allocated to such
Holder under this Section 2.11(f).
(g) Loss shall not be allocated to a Holder to the extent that
such allocation would cause a deficit in such Holder's Capital Account (after
reduction to reflect the items described in Treasury Regulations Section
1.704-l(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Holder's shares
of Trust Minimum Gain and Holder Nonrecourse Debt Minimum Gain. Any loss in
excess of that limitation shall be allocated to all the Holders in accordance
with their respective Percentage Interests. After the occurrence of an
allocation of loss to a Holder in accordance with this Section 2.11(g), to the
extent permitted by Treasury Regulations Section 1.704-l(b), profit shall be
allocated to such Holder in an amount necessary to offset the loss previously
allocated to such Holder under this Section 2.11(g).
(h) If a Holder transfers any part or all of its Percentage
Interest and the transferee is admitted as provided herein (a "Transferee
Holder"), the distributive shares of the various items of profit and loss
allocable among the Holders during such Taxable Year shall be allocated between
the transferor and the Transferee Holder (at the election of the Holders
(including the transferor, but excluding the Transferee Holder)) either (i) as
if the Taxable Year had ended on the date of the transfer or (ii) based on the
number of days of such Taxable Year that each was a Holder without regard to the
results of Trust activities in the respective portions of such Taxable Year in
which the transferor and Transferee Holder were Holders.
(i) "Profit" and "loss" and any items of income, gain, expense
or loss referred to in this Section 2.11 shall be determined in accordance with
federal income tax accounting principles as modified by Treasury Regulations
Section 1.704-l(b)(2)(iv), except that profits and losses shall not include
items of income, gain, and expense that are specially allocated pursuant to
Sections 2.11(e), 2.11(f) or 2.11(g) hereof. All allocations of income, profits,
gains, expenses, and losses (and all items contained therein) for federal income
tax purposes shall be identical to all allocations of such items set forth in
11
<PAGE>
this Section 2.11, except as otherwise required by Section 704(c) of the Code
and Section 1.704-l(b)(4) of the Treasury Regulations.
(j) The taxable year of the Trust (the "Taxable Year") shall
be the calendar year or such other taxable year as may be required by Section
706(b) of the Code.
(k) At the Trust's expense, the Owner Trustee shall
(i) prepare, or cause to be prepared, and file or cause to be filed such tax
returns relating to the Trust (including a partnership information return, IRS
Form 1065) as are required by applicable federal, state, and local law, (ii)
cause such returns to be signed in the manner required by law, (iii) make such
elections as may from time to time be required or appropriate under any
applicable law so as to maintain the Trust's classification as a partnership for
tax purposes, (iv) prepare and deliver, or cause to be prepared and delivered,
to the Holders, no later than 120 days after the close of each Taxable Year (or
no later than April 15th), a Schedule K-1, a copy of the Trust's informational
tax return (IRS Form 1065), and such other reports (collectively, the "Annual
Tax Reports") setting forth in sufficient detail all such information and data
with respect to the transactions effected by or involving the Trust during such
Taxable Year as shall enable the each Holder to prepare its federal, state, and
local income tax returns in accordance with the laws then prevailing, and (v)
collect, or cause to be collected, any withholding tax as described in Section
5.2(c) with respect to income or distributions to Certificateholders.
(l) Mortgage Lenders Network USA, Inc. shall be designated as
the tax matters partner for the Trust within the meaning of Section 6231(a)(7)
of the Code (the "Tax Matters Partner"). The Tax Matters Partner shall have the
right and obligation to take all actions authorized and required, respectively,
by the Code for the Tax Matters Partner. The Tax Matters Partner shall have the
right to retain professional assistance in respect of any audit or controversy
proceeding initiated with respect to the Trust by the Internal Revenue Service
or any state or local taxing authority, and all expenses and fees incurred by
the Tax Matters Partner on behalf of the Trust shall constitute expenses of the
Trust. In the event the Tax Matters Partner receives notice of a final
partnership adjustment under Section 6223(a)(2) of the Code, the Tax Matters
Partner shall either (i) file a court petition for judicial review of such
adjustment within the period provided under Section 6226(a) of the Code, a copy
of which petition shall be mailed to all other Holders on the date such petition
is filed, or (ii) mail a written notice to all other Holders, within such
period, that describes the Tax Matters Partner's reasons for determining not to
file such a petition.
(m) Except as otherwise provided in this Section 2.11, the
Holders shall instruct the Owner Trustee as to whether to make any available
election under the Code or any applicable state or local tax law on behalf of
the Trust. Notwithstanding the foregoing, any Holder may request that the Owner
Trustee make an election under section 754 of the Code; provided that the
requesting Holder shall agree to bear the cost of preparing such election and
any additional accounting expenses of the Trust incurred as a result of such
election.
12
<PAGE>
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Certificates, the Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2 THE CERTIFICATES. The Certificates shall be issued without a
principal amount and shall evidence beneficial ownership interests in the Trust.
The Certificates shall be printed, lithographed or engraved or may be produced
in any other manner as is reasonably acceptable to the Owner Trustee, as
evidenced by its execution thereof. The Certificates shall be executed on behalf
of the Trust by manual or facsimile signature of an Authorized Officer of the
Owner Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid, notwithstanding that
such individuals or any of them shall have ceased to be so authorized prior to
the authentication and delivery of such Certificates or did not hold such
offices at the date of authentication and delivery of such Certificates.
A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
3.4.
SECTION 3.3 EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST CERTIFICATES.
Concurrently with the initial transfer of the Mortgage Loans to the Trust
pursuant to the Mortgage Loan Contribution Agreement, the Owner Trustee shall
cause the Certificates, representing 100% of the Percentage Interests of the
Trust Interest, to be executed on behalf of the Trust, authenticated and
delivered to the Company, as the designee of the Depositor. No Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 3.4 REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST CERTIFICATES. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
Certificate Registrar.
Upon surrender for registration of transfer of any Certificate
at the office or agency maintained pursuant to Section 3.8, the Owner Trustee
shall execute, authenticate and deliver (or shall cause its authenticating agent
to authenticate and
13
<PAGE>
deliver), in the name of the designated transferee or transferees, one or more
new Certificates of a like Percentage Interest dated the date of authentication
by the Owner Trustee or any authenticating agent. At the option of a
Certificateholder, Certificates may be exchanged for other Certificates of a
like Percentage Interest upon surrender of the Certificates to be exchanged at
the office or agency maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing. In
addition, each Certificate presented or surrendered for registration of transfer
and exchange must be accompanied by a representation letter from the Prospective
Holder certifying as to the representations set forth in Section 3.11(a), (b)
and (c). Each Certificate surrendered for registration of transfer or exchange
shall be canceled and disposed of by the Owner Trustee in accordance with its
customary practice.
No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
The preceding provisions of this Section notwithstanding, the
Owner Trustee shall not make and the Certificate Registrar shall not register
transfers or exchanges of Certificates for a period of 15 days preceding the
Payment Date with respect to the Certificates.
Notwithstanding anything contained herein to the contrary, the
Owner Trustee shall not be responsible for ascertaining whether any transfer
complies with the registration provisions or exemptions from the Securities Act
of 1933, as amended, the Securities Act of 1934, as amended, applicable state
securities law or the Investment Company Act of 1940; provided, however, that if
a certificate is specifically required to be delivered to the Owner Trustee by a
purchaser or transferee of a Certificate, the Owner Trustee shall be under a
duty to examine the same to determine whether it conforms to the requirements of
this Trust Agreement and shall promptly notify the party delivering the same if
such certificate does not so conform.
SECTION 3.5 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any
mutilated Certificate shall be surrendered to the Certificate Registrar, or if
the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Percentage Interest. In connection with
the issuance
14
<PAGE>
of any new Certificate under this Section, the Owner Trustee or the Certificate
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute conclusive evidence
of ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
SECTION 3.6 PERSONS DEEMED OWNERS. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be bound
by the terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.2 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
SECTION 3.7 ACCESS TO LIST OF HOLDERS' NAMES AND ADDRESSES. The Owner Trustee
shall furnish or cause to be furnished to the Servicer, the Depositor and the
Trust Paying Agent immediately prior to each Payment Date, a list of the names
and addresses of the Certificateholders as of the most recent Record Date. If
three or more Certificateholders or one or more Holders of Certificates,
together evidencing Percentage Interests totaling not less than 25%, apply in
writing to the Owner Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their rights
under this Agreement or under the Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each
Certificateholder, by receiving and holding a Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.8 MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall maintain an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Owner Trustee in respect of the Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the Corporate Trust Office
of Wilmington Trust Company as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Depositor
and to the Certificateholders of any change in the location of the Certificate
Register or any such office or agency.
SECTION 3.9 APPOINTMENT OF TRUST PAYING AGENT. The Owner Trustee hereby appoints
Norwest Bank Minnesota, National Association, as Trust Paying Agent under this
Agreement. The Trust Paying Agent shall make distributions to Certificateholders
from the Certificate Distribution Account pursuant to Section 5.2 and shall
report to the Owner Trustee on the Payment Date via facsimile transmission of a
distribution statement the amounts of such distributions to the
Certificateholders. The
15
<PAGE>
Trust Paying Agent shall have the revocable power to withdraw funds from the
Certificate Distribution Account for the purpose of making the distributions
referred to above. In the event that Norwest Bank Minnesota, National
Association, shall no longer be the Trust Paying Agent hereunder, the Owner
Trustee shall appoint a successor to act as Trust Paying Agent (which shall be a
bank or trust company) acceptable to the Certificateholders, Mortgage Lenders
Network, so long as Mortgage Lenders Network is acting as Servicer, and the Note
Insurer. The Owner Trustee shall cause such successor Trust Paying Agent or any
additional Trust Paying Agent appointed by the Owner Trustee to execute and
deliver to the Owner Trustee an instrument in which such successor Trust Paying
Agent or additional Trust Paying Agent shall agree with the Owner Trustee that
as Trust Paying Agent, such successor Trust Paying Agent or additional Trust
Paying Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. After one year
from the date of receipt, the Trust Paying Agent shall promptly return all
unclaimed funds to the Owner Trustee, and upon removal of a Trust Paying Agent,
such Trust Paying Agent shall also return all funds in its possession to the
Owner Trustee. The provisions of Sections 7.1, 7.3(b), 7.4, 8.1, and 10.2 as to
resignations, shall apply to the Trust Paying Agent to the same extent as if it
were named therein and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Agreement to the Trust Paying Agent
shall include any co-paying agent unless the context requires otherwise.
SECTION 3.10 RESTRICTIONS ON TRANSFER OF CERTIFICATES.
(a) Each prospective purchaser and any subsequent transferee
of a Certificate (each, a "Prospective Holder"), other than the Company, shall
represent and warrant, in writing, to the Owner Trustee and the Certificate
Registrar and any of their respective successors that:
(i) Such Person is (A) a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), and is aware that the seller of the Certificate may
be relying on the exemption from the registration requirements of the
Securities Act provided by Rule 144A and is acquiring such Certificate
for its own account or for the account of one or more qualified
institutional buyers for whom it is authorized to act, or (B) a Person
involved in the organization or operation of the Trust or an affiliate
of such Person within the meaning of Rule 3a-7 of the Investment
Company Act of 1940, as amended (including, but not limited to, the
Depositor), or (C) otherwise acquiring such Certificate in a
transaction which is exempt from registration under the Securities Act
and such Person delivers to the Owner Trustee and to the Certificate
Registrar an approving opinion of counsel to that effect, and to the
effect that the proposed transfer, if consummated, would not cause the
Trust to be required to register as an "investment company" under the
Investment Company Act of 1940, as amended.
(ii) Such Person understands that the Certificates have not
been and will not be registered under the Securities Act and may be
offered, sold, pledged or
16
<PAGE>
otherwise transferred only to a person whom the seller reasonably
believes is (C) a qualified institutional buyer or (D) a Person
involved in the organization or operation of the Trust or an affiliate
of such Person, in a transaction meeting the requirements of Rule 144A
under the Securities Act and in accordance with any applicable
securities laws of any state of the United States.
(iii) Such Person understands that the Certificates bear a
legend to the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT
NOT LIMITED TO, MLN RESIDUAL HOLDING CORPORATION I) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED
TO REGISTER THIS CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(b) By its acceptance of a Certificate, each Prospective
Holder agrees and acknowledges that no legal or beneficial interest in all or
any portion of any Certificate may be transferred directly or indirectly to an
entity that holds residual securities as nominee to facilitate the clearance and
settlement of such securities through electronic book-entry changes in Accounts
of participating organizations (a "Book-Entry Nominee") and any such purported
transfer shall be void and have no effect.
(c) No transfer of a Certificate or any beneficial interest
therein shall be made to any person unless the Note Insurer has given its prior
written consent to such transfer and the Owner Trustee has received a
representation letter from the Transferee to
17
<PAGE>
the effect that such transferee (i) is not a person which is an employee benefit
plan, trust or account subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code or a
governmental plan, as defined in Section 3(32) of ERISA, subject to any federal,
state or local law which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (any such person being a "Plan"), (ii) is not an
entity, including an insurance company separate account or general account,
whose underlying assets include "plan assets" by reason of a Plan's investment
in the entity and (iii) is not directly or indirectly purchasing such
Certificate or interest therein on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with the assets of a Plan.
(d) The Owner Trustee shall not execute, and shall not
countersign and deliver, a Certificate in connection with any transfer thereof
unless the transferor shall have provided to the Owner Trustee a certificate,
substantially in the form attached as Exhibit C to this Agreement, signed by the
transferee, which certificate shall contain the consent of the transferee to any
amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Certificates to Book-Entry Nominees,
and an agreement by the transferee that it will not transfer a Certificate
without providing to the Owner Trustee a certificate substantially in the form
attached as Exhibit C to this Agreement.
(e) The Certificates shall bear an additional legend referring
to the restrictions contained in paragraph (b) above.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 PRIOR NOTICE TO HOLDERS WITH RESPECT TO CERTAIN MATTERS.
With respect to the following matters, the Owner Trustee shall
not take action, and the Certificateholders shall not direct the Owner Trustee
to take any action, unless at least 30 days before the taking of such action,
the Owner Trustee shall have notified the Certificateholders and the Note
Insurer in writing of the proposed action and neither the Certificateholders nor
the Note Insurer shall have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders and/or the Note
Insurer have withheld consent or the Certificateholders have provided
alternative direction (any direction by the Certificateholders shall require the
prior consent of the Note Insurer):
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of the
Mortgage Loans) and the compromise of any action, claim or lawsuit brought by or
against the Trust (except with respect to the aforementioned claims or lawsuits
for collection of the Mortgage Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute);
18
<PAGE>
(c) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any Holder or the Note
Insurer is required;
(d) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any Holder or the Note
Insurer is not required and such amendment materially adversely affects the
interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor
Note Registrar, Trust Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar or Paying Agent, or the consent
to the assignment by the Note Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar or Trust Paying Agent of its obligations under the
Indenture or this Agreement, as applicable.
(f) the consent to the calling or waiver of any default of any
Basic Document;
(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the Trust's assets to
any other entity;
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the Basic Documents;
(k) do any act that conflicts with any other Basic Document;
(l) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.3 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth
in this Trust Agreement.
In addition the Trust shall not commingle its assets with
those of any other entity. The Trust shall maintain its financial and accounting
books and records separate from those of any other entity. Except as expressly
set forth herein, the Trust shall pay its
19
<PAGE>
indebtedness, operating expenses and liabilities from its own funds, and the
Trust shall not pay the indebtedness, operating expenses and liabilities of any
other entity. The Trust shall maintain appropriate minutes or other records of
all appropriate actions and shall maintain its office separate from the offices
of the Depositor, the Company and Mortgage Lenders Network.
The Owner Trustee shall not have the power, except upon the
direction of the Certificateholders with the consent of the Note Insurer, and to
the extent otherwise consistent with the Basic Documents, to (i) remove or
replace the Servicer or the Indenture Trustee, (ii) institute proceedings to
have the Trust declared or adjudicated a bankruptcy or insolvent, (iii) consent
to the institution of bankruptcy or insolvency proceedings against the Trust,
(iv) file a petition or consent to a petition seeking reorganization or relief
on behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or any similar official) of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit in writing its
inability to pay its debts generally as they become due, (viii) take any action,
or cause the Trust to take any action, in furtherance of any of the foregoing
(any of the above, a "Bankruptcy Action"). So long as the Indenture and the
Insurance Agreement remain in effect and no Note Insurer Default exists, no
Certificateholder shall have the power to take, and shall not take, any
Bankruptcy Action with respect to the Trust or direct the Owner Trustee to take
any Bankruptcy Action with respect to the Trust.
SECTION 4.2 ACTION BY HOLDERS WITH RESPECT TO BANKRUPTCY. The Owner Trustee
shall not have the power to commence a voluntary proceeding in bankruptcy
relating to the Trust without the consent and approval of the Note Insurer, the
unanimous prior approval of all Certificateholders and the Note Insurer and the
delivery to the Owner Trustee by each such Certificateholder of a certification
that such Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.3 RESTRICTIONS ON HOLDERS' POWER. The Certificateholders shall not
direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement or any of the Basic Documents or would be contrary
to Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.4 MAJORITY CONTROL. Except as expressly provided herein, any action
that may be taken by the Certificateholders under this Agreement may be taken by
the Holders of Certificates evidencing more than 50% of the Percentage Interest
in the Trust Interest and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust Interest at the time of the delivery of such notice and
such action shall be binding upon all Certificateholders.
20
<PAGE>
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 ESTABLISHMENT OF CERTIFICATE DISTRIBUTION ACCOUNT. The Owner Trustee
shall cause the Trust Paying Agent, for the benefit of the Certificateholders,
to establish and maintain with Norwest Bank Minnesota, National Association, for
the benefit of the Owner Trustee one or more Accounts that while the Trust
Paying Agent holds such Account shall be entitled "Certificate Distribution
Account, Norwest Bank Minnesota, National Association, as Trust Paying Agent, in
trust for the Holders of Certificates evidencing beneficial interests in
Mortgage Lenders Network Home Equity Loan Trust 1999-1." Funds shall be
deposited in the Certificate Distribution Account as required by the Indenture
or, following satisfaction and release of the Indenture, by the Servicing
Agreement.
All of the right, title and interest of the Owner Trustee in
all funds on deposit from time to time in the Certificate Distribution Account
and in all proceeds thereof shall be held for the benefit of the
Certificateholders, the Note Insurer and such other persons entitled to
distributions therefrom. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders and the Note
Insurer.
SECTION 5.2 APPLICATION OF TRUST FUNDS.
(a) On each Payment Date, the Trust Paying Agent shall
distribute to the Certificateholders, on the basis of their respective
Percentage Interests, all amounts then on deposit in the Certificate
Distribution Account.
(b) On each Payment Date, the Trust Paying Agent shall send to
Certificateholders the statement provided to the Owner Trustee by the Indenture
Trustee pursuant to Section 2.08(d) of the Indenture with respect to such
Payment Date. If the Trust Paying Agent is an entity other than the Indenture
Trustee, the Owner Trustee shall provide a copy of such statement to the Trust
Paying Agent to enable it to perform its duties under this Section 5.2(b).
(c) In the event that any withholding tax is imposed under
federal, state, or local tax on the Trust's payment (or allocations of income)
to a Certificateholder, such tax shall reduce the amount otherwise distributable
to such Certificateholder in accordance with this Section. The Owner Trustee,
and the Trust Paying Agent on its behalf, is hereby authorized and directed to
retain in the Certificate Distribution Account from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Owner Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The Certificate Registrar will provide the Trust Paying Agent
with a statement indicating the amount of any such withholding tax. The amount
of any withholding tax imposed with respect to a Certificateholder shall be
treated as cash distributed to such Certificateholder at the time it is withheld
by the Trust and remitted to
21
<PAGE>
the appropriate taxing authority from the Certificate Distribution Account at
the direction of the Owner Trustee or the Trust Paying Agent on its behalf. If
there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a Certificateholder who is a Non-U.S.
Person), the Trust Paying Agent may in its sole discretion withhold such amounts
in accordance with this paragraph (c). In the event that a Certificateholder
wishes to apply for a refund of any such withholding tax, the Owner Trustee and
the Trust Paying Agent shall reasonably cooperate with such Certificateholder in
making such claim so long as such Certificateholder agrees to reimburse the
Owner Trustee for any out-of-pocket expenses incurred.
Any Holder which is organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date such Holder becomes a
Holder, (a) so notify the Trust, the Owner Trustee and the Trust Paying Agent,
(b) (i) provide the Trust, the Owner Trustee and the Trust Paying Agent with
Internal Revenue Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii)
notify the Trust, the Owner Trustee and the Trust Paying Agent that it is not
entitled to an exemption from United States withholding tax or a reduction in
the rate thereof on payments of interest. Any such Holder agrees by its
acceptance of a Certificate, on an ongoing basis, to provide like certification
for each taxable year and to notify the Trust, the Owner Trustee and the Trust
Paying Agent should subsequent circumstances arise affecting the information
provided in clauses (a) and (b) above. The Trust, the Owner Trustee and the
Trust Paying Agent shall be fully protected in relying upon, and each Holder by
its acceptance of a Certificate hereunder agrees to indemnify and hold the
Trust, the Owner Trustee and the Trust Paying Agent harmless against all claims
or liability of any kind arising in connection with or related to their reliance
upon any documents, forms or information provided by any Holder. In addition, if
the Trust Paying Agent has not withheld taxes on any payment made to any Holder,
and the Trust Paying Agent is subsequently required to remit to any taxing
authority any such amount not withheld, such Holder shall return such amount to
the Trust Paying Agent upon written demand by the Trust Paying Agent. Neither
the Owner Trustee nor the Trust Paying Agent shall be liable for damages to any
Holder due to a violation of the Code unless and only to the extent such
liability is caused by the Owner Trustee's or the Trust Paying Agent's failure
to act in accordance with its standard of care under this Agreement.
(d) Notwithstanding anything to the contrary herein, at any
time after the Indenture is no longer in effect but while this Agreement remains
in effect, the manager under the Management Agreement (the "Manager") shall be
entitled to a fee on each Payment Date equal to the Indenture Trustee Fee that
would have been payable to the Indenture Trustee on such Payment Date if the
Indenture were still in effect. Such fee shall be distributed to the Manager
from funds in the Certificate Distribution Account prior to distribution of any
such funds to Certificateholders. Also, in such event, the Servicer shall
provide the same information to the Manager that it would have provided to the
Indenture Trustee pursuant to the Servicing Agreement, as well as any other
information concerning the Mortgage Loans as may be reasonably requested by the
Manager to enable the Manager to perform its obligations under the Management
Agreement. On each such Payment Date, the Trust Paying Agent shall mail to each
Certificateholder a statement detailing the amount remitted to the Trust Paying
Agent by
22
<PAGE>
the Servicer on the related Deposit Date and setting forth the amount of the
Monthly Servicing Fee and fees paid to the Manager with respect to such Payment
Date, and the aggregate amount distributed to Certificateholders on such Payment
Date.
SECTION 5.3 METHOD OF PAYMENT. Distributions required to be made to
Certificateholders on any Payment Date shall be made to each Certificateholder
of record on the preceding Record Date either by wire transfer, in immediately
available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder shall have provided
to the Trust Paying Agent appropriate written instructions at least five
Business Days prior to such Payment Date, or, if not, by check mailed to such
Certificateholder at the address of such Holder appearing in the Certificate
Register.
SECTION 5.4 SEGREGATION OF MONEYS; NO INTEREST. Subject to Sections 5.1 and 5.2,
moneys received by the Trust Paying Agent hereunder and deposited into the
Certificate Distribution Account will be segregated except to the extent
required otherwise by law and, if the Holders of more than 50% of the
Certificates so direct, shall be invested in Permitted Investments maturing no
later than one Business Day prior to the related Payment Date at the direction
of such Certificateholders. The Trust Paying Agent shall not be liable for
payment of any interest or losses in respect of such moneys. Investment gains
shall be for the account of and paid to the Certificateholders.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 GENERAL AUTHORITY. The Owner Trustee is authorized and directed to
execute and deliver or cause to be executed and delivered the Notes, the
Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article III, in each case, in such
form as the Depositor and the Owner Trustee shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition, the Owner
Trustee is authorized and directed, on behalf of the Trust, to execute and
deliver to the Authenticating Agent the Issuer Request and the Issuer Order
referred to in Section 2.11 of the Indenture, in such form as the Depositor
shall approve, as evidenced conclusively by the Owner Trustee's or the
Depositor's execution thereof, directly to the Authenticating Agent to
authenticate and deliver the Class A-1 Notes in the aggregate principal amount
of $100,538,000 and the Class A-2 Notes in the aggregate principal amount of
$44,572,000. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust, pursuant to
the Basic Documents.
23
<PAGE>
SECTION 6.2 GENERAL DUTIES.
(a) It shall be the duty of the Owner Trustee:
(i) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic
Documents to which the Trust is a party and to administer the Trust in
the interest of the Certificateholders, subject to the Basic Documents
and in accordance with the provisions of this Agreement; and
(ii) to obtain and preserve (or cause to be obtained and
preserved) the Issuer's existence and qualification to do business in
each jurisdiction in which such qualification is or shall be necessary
to protect the validity and enforceability of the Indenture, the Notes,
the Mortgage Loans and each other instrument and agreement included in
the Trust Estate. The Servicer agrees to perform the obligations of the
Owner Trustee under this Section 6.2(a)(ii), other than with respect to
the obligation to obtain and preserve the Issuer's existence and
qualification to do business in the State of Delaware which shall
remain the obligation of the Owner Trustee hereunder.
(b) The Owner Trustee shall not be responsible for taking any
action on behalf of the Trust under any Basic Document unless specifically
directed in writing to do so in accordance with Section 6.3 of this Agreement.
(c) The Owner Trustee shall not be responsible for any matter
regarding the Securities Act, the Exchange Act or the Investment Company Act of
1940, as amended, or the rules or regulations thereunder.
SECTION 6.3 ACTION UPON INSTRUCTION.
(a) Subject to Article IV and in accordance with the terms of
the Basic Documents, the Certificateholders may by written instruction direct
the Owner Trustee in the management of the Trust but only to the extent
consistent with the limited purpose of the Trust. Such direction may be
exercised at anytime by written instruction of the Certificateholders pursuant
to Article IV. Without limiting the generality of the foregoing, the Owner
Trustee shall act as directed by the Certificateholders in connection with Note
redemptions requested by the Certificateholders, and shall take all actions and
deliver all documents that the Trust is required to take and deliver in
accordance with Section 4.01 and Article X of the Indenture in order to effect
any redemption requested by the Certificateholders.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
24
<PAGE>
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Certificateholders and the Note Insurer requesting instruction from the
Certificateholders as to the course of action to be adopted, and to the extent
the Owner Trustee acts in good faith in accordance with any written instruction
of the Certificateholders received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4 NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT, THE BASIC DOCUMENTS
OR ANY INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Trust is a party, except as expressly provided by the terms of this
Agreement, any Basic Document or in any document or written instruction received
by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Basic Document against the
Owner Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any liens
on any part of the Owner Trust
25
<PAGE>
Estate that result from actions by, or claims against, the Owner Trustee in its
individual capacity that are not related to the ownership or the administration
of the Owner Trust Estate.
SECTION 6.5 NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS. The
Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.
SECTION 6.6 RESTRICTIONS. The Owner Trustee shall not take any action (a) that
violates or results in a breach of or is inconsistent with the purposes of the
Trust set forth in Section 2.3 or (b) that, to the actual knowledge of the Owner
Trustee, would result in the Trust's becoming taxable as a corporation for
Federal income tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts the
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement and the Basic Documents.
The Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder under any circumstances, except (i) for its own willful
misconduct or gross negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.3 expressly made by the Owner
Trustee in its individual capacity. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions of
the Certificateholders;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
26
<PAGE>
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Basic Documents, other than the
certificate of authentication on the Certificates, and the Owner Trustee shall
in no event assume or incur any liability, duty, or obligation to any Noteholder
or to any Certificateholder, other than as expressly provided for herein and in
the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Seller, the Depositor, the Indenture Trustee, the Trust Paying
Agent, the Manager or the Servicer under any of the Basic Documents or otherwise
and the Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents that are
required to be performed by the Indenture Trustee under the Indenture, the
Servicer under the Servicing Agreement, the Trust Paying Agent under this
Agreement or the Manager under the Management Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Basic Document, at the request, order or
direction of any of the Certificateholders, unless such Certificateholders have
offered to the Owner Trustee security or indemnity satisfactory to it against
the costs, expenses and liabilities that may be incurred by the Owner Trustee
therein or thereby. The right of the Owner Trustee to perform any discretionary
act enumerated in this Agreement or in any Basic Document shall not be construed
as a duty, and the Owner Trustee shall not be answerable for other than its
gross negligence or willful misconduct in the performance of any such act.
(h) Notwithstanding anything contained herein to the contrary,
neither Wilmington Trust Company nor the Owner Trustee shall be required to take
any action in any jurisdiction other than in the State of Delaware if the taking
of such action will (i) require the consent or approval or authorization or
order of or the giving of notice to, or the registration with or the taking of
any other action in respect of, any state or other governmental authority or
agency of any jurisdiction other than the State of Delaware; (ii) result in any
fee, tax or other governmental charge under the laws of any jurisdiction or any
political subdivisions thereof in existence on the date hereof other than the
State of Delaware becoming payable by Wilmington Trust Company; or (iii) subject
Wilmington Trust Company to personal jurisdiction in any jurisdiction other than
the State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company or the Owner
Trustee, as the case may be, contemplated hereby. The Owner Trustee shall be
entitled to obtain advice of counsel (which advice shall be an expense of
Mortgage Lenders Network) to determine whether
27
<PAGE>
any action required to be taken pursuant to the Agreement results in the
consequences described in clauses (i), (ii) and (iii) of the preceding sentence.
In the event that said counsel advises the Owner Trustee that such action will
result in such consequences, the Owner Trustee will appoint an additional
trustee pursuant to Section 10.5 hereof to proceed with such action.
SECTION 7.2 FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish to the
Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents. On behalf of the Owner Trustee, the Depositor shall
furnish to Noteholders promptly upon written request therefor, copies of the
Servicing Agreement and the Indenture.
SECTION 7.3 REPRESENTATIONS AND WARRANTIES.
(a) The Owner Trustee hereby represents and warrants to the
Depositor, the Owner Trustee for the benefit of the Certificateholders, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Federal or Delaware law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any judgment or order binding on it, or constitute any default under
its charter documents or by-laws.
(b) The Trust Paying Agent hereby represents and warrants to
the Depositor and the Note Insurer for the benefit of the Certificateholders,
that:
(i) It is a banking association duly organized and validly
existing in good standing under the laws of the United States of
America. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
28
<PAGE>
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Federal law, governmental rule or regulation
governing the banking or trust powers of the Trust Paying Agent or any
judgment or order binding on it, or constitute any default under its
charter documents or by-laws.
SECTION 7.4 RELIANCE; ADVICE OF COUNSEL.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, Note, or other document or paper believed
by it to be genuine and believed by it to be signed by the proper party or
parties. The Owner Trustee may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on a certificate, signed by the president or
any vice president or by the treasurer or other authorized officers of the
relevant party, as to such fact or matter and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee in good faith, and (ii) may consult with counsel, accountants and other
skilled persons to be selected in good faith and employed by it. The Owner
Trustee shall not be liable for anything done, suffered or omitted in good faith
by it in accordance with the written opinion or advice of any such counsel,
Accountants or other such persons and not contrary to this Agreement or any
Basic Document.
SECTION 7.5 NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in this
Article VII, in accepting the trusts hereby created, Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS. The
recitals contained herein and in the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, of any Basic Document or of the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates and as
29
<PAGE>
specified in Section 7.3) or the Notes, or of any Mortgage Loans or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any security interest
created by any Mortgage Loan or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to Certificateholders
under this Agreement or the Noteholders under the Indenture, including, without
limitation, the existence, condition and ownership of any Mortgaged Property,
the existence and enforceability of any insurance thereon, the existence and
contents of any Mortgage Loan on any computer or other record thereof, the
validity of the assignment of any Mortgage Loan to the Trust or of any
intervening assignment, the completeness of any Mortgage Loan, the performance
or enforcement of any Mortgage Loan, the compliance by the Depositor or the
Servicer with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation or
any action of the Indenture Trustee or the Servicer or any subservicer taken in
the name of the Owner Trustee.
SECTION 7.7 OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner Trustee in
its individual or any other capacity may become the owner or pledgee of
Certificates or Notes and may deal with the Depositor, the Indenture Trustee and
the Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8 LICENSES. The Owner Trustee shall cause the Trust to use its best
efforts to obtain and maintain the effectiveness of any licenses required in
connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof. The Servicer agrees to perform the obligations
of the Owner Trustee under this Section 7.8, other than with respect to the
obligation to obtain and maintain the effectiveness of any licenses required in
the State of Delaware which shall remain the obligation of the Owner Trustee
hereunder.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall receive
as compensation for its services hereunder such fees as have been separately
agreed upon before the date hereof between Mortgage Lenders Network and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
Mortgage Lenders Network for its other reasonable expenses hereunder, including
the reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder. Mortgage Lenders Network shall be responsible and liable for the
payment of such fees and expenses and shall pay such fees and expenses promptly
after receipt of a written invoice therefor from the Owner Trustee.
30
<PAGE>
SECTION 8.2 INDEMNIFICATION. The Certificateholders shall be jointly and
severally liable as obligor for, and shall indemnify the Owner Trustee (in its
individual and trust capacities) and the Trust Paying Agent and their respective
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against any Indemnified Party in any way
relating to or arising out of this Agreement, the Basic Documents, the Owner
Trust Estate, the administration of the Owner Trust Estate or the action or
inaction of the Owner Trustee or the Trust Paying Agent hereunder, except only
that the Certificateholders shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from any of the
matters described in the third sentence of Section 7.1. The indemnities
contained in this Section shall survive the resignation or termination of the
Owner Trustee or the Trust Paying Agent or the termination of this Agreement. In
any event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Certificateholders will be entitled to participate
therein, with counsel selected by such Holders and reasonably satisfactory to
the Indemnified Parties, and after notice from Certificateholders to the
Indemnified Parties of its election to assume the defense thereof, the
Certificateholders shall not be liable to the Indemnified Party under this
Section 8.2 for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense of such action; provided,
however, that this sentence shall not be in effect if (1) the Certificateholders
shall not have employed counsel reasonably satisfactory to the Indemnified Party
to represent the Indemnified Party within a reasonable time after notice of
commencement of the action, (2) the Certificateholders shall have authorized the
employment of counsel for the Indemnified Party at the expense of the
Certificateholders or (3) in the event any such claim involves a possible
imposition of criminal liability or penalty or a material civil penalty on such
Indemnified Party, a conflict of interest between such Indemnified Party and the
Certificateholders or another indemnitee or the granting of material injunctive
relief against such Indemnified Party, and such Indemnified Party informs the
Certificateholders that such Indemnified Party desires to be represented by
separate counsel, in which case, the reasonable fees and expenses of such
separate counsel shall be born by the Certificateholders. If the
Certificateholders assume the defense of any such proceeding, they shall be
entitled to settle such proceeding without any liability being assessed against
any Indemnified Party or, if such settlement provides for release of any such
Indemnified Party without any liability being assessed against any Indemnified
Party in connection with all matters relating to the proceeding which have been
asserted against such Indemnified Party in such proceeding by the other parties
to such settlement, without the consent of such Indemnified Party, but otherwise
only with the consent of such Indemnified Party. Certificateholders shall be
liable for this indemnification obligation pro rata, based upon their respective
Percentage Interests.
SECTION 8.3 PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the Owner Trustee
or the Trust Paying Agent pursuant to this Article VIII shall be deemed not to
be a part of the Owner Trust Estate immediately after such payment.
31
<PAGE>
SECTION 8.4 SERVICER LIABILITY. In the event the Certificateholders fail to pay
all or any portion of any fees, expenses or indemnification amounts to the Owner
Trustee or the Trust Paying Agent for which they are liable under this Article
VIII, the Servicer shall pay such amounts to the Owner Trustee or the Trust
Paying Agent, as the case may be, promptly after receipt of an invoice therefor
from the party entitled thereto.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 TERMINATION OF TRUST AGREEMENT.
(a) This Agreement (other than Article VIII) shall terminate
and the Trust shall be dissolved, wound up and terminated and be of no further
force or effect on the earlier of: (i) the final payment or other liquidation of
the Mortgage Loans and the disposition of all REO Properties and the remittance
of all funds due hereunder with respect to such Mortgage Loans and REO
Properties or the disposition of the Mortgage Loans and REO Properties at the
direction of a majority of the Certificateholders, in either case after the
satisfaction and discharge of the Indenture pursuant to Section 4.01 of the
Indenture; and (ii) the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy (the late ambassador of the
United States to the Court of St. James's). The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder or the Depositor shall
not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an Accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a) above, none of the
Depositor, the Servicer, the Note Insurer nor any Certificateholder shall be
entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Owner Trustee for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the
Note Insurer, the Rating Agencies and the Trust Paying Agent mailed within five
Business Days of receipt by the Owner Trustee of notice of such termination
pursuant to Section 9.1(a) above, which notice given by the Owner Trustee shall
state (i) the Payment Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the Owner Trustee therein designated, (ii) the amount of any
such final payment and (iii) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Owner Trustee therein
specified. The Owner Trustee shall give such notice to the Certificate Registrar
(if other than the Owner Trustee) and the Trust Paying Agent at the time such
notice is given to Certificateholders. The Owner Trustee shall give notice to
the Trust Paying Agent of each presentation and surrender of Certificates
promptly, and the Trust Paying Agent shall promptly cause to be distributed
32
<PAGE>
to the related Certificateholders amounts distributable on such Payment Date
pursuant to Section 5.2(a).
(d) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner Trustee shall
at all times be a corporation satisfying the provisions of Section 3807(a) of
the Business Trust Statute; authorized to exercise trust powers; having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by Federal or state authorities; and having (or having a parent
that has) a rating of at least "Baa3" by Moody's and "A-1" by Standard & Poor's
(or otherwise acceptable to the Rating Agencies) and being acceptable to the
Note Insurer. If such corporation shall publish reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer, the Indenture Trustee and the Note
Insurer. Upon receiving such notice of resignation, the Servicer shall promptly
appoint a successor Owner Trustee (acceptable to the Note Insurer) by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Owner Trustee and one copy to the successor Owner Trustee. If no
successor Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or the Note Insurer may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Certificateholders or the Servicer, or if at any
time the Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Owner Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Note Insurer, or the Certificateholders or
the Servicer with the consent of the Note Insurer, may remove the Owner Trustee.
If the Certificateholders or the Servicer or the Note Insurer shall remove the
Owner Trustee under the authority of the immediately preceding sentence, the
Note Insurer, or the
33
<PAGE>
Servicer with the consent of the Note Insurer, shall promptly appoint a
successor Owner Trustee by written instrument in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee and payment of all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 10.3 written approval by the Note
Insurer and payment of all fees and expenses owed to the outgoing Owner Trustee.
The Servicer shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies, the Indenture Trustee, the Trust Paying
Agent and the Note Insurer.
SECTION 10.3 SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee appointed
pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Indenture Trustee, the Note Insurer and to its predecessor Owner
Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee (if acceptable to the Note
Insurer), without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties, and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and moneys held by it
under this Agreement; and the Depositor and the predecessor Owner Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Depositor shall mail notice of the successor of
such Owner Trustee to all Certificateholders, the Indenture Trustee, the Trust
Paying Agent, the Noteholders, the Note Insurer and the Rating Agencies. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor Owner Trustee, the successor Owner Trustee shall
cause such notice to be mailed at the expense of the Depositor.
Any successor Owner Trustee appointed pursuant to this Section
10.2 shall file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of Delaware.
SECTION 10.4 MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation into
which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation
34
<PAGE>
to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Owner Trust Estate or any Mortgaged Property may at the
time be located, and for the purpose of performing certain duties and
obligations of the Owner Trustee with respect to the Trust and the Certificates,
the Owner Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Note Insurer to act as cotrustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Note Insurer
and the Owner Trustee may consider necessary or desirable. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.3.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised
or performed by the Owner Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Owner
Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties,
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or cotrustee, but solely at
the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under
this Agreement; and
(iii) the Owner Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
35
<PAGE>
Any notice, request or other writing given to the Owner
Trustee shall be deemed to have been given to the separate trustees and
co-trustees, as if given to each of them. Every instrument appointing any
separate trustee or co-trustee, other than this Agreement, shall refer to this
Agreement and to the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of appointment, shall be vested with the estates
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as its Agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 SUPPLEMENTS AND AMENDMENTS. This Agreement may be amended by the
Depositor, and the Owner Trustee, with the prior consent of the Note Insurer,
and with prior written notice to the Rating Agencies, but without the consent of
any of the Noteholders or the Certificateholders or the Indenture Trustee, to
cure any ambiguity, to correct or supplement any provisions in this Agreement or
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, such action shall not adversely affect in any material respect the
interests of any Noteholder or Certificateholder or the rights of the Note
Insurer. An amendment described above shall be deemed not to adversely affect in
any material respect the interests of any Noteholder if the party requesting the
amendment satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the
Depositor and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the Note
Insurer, the Holders (as defined in the Indenture) of Notes evidencing more than
50% of the Outstanding Amount of the Notes, the Holders of Certificates
evidencing more than 50% of the Percentage Interests of the Trust Interest and
if the party requesting such amendment satisfies the Rating Agency Condition
with respect to such amendment, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the Mortgage Loans or distributions that shall be
required to be made for the benefit of
36
<PAGE>
the Noteholders, the Certificateholders or the Note Insurer, (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes or the Percentage
Interests required to consent to any such amendment, in either case of clause
(a) or (b) without the consent of the holders of all the outstanding Notes, the
Note Insurer and the Holders of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, the Note
Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such amendment
with the Secretary of State.
Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 NO LEGAL TITLE TO OWNER TRUST ESTATE IN HOLDERS. The
Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title, or interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an Accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3 LIMITATIONS ON RIGHTS OF OTHERS. Except for Section 2.7, the
provisions of this Agreement are solely for the benefit of the Owner Trustee,
the Depositor, the Certificateholders, the Note Insurer and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.7), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
37
<PAGE>
SECTION 11.4 NOTICES.
(a) Unless otherwise expressly specified or permitted by the
terms hereof, all communications provided for or permitted hereunder shall be in
writing and shall be deemed to have been given if (1) personally delivered, (2)
upon receipt by the intended recipient or three Business Days after mailing if
mailed by certified mail, postage prepaid (except that notice to the Owner
Trustee shall be deemed given only upon actual receipt by the Owner Trustee),
(3) sent by express courier delivery service and received by the intended
recipient or (4) except with respect to notices sent to the Owner Trustee,
transmitted by telex or facsimile transmission (or any other type of electronic
transmission agreed upon by the parties and confirmed by a writing delivered by
any of the means described in (1), (2) or (3), at the following addresses: (i)
if to the Owner Trustee, its Corporate Trust Office; (ii) if to the Depositor,
Residential Asset Funding Corporation, c/o First Union National Bank
Incorporated, 301 South College Street, Charlotte, North Carolina, 28288-0610,
Telecopy: (704) 383-8121; (iii) if to the Note Insurer, MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Mortgage
Lenders Network Home Equity Loan Trust 1999-1, Telecopy: (914) 765-3810; (iv) if
to the Trust Paying Agent, Norwest Bank Minnesota, National Association, 11000
Broken Land Parkway, Columbia, Maryland 21044, Attention: Mortgage Lenders
Network 1999-1, Telecopy: (410) 884-2360; (v) if to Mortgage Lenders Network
USA, Inc., Middlesex Corporate Center, 213 Court Street, Middletown, Connecticut
06457, Attention: General Counsel, Telecopy (860) 344-5707 or, as to each such
party, at such other address as shall be designated by such party in a written
notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.5 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.6 SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 SUCCESSORS AND ASSIGNS. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Depositor, the
Note Insurer, the Owner Trustee and its successors and each owner and its
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other
38
<PAGE>
instrument or action by a Certificateholder shall bind the successors and
assigns of such Certificateholder.
SECTION 11.8 NO PETITION. The Owner Trustee, by entering into this Agreement,
each Certificateholder, by accepting a Certificate, and the Indenture Trustee
and each Noteholder by accepting the benefits of this Agreement, hereby covenant
and agree that they will not at any time institute against the Depositor or the
Trust, or join in any institution against MLN Capital Corporation I or the Trust
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or law in connection with any obligations relating to the
Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.9 NO RECOURSE. Each Certificateholder by accepting a Certificate
acknowledges that such Certificateholder's Certificate represents a beneficial
interest in the Trust only and does not represent an interest in or an
obligation of the Servicer, the Depositor, the Owner Trustee or any Affiliate
thereof and no recourse may be had against such parties or their assets, except
as may be expressly set forth or contemplated in this Agreement, the
Certificates or the Basic Documents.
SECTION 11.10 HEADINGS. The headings of the various Articles and Sections herein
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
SECTION 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 GRANT OF CERTIFICATEHOLDER RIGHTS TO NOTE INSURER.
(a) In consideration for the issuance of the Certificates and
for the guarantee of the Notes by the Note Insurer pursuant to the Insurance
Policy, the holders of the Certificates hereby grant to the Note Insurer the
right to act as the holder of 100% of the outstanding Certificates for the
purpose of exercising the rights of the Certificateholders under this Agreement
without the consent of the Certificateholders, including the voting rights of
such holders hereunder, but excluding those rights requiring the consent of all
such holders under Section 11.1 and any rights of such holders to distributions
under Section 5.2(a); provided that the preceding grant of rights to the Note
Insurer by the holders of the Trust Interest shall be subject to Section 11.14.
(b) The rights of the Note Insurer to direct certain actions
and consent to certain actions of the Certificateholders hereunder will
terminate at such time as the Balance of the Notes has been reduced to zero and
the Note Insurer has been reimbursed for any amounts owed under the Insurance
Policy and the Insurance Agreement and the Note Insurer has no further
obligation under the Insurance Policy.
39
<PAGE>
The duties and responsibilities of the Owner Trustee shall be
limited to those expressly provided for in this Agreement. The parties hereto
agree that except for purposes of the foregoing sentence, the Owner Trustee
shall have no management responsibilities or owe any fiduciary duties to the
Note Insurer (or the Noteholders in the event they succeed to the Note Insurer's
rights).
Whenever in connection with its performance under this
Agreement the Owner Trustee receives inconsistent notices or advice from the
Note Insurer and the Certificateholders, the Owner Trustee need not take any
action in respect of such notices or advice unless and until Owner Trustee
receives (a) indemnification in respect of the matters noted in such notices or
advice to its satisfaction or (b) written direction signed by the Note Insurer
and the Certificateholders in respect thereof.
SECTION 11.13 THIRD-PARTY BENEFICIARY. The Note Insurer is an intended
third-party beneficiary of this Agreement, and this Agreement 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
Agreement 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 Agreement.
In addition, the Manager is an intended third-party
beneficiary of this Agreement for purposes of enforcing Section 5.2(d) hereof.
SECTION 11.14 SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
During the continuation of a Note Insurer Default, rights
granted or reserved to the Note Insurer hereunder shall vest instead in the
Certificateholders; provided that the Note Insurer shall be entitled to any
distributions of reimbursements as set forth in the Insurance Agreement and the
Note Insurer shall retain those rights under Section 11.1 to consent to any
amendment of this Agreement.
At such time as either (i) the Note Balance of the Notes has
been reduced to zero or (ii) the Insurance Policy has been terminated and in
either case of (i) or (ii) the Note Insurer has been reimbursed for all amounts
owed under the Insurance Policy and the Insurance Agreement (and the Note
Insurer no longer has any obligation under the Insurance Policy, except for
breach thereof by the Note Insurer), then the rights and benefits granted or
reserved to the Note Insurer hereunder (including the rights to direct certain
actions and receive certain notices) shall terminate and the Certificateholders
shall be entitled to the exercise of such rights and to receive such benefits of
the Note Insurer following such termination to the extent that such rights and
benefits are applicable to the Certificateholders.
[Signatures follow]
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Deposit Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
RESIDENTIAL ASSET FUNDING CORPORATION,
as Depositor
By: /s/ Shanker Merchant
---------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
in its individual capacity and as Owner Trustee
By: /s/ Norma Closs
---------------------------------
Authorized Signatory
The Trust Paying Agent hereby acknowledges its appointment as
Trust Paying Agent under this Agreement and agrees to act in such capacity as
described herein.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By: /s/ Amy Wahl
---------------------------------
Name: Amy Wahl
Title: Assistant Vice President
The Servicer hereby acknowledges its obligations under this
Agreement and agrees to act in accordance therewith.
MORTGAGE LENDERS NETWORK USA, INC.
By: /s/ Marion H. Mathes
----------------------------------
Name: Marion H. Mathes
Title: Senior Vice President
<PAGE>
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, MLN CAPITAL CORPORATION I) IN A TRANSACTION THAT
IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS
OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES
LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM
THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO
THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN"),
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY AND (III) IS NOT DIRECTLY OR INDIRECTLY
PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OR, AS
INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL
A-1
<PAGE>
HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF
SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING
ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE
INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE.
A-2
<PAGE>
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
CERTIFICATE
No. 0001
THIS CERTIFIES THAT MLN Depository Corp. (the "Owner") is the
registered owner of a 100% Percentage Interest of the Trust Interest in Mortgage
Lenders Network Home Equity Loan Trust 1999-1 (the "Trust") existing under the
laws of the State of Delaware and created pursuant to that certain Deposit Trust
Agreement, dated as of June 1, 1999 (the "Trust Agreement"), between Residential
Asset Funding Corporation, as depositor, and Wilmington Trust Company, in its
individual capacity and in its fiduciary capacity as owner trustee under the
Trust Agreement (the "Owner Trustee"). Capitalized terms used but not otherwise
defined herein have the meanings assigned to such terms in the Trust Agreement.
The Owner Trustee, on behalf of the Issuer and not in its individual capacity,
has executed this Certificate by one of its duly authorized signatories as set
forth below. This Certificate is one of the Certificates referred to in the
Trust Agreement and is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement to which the holder of this Certificate by
virtue of the acceptance hereof agrees and by which the holder hereof is bound.
Reference is hereby made to the Trust Agreement for the rights of the holder of
this Certificate, as well as for the terms and conditions of the Trust created
by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer
this Certificate except in accordance with terms and provisions of the
Agreement.
A-3
<PAGE>
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
MORTGAGE LENDERS NETWORK HOME
EQUITY LOAN TRUST 1999-1
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the
Trust Agreement
By: ______________________________________________
Authorized Signatory
DATED: June 1, 1999
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Agreement.
Wilmington Trust Company, not in its individual capacity
but solely as Owner Trustee as Authenticating Agent
By: ___________________________________________________
Authorized Signatory
A-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
_______________________________________________________________________________
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________ Attorney to transfer
said
Instrument on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
______________
__________________________________*/
Signature Guaranteed:
_________________________________ */
__________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-5
<PAGE>
B-1
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-1
THIS CERTIFICATE OF TRUST OF MORTGAGE LENDERS NETWORK HOME
EQUITY LOAN TRUST 1999-1 (the "Trust"), dated as of June __, 1999, is being duly
executed and filed by Wilmington Trust Company, a Delaware banking corporation,
as trustee, to form a business trust under the Delaware Business Trust Act (12
Del. Code, S 3801 et seq.).
1. NAME. The name of the business trust formed hereby
is Mortgage Lenders Network Home Equity Loan Trust 1999-1.
2. DELAWARE TRUSTEE. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
Attention: Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be
effective upon filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under a Deposit Trust Agreement,
dated as of June 1, 1999.
By: ___________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
FORM OF INVESTMENT LETTER
_________, 1999
Residential Asset Funding Corporation
c/o First Union Capital Markets
301 South College Street
Charlotte, North Carolina 28288-0610
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Re: Mortgage Lenders Network Home Equity Loan Trust 1999-1 (the
"Issuer") Asset Backed Notes, Series 1999-1 Class A-1 and
Class A-2
Ladies and Gentlemen:
_________________________________________ (the "Holder") has
purchased or acquired, or intends to purchase or acquire from ________________,
the current Holder (the "Current Holder"), a Certificate representing a ___%
Percentage Interest (the "___% Certificate") in the Trust Interest for the
referenced Issuer, which represents an interest in the Issuer created pursuant
to that certain Deposit Trust Agreement, dated as of June 1, 1999 (the "Trust
Agreement"), between MLN Residual Holding Corporation I, as depositor, and
Wilmington Trust Company, as Owner Trustee. Capitalized terms used and not
otherwise defined herein have the meanings assigned to such terms in the Trust
Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the
Holder, hereby certifies, represents, warrants and agrees on behalf of the
Holder as follows:
1. The Holder is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed and is
authorized to invest in the ___% Certificate. The person executing this letter
on behalf of the Holder is duly authorized to do so on behalf of the Holder.
2. The Holder hereby acknowledges that no transfer of the ___%
Certificate may be made unless such transfer is exempt from the registration
requirements
C-1
<PAGE>
of the Securities Act of 1933, as amended (the "Securities Act");
and applicable state securities laws, or is made in accordance with the
Securities Act and such laws.
3. The Holder understands that the ___% Certificate has not
been and will not be registered under the Securities Act and may be offered,
sold, pledged or otherwise transferred apply to a person whom the transferor
reasonably believes is (A) a qualified institutional buyer (as defined in Rule
144A under the Securities Act) or (B) a Person involved in the organization or
operation of the Trust or an affiliate of such Person, in a transaction meeting
the requirements of Rule 144A under the Securities Act and in accordance with
any applicable securities laws of any state of the United States. The Holder
understands that the _% Certificate bears a legend to the foregoing effect.
4. The Holder is acquiring the ___% Certificate for its own
account or for accounts for which it exercises sole investment discretion, and
not with a view to or for sale or other transfer in connection with any
distribution of the ___% Certificate in any manner that would violate Section 5
of the Securities Act or any applicable state securities laws, subject
nevertheless to any requirement of law that the disposition of the Holder's
property shall at all times be and remain within its control.
5. The Holder is (A) a "qualified institutional buyer" (a
"QIB") as defined in Rule 144A under the Securities Act, and is aware that the
transferor of the ___% Certificate may be relying on the exemption from the
registration requirements of the Securities Act provided by Rule 144A and is
acquiring such ___% Certificate for its own Account or for the Account of one or
more qualified institutional buyers for whom it is authorized to act, or (B) a
Person involved in the organization or operation of the Trust or an affiliate of
such Person within the meaning of Rule 3a-7 of the Investment Company Act of
1940, as amended (including, but not limited to, the Transferor). The Holder is
able to bear the economic risks of such an investment. The Holder is a QIB
because [STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Holder sells or otherwise transfers the registered
ownership of such ___% Certificate, the Holder will comply with the restrictions
and requirements with respect to the transfer of the ownership of the ___%
Certificate under the Trust Agreement, and the Holder will obtain from any
subsequent purchaser or transferee substantially the same certifications,
representations, warranties and covenants as required under the Trust Agreement
in connection with such subsequent sale or transfer thereof.
7. The Holder is not an entity that will hold a ___%
Certificate as nominee (a "Book Entry Nominee") to facilitate the clearance and
settlement of such security through electronic book-entry changes in Accounts or
participating organizations.
8. The Holder (i) is not a person which is an employee benefit
plan, trust or account subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code or a
governmental plan, as defined in Section 3(32) of ERISA, subject to any federal,
state or local law which is, to a
C-2
<PAGE>
material extent, similar to the foregoing provisions of ERISA or the
Code (any such person being a "Plan"), (ii) is not an entity, including an
insurance company separate account or general account, whose underlying assets
include "plan assets" by reason of a Plan's investment in the entity and (iii)
is not directly or indirectly purchasing such ___% Certificate on behalf of, as
investment manager of, as named fiduciary of, as trustee of, or with assets of a
Plan.
9. The Holder hereby agrees to indemnify each of the Issuer,
the Indenture Trustee and the Owner Trustee against any liability that may
result if the Holder's transfer of a ___% Certificate (or any portion thereof)
is not exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is not made in accordance with such federal
and state laws. Such indemnification of the Issuer, the Owner Trustee shall
survive the termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Holder has caused this instrument to
be executed on its behalf, pursuant to the authority of its Board of Directors,
by its duly authorized signatory this ____ day of __________, _____.
[NAME OF HOLDER]
By: _______________________
Name:
Title:
C-3
EXHIBIT 5.1
OPINION REGARDING LEGALITY
<PAGE>
June 4, 1999
To the parties listed on Annex A attached hereto
Re: Mortgage Lenders Network Home Equity Loan Trust 1999-1,
Asset Backed Notes, Series 1999-1, Class A-1 and Class A-2
Ladies and Gentlemen:
We have acted as special counsel to Residential Asset Funding
Corporation (the "Depositor") and Mortgage Lenders Network Home Equity Loan
Trust 1999-1, a Delaware business trust (the "Issuer") in connection with the
execution and delivery of the following documents:
(i) the Mortgage Loan Sale Agreement dated as of June 1, 1999 (the
"Sale Agreement") between the Depositor and Mortgage Lenders Network
USA, Inc., as Seller (the "Seller");
(ii) the Deposit Trust Agreement dated as of June 1, 1999 (the "Trust
Agreement") among the Depositor, the Seller, Norwest Bank Minnesota,
National Association, as Trust Paying Agent and Wilmington Trust
Company, as Owner Trustee;
(iii) the Management Agreement dated as of June 1, 1999 (the
"Management Agreement") between the Issuer and Norwest Bank Minnesota,
National Association, as Manager;
(iv) the Mortgage Loan Contribution Agreement dated as of June 1,
1999 (the "Contribution Agreement") between the Depositor and the
Issuer;
(v) the Indenture dated as of June 1, 1999 (the "Indenture") between
Norwest Bank Minnesota, National Association, as Indenture Trustee (in
such capacity, the "Indenture Trustee") and the Issuer;
<PAGE>
(vi) the Underwriting Agreement dated as of May 27, 1999 (the
"Underwriting Agreement") between the Depositor and First Union Capital
Markets Corp., as Representative of the Underwriters (the
"Representative");
(vii) the Standard Provisions to Underwriting Agreement dated as of
May 27, 1999 between the Depositor and the Representative;
(viii) the Custodial Agreement dated as of June 1, 1999 among
Mortgage Lenders Network USA, Inc., as Servicer (in such capacity, the
"Servicer"), Bank Boston, as Custodian and the Indenture Trustee;
(ix) the Servicing Agreement dated as of June 1, 1999 among the
Servicer, the Issuer and Norwest Bank Minnesota, as Trust Paying Agent;
and
(x) the Insurance Agreement dated as of June 1, 1999 (the "Insurance
Agreement") among MBIA Insurance Corporation (the "Insurer"), the
Issuer, the Seller, the Servicer, the Depositor and the Indenture
Trustee.
Capitalized terms used herein, but not defined, shall have the
meanings assigned to them in the Indenture.
We have examined executed copies of the Sale Agreement, the
Underwriting Agreement, the Standard Provisions to Underwriting Agreement, the
Contribution Agreement, the Trust Agreement, the Servicing Agreement; the
Custodial Agreement, the Indenture. the Management Agreement and the Insurance
Agreement (collectively, the "Documents"). We have also examined a copy of each
of the executed Notes. We have also examined the Registration Statement No.
333-64775, as heretofore amended (the "Registration Statement") and the
Prospectus dated November 10, 1998 the Preliminary Prospectus Supplement
relating to the Notes and the Prospectus Supplement dated May 27, 1999 relating
to the Notes (such Prospectus, Preliminary Prospectus Supplement and Prospectus
Supplement being referred to together as the "Prospectus").
We have also examined originals or photostatic or certified
copies of all such corporate records of the Depositor and such certificates of
public officials, certificates of corporate officers, and other documents, and
such questions of law, as we have deemed relevant and necessary as a basis for
the opinions hereinafter expressed. As to certain issues of fact material to the
opinions expressed herein, we have, with your consent, relied to the extent we
deemed appropriate upon certificates and representations of officers of the
Depositor. In making our examinations and rendering the opinions herein
expressed, we have made the following assumptions:
(1) each party to each of the Documents (other than the Depositor)
has the corporate power to enter into and perform all of its
obligations thereunder;
(2) the due authorization, execution and delivery of the Documents
by all parties thereto (other than the Depositor) and the
validity and binding effect on all parties (other than the
Depositor) of each of the Documents, as applicable;
<PAGE>
(3) the genuineness of all signatures;
(4) the authenticity of all documents submitted to us as originals
and the conformity to originals of all documents submitted to
us as copies;
(5) in the case of each purchaser of a Note investing assets of an
employee benefit plan covered by ERISA, such plan is a plan to
which Prohibited Transaction Exemption 90-32 is fully
available.
The opinions expressed in paragraphs 3 and 4 with respect to
the enforceability of certain agreements are subject to the following additional
qualifications:
The effect of bankruptcy, insolvency, reorganization,
moratorium, receivership, or other similar laws of general
applicability relating to or affecting creditors' rights generally or
the rights of creditors of national banking associations in the event
of bankruptcy, insolvency, reorganization, moratorium or receivership.
The application of general principles of equity, including,
but not limited to, the right of specific performance (regardless of
whether enforceability is considered in a proceeding in equity or at
law).
In addition, we wish to advise you that the enforceability of
certain provisions set forth in the Underwriting Agreement which purport to
provide for indemnification for losses due to securities laws violations may be
limited by public policy considerations.
We are admitted to the Bar of the State of New York, and we
express no opinion as to the laws of any other jurisdiction except as to matters
that are governed by federal law and with respect to paragraph 1 below, the
General Corporation Law of the State of Delaware. All opinions expressed herein
are based on laws, regulations and policy guidelines currently in force and may
be affected by future regulations. Furthermore, no opinion is expressed herein
regarding the applicable state Blue Sky, legal investment or real estate
syndication laws.
Based upon the foregoing and subject to the last paragraph
hereof, we are of the opinion that:
1. The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of North Carolina and
is duly qualified to do business in each State necessary to enable it
to perform its obligations under the Documents to which it is a party.
2. The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into
and consummate transactions contemplated by the Documents to which it
is a party and such Documents have been duly authorized, executed and
delivered by the Depositor.
<PAGE>
3. Each of the Documents to which the Depositor is a party
constitutes the valid, legal and binding agreement of the Depositor,
and is enforceable against the Depositor in accordance with its terms.
4. Each of the Documents to which the Issuer is a party is
enforceable against the Issuer in accordance with its terms.
5. The Notes, assuming the due execution by the Owner Trustee on
behalf of the Trust 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.
6. 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 to which the
Depositor is a party, 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.
7. 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 Securities Act of
1933, as amended, 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.
8. The Registration Statement is effective, and to the best of our
knowledge, the Commission has not issued any stop order suspending the
effectiveness of the Registration Statement (which for purposes of this
opinion shall not be deemed to include any exhibits filed therewith) or
any order directed to any prospectus relating to the Notes (including
the Prospectus), and has not initiated or threatened any proceeding for
that purpose.
9. The Indenture has been duly qualified under the Trust Indenture
Act of 1939 (the "TIA"), as amended, the Trust Agreement is not
required to be qualified under the TIA and neither the Depositor nor
the Issuer is required to be qualified under the Investment Company Act
of 1940.
10. The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE NOTES," to the extent such statements
purport
<PAGE>
to summarize certain provisions of the Notes or of the Indenture, are
fair and accurate in all material respects.
11. None of the sale of the Mortgage Loans to the Issuer, the
issuance or sale of the Notes, or the execution, delivery or
performance by the Depositor of its obligations under the Documents,
conflicts with or will conflict with, or results or will result in a
breach of, or constitutes or will constitute a default under the
charter or bylaws of the Depositor or any law, rule or regulation of
the United States federal government or of the State of New York.
12. The Indenture establishes in favor of the Indenture Trustee for
the benefit of the Noteholders and the Insurer, a valid and enforceable
security interest in all right, title and interest of the Issuer in the
Mortgage Loans.
Our opinions contained herein are rendered only as of the date
hereof, and we undertake no obligation to update this letter or the opinions
contained herein after the date hereof.
This opinion is furnished by us as counsel in connection with
the conveyance of the Mortgage Loans to the Issuer as of the date hereof and is
solely for the benefit of the addressees hereto, and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.
Very truly yours,
/s/ Dewey Ballantine LLP
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
<S> <C>
MBIA Insurance Corporation First Union Capital Markets Corp.
113 King Street 301 South College Street
Armonk, New York 10504 Charlotte, North Carolina 28288
Residential Asset Funding Corporation
Norwest Bank Minnesota, National Association c/o First Union Capital Markets
Sixth Street and Marquette Avenue 301 South College Street
Minneapolis, Minnesota 55479-0070 Charlotte, North Carolina 28288-0610
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
Mortgage Lenders Network USA, Inc.
Middlex Corporate Center, 11th Floor Fitch IBCA
213 Court Street One State Street Plaza
Middletown, Connecticut 06457 New York, New York 10004
Mortgage Lenders Home Equity Loan Trust 1999-1
c/o Wilmington Trust Company Wilmington Trust Company
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890-0001
</TABLE>
EXHIBIT 5.2
OPINION REGARDING TAX MATTERS
<PAGE>
June 4, 1999
First Union Capital Markets Corp.
301 South College Street
Charlotte, North Carolina 28288
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292-2015
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Mortgage Lenders Network Home Equity Loan Trust 1999-1
Asset Backed Notes, Series 1999-1, Class A-1and Class A-2
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the
issuance and delivery of certain notes denominated as Mortgage Lenders Network
Home Equity Loan Trust 1999-1, Series 1999-1 Notes, Class A-1 and Class A-2 (the
"Notes") pursuant to the terms of the Indenture (the "Indenture"), dated as of
June 1, 1999, between the Mortgage Lenders Network Home Equity Loan Trust 1999-1
(the "Issuer") and Norwest Bank Minnesota, National Association, 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
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 by Mortgage
Lenders Network USA, Inc. and the Issuer.
We do not purport to express an opinion on any laws other than
the federal income tax law of the United States of America. No opinion has been
sought and none has been given concerning the tax treatment of the issuance and
sale of the Notes under the laws of any state.
<PAGE>
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").
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 Basic Documents has been the subject of
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) Neither the Issuer nor the Mortgage Pool will be
characterized as 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.
We consent to reliance on this opinion letter by you and by
Richards, Layton & Finger, for the purpose of issuing their opinion with respect
to the tax treatment of the Trust under Delaware law. Except as provided in the
proceeding sentence, this opinion letter may not be relied upon by, nor may
copies be delivered to, any person without our prior written consent. We do not
undertake to advise you of any changes in the opinions expressed herein from
matters that might hereafter arise or be brought to our attention.
2
<PAGE>
Very truly yours,
/s/ Dewey Ballantine LLP
---------------------------
Dewey Ballantine LLP
3
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS
<PAGE>
PricewaterhouseCoopers Letterhead
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone (212) 596-8000
Facsimile (212) 596-8910
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Residential Asset Funding Corporation relating to Mortgage Lenders Network Home
Equity Loan Trust 1999-1, of our report dated February 2, 1999, on our audits of
the consolidated financial statements of MBIA Insurance Corporation and
Subsidiaries as of December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998. We also consent to the reference to our Firm
under the caption "Report of Experts."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
June 1, 1999
