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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 30, 1999
Residential Asset Funding Corporation
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(Exact name of registrant as specified in its charter)
North Carolina 333-81721 56-2064715
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(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation) Number) Identification No.)
301 South College Street
Charlotte, North Carolina 28288-0610
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (704) 374-4868
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No Change
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(Former name or former address, if changed since last report)
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<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 Asset Backed Notes and Asset Backed
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statements
on Form S-3 (Registration File No. 333-81721) (the "Registration Statement").
Pursuant to the Registration Statement, RBMG Funding Co. Mortgage Loan Trust
1999-2 (the "Issuer") issued $125,000,000 in aggregate principal amount of its
Asset Backed Notes, Class A-1 and Class A-2, Series 1999-2 (the "Notes"), on
November 30, 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 November 1, 1999,
between RBMG Funding Co. Mortgage Loan Trust 1999-2, and Bankers Trust Company,
in its capacity as indenture trustee (the "Indenture Trustee"). The Notes
represent non-recourse obligations of the Issuer, which obligations are secured
by a pledge of mortgage loans and certain related property. Bankers Trust
Company will serve as indenture trustee with respect to the Notes.
The assets of the Trust consist primarily of (i) two groups of
fixed and adjustable rate, residential one- to four-family, first lien mortgage
loans (the "Mortgage Loans") to be pledged to the Indenture Trustee for the
benefit of the holders of the Notes, (ii) all payments in respect of principal
and interest on the Mortgage Loans (other than any principal or interest
payments on the Mortgage Loans due prior to the Cut-Off Date), (iii) the
Issuer's rights under the Sponsor Sale Agreement, the Servicing Agreement and
the Cap Agreement, (iv) the rights of the Indenture Trustee under the Insurance
Policy, (v) certain other property.
Interest distributions on each Class of Notes are based on the
aggregate principal balance thereof and the then applicable Note Interest Rate
thereof. With respect to the Class A-1 Notes, the Note Interest Rate is LIBOR
plus 0.35% for each Interest Period prior to the Redemption Date and LIBOR plus
0.70% for each Interest Period thereafter. With respect to the Class A-2 Notes,
the Note Interest Rate is LIBOR plus 0.38% for each Interest Period prior to the
Redemption Date and LIBOR plus 0.76% for each Interest Period thereafter.
As of November 1, 1999, the Mortgage Loans possessed the
characteristics described in the Prospectus dated September 9, 1999 and the
Prospectus Supplement dated November 18, 1999 filed pursuant to Rule 424(b)(2)
of the Act on November 24, 1999.
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Item 5. Incorporation of Certain Documents by Reference
The consolidated financial statements of Ambac Assurance
Corporation and its subsidiaries as of December 31, 1998 and December 31, 1997,
and for each of the years in the three-year period ended December 31, 1998,
included in the Annual Report of Form 10-K of Ambac Financial Group, Inc. (which
was filed with the Securities and Exchange Commission on March 30, 1999;
Commission File Number 1-10777) and the unaudited consolidated financial
statements of Ambac Assurance Corporation and subsidiaries as of September 30,
1999, and for the periods ended September 30, 1999 and September 30, 1998,
included in the Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. for
the period ended September 30, 1999 (which was filed with the Securities and
Exchange Commission on November 12, 1999) are hereby incorporated by reference
in (i) this Current Report on Form 8-K; (ii) the prospectus; and (iii) the
prospectus supplement for RBMG Funding Co. Mortgage Loan Trust 1999-2,
Asset-Backed Notes, Series 1999-2, and shall be deemed to be part hereof and
thereof.
In connection with the issuance of the RBMG Funding Co.
Mortgage Loan Trust Asset Back Notes, Series 1999-2 (the "Notes), the registrant
is filing herewith the consents of KPMG LLP ("KPMG") to the use of their name
and the incorporation by reference of their report in the prospectus supplement
relating to the issuance of the Notes. The consents of KPMG are attached hereto
as Exhibit 23.1.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibit 1.1. Underwriting Agreement, dated November 18, 1999,
between Residential Asset Funding Corporation and First Union
Securities, Inc.
Exhibit 4.1. Indenture, dated as of November 1, 1999, between
the Issuer and the Indenture Trustee.
Exhibit 8.1. Opinion of Dewey Ballantine LLP regarding tax
matters, dated November 30, 1999.
Exhibit 10.1. Indemnification Agreement, dated as of November
18, 1999, among Ambac Assurance Corporation and First Union
Securities, Inc.
Exhibit 10.2. Insurance and Indemnity Agreement, dated as of
November 30, 1999, among Ambac Assurance Corporation, Meritage
Mortgage Corporation, RBMG, Inc., Ocwen Federal Bank FSB, RBMG
Asset Management Company, Inc., RBMG Funding Co., Residential
Asset Funding Corporation, RBMG Funding Co. Mortgage Loan
Trust 1999-2 and Bankers Trust Company.
Exhibit 23.1. Consent of KPMG regarding consolidated financial
statements of the Ambac Assurance Corporation and
Subsidiaries.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.
RESIDENTIAL ASSET FUNDING CORPORATION,
as Sponsor and on behalf of RBMG Funding Co. Mortgage
Loan Trust 1999-2
Registrant
By: /s/ Shanker Merchant
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Name: Shanker Merchant
Title: Senior Vice President
Dated: December 10, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
Exhibit 1.1. Underwriting Agreement, dated November 18, 1999,
between Residential Asset Funding Corporation and
First Union Securities, Inc.
Exhibit 4.1. Indenture, dated as of November 1, 1999, between the
Issuer and the Indenture Trustee.
Exhibit 8.1. Opinion of Dewey Ballantine LLP regarding tax
matters, dated November 30, 1999.
Exhibit 10.1. Indemnification Agreement, dated as of November 18,
1999, among Ambac Assurance Corporation and First
Union Securities, Inc.
Exhibit 10.2. Insurance and Indemnity Agreement, dated as of
November 30, 1999, among Ambac Assurance Corporation,
Meritage Mortgage Corporation, RBMG, Inc., Ocwen
Federal Bank FSB, RBMG Asset Management Company,
Inc., RBMG Funding Co., Residential Asset Funding
Corporation, RBMG Funding Co. Mortgage Loan Trust
1999-2 and Bankers Trust Company.
Exhibit 23.1. Consent of KPMG regarding consolidated financial
statements of the Ambac Assurance Corporation and
Subsidiaries.
Exhibit 1.1
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
ASSET BACKED NOTES
SERIES 1999-2
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
First Union Securities, Inc.
301 South College Street
Charlotte, North Carolina 28202-6001
November 18, 1999
Dear Sirs:
Residential Asset Funding Corporation (the "Sponsor")
proposes, subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated November 18, 1999 (the
"Standard Provisions"), between the Sponsor and First Union Securities, Inc.,
("First Union") to issue and sell to you (the "Underwriter") the Securities
specified in Schedule I hereto (the "Offered Securities") in the amounts set
forth in Schedule I hereto. The Sponsor agrees that each of the provisions of
the Standard Provisions is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Underwriting Agreement. Each reference to the "Representative"
herein and in the provisions of the Standard Provisions so incorporated by
reference shall be deemed to refer to you. Unless otherwise defined herein,
terms defined in the Standard Provisions are used herein as therein defined. The
Prospectus Supplement and the accompanying Prospectus relating to the Offered
Securities (together, the "Prospectus") are incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Sponsor agrees to
cause the Issuer to issue and sell to the Underwriter, and each Underwriter
agrees to purchase from the Sponsor, 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.
Remainder of Page Intentionally Left Blank
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If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon acceptance hereof
by you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Sponsor.
Yours truly,
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ Shanker Merchant
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Name: Shanker Merchant
Title: Senior Vice President
Accepted as of the date hereof:
FIRST UNION SECURITIES, INC.
By: /s/ Carloyn Eskridge
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Name: Carloyn Eskridge
Title: Senior Vice President
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE I
Issuer: RBMG Funding Co. Mortgage Loan
Trust 1999-2
Title of Offered Securities: RBMG Funding Co. Mortgage Loan
Trust 1999-2, Asset Backed Notes,
Series 1999-2, 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 November 1, 1999 among
the Issuer and Bankers Trust
Company, as indenture trustee.
Purchase Commitment: First Union Securities, Inc.:
$125,000,000
Purchase Price: The purchase price for the Offered
Securities shall be 100.00% of the
aggregate principal balance of the
Class A-1 Notes and the Class A-2
Notes, as of the Closing Date.
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 November 30, 1999 at
10:00 A.M. eastern time or at such
other time as the Sponsor and the
Underwriter shall agree.
Closing Location: Offices of Dewey Ballantine LLP,
1301 Avenue of the Americas, New
York, New York 10019.
Representative: Designated Representative: First
Union Securities, Inc.
Address for Notices, etc.: First Union Securities, Inc.
One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6001
Attn: Evan Peverley
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
November 18, 1999
From time to time, Residential Asset Funding Corporation, a
North Carolina corporation (the "Sponsor") 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 Underwriter and to Underwriter 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 Sponsor to sell any securities or as an obligation of any of the
Underwriter to purchase such securities. The obligation of the Sponsor to sell
any securities and the obligation of any of the Underwriter 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 Sponsor proposes to
cause the Issuer to sell, pursuant to the Underwriting Agreement to the
Underwriter or Underwriters named therein, 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 November 1, 1999 by and between the Issuer and Bankers Trust Company, a
New York banking corporation, as indenture trustee (the "Indenture Trustee").
The underlying loans were originated or acquired by Meritage Mortgage
Corporation ("Meritage"). Meritage has conveyed its interest in the Mortgage
Loans, directly or indirectly, to RBMG Asset Management Company, Inc. (the
"Company"). The Company has conveyed its interest in the Mortgage Loans to RBMG
Funding Co., a special purpose corporation and a wholly-owned subsidiary of the
Company, ("Funding Co.") Funding Co., in turn, will convey the Mortgage Loans to
the Sponsor 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
November 1, 1999 by and among the Issuer, RBMG, Inc., as servicer (in such
capacity, the "Servicer") and the Indenture Trustee and a Sub-Servicing
Agreement dated as of November 1, 1999 by and between the Servicer and the
Sub-Servicer.
The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Indenture identified in such Underwriting Agreement. The
Securities which are the subject of any particular Underwriting Agreement into
which this Agreement is incorporated are herein referred to as the "Offered
Securities."
<PAGE>
The Sponsor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
[333-81721]), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Base Prospectus" means the prospectus included
in the Registration Statement. The term "Prospectus" means the Base Prospectus
together with the prospectus supplement specifically relating to the Offered
Securities, as first filed with the Commission pursuant to Rule 424. The term
"Preliminary Prospectus" means a preliminary prospectus supplement specifically
relating to the Offered Securities together with the Base Prospectus.
SECTION 2. OFFERING BY THE UNDERWRITER. 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
Underwriter 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 Sponsor 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
Underwriter 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'S OBLIGATIONS. The
respective obligations of the several Underwriter 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
Sponsor 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 Sponsor and the
Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Sponsor 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 Sponsor under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act") prior to the sale of the
Offered Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings for such purpose
shall be pending before or threatened by the Commission, or by any authority
administering any state securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall have been complied
with to the Representative's reasonable satisfaction; (iv) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall have been no material
adverse change in the condition, financial or otherwise, earnings,
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affairs, regulatory situation or business prospects of the Sponsor; (v) there
are no material actions, suits or proceedings pending before any court or
governmental agency, authority or body or threatened, affecting the Sponsor or
the transactions contemplated by the Underwriting Agreement; (vi) the Sponsor is
not in violation of its charter or its by-laws or in default in the performance
or observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may be bound,
which violations or defaults separately or in the aggregate would have a
material adverse effect on the Sponsor; 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 Sponsor, 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 Sponsor 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.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, special counsel for the Sponsor, 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, opinions of in-house counsel and/or Kirkpatrick & Lockhart LLP, counsel
for Meritage, the Company and Funding Co., dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the Underwriter and
containing opinions substantially to the effect set forth in Exhibits B-1, B-2
and B-3 hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Indenture Trustee, dated the Closing Date,
in form and substance satisfactory to the Representative and counsel for the
Underwriter and containing opinions substantially to the effect set forth in
Exhibit C hereto.
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(h) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, counsel for the Underwriter, dated the
Closing Date, with respect to the incorporation of the Sponsor, the validity of
the Offered Securities, the Registration Statement, the Prospectus and other
related matters as the Underwriter may reasonably require, and the Sponsor shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(i) The Representative shall have received, on the Closing
Date, such other opinions of Counsel in form and substance satisfactory to the
Representative and counsel to the Underwriter as the Representative shall
request.
(j) The Representative shall have received, on or prior to the
date of first use of each of the preliminary prospectus supplement and the
prospectus supplement relating to the Offered Securities, and on the Closing
Date if requested by the Representative, letters of independent accountants of
the Sponsor in the form and reflecting the performance of the procedures
previously requested by the Representative.
(k) The Sponsor shall have furnished or caused to be furnished
to the Representative on the Closing Date a certificate of an executive officer
of the Sponsor satisfactory to the Representative as to the accuracy of the
representations and warranties of the Sponsor herein at and as of such Closing
Date as if made as of such date, as to the performance by the Sponsor 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 Sub-Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of officers of
the Sub-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 Ambac Assurance Corporation. (the "Note
Insurer"), dated the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriter and containing opinions
substantially to the effect set forth in Exhibit D hereto.
(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.
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(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 September 30, 1999 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.
(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 Sponsor 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 INSURER AND THE NOTE INSURANCE POLICY" 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 INSURER AND THE NOTE
INSURANCE POLICY" present fairly the capitalization of the
Note Insurer as of September 30, 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
September 30, 1999 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
KPMG 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
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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.
(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 SPONSOR. In further consideration
of the agreements of the Underwriter contained in the Underwriting Agreement,
the Sponsor 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 Sponsor 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 Underwriter from the Sponsor, 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 Sponsor deem appropriate in connection
with the offering of the Offered Securities, but the Sponsor 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 Sponsor 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 Sponsor 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 Sponsor 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 Sponsor will advise the Representative, promptly
after it
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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
Sponsor will advise the Representative, promptly after it receives notice or
obtains knowledge thereof, of the issuance 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 Sponsor 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 Sponsor'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 Sponsor will file, on a timely and complete
basis, all documents that are required to be filed by the Sponsor 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 Sponsor 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 Sponsor'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 Sponsor 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 Sponsor, 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 Sponsor
may from time to time distribute generally to its creditors or the
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holders of the Offered Securities and to furnish to the Representative copies of
each annual or other report the Sponsor shall be required to file with the
Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Sponsor 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 SPONSOR. The
Sponsor 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 Sponsor and the Registration Statement.
There are no contracts or documents of the Sponsor 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 Sponsor by any Underwriter
specifically for use therein. "Computational Materials" shall mean those
materials
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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 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 Sponsor, whether or not arising in the ordinary course of the
business of the Sponsor.
(d) The Sponsor 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 Sponsor 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 Trust Agreement, Loan
Sale Agreement and the Loan Sale Agreement, except such as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution by the Underwriter 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 Sponsor,
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 Sponsor of this
Agreement, the Underwriting Agreement, the Trust Agreement, dated as of November
1, 1999, among the Sponsor, the Owner Trustee and Bankers Trust Company, as
trust paying agent (the "Trust Agreement"), the Loan Sale Agreement, dated as of
November 1, 1999, between Funding Co. and the Sponsor (the "Loan Sale
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Agreement) and the Loan Sale Agreement, dated as of November 1, 1999, between
the Sponsor and the Issuer (the "Loan Sale Agreement) (collectively, the
"Sponsor Agreements") are within the corporate power of the Sponsor and neither
the execution and delivery by the Sponsor of the Sponsor Agreements, nor the
consummation by the Sponsor of the transactions therein contemplated, nor the
compliance by the Sponsor 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 Sponsor or any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Sponsor or its properties,
or any of the provisions of any indenture, mortgage, contract or other
instrument to which the Sponsor 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 Underwriter.
(h) The Underwriting Agreement has been, and at the Closing
Date the Trust Agreement, the Loan Sale Agreement and the Loan Sale Agreement
will have been, duly authorized, executed and delivered by the Sponsor.
(i) At the Closing Date, each of the Sponsor Agreements will
constitute a legal, valid and binding obligation of the Sponsor, enforceable
against the Sponsor, 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
Sponsor of the transactions contemplated by the Sponsor 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
Underwriter.
(k) The Sponsor 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 Sponsor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the Sponsor is a
party or of which any property of the Sponsor is the subject which, if
determined adversely to the Sponsor 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 Sponsor and, to the best of
the Sponsor's knowledge, no
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such proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section 3(a)(41) of the
1934 Act.
(n) At the time of execution and delivery of the Loan Sale
Agreement, the Sponsor will have good and marketable title to the Initial
Mortgage Loans, being transferred to the Issuer pursuant to the Loan Sale
Agreement, free and clear of any lien, mortgage, pledge, charge, encumbrance,
adverse claim or other security interest claiming through the Sponsor
(collectively, "Liens"), and will not have assigned to any person any of its
right, title or interest in such Initial Mortgage Loans, or in such Loan Sale
Agreement, the Sponsor will have the power and authority to transfer such
Initial Mortgage Loans, to the Issuer and to cause the Issuer to transfer the
Offered Securities to each of the Underwriter, and upon execution and delivery
to the Issuer of the Loan Sale Agreement and delivery to each of the Underwriter
of the Offered Securities, the Issuer will have good and marketable title to the
Initial Mortgage Loans, and each of the Underwriter will have good and
marketable title to the Offered Securities, in each case free and clear of any
Liens claiming through the Sponsor.
(o) 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.
(p) Any taxes, fees and other governmental charges in
connection with the execution and delivery of the Sponsor 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 Sponsor
agrees to indemnify and hold harmless each Underwriter (including First Union
Securities, Inc., 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 Sponsor 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 Sponsor by any
Underwriter through the Representative specifically for use therein or (2)
information regarding Meritage or the Mortgage Loans, except to
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the extent that the Sponsor has been indemnified by Meritage or (3) information
supplied by the Note Insurer. This indemnity agreement will be in addition to
any liability which the Sponsor may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Sponsor, each of the Sponsor's directors, each of the Sponsor's officers who
signed the Registration Statement and each person, if any, who controls the
Sponsor, within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities to which the Sponsor, 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 Sponsor by any Underwriter
through the Representative specifically for use therein; and each Underwriter
will reimburse any legal or other expenses reasonably incurred by the Sponsor 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 Sponsor acknowledges that the statements set
forth under the caption "UNDERWRITING" in the Prospectus Supplement constitute
the only information furnished to the Sponsor by or on behalf of any Underwriter
for use in the Registration Statement, any Preliminary Prospectus or the
Prospectus, and each of the several Underwriter 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
Sponsor 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 Sponsor's and the Underwriter' 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 Sponsor 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 underwriting fee of the
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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 Sponsor, each officer of the Sponsor who signed the Registration
Statement, and each person, if any, who controls the Sponsor within the meaning
of Section 15 of the 1933 Act, shall have the same rights to contribution as the
Sponsor.
(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, Meritage, and First Union
Securities, Inc., shall not be construed as limiting the Sponsor's right to
enforce its rights under Section 7 of this Agreement. The parties further agree
that, as between the parties hereto, to the extent that the provisions of
Section 6 of the Indemnification Agreement conflict with Section 7 hereof, the
provisions of Section 7 hereof shall govern.
SECTION 8. SURVIVAL OF CERTAIN REPRESENTATIONS AND
OBLIGATIONS. The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Sponsor, its officers and the several
Underwriter 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 Sponsor,
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 Sponsor 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 Sponsor in the event that the Sponsor shall have
failed, refused or been unable to perform all obligations and satisfy all
conditions to be performed or satisfied hereunder by the Sponsor 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 or
Underwriter defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or 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
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the Underwriting Agreement to purchase the Offered Securities which such
defaulting Underwriter or Underwriter agreed but failed to purchase. If any
Underwriter or Underwriter so defaults or default and the aggregate principal
amount of the Offered Securities with respect to which such default or defaults
occurs or occur is more than ten percent of the aggregate principal amount,
notional amount or stated amount, as applicable, of Offered Securities to be
sold under the Underwriting Agreement, as the case may be, and arrangements
satisfactory to the Representative and the Sponsor 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 Sponsor except
for the expenses to be paid or reimbursed by the Sponsor 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 Sponsor agrees with the Underwriter
that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated, the Sponsor 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 Sponsor, (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 Underwriter 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 Sponsor if the Underwriting
Agreement is terminated by the Sponsor pursuant to Section 9(a) hereof or by the
Representative on account of the failure, refusal or inability on the part of
the Sponsor to perform all obligations and satisfy all conditions on the part of
the Sponsor to be performed or satisfied hereunder; and
(c) the Sponsor will pay the cost of preparing the
certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriter agree to pay all of their expenses in connection with investigating,
preparing to market and marketing the Offered Securities and proposing to
purchase and purchasing the Offered Securities under the Underwriting Agreement,
including the fees and expenses of their counsel and any advertising expenses
incurred by them in making offers and sales of the Offered Securities.
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SECTION 12. NOTICES. All communications under the Underwriting
Agreement shall be in writing and, if sent to the 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 Sponsor, 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 UNDERWRITER. Any Representative
identified in the Underwriting Agreement will act for the Underwriter 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 Underwriter and the
Sponsor 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 Sponsor 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 Underwriter shall also be for
the benefit of the directors of the Sponsor, the officers of the Sponsor who
have signed the Registration Statement and any person or persons who control the
Sponsor 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]
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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: Shanker Merchant
Title: Senior Vice President
Accepted as of the date hereof:
FIRST UNION SECURITIES, INC.,
By: /s/ Carolyn Eskridge
------------------------------
Name: Carolyn Eskridge
Title: Senior Vice President
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine LLP,
special counsel for the Sponsor
(1) Each of the Sponsor Documents constitutes the valid, legal
and binding agreement of the Sponsor, and is enforceable against the Sponsor 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 Sponsor, 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-1
Form of Opinions of Counsel to
Meritage Mortgage Corporation
(1) Meritage Mortgage Corporation (the "Company") has been
duly organized and is validly existing as a corporation in good standing under
the State of Oregon 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 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 directly or
indirectly to RBMG Asset Management Company, Inc., 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 and delivery of an Assignment of Mortgage with respect to each
Mortgage is sufficient fully to transfer to RBMG Asset Management Company, Inc.
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
Oregon, 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
B-1-1
<PAGE>
Mortgagor to any Mortgaged Property; or (B) which have not otherwise been
disclosed in the Registration Statement and to the best of such counsel's
knowledge, no such proceedings or investigations are threatened or contemplated
by governmental authorities or threatened by others.
B-1-2
<PAGE>
Exhibit B-2
Opinions of Counsel to
RBMG Asset Management Company, Inc.
(1) RBMG Asset Management Company, Inc. ("the Company") has
been duly organized and is validly existing as a corporation in good standing
under the State of Nevada 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 RBMG Funding
Co., 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 and delivery of an Assignment of Mortgage with respect to each
Mortgage is sufficient fully to transfer to RBMG Funding Co. and its assignees
all right, title and interest thereto, 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
Nevada, 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-2-1
<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-2-2
<PAGE>
Exhibit B-3
Opinions of Counsel to
RBMG Funding Co.
(1) RBMG Funding Co. ("the Company") has been duly organized
and is validly existing as a corporation in good standing under the State of
Nevada 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 Sponsor,
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 and delivery of an Assignment of Mortgage with respect to each
Mortgage is sufficient fully to transfer to the Sponsor and its assignees all
right, title and interest thereto, 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
Nevada, 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 Registration Statement and
to the best of such counsel's knowledge, no such proceedings or investigations
are threatened or contemplated by governmental authorities or threatened by
others.
<PAGE>
Exhibit C
Opinions of Counsel to
the Indenture Trustee
(1) The Indenture Trustee is a 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
INSURER AND THE NOTE INSURANCE POLICY" in the Prospectus insofar as such
statements constitute a description of the Note Insurance Policy, accurately
summarizes the Note Insurance Policy.
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2,
ISSUER
AND
BANKERS TRUST COMPANY,
INDENTURE TRUSTEE
---------------------------------------
INDENTURE
DATED AS OF NOVEMBER 1, 1999
---------------------------------------
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
ASSET-BACKED NOTES, CLASS A-1 AND CLASS A-2
SERIES 1999-2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................2
Section 1.01. General Definitions........................................................................2
ARTICLE II THE NOTES.............................................................................................37
Section 2.01. Forms Generally...........................................................................37
Section 2.02. Forms of Certificate of Authentication....................................................37
Section 2.03. General Provisions With Respect to Principal and Interest
Payments..............................................................................38
Section 2.04. Denominations.............................................................................39
Section 2.05. Execution, Authentication, Delivery and Dating............................................39
Section 2.06. Registration, Registration of Transfer and Exchange.......................................39
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes................................................40
Section 2.08. Payments of Principal and Interest........................................................41
Section 2.09. Persons Deemed Owners.....................................................................43
Section 2.10. Cancellation..............................................................................43
Section 2.11. Authentication and Delivery of Notes......................................................44
Section 2.12. Book-Entry Notes..........................................................................45
Section 2.13. Termination of Book Entry System..........................................................47
Section 2.14. Reserved..................................................................................48
Section 2.15. Certain Available Information.............................................................48
ARTICLE III COVENANTS............................................................................................48
Section 3.01. Payment of Notes..........................................................................48
Section 3.02. Maintenance of Office or Agency...........................................................49
Section 3.03. Money for Note Payments to be Held in Trust...............................................49
Section 3.04. Existence of Issuer.......................................................................51
Section 3.05. Protection of Trust Estate................................................................52
Section 3.06. Opinions as to Trust Estate...............................................................52
Section 3.07. Performance of Obligations; Servicing Agreement...........................................53
Section 3.08. Investment Company Act....................................................................53
Section 3.09. Negative Covenants........................................................................53
Section 3.10. Annual Statement as to Compliance.........................................................54
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Section 3.11. Restricted Payments.......................................................................55
Section 3.12. Treatment of Notes as Debt for Tax Purposes...............................................55
Section 3.13. Notice of Events of Default...............................................................55
Section 3.14. Further Instruments and Acts..............................................................55
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................55
Section 4.01. Satisfaction and Discharge of Indenture...................................................55
Section 4.02. Application of Trust Money................................................................57
ARTICLE V DEFAULTS AND REMEDIES..................................................................................57
Section 5.01. Event of Default..........................................................................57
Section 5.02. Acceleration of Maturity; Rescission and Annulment........................................58
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture
Trustee...............................................................................59
Section 5.04. Remedies..................................................................................59
Section 5.05. Indenture Trustee May File Proofs of Claim................................................60
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes..........................61
Section 5.07. Application of Money Collected............................................................61
Section 5.08. Limitation on Suits.......................................................................62
Section 5.09. Unconditional Right of Noteholders to Receive Principal and
Interest..............................................................................63
Section 5.10. Restoration of Rights and Remedies........................................................63
Section 5.11. Rights and Remedies Cumulative............................................................64
Section 5.12. Delay or Omission Not Waiver..............................................................64
Section 5.13. Control by Noteholders....................................................................64
Section 5.14. Waiver of Past Defaults...................................................................64
Section 5.15. Undertaking for Costs.....................................................................65
Section 5.16. Waiver of Stay or Extension Laws..........................................................65
Section 5.17. Sale of Trust Estate......................................................................65
Section 5.18. Action on Notes...........................................................................67
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the Issuer..........................67
Section 5.20. Application of the Trust Indenture Act....................................................67
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................67
Section 6.01. Duties of Indenture Trustee...............................................................67
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Section 6.02. Notice of Default.........................................................................69
Section 6.03. Rights of Indenture Trustee...............................................................69
Section 6.04. Not Responsible for Recitals or Issuance of Notes.........................................70
Section 6.05. May Hold Notes............................................................................70
Section 6.06. Money Held in Trust.......................................................................70
Section 6.07. Eligibility; Disqualification.............................................................70
Section 6.08. Indenture Trustee's Capital and Surplus...................................................71
Section 6.09. Resignation and Removal; Appointment of Successor.........................................71
Section 6.10. Acceptance of Appointment by Successor....................................................72
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of
Indenture Trustee.....................................................................73
Section 6.12. Preferential Collection of Claims against Issuer..........................................73
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees.....................................73
Section 6.14. Authenticating Agents.....................................................................75
Section 6.15. Review of Mortgage Files..................................................................76
Section 6.16. Indenture Trustee Fees and Expenses.......................................................78
ARTICLE VII NOTEHOLDERS' LISTS...................................................................................78
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders....................78
Section 7.02. Preservation of Information; Communications to Noteholders................................78
Section 7.03. Reports by Indenture Trustee..............................................................79
Section 7.04. Reports by Issuer.........................................................................79
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES..........................................79
Section 8.01. Collection of Moneys......................................................................79
Section 8.02. Establishment of Accounts;................................................................80
Section 8.03. Reserved..................................................................................83
Section 8.04. Reserved..................................................................................83
Section 8.05. Claims Against the Ambac Insurance Policy.................................................83
Section 8.06. General Provisions Regarding the Note Account and Mortgage
Loans.................................................................................85
Section 8.07. Releases of Defective Mortgage Loans......................................................86
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Section 8.08. Reports by Indenture Trustee to Noteholders; Access to Certain
Information...........................................................................87
Section 8.09. Trust Estate Mortgage Files...............................................................87
Section 8.10. Amendment to Servicing Agreement..........................................................87
Section 8.11. Delivery of the Mortgage Files Pursuant to Servicing Agreement............................88
Section 8.12. Servicer as Agent.........................................................................88
Section 8.13. Termination of Servicer...................................................................88
Section 8.14. Investment of Funds in the Note Accounts and the Reserve
Account..............................................................................88
Section 8.15. Appointment of Custodians.................................................................89
Section 8.16. Rights of the Note Insurer to Exercise Rights of Noteholders..............................90
Section 8.17. Trust Estate and Accounts Held for Benefit of the Note Insurer............................91
Section 8.18. Reserve Account...........................................................................91
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................93
Section 9.01. Supplemental Indentures without Consent of Noteholders....................................93
Section 9.02. Supplemental Indentures with Consent of Noteholders.......................................94
Section 9.03. Execution of Supplemental Indentures......................................................95
Section 9.04. Effect of Supplemental Indentures.........................................................95
Section 9.05. Reserved..................................................................................96
Section 9.06. Reference in Notes to Supplemental Indentures.............................................96
Section 9.07. Amendments to Governing Documents.........................................................96
ARTICLE X REDEMPTION OF NOTES....................................................................................96
Section 10.01. Redemption...............................................................................96
Section 10.02. Form of Redemption Notice................................................................97
Section 10.03. Notes Payable on Optional Redemption.....................................................98
ARTICLE XI MISCELLANEOUS........................................................................................ 98
Section 11.01. Compliance Certificates and Opinions.....................................................98
Section 11.02. Form of Documents Delivered to Indenture Trustee.........................................99
Section 11.03. Acts of Noteholders.....................................................................100
Section 11.04. Notices, etc. to Indenture Trustee, the Note Insurer and Issuer.........................100
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices...................................101
Section 11.06. Rules by Indenture Trustee..............................................................102
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Section 11.07. Conflict With Trust Indenture Act.......................................................102
Section 11.08. Effect of Headings and Table of Contents................................................102
Section 11.09. Successors and Assigns..................................................................102
Section 11.10. Separability............................................................................102
Section 11.11. Benefits of Indenture...................................................................103
Section 11.12. Legal Holidays..........................................................................103
Section 11.13. Governing Law...........................................................................103
Section 11.14. Counterparts............................................................................103
Section 11.15. Recording of Indenture..................................................................103
Section 11.16. Issuer Obligation.......................................................................103
Section 11.17. No Petition.............................................................................104
Section 11.18. Inspection..............................................................................104
Section 11.19. Usury................................................................................. 105
Section 11.20. Third-Party Beneficiary.................................................................105
Section 11.21. Limitation on Liability of Owner Trustee................................................105
</TABLE>
SCHEDULES AND EXHIBITS
Schedule I.................Mortgage Loan Schedule
Exhibit A..................Form of Note
Exhibit B..................Form of Officer's Certificate
Exhibit C..................Form of Servicing Agreement
Exhibit D..................Form of Custodial Agreement
Exhibit E..................Form of Investment Letter
v
<PAGE>
THIS INDENTURE, dated as of November 1, 1999 (as amended or
supplemented from time to time as permitted hereby, this "Indenture"), is
between RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2, a Delaware business trust
(together with its permitted successors and assigns, the "Issuer") and BANKERS
TRUST COMPANY, a New York banking corporation, as 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 1999-2 (the
"Notes"), issuable in two Classes 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, without
recourse but subject to the terms and provisions of this Agreement, all of the
Issuer's right, title and interest in and to (a) the Additional Mortgage Loans
(as from time to time may be Granted by the Issuer) and all Qualified
Replacement Mortgage Loans (as from time to time may be Granted by the Issuer)
(including property that secures a Mortgage Loan that becomes an REO Property),
including the related Mortgage Files delivered or to be delivered to the
Indenture Trustee or its custodian pursuant to the Sponsor Sale Agreement, all
payments of principal and interest due after the applicable Cut-off Date for
each Mortgage Loan and all other proceeds received in respect of such Mortgage
Loans, (b) the AMBAC Insurance Policy, (c) the Servicing Agreement, (d) the Cap
Agreement, (e) Sections 2, 3, 4, 7, 10 and 13 of the Company Sale Agreement, (f)
Sections 2, 3, 4, 7, 10 and 13 of the Sponsor Sale Agreement, (g) Sections 2, 3,
4, 7, 10 and 13 of the Funding Co. Sale Agreement, (h) the Insurance Policies,
(i) all cash, instruments or other property held or required to be deposited in
the Collection Account, the Note Accounts and the Reserve Account, including all
investments made with funds in such accounts (but not including any income on
funds deposited in, or earnings on, investments made with funds deposited in,
the Collection Account, which income shall belong to and be for the account of
the Servicer, and not including any income on funds deposited in, or earnings on
investments made with funds deposited in the Note Accounts, which income shall
belong to and be for the account of the Issuer) and (j) 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
<PAGE>
of all other sums payable under this Indenture and (z) compliance with the
provisions of this Indenture, all as provided in this Indenture.
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 in order that, and for the purpose that,
the interests of the Holders of the Notes may be adequately and effectively
protected. The Indenture Trustee agrees that it will hold the AMBAC Insurance
Policy in trust and that it will hold any proceeds of any claim upon the AMBAC
Insurance Policy, solely for the use and benefit of the Noteholders in
accordance with the terms hereof and the AMBAC Insurance Policy.
In connection with the Grant set forth above, the Issuer does
hereby deliver to, and deposit with the Custodian as the agent of the Indenture
Trustee, the Mortgage Files.
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, including the Preliminary
Statement and the Granting Clause, 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).
"A Risk Mortgage Loans": Mortgage Loans graded in the "A" risk
category under the Meritage Guidelines, as more fully described in the
Prospectus Supplement.
"A- Risk Mortgage Loans": Mortgage Loans graded in the "A-"
risk category under the Meritage Guidelines, as more fully described in the
Prospectus Supplement.
"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.
"Adjustable-Rate Mortgage Loan": A Mortgage Loan, with respect
to which the Coupon Rate adjusts from time-to-time as provided in the related
Mortgage Note and designated as an adjustable-rate Mortgage Loan on the Mortgage
Loan Schedule.
"Adjustment Date": With respect to each Adjustable-Rate
Mortgage Loan, each Adjustment Date, which is the first day of the month in
which the Coupon Rate of an Adjustable-Rate Mortgage Loan changes pursuant to
the related Mortgage Note. The first
2
<PAGE>
Adjustment Date following the Cut-off Date as to each Adjustable-Rate Mortgage
Loan is set forth in the Mortgage Loan Schedule.
"Administrative Fee Amount": For each Group and any Payment
Date, the sum of the related Servicing Fee, the related Indenture Trustee's Fee,
the Premium, and allocable to such Group, 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 Scheduled Principal Balance": On any date of
determination, the aggregate of the Scheduled Principal Balances of the Mortgage
Loans and REO Properties in Group I, Group II or the Trust Estate, as applicable
on such date.
"Aggregate Stated Principal Balance": On any date of
determination, the aggregate of the Stated Principal Balances of the Mortgage
Loans and REO Properties in Group I, Group II or the Trust Estate, as applicable
on such date.
"AMBAC Insurance Policy": The financial guaranty insurance
policy (No. AB0322BE), dated November 30, 1999, issued by the Note Insurer to
the Indenture Trustee for the benefit of the Noteholders, pursuant to which the
Note Insurer guarantees payment of Insured Payments.
"AMBAC Payment Default": Failure and continued failure by the
Note Insurer to make an Insured Payment required under the AMBAC Insurance
Policy in accordance with its terms.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"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 initial Authenticating Agent shall be the
Indenture Trustee. Any Authenticating Agent other than the Indenture Trustee
shall sign an instrument under which it agrees to be bound by all of the terms
of this Indenture applicable to the Authenticating Agent.
"Authorized Officer": With respect to the Indenture Trustee,
any Responsible Officer in the case of the Owner Trustee, the President, any
Vice President, Financial Services Officer or Trust Officer, or any other
officer or employee of the Owner Trustee who has been authorized by the Owner
Trustee's board of directors or by-laws to act for the Owner Trustee
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with respect to the Issuer, and with respect to any other Person, the Chairman,
Chief Operating Officer, President or any Vice President of such Person.
"Available Funds": With respect to a Group and any Payment
Date, the sum of the amounts described in clauses (a) through (h) below,
together with amounts from the Reserve Account for the benefit of such Group on
such Payment Date, less (i) the Administrative Fee Amount for such Group in
respect of such Payment Date, (ii) P&I 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) with respect to the
related Collection Period to the extent permitted by the Servicing Agreement,
(iii) the aggregate amounts (A) deposited into the Collection Account or Note
Account and allocable to the related Group 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, (iv) any Stayed
Funds and , (v) any amounts reimbursable to the Indenture Trustee to the extent
appointed as successor servicer for an advance made pursuant to Section 5.02(b)
of the Servicing Agreement, which advance the Indenture Trustee has determined
to be nonrecoverable from the Stayed Funds in respect of which it was made
(without duplication of any such amount not constituting a portion of Remittable
Funds).
(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 the Mortgage
Loans in such Group 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 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, but excluding amounts described elsewhere in this
definition) 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 the related
Mortgage Loans;
(c) the aggregate of any related Insurance Proceeds collected
by the Servicer during the related Collection Period with respect to
Mortgaged Property securing a Mortgage Loan in such Group;
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(d) the aggregate of any related Net Liquidation Proceeds
collected by the Servicer during the related Collection Period with
respect to Mortgaged Property securing a Mortgage Loan in such Group;
(e) the aggregate of the Purchase Prices received with respect
to Mortgaged Property securing a Mortgage Loan in such Group that are
required or permitted to be repurchased, released, removed or
substituted by any of Meritage, Funding Co., the Company, the Sponsor
or the Issuer 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 Servicer Remittance Date;
(f) the amount of any P&I Advances with respect to such Group
made by the Servicer for such Payment Date;
(g) the amount of any Cap Payments available with respect to
such Group for such Payment Date under the Cap Agreement; and
(h) the aggregate of amounts deposited in the related Note
Account during such Collection Period in connection with redemption of
the Notes pursuant to Article X.
"Available Funds Cap Rate": For a Class of Notes and any
Payment Date is a rate per annum equal to a fraction, expressed as a percentage,
the numerator of which is (i) an amount equal to (A) 1/12 of the Aggregate
Scheduled Principal Balance of the then outstanding Mortgage Loans and REO
Properties in the related Group multiplied by the weighted average of the
Expense Adjusted Coupon Rates on the then outstanding Mortgage Loans and REO
Properties in the related Group minus (B) the amount of the Premium allocable to
the related Group for such Payment Date, and the denominator of which is (ii) an
amount equal to (x) the Note Balance of the related Class on such Payment Date
multiplied by (y) the actual number of days elapsed in the related Interest
Period divided by 360.
"Available Funds Cap Rate Carry Forward Amount": For a Class
of Notes and any Payment Date for which the related Note Interest Rate was equal
to the related Available Funds Cap Rate, the difference between the amount of
Note Interest that would have accrued had the related Note Interest Rate equaled
the related Note Formula Rate, minus the amount of Note Interest that did accrue
for such Class and Payment Date, plus interest accrued on such difference from
such Payment Date at the related Note Interest Rate for each successive Interest
Period to but excluding the Payment Date on which such amount, with interest, is
paid in full.
"B Risk Mortgage Loans": Mortgage Loans graded in the "B" risk
category under the Meritage Guidelines, as more fully described in the
Prospectus Supplement.
"B- Risk Mortgage Loans": Mortgage Loans graded in the "B-"
risk category under the Meritage Guidelines, as more fully described in the
Prospectus Supplement.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
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"Basic Documents": This Agreement, the Trust Agreement, the
Servicing Agreement, the Company Sale Agreement, the Funding Co. Sale Agreement,
the Sponsor Sale Agreement, the Sub-Servicing Agreement, the Management
Agreement, the Cap Agreement, the Guarantee, the Custodial 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, in its reasonable
discretion. Such efforts do not require such Person to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require such Person to advance or expend fees or sums of money in addition to
those specifically set forth in this Indenture and the Servicing Agreement.
"Book-Entry Notes": Any Notes registered in the name of the
Clearing Agency or its nominee, ownership of which is reflected on the books of
the Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"Book-Entry Custodian": The custodian appointed pursuant to
Section 2.12 (c)
"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 on which banking institutions in the State of Nevada, the State of
New York, the State of New Jersey, the State of South Carolina, the State of
Delaware, or the city in which the Corporate Trust Office of the Indenture
Trustee or in which the Note Insurer's principal office is located are
authorized or obligated by law, regulation, executive order or governmental
decree to be closed.
"C Risk Mortgage Loans": Mortgage Loans graded in the "C" risk
category under the Meritage Guidelines, as more fully described in the
Prospectus Supplement.
"Cap Agreement": That certain interest rate cap agreement held
by the Indenture Trustee and made between the Issuer and the Cap Provider.
"Cap Payment": Any payments received by the Indenture Trustee
with respect to a Group and a Payment Date under the Cap Agreement.
"Cap Provider": Bank of America Financial Products, Inc.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which were more than (i) 1% of the original principal balance of the
Mortgage Loan or (ii) $1000 in excess of the principal balance of any existing
first mortgage or subordinate mortgage on the
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related Mortgaged Property and related closing costs, and any consumer debt of
the borrower that was paid at closing.
"Cedel": Cedel, Societe anonyme.
"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 or the Class A-2 Notes as
applicable.
"Class A-1 Aggregate O/C Surplus Amount": As defined in
Section 8.18(c)(i) of this Indenture.
"Class A-1 Available Funds": Available Funds with respect to
the Class A-1 Notes.
"Class A-1 Available Funds Cap Rate Carry-Forward Amount": The
Available Funds Cap Rate Carry-Forward Amount with respect to the Class A-1
Notes.
"Class A-1 Cash O/C Amount": As defined in Section 8.18 (a) of
this Indenture.
"Class A-1 Monthly Principal Available": The Monthly Principal
Available with respect to the Class A-1 Notes.
"Class A-1 Noteholder": A Holder of a Class A-1 Note.
"Class A-1 Note Interest": The Note Interest payable with
respect to the Class A-1 Notes.
"Class A-1 Notes": The RBMG Funding Co. Mortgage Loan Trust
1999-2 Asset Backed Notes, Series 1999-2, Class A-1.
"Class A-1 Overcollateralization Amount": The
Overcollateralization Amount with respect to the Class A-1 Notes.
"Class A-1 Overcollateralization Deficit": The
Overcollateralization Deficit with respect to the Class A-1 Notes.
"Class A-1 Overcollateralization Surplus": As defined in
Section 8.18(d)(i) of this Indenture.
"Class A-1 Required Overcollateralization Amount": The
Required Overcollateralization Amount with respect to the Class A-1 Notes.
"Class A-2 Aggregate O/C Surplus Amount": As defined in
Section 8.18(c)(ii) of this Indenture.
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"Class A-2 Available Funds": Available Funds with respect to
the Class A-2 Notes.
"Class A-2 Available Funds Cap Rate Carry-Forward Amount": The
Available Funds Cap Rate Carry-Forward Amount with respect to the Class A-2
Notes.
"Class A-2 Cash O/C Amount": As defined in Section 8.18 (a) of
this Indenture.
"Class A-2 Monthly Principal Available": The Monthly Principal
Available with respect to the Class A-2 Notes.
"Class A-2 Noteholder": A Holder of a Class A-2 Note.
"Class A-2 Note Interest": The Note Interest payable with
respect to the Class A-2 Notes.
"Class A-2 Notes": The RBMG Funding Co. Mortgage Loan Trust
1999-2 Asset Backed Notes, Series 1999-2, Class A-2.
"Class A-2 Overcollateralization Amount": The
Overcollateralization Amount with respect to the Class A-2 Notes.
"Class A-2 Overcollateralization Deficit": The
Overcollateralization Deficit with respect to the Class A-2 Notes.
"Class A-2 Overcollateralization Surplus": As defined in
Section 8.18(d)(ii) of this Indenture.
"Class A-2 Required Overcollateralization Amount": The
Required Overcollateralization Amount with respect to the Class A-2 Notes.
"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, the nominee of 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": November 30, 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.
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"Collection Account": As defined in the Servicing Agreement.
"Collection Period": With respect to each Class of Notes and
any Payment Date and any Mortgage Loan, the calendar month immediately preceding
the month in which such Payment Date occurs (or, in the case of the first
Payment Date after a Mortgage Loan constitutes part of the Trust Estate, the
period beginning on the day following the applicable Cut-off Date for such
Mortgage Loan through and including the last day of the month prior to the month
in which such Payment Date occurs).
"Commission": The Securities and Exchange Commission, as from
time to time constituted, or if at any time such Commission is not existing and
performing the duties now assigned to it, then the body performing such duties
at such time.
"Company": RBMG Asset Management Company, Inc., a Nevada
corporation, or its successor in interest.
"Company Sale Agreement": That certain Loan Sale Agreement,
dated as of November 1, 1999, between Funding Co. and the Company pursuant to
which the Mortgage Loans will be acquired from the Company by Funding Co.
"Compensating Interest Payments": 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 1761 East St Andrew
Place, Santa Ana, California 92705 or such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders, the
Issuer, the Servicer and the Note Insurer.
"Coupon Rate": With respect to each Mortgage Loan, the annual
rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate (i) in
the case of each Mortgage Loan other than an Adjustable-Rate Mortgage Loan shall
remain constant at the rate set forth in the Mortgage Loan Schedule as the
Coupon Rate in effect immediately following the Cut-off Date and (ii) in the
case of each Adjustable-Rate Mortgage Loan, (A) as of any date of determination
until the first Adjustment Date following the applicable Cut-off Date, shall be
the rate set forth in the Mortgage Loan Schedule as the Coupon Rate in effect
immediately following the applicable Cut-off Date and (B), as of any date of
determination thereafter, shall be the rate as adjusted on the most recent
Adjustment Date, to equal the sum, rounded to the nearest 0.125% as provided in
the Mortgage Note, of the Index, as most recently available as of a date prior
to the Adjustment Date as set forth in the related Mortgage Note, plus the
related Gross Margin; PROVIDED that the Coupon Rate on such Mortgage Loan on any
Adjustment Date shall never be more than the lesser of (i) the sum of the Coupon
Rate in effect immediately prior to the Adjustment Date plus the related
Periodic Rate Cap, if any, and (ii) the related Maximum Rate, and shall never be
less than the greater of (x) the Coupon Rate in effect immediately prior to the
Adjustment Date less the Periodic Rate Cap, if any, and (y) the related Minimum
Rate. With respect to each Mortgage Loan that becomes an REO Property, as of any
date of determination, the annual rate determined
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in accordance with the immediately preceding sentence as of the date such
Mortgage Loan became an REO Property.
"Crossover Amount": With respect to a Class of Notes and any
Payment Date, the amount withdrawn from the Note Account for the other Class and
deposited to the Note Account with respect to the first Class, pursuant to
clauses (i), (iv) and (v) of Section 8.02(c) hereof on such Payment Date.
"Cumulative Insured Payments": As of any time of
determination, the aggregate amount of all Insured Payments previously made by
the Note Insurer under the AMBAC Insurance Policy plus interest thereon from the
date such amount became due until paid in full, at a rate of interest calculated
as provided in the Insurance Agreement minus the sum of all payments previously
made to the Note Insurer pursuant to Section 8.02 hereof as reimbursement for
such amounts.
"Custodial Agreement": The agreement between the Indenture
Trustee and a Custodian appointed pursuant to Section 8.15 and one or more other
parties. As of the Closing Date, the Custodial Agreement, is that certain
Custodial Agreement, dated as of November 1, 1999, among the Issuer, the
Indenture Trustee, LaSalle National Bank, as Custodian, and the Servicer, as may
be amended from time to time.
"Custodian": A Person who is at any time appointed by the
Indenture Trustee pursuant to Section 8.15 as a document custodian for the
Mortgage Files, which Person shall not be the Issuer or an Affiliate of the
Issuer. As of the Closing Date, the Custodian is LaSalle National Bank, having
an address at 135 South LaSalle Street, Chicago, Illinois 60674-4107.
"Cut-off Date": With respect to the Mortgage Loans Granted to
the Indenture Trustee on the Closing Date, November 1, 1999, and with respect to
the Qualified Replacement Mortgage Loans, their respective dates of
substitution.
"D Risk Mortgage Loans": Mortgage Loans graded in the "D" risk
category under the Meritage Guidelines, as more fully described in the
Prospectus Supplement.
"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 Issuer, the Company, Funding Co., the
Sponsor or Meritage.
"Deficiency Event": The inability of the Indenture Trustee to
remit the Insured Payment on any Payment Date due to a shortage of funds for
such purpose then held in the Note Account and the failure of the Note Insurer
to pay in full a claim made in accordance with the AMBAC Insurance Policy with
respect to such Payment Date.
"Deficient Valuation": As defined in the Servicing Agreement.
"Definitive Notes": Notes other than Book-Entry Notes.
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"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Replacement Mortgage Loan.
"Delinquency Amount": As of any Payment Date, the product of
the Delinquency Percentage and the Aggregate Stated Principal Balance of the
Mortgage Loans and REO Properties in the related Group as of the Determination
Date relating to such Payment Date.
"Delinquency Percentage": With respect to each Group and any
Payment Date, the fraction expressed as a percentage, the numerator of which is
(x) the sum of the aggregate Stated Principal Balance of (i) all related
Mortgage Loans 90 or more days delinquent on a contractual basis (including
those in bankruptcy) plus (ii) related Mortgage Loans in foreclosure, plus all
Mortgage Loans purchased pursuant to Section 2.15(c) of the Servicing Agreement
for so long as such related Mortgage Loans are 90 days delinquent plus (iv)
related Mortgage Loans converted to REO Properties, and the denominator of which
is (y) the then Aggregate Stated Principal Balance of the related Mortgage
Loans.
"Determination Date": As to any Payment Date, the fifteenth
(15th) day of the month in which such Payment Date occurs, or if such fifteenth
day is not a Business Day, the immediately preceding Business Day.
"Due Date": With respect to each Payment Date, the first day
of the calendar month in which such Payment Date occurs, which is the day of the
month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any
days of grace.
"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 after a Mortgage Loan constitutes part of the Trust Estate,
commencing the day following the applicable Cut-off Date for such 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
long-term unsecured 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) approved in writing by the Note
Insurer or (B) a segregated account maintained with the trust department of a
federal or state chartered depository institution or trust company acceptable to
each Rating Agency and the Note Insurer, having capital and surplus of not less
than $100,000,000, acting in its fiduciary capacity, the long-term unsecured
debt obligations of which shall be rated "Baa3" or better by Moody's or (C) a
segregated account or accounts the deposits in which are fully insured by the
FDIC (to the limits established by such corporation), the uninsured deposits in
which account are otherwise
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secured such that the Noteholders will have a claim with respect to the funds in
such account or a perfected first priority security interest against any
collateral (which shall be limited to Permitted Investments) securing such funds
that is superior to claims of any other depositors or general creditors of the
depository institution with which such account is maintained. Any Eligible
Accounts maintained with the Indenture Trustee shall conform to the preceding
clause (B).
"Euroclear": Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Default": As defined in Section 5.01.
"Excess Cash": With respect to a Group and any Payment Date,
the amount, if any, by which Available Funds for such Group and Payment Date
exceed the sum of (i) any amounts payable to the Note Insurer for Insured
Payments with respect to either Group paid on prior Payment Dates and not yet
reimbursed and for any unpaid Premiums for such Group on prior Payment Dates (in
each case with interest thereon at the "Late Payment Rate" (as defined in the
Insurance Agreement)) (and to the extent not covered by Available Funds for the
other Group, such amounts with respect to the other Group), (ii) the Note
Interest for the related Class and Payment Date (and to the extent not covered
by Available Funds for the other Group, such amounts with respect to the other
Group), (iii) an amount equal to the Overcollateralization Deficit for either
Class, (iv) the Monthly Principal for the related Class and Payment Date, and
(v) any amounts due and owing to the Note Insurer under the Insurance Agreement
that are not described in Section 8.02(c)(i) hereof.
"Excess Cash Payment": As defined in clause fourth of Section
8.02(c).
"Expense Adjusted Coupon Rate": With respect to any Mortgage
Loan, the then applicable Coupon Rate thereon minus the sum of (i) the Minimum
Spread, (ii) the Servicing Fee Rate and (iii) the Indenture Trustee Fee Rate.
"FDIC": The Federal Deposit Insurance Corporation and its
successors in interest.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Certification": A certification as to the completeness
of each Mortgage File provided by the Indenture Trustee, or a Custodian on its
behalf, on or before the 270th day after the Closing Date pursuant to Section
6.15(b) hereof and Section 6(b) of the Custodial Agreement substantially in the
form of Exhibit B-2 to the Custodial Agreement.
"Final Maturity Date": The Payment Date in November 2030.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Mortgaged Property.
"FNMA": Fannie Mae or any successor thereto.
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"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 principal balance of such Mortgage Loan,
together with all accrued and unpaid interest thereon at the Coupon 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 Meritage, the Company, the Sponsor, Funding Co. 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.
"Funding Co. ": RBMG Funding Co., a Nevada corporation.
"Funding Co. Sale Agreement": That certain Loan Sale
Agreement, dated as of November 1, 1999, between the Sponsor and Funding Co.,
pursuant to which the Mortgage Loans will be acquired from Funding Co. by the
Sponsor.
"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 Company Sale Agreement, the Funding Co. Sale Agreement, an
Insurance Policy or any other instrument shall include all rights, powers and
options (but none of the obligations) of the Granting party thereunder (except
as otherwise specified in the Granting Clause), 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.
"Gross Margin": With respect to each Adjustable-Rate Mortgage
Loan, the fixed percentage set forth in the related Mortgage Note that is added
to the Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Coupon Rate for such 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 Mortgage Loans": The Mortgage Loans assigned to
Group I.
"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 Mortgage Loans": The Mortgage Loans assigned to
Group II.
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"Guarantee": That certain guarantee dated as of November 30,
1998 by Meritage, in favor of the Sponsor, the Issuer and the Indenture Trustee.
"Highest Lawful Rate": As defined in Section 11.19.
"Indenture": This Indenture, dated as of November 1, 1999,
between the Issuer and the Indenture Trustee, 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": Bankers Trust Company, a New York banking
corporation, 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 Fee Rate": As of any Payment Date, 0.015%
per annum.
"Indenture Trustee's Fee": With respect to each Class of
Notes, the Indenture Trustee's monthly fee, equal to 1/12th of 0.015% of the
Aggregate Stated Principal Balance of the Mortgage Loans in the related Group as
of the first day of the related Due Period.
"Independent": When used with respect to any specified Person
means such a Person who (i) is in fact independent of the Issuer, Resource
Bancshares Mortgage, Meritage, Funding Co., the Sub-Servicer, the Company, the
Servicer and any other obligor upon the Notes, (ii) does not have any direct
financial interest or any material indirect financial interest in the Issuer,
Resource Bancshares Mortgage, Meritage, Funding Co., the Sub-Servicer, the
Company, the Servicer or in any such other obligor or in an Affiliate of the
Issuer, Resource Bancshares Mortgage, Meritage, Funding Co., the Sub-Servicer,
the Company, the Servicer or such other obligor, and (iii) is not connected with
the Issuer, Resource Bancshares Mortgage, Meritage, Funding Co., the
Sub-Servicer, the Company, the Servicer or any such other obligor as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions; PROVIDED, HOWEVER, that a Person shall not fail to be
Independent of the Issuer, Resource Bancshares Mortgage, Meritage, Funding Co.,
the Sub-Servicer, the Company or the Servicer or any Affiliate thereof merely
because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Issuer, Resource Bancshares Mortgage, Meritage, Funding
Co., the Sub-Servicer, the Company or the Servicer or any Affiliate thereof, as
the case may be. 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.
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"Index": With respect to each Adjustable-Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available either (i) as of the first
business day 45 days prior to such Adjustment Date or (ii) as of the first
business day of the month preceding the month of such Adjustment Date, as
specified in the related Mortgage Note.
"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 provided by the Indenture Trustee, or a
Custodian on its behalf, on the Closing Date pursuant to Section 6.15(a) hereof
and Section 6(a) of the Custodial Agreement, substantially in the form of
Exhibit B-1 to the Custodial Agreement.
"Indemnification Agreement": As defined in the Insurance
Agreement.
"Insurance Agreement": The Insurance Agreement, dated as of
November 1, 1999, among the Note Insurer, the Issuer, the Servicer, the
Sub-Servicer, the Company, the Sponsor, First Union Corporation, Funding Co.,
Meritage and the Indenture Trustee, as may be amended from time to time.
"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.
"Insurance Proceeds": As defined in the AMBAC Insurance
Policy.
"Insured Payments": As defined in the AMBAC Insurance Policy.
"Interest Determination Date": With respect to any Interest
Period after the first Interest Period, the second London Business Day
immediately preceding the first day of such Interest Period.
"Interest Period": With respect to the first Payment Date, the
period beginning on the Closing Date and ending on the day preceding the Payment
Date in December 1999 and, as to any subsequent Payment Date, the period
beginning on the immediately preceding Payment Date and ending on the day prior
to the related Payment Date.
"Interim Certification": A certification as to the
completeness of each Mortgage File provided by the Indenture Trustee, or a
Custodian on its behalf, pursuant to Section 6.15(b) hereof and Section 6(b) of
the Custodial Agreement substantially in the form of Exhibit B-2 to the
Custodial Agreement.
"Issuer": RBMG Funding Co. Mortgage Loan Trust 1999-2, a
Delaware business trust.
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"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 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
November 29, 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 Event": As defined in the Servicing Agreement.
"Liquidation Proceeds": As defined in the Servicing Agreement.
"Loan-To-Value Ratio": With respect to any Mortgage Loan as of
any date of determination, the fraction, expressed as a percentage, the
numerator of which is the principal balance of the related Mortgage Loan as of
such date and the denominator of which is the Value of the related Mortgaged
Property.
"London Business Day": A Business Day on which banks are open
for dealing in foreign currency and exchange in London and New York City.
"Majority Certificateholder": The holder of the majority
interest in the Certificate, which as of the Closing Date is Funding Co.
"Management Agreement": That certain Management Agreement,
dated as of November 1, 1999, among the Issuer, the Manager and RBMG Asset
Management Company, Inc., as may be amended from time to time.
"Manager": RBMG, Inc., its successors and permitted assigns.
"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.
"Maximum Rate": With respect to each Mortgage Loan, the
percentage set forth in the related Mortgage Note as the maximum Coupon Rate
thereunder.
"Meritage": Meritage Mortgage Corporation, an Oregon
corporation, and its successors.
"Meritage Guidelines": As defined in the Prospectus
Supplement.
"Minimum Rate": With respect to each Mortgage Loan, the
percentage set forth in the related Mortgage Note as the minimum Coupon Rate
thereunder.
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"Minimum Spread": With respect to each Group and Payment Date
occurring from the Closing Date through and including the twelfth Payment Date
after the Closing Date, 0.00% per annum. With respect to each Payment Date
occurring after the twelfth Payment Date, 0.50% per annum.
"Monthly Payment": With respect to any Mortgage Note, the
amount of each scheduled monthly payment of principal and interest payable from
time to time under such Mortgage Note by the Mortgagor in accordance with its
terms, including one month's accrued interest on the related Scheduled Principal
Balance at the then applicable Coupon 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 Class of Notes and any Payment
Date, the excess of (i) the Monthly Principal Available for such Class and
Payment Date over (ii) the Overcollateralization Surplus for such Class and
Payment Date.
"Monthly Principal Available": For each Class of Notes and any
Payment Date, an amount equal to the lesser of: (a) the excess of (i) the
Available Funds in the related Note Account, over (ii) the amounts payable
pursuant to Section 8.02(c)(i) and (ii) and, (b) the aggregate of (i) all
scheduled payments of principal received (or advanced or to be advanced on the
related Servicer Remittance Date) with respect to the Mortgage Loans in the
related 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 Servicer Remittance Date by the Issuer, Funding Co., the Company, the
Sponsor, the Servicer or the Note Insurer or Meritage in connection with a
repurchase, release, removal or substitution of any Mortgage Loans in the
related Group pursuant to this Indenture or 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": The mortgage documents listed in Section 3(b)
of the Sponsor Sale Agreement pertaining to a particular Mortgage Loan and any
additional documents pertaining to a Mortgage Loan required to be delivered to
the Issuer under the Sponsor Sale 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 those Mortgage Loans
Granted to the Indenture Trustee on the Closing Date, the Qualified Replacement
Mortgage Loans, and any property that secures a Mortgage Loan that becomes REO
Property.
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"Mortgage Loan Schedule": As of any date, the schedule,
provided in computer readable format, of Mortgage Loans included in the Trust
Estate. Schedule I hereto identifies the Initial Mortgage Loans being Granted to
the Indenture Trustee on the Closing Date. The Issuer shall deliver the Initial
Mortgage Loan Schedule to the Indenture Trustee in both physical and
computer-readable form.
The Mortgage Loan Schedule shall set forth the following
information with respect to each Mortgage Loan (and shall set forth such
information according to Group):
(i) Meritage's Mortgage Loan identifying number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property
including the state and zip code;
(iv) a code indicating whether the Mortgaged Property
is owner-occupied;
(v) the type of Residential Dwelling constituting the
Mortgaged Property;
(vi) the original months to maturity;
(vii) the stated remaining months to maturity from the
applicable Cut-off Date based on the original amortization schedule;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Coupon Rate in effect immediately following
the applicable Cut-off Date;
(x) (A) the date on which the first Monthly Payment was
due on the Mortgage Loan and, (B) if such date is not consistent with
the Due Date currently in effect, such Due Date;
(xi) the stated maturity date;
(xii) the amount of the Monthly Payment at origination;
(xiii) the last Due Date on which a Monthly Payment was
actually applied to the unpaid Stated Principal Balance;
(xiv) the original principal amount of the Mortgage
Loan;
(xv) the Scheduled Principal Balance of the Mortgage
Loan as of the close of business on the applicable Cut-off Date;
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(xvi) in the case of each Adjustable-Rate Mortgage
Loan, the Adjustment Dates;
(xvii) in the case of each Adjustable-Rate Mortgage
Loan, the Gross Margin;
(xviii) a code indicating the purpose of the Mortgage
Loan (i.e., purchase financing, Rate/Term Refinancing, Cash-Out
Refinancing);
(xix) in the case of each Adjustable-Rate Mortgage
Loan, the Maximum Rate;
(xx) in the case of each Adjustable-Rate Mortgage Loan,
the Minimum Rate;
(xxi) the Coupon Rate at origination;
(xxii) in the case of each Adjustable-Rate Mortgage
Loan, the Periodic Rate Cap and the maximum first Adjustment Date
Coupon Rate adjustment;
(xxiii) a code indicating the documentation style
(i.e., Full Documentation, Limited Documentation or Stated Income
Documentation);
(xxiv) a code indicating the originator;
(xxv) in the case of each Adjustable-Rate Mortgage
Loan, the first Adjustment Date immediately following the applicable
Cut-off Date;
(xxvi) the risk grade;
(xxvii) the Value of the Mortgaged Property;
(xxviii) the sale price of the Mortgaged Property, if
applicable;
(xxix) the actual unpaid principal balance of the
Mortgage Loan as of the applicable Cut-off Date;
(xxx) a code indicating whether there is a prepayment
penalty;
(xxxi) a code indicating whether the Mortgage Loan is
an Adjustable Rate Mortgage Loan;
(xxxii) the first payment date of the Mortgage Loan;
and
(xxxiii) the first payment date of the Mortgage Loan
immediately succeeding the Cut-off Date.
The Mortgage Loan Schedule shall set forth the following
information as of the Initial Cut-off Date with respect to the Mortgage Loans in
the aggregate in each Group: (1) the
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number of Mortgage Loans; (2) the current principal balance of the Mortgage
Loans; (3) the weighted average Coupon Rate of the Mortgage Loans; and (4) the
weighted average maturity of the Mortgage Loans. The Mortgage Loan Schedule
shall be amended from time to time by the Issuer upon each Grant of a Qualified
Replacement Mortgage Loan to set forth the aforementioned information with
respect to the Mortgage Loans as of the applicable Cut-off Date and the deletion
of Mortgage Loans.
"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 Loan, including any REO Property, consisting of an Estate in Real
Property.
"Mortgagor": The obligor under a Mortgage Note.
"Net Liquidation Proceeds": As defined in the Servicing
Agreement.
"Nonrecoverable P&I 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 "Bankers Trust Company, as
Indenture Trustee for RBMG Funding Co. Mortgage Loan Trust 1999-2 Asset-Backed
Notes, Series 1999-2, Class A-1 Note Account" or "Bankers Trust Company, as
Indenture Trustee for RBMG Funding Co. Mortgage Loan Trust 1999-2 Asset Backed
Notes, Series 1999-2, Class A-2 Note Account" on behalf of the Noteholders and
the Note Insurer.
"Note Balance": With respect to the Class A-1 or Class A-2
Notes will be equal, as of any Payment Date, to the Original Note Balance of
such Class less all Monthly Principal and Excess Cash paid to the related
Noteholders on previous Payment Dates to reduce the Note Balance of such Class
(exclusive, for the sole purpose of effecting the Note Insurer's subrogation
rights, of payments made by the Note Insurer in respect of any
Overcollateralization Deficit related to such Class of Notes and such Payment
Date under the Insurance Policy, except to the extent reimbursed to the Note
Insurer pursuant to Section 8.02(c) of this Indenture).
"Note Factor": With respect to each Class of Notes as of any
Payment Date, a fraction, expressed as a decimal carried to six places, the
numerator of which is the aggregate Outstanding Note Balance of the related
Notes on such Payment Date (after giving effect to any distributions of
principal in reduction of the aggregate Outstanding Note Balance of the related
Notes to be made on such Payment Date), and the denominator of which is the
related Original Note Balance.
"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 Company, the
Servicer, Funding Co., Meritage or the Sponsor, or any Persons actually known by
a Responsible Officer of the Indenture Trustee to be an Affiliate of the Issuer,
the Company, the Servicer, Funding Co., Meritage or the Sponsor shall be deemed
not to be
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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 Company, the Servicer, Funding Co.,
the Sponsor, Meritage, or any such Person is an owner of record of all of the
Notes.
"Note Formula Rate": With respect to the Class A-1 Notes and
for any Interest Period ending prior to the Redemption Date, a per annum rate
equal to One-Month LIBOR plus 0.35% and, for any Interest Period ending
thereafter, a per annum rate equal to One-Month LIBOR plus 0.70%. With respect
to the Class A-2 Notes and for any Interest Period ending prior to the
Redemption Date, a per annum rate equal to One-Month LIBOR plus 0.38% and, for
any Interest Period ending thereafter, a per annum rate equal to One-Month LIBOR
plus 0.76%.
"Note Insurer": Ambac Insurance Corporation, a
Wisconsin-domiciled insurance company, and any successors thereto.
"Note Insurer Default": The existence and continuance of any
of the following:
(a) a Ambac Payment Default;
(b) the entry by a court having jurisdiction 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 60 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, or the taking
of corporate action by the Note Insurer in furtherance of any such
action.
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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.
"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 (a) with respect to the initial Interest Period,
interest for the number of days in the period commencing on the Closing Date and
ending on the day prior to such Payment Date at the related Note Interest Rate
on the related Original Note Balance, and (b) with respect to any subsequent
Interest Period, interest for the number of days in such Interest Period at 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) reduced by (i) the
related aggregate Prepayment Interest Shortfall, if any, for such Payment Date,
to the extent not covered by related Compensating Interest Payments, and (ii)
the aggregate amount of Relief Act Interest Shortfall with respect to Mortgage
Loans in the related Group, if any, for such Payment Date. All calculations of
interest on each Class of Notes will be computed on the basis of the actual
number of days elapsed in the related Interest Period and in a year of 360 days.
"Note Interest Rate": With respect to the Interest Period
relating to the December 1999 Payment Date and the Class A-1 Notes, 35% per
annum. With respect to each Interest Period thereafter and the Class A-1 Notes,
a per annum rate equal to the lesser of (a) the related Note Formula Rate and
(b) the related Available Funds Cap Rate. With respect to the Interest Period
relating to the December 1999 Payment Date and the Class A-2 Notes, 38% per
annum. With respect to each Interest Period thereafter and the Class A-2 Notes,
a per annum rate equal to the lesser of (a) the related Note Formula Rate and
(b) the related Available Funds Cap Rate.
"Note Register": As defined in Section 2.06.
"Notes": The Class A-1 Notes and the Class A-2 Notes of the
RBMG Funding Co. Mortgage Loan Trust 1999-2 Asset-Backed Notes, Series 1999-2,
authorized by, and authenticated and delivered under, this Indenture.
"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 Ambac Insurance Policy with respect to any Payment
Date, in the form set forth as Exhibit A to the Ambac Insurance Policy.
"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 Meritage, the Company, the Sponsor, Funding Co.,
the Servicer or, in the case of the Issuer, an authorized signatory 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.
"One-Month Libor": With respect to the first Interest Period,
5.6075% per annum. With respect to any Interest Period after the first Interest
Period, the per annum rate
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determined by the Indenture Trustee on the related Interest Determination Date
for one-month U.S. dollar deposits as such rate appears on page 3750 of
Telerate, as of 11:00 a.m. (London time) on such Interest Determination Date.
For purposes of this Indenture, "page 3750 of Telerate" means the display
designated as page 3750 on the Dow Jones Telerate Service (or such other page as
may replace page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks). If such rate does not appear on page
3750 of Telerate, One-Month LIBOR will be established by the Indenture Trustee
as follows:
(i) if on such Interest Determination Date two or more
Reference Banks provide such offered quotations, One-Month LIBOR shall
be the arithmetic mean (rounded upwards if necessary to the nearest
whole multiple of 0.0625%) of such offered quotations; or
(ii) if on such Interest Determination Date, fewer than
two Reference Banks provide such offered quotations, One-Month LIBOR
shall be the higher of (x) One-Month LIBOR as determined on the
previous Interest Determination Date and (y) the Reserve Interest Rate.
"Opinion Of Counsel": A written opinion of counsel reasonably
acceptable to the Indenture Trustee and, in the case of opinions delivered to
the Note Insurer, reasonably acceptable to it. Any expense related to obtaining
an Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel, except in such instances where
such opinion is at the request of the Indenture Trustee, in which case such
expense shall be an expense of the Issuer.
"Original Note Balance": The aggregate principal balance of
the Notes at the issue date thereof, equal to $85,000,000 for the Class A-1
Notes and $40,000,000 for the Class A-2 Notes.
"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
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(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, Meritage, the Sponsor,
the Company, the Servicer, the Sub-Servicer, or Funding Co., the Issuer or any
Affiliate of any of them, 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, Meritage,
the Sponsor, the Company, the Servicer, the Sub-Servicer, Funding Co., or any
Affiliate of any of them; PROVIDED, FURTHER, HOWEVER, that Notes that have been
paid with the proceeds of the Ambac 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.
"Outstanding 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.
"Overcollateralization Amount": For each Class of Notes and
any Payment Date, the amount, if any, by which (x) the Aggregate Stated
Principal Balance of the Mortgage Loans in the related Group as of the end of
the related Due Period exceeds (y) the Note Balance of the related Class of
Notes for such Payment Date, after taking into account the Monthly Principal
(disregarding any permitted reduction in Monthly Principal due to an
Overcollateralization Surplus) to be applied in reduction of the related Note
Balance on such Payment Date. If the Aggregate Stated Principal Balance of the
Mortgage Loans in such Group as of the end of the related Due Period as of such
date 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": With respect to each Class of
Notes and 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 such Note Balance exceeds the Aggregate
Stated Principal Balance of the related Mortgage Loans in such Group as of the
end of the related Due Period as of such date. If the Aggregate Stated Principal
Balance of the Mortgage Loans in such Group is greater than the related Note
Balance for such Payment Date determined as provided above, the related
Overcollateralization Deficit for such Payment Date shall be zero.
"Overcollaterization Surplus": Either the Class A-1
Overcollaterization Surplus or the Class A-2 Overcollaterization Surplus, as
applicable.
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"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.
"P&I Advance": As defined the Servicing 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 December 27, 1999.
"Payment Date Statement": The statement prepared pursuant to
Section 2.08(d) with respect to collections on or in respect of the Mortgage
Loans in each Group and other assets of the Trust Estate and payments on or in
respect of the Notes, based solely 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 and
each Group (to the extent the Servicer has made such information (other than the
information described in clause (ii), (iii), (iv), (v), (xii), (xix) and (xxii)
below) available to the Indenture Trustee):
(i) the amount of such payment to Noteholders of each
Class allocable to (x) Monthly Principal (separately setting forth
Principal Prepayments) and (y) any Excess Cash Payment;
(ii) the amount of such payment to Noteholders of each
Class allocable to (x) Note Interest and (y) the Available Funds Cap
Rate Carry Forward Amount;
(iii) the Note Balance for each Class, after giving
effect to the payment of Monthly Principal and any Excess Cash Payment
applied to reduce the Note Balance on such Payment Date;
(iv) the amount of any Insured Payments with respect to
the properties securing the Mortgage Loans in each Group for such
Payment Date and the respective portions thereof allocable to principal
and interest;
(v) the related Overcollateralization Amount, the then
applicable Required Overcollateralization Amount, the
Overcollateralization Surplus, if any, and the Overcollateralization
Deficit, if any, with respect to such Payment Date;
(vi) the Aggregate Stated Principal Balance of the
Mortgage Loans and REO Properties in each Group as of the end of the
related Due Period;
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(vii) the amount of P&I Advances made with respect to
each Group and such Payment Date and the aggregate amount of
unreimbursed P&I Advances and Servicing Advances, if any;
(viii) the number and aggregate of the Stated Principal
Balances of Mortgage Loans (including the Stated Principal Balances of
all Mortgage Loans in foreclosure) in each Group contractually
delinquent (i) one month, (ii) two months and (iii) three or more
months, as of the end of the related Collection Period;
(ix) the number and aggregate of the Stated Principal
Balances of the Mortgage Loans in each Group in foreclosure or subject
to other similar proceedings, and the number and aggregate of the
Stated Principal Balances of Mortgage Loans in each Group the
Mortgagors of which are 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;
(x) the aggregate of the Stated Principal Balances of
the Mortgage Loans in each Group repurchased by Meritage, the Company,
the Sponsor or Funding Co. or purchased by the Servicer, the Majority
Certificateholders or the Note Insurer, separately setting forth the
aggregate of the Stated Principal Balances of Mortgage Loans in each
Group delinquent for three consecutive monthly installments purchased
by the Majority Certificateholder, the Servicer or the Note Insurer at
their option pursuant to the Servicing Agreement;
(xi) the aggregate amount of the related Servicing Fee
paid to or retained by the Servicer for the related Collection Period;
(xii) the amount of any reimbursement payment made to
the Note Insurer on the related Payment Date pursuant to Section
8.02(c)(i) and (iv) and the amount of Cumulative Insured Payments after
giving effect to any Insured Payment made or such Payment Date to the
Noteholders or any such reimbursement payment to the Note Insurer;
(xiii) the number, aggregate principal balance,
weighted average remaining term to maturity and weighted average Coupon
Rate of the Mortgage Loans in each Group as of the related Due Date;
(xiv) with respect to any Mortgage Loan that in each
Group became an REO Property during the preceding calendar month, the
loan number of such Mortgage Loan, the unpaid principal balance and the
Stated Principal Balance of such Mortgage Loan as of the date it became
an REO Property;
(xv) the book value of any REO Property in each Group
as of the close of business on the last Business Day of the calendar
month preceding the Payment Date;
(xvi) the aggregate amount of Principal Prepayments in
each Group made during the related Collection Period;
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(xvii) the aggregate amount of Realized Losses in each
Group incurred during the related Collection Period;
(xviii) the Class A-1 Cash O/C Amount, the Class A-2
Cash O/C Amount the Class A-1 Aggregate O/C Surplus Amount and the
Class A-2 Aggregate O/C Surplus Amount;
(xix) the Note Factor for the related Notes applicable
to such Payment Date;
(xx) the aggregate amount of any Prepayment Interest
Shortfalls for such Group and Payment Date, to the extent not covered
by Compensating Interest Payments by the Servicer pursuant to Section
2.23 of the Servicing Agreement;
(xxi) the aggregate amount of Relief Act Interest
Shortfalls for such Group and Payment Date; and
(xxii) the aggregate amount of any Cap Payments
received with respect to each Group with respect to such Payment Date.
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 related Original Note Balance
and multiplying the result by 100.
"Periodic Rate Cap": With respect to each Adjustable Rate
Mortgage Loan and any Adjustment Date therefor, the fixed percentage set forth
in the related Mortgage Note, which is the maximum amount by which the Coupon
Rate for such Mortgage Loan may increase or decrease (without regard to the
Maximum Rate or the Minimum Rate) on such Adjustment Date from the Coupon Rate
in effect immediately prior to such Adjustment Date.
"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, Fannie Mae, the Federal Home Loan Banks or any
agency or instrumentality of the United States of America, 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
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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 and the highest available rating category 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 Standard & Poor's 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, 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
certificated 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 one of the two
highest available rating categories of Standard & Poor's and the
highest available rating category Moody's 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 for which the 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.
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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.
"Policy Payments Account": As defined in Section 8.05(e).
"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.
"Preference Amount": As defined in the Insurance Policy.
"Premium": As defined in the Insurance Agreement.
"Premium Percentage": As defined in the Insurance Agreement.
"Prepayment Interest Shortfall": As defined in the Servicing
Agreement.
"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 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, or (b) is accompanied by
instructions from the related Mortgagor directing the Servicer to apply such
payment to the principal balance of such Mortgage Loan currently.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Prospectus Supplement": The Issuer's Prospectus Supplement,
dated November 18, 1999, relating to the Notes.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 8.07 or
10.01, and as confirmed by an Officers' Certificate from the Servicer to the
Indenture Trustee, an amount equal to the sum of (i) 100% of the Stated
Principal Balance thereof as of the date of purchase (or such other price as
provided in Section 8.07), (ii) in the case of (x) a Mortgage Loan, accrued
interest on such Stated Principal Balance (plus, in the case of a Defective
Mortgage Loan, the amount of any Related Loss resulting From a Deficient
Valuation) at a rate equal to the applicable Coupon Rate minus the related
Servicing Fee Rate in effect from time to time from the Due Date as to which
interest was last covered by a payment by the Mortgagor or an advance by the
Servicer, which payment or advance had as of the date of purchase been paid
pursuant to Section 8.02, through the end of
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the calendar month in which the purchase is to be effected, and (y) an REO
Property, the sum of (1) accrued interest on such Stated Principal Balance
(plus, in the case of a Defective Mortgage Loan, the amount of any Related Loss
resulting from a Deficient Valuation) at a rate equal to the applicable Coupon
Rate minus the related Servicing Fee Rate in effect from time to time from the
Due Date as to which interest was last covered by a payment by the Mortgagor or
an advance by the Servicer through the end of the calendar month immediately
preceding the calendar month in which such REO Property was acquired, plus (2)
REO Imputed Interest for such REO Property for each calendar month commencing
with the calendar month in which such REO Property was acquired and ending with
the calendar month in which such purchase is to be effected, net of the total of
all net rental income, Insurance Proceeds, Liquidation Proceeds and P&I Advances
that had as of the date of purchase been distributed as or to cover REO Imputed
Interest pursuant to Section 8.02, (iii) any unreimbursed Servicing Advances and
P&I Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or
REO Property, (iv) any amounts previously withdrawn from the Collection Account
in respect of such Mortgage Loan or REO Property pursuant to the Servicing
Agreement, and (v) in the case of a Mortgage Loan required to be purchased
pursuant to Section 8.07, expenses reasonably incurred or to be incurred by the
Servicer or the Indenture Trustee in respect of the breach or defect giving rise
to the purchase obligation.
"Qualified Replacement Mortgage Loan": A Mortgage Loan that is
substituted for a Deleted Mortgage Loan pursuant to Section 8.07 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 ten percent less than the unpaid principal balance of the
Deleted Mortgage Loan(s) at the end of the Due Period preceding the date of
substitution, (ii) have the Coupon Rate computed on substantially the same basis
as the Coupon Rate on the related Mortgage Loan, utilizing the same Index and
having a Gross Margin or Minimum Rate not less than (and not more than one
percentage point in excess of) the Gross Margin and Minimum Rate applicable to
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 equal to or lower than the Loan-to- Value Ratio
of the Deleted Mortgage Loan, (v) have a first lien priority, (vi) comply as of
the date of substitution with each representation and warranty set forth in
Section 3(b) of the Funding Co. Sale Agreement, Section 3(b) of the Company Sale
Agreement or Section 3(b) of the Sponsor 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.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than (i) 1% of the original principal balance of
the Mortgage Loan, or (ii) $1000 in excess of the amounts outstanding on the
existing first mortgage loan, on any subordinate mortgage loan on the related
Mortgaged Property, related closing costs, and consumer debt of the borrower
that was paid at closing and were used exclusively (except for up to $1000) to
satisfy
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the then existing first mortgage loan, any subordinate mortgage loan of the
Mortgagor on the related Mortgaged Property to pay related closing costs, and
consumer debt of the borrower.
"Rating Agencies": Standard & Poor's and Moody's (each, a
"Rating Agency"). If either such agency or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
credit rating agency, or other comparable Person, designated by the Issuer and
the Note Insurer, notice of which designation shall be given to the Indenture
Trustee.
"Realized Loss": As defined in the Servicing Agreement.
"Recordation Event" means (i) the occurrence of any Event of
Default (as defined in the Indenture), Servicer Event of Default or Event of
Default (as defined in the Sub-Servicing Agreement), (ii) the Note Insurer gives
written notice to Meritage that the Note Insurer has determined, in its sole
discretion, that recording an Assignment of Mortgage is required to protect the
right, title and interest of the Indenture Trustee on behalf of the Noteholders
and the Note Insurer in and to the related Mortgage Loan, (iii) with respect to
a particular Mortgage Loan, a bankruptcy or insolvency proceeding involving the
Mortgagor is initiated, or foreclosure proceedings are initiated against the
related Mortgaged Property, (iv) a court recharacterizes the conveyance of the
Mortgage Loans as a financing, or (v) as a result of any change in or amendment
to the laws of the State or jurisdiction or any political subdivision thereof in
which a Mortgaged Property is located, or of any change in official position
regarding application or interpretation of such laws, including, without
limitation, a holding by a court of competent jurisdiction, recording of the
related Assignment is required to protect the right, title and interest of the
Indenture Trustee on behalf of the Noteholders and the Note Insurer in and to
the related Mortgage Loan.
"Recordation Opinion" means a written opinion of counsel
(which may include inside or salaried counsel of Resource Bancshares Mortgage or
RBMG) acceptable to the Note Insurer to the effect that recording an Assignment
of Mortgage is not required (i) to protect the Indenture Trustee's right, title
and interest in and to the related Mortgage Loan on behalf of the Noteholders
and the Note Insurer, or (ii) in the event that a court should recharacterize
the conveyance of the Mortgage Loans as a financing, to perfect a first priority
security interest in favor of the Indenture Trustee in the related Mortgage
Loan.
"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": The Payment Date, if any, on which a Class
of Notes is redeemed pursuant to Article X hereof, which date may occur on or
after the Payment Date on which the combined aggregate Outstanding Note Balance
of the Class A-1 Notes and Class A-2
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Notes as of the related Determination Date is less than 10% of the combined
aggregate Outstanding Note Balance of the Class A-1 Notes and the Class A-2
Notes as of the Closing Date.
"Redemption Price": With respect to any Note to be redeemed in
whole or in part, an amount equal to 100% of the combined aggregate Outstanding
Note Balance of the Class A-1 Notes and the Class A-2 Notes to be so redeemed,
together with accrued and unpaid interest on such amount at the Note Interest
Rate, plus any unpaid Available Funds Cap Rate Carry Forward Amount, through the
end of the Interest Period immediately preceding the Redemption Date.
"Reference Banks": Leading banks which are engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, (ii) which have been designated
as such by the Indenture Trustee and (iii) which are not controlling, controlled
by, or under common control with the Issuer, the Company, the Sponsor, Funding
Co., Meritage, or any Affiliates thereof.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Release Date": The date forty (40) calendar days after the
later of (i) the commencement of the offering of the Notes and (ii) the Closing
Date.
"Relief Act Interest Shortfall": With respect to any Payment
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"Remittable Funds": As defined in the Servicing Agreement.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Estate, one month's interest at a rate equal to the then applicable Coupon Rate
minus the related Servicing Fee Rate on the Stated Principal Balance of such REO
Property (or, in the case of the first such calendar month, of the related
Mortgage Loan if appropriate) as of the close of business on the Payment Date in
such calendar month.
"REO Principal Amortization": As defined in the Servicing
Agreement.
"REO Property": As defined in the Servicing Agreement.
"Required Overcollateralization Amount": As defined in the
Insurance Agreement.
"Required Payment Amount": With respect to each Class of Notes
and any Payment Date, the Note Interest for such Payment Date plus the amount of
any related Overcollateralization Deficit for such Payment Date.
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"Reserve Account": That certain account, which shall be an
Eligible Account, established pursuant to Section 8.18 of this Indenture.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Indenture Trustee determines to
be either (i) the arithmetic mean (rounded upwards if necessary to the nearest
whole multiple of 0.0625%) of the one-month U.S. dollar lending rates that New
York City banks selected by the Indenture Trustee are quoting on the relevant
Interest Determination Date to the principal London offices of leading banks in
the London interbank market, (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate
that New York City banks selected by the Indenture Trustee are quoting on such
Interest Determination Dates to leading European banks or (iii) in the event New
York City banks are not offering quotes, One-Month LIBOR for the Interest Period
in which such Interest Determination Date occurs.
"Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a detached one-family dwelling in a planned unit development, or (iv)
condominium units.
"Resource Bancshares Mortgage": Resource Bancshares Mortgage
Group, Inc., a Delaware corporation, and its successors.
"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
in each case having direct responsibility for the administration of this
Indenture 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": As defined in Section 5.17.
"Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the applicable Cut-off Date, the outstanding principal balance
of such Mortgage Loan as of such date, net of the principal portion of all
unpaid Monthly Payments, if any, due on or before such date; (b) as of any Due
Date subsequent to the applicable Cut-off Date up to and including the Due Date
in the calendar month in which a Liquidation Event occurs with respect to such
Mortgage Loan, the Scheduled Principal Balance of such Mortgage Loan as of the
applicable Cut-off Date, minus the sum of (i) the principal portion of each
Monthly Payment due on or before such Due Date but subsequent to the applicable
Cut-off Date, whether or not received, (ii) all Principal Prepayments received
before such Due Date but after the applicable Cut-off Date, (iii) the principal
portion of all Liquidation Proceeds and Insurance Proceeds received before such
Due Date but after the applicable Cut-off Date, net of any portion thereof that
represents principal due (without regard to any acceleration of payments under
the related Mortgage and Mortgage Note) on a Due Date occurring on or before the
date on which such proceeds were
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received and (iv) any Realized Loss incurred with respect thereto as a result of
a Deficient Valuation occurring before such Due Date, but only to the extent
such Realized Loss represents a reduction in the portion of principal of such
Mortgage Loan not yet due (without regard to any acceleration of payments under
the related Mortgage and Mortgage Note) as of the date of such Deficient
Valuation; and (c) as of any Due Date subsequent to the occurrence of a
Liquidation Event with respect to such Mortgage Loan, zero. With respect to any
REO Property: (a) as of any Due Date subsequent to the date of its acquisition
on behalf of the Trust Estate up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such REO Property, an
amount (not less than zero) equal to the Scheduled Principal Balance of the
related Mortgage Loan as of the Due Date in the calendar month in which such REO
Property was acquired, minus the aggregate amount of REO Principal Amortization,
if any, in respect of such REO Property for all previously ended calendar
months; and (b) as of any Due Date subsequent to the occurrence of a Liquidation
Event with respect to such REO Property, zero.
"Securities Act": The Securities Act of 1933, as amended.
"Servicer": RBMG, Inc., in its capacity as servicer under the
Servicing Agreement, and its permitted successors and assigns thereunder,
including any successor servicer appointed pursuant to the Servicing Agreement.
"Servicer Remittance Date": With respect to any Payment Date,
3:00 p.m. New York Time on the 18th day of the calendar month in which such
Payment Date occurs or, if such 18th day is not a Business Day, the Business Day
immediately following such 18th day.
"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
November 1, 1999, among the Issuer, the Servicer and the Indenture Trustee, as
indenture trustee and backup servicer, 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. A
copy of the Servicing Agreement as in effect as of the date hereof is attached
hereto as Exhibit C.
"Servicing Fee": As defined in the Servicing Agreement.
"Servicing Fee Rate": With respect to each Group, 0.44% per
annum; PROVIDED, HOWEVER, that such rate may be increased to a maximum of 0.50%
per annum if the Indenture Trustee and the Note Insurer mutually determine in
good faith that such increase is required in order to obtain a successor
servicer or a successor sub-servicer pursuant to Section 5.02 of the Servicing
Agreement.
"Sponsor": Residential Asset Funding Corporation, a North
Carolina corporation, and its successors and permitted assigns.
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"Sponsor Sale Agreement": That certain Loan Sale Agreement,
dated as of November 1, 1999, between the Sponsor and the Issuer, pursuant to
which the Mortgage Loans will be acquired from the Sponsor by the Issuer for
inclusion in the Trust Estate.
"Standard & Poor's": Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies Inc., and its successors in interest.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the Scheduled Principal Balance of such Mortgage Loan
as of the applicable Cut-off Date, as shown in the Mortgage Loan Schedule, minus
the sum of (i) the principal portion of each Monthly Payment due on a Due Date
subsequent to the applicable Cut-off Date, to the extent received from the
Mortgagor or advanced by the Servicer and distributed pursuant to Section 8.02
on or before such date of determination, (ii) all Principal Prepayments received
after the applicable Cut-off applicable Date, to the extent distributed pursuant
to Section 8.02 on or before such date of determination, (iii) all Liquidation
Proceeds and Insurance Proceeds applied by the Servicer as recoveries of
principal in accordance with the Servicing Agreement, to the extent distributed
pursuant to Section 8.02 on or before such date of determination, and (iv) any
Realized Loss incurred with respect thereto as a result of a Deficient Valuation
made during or prior to the Collection Period for the most recent Payment Date
coinciding with or preceding such date of determination; and (b) as of any date
of determination coinciding with or subsequent to the Payment Date on which the
proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan
would be distributed, zero. With respect to any REO Property: (a) as of any date
of determination up to but not including the Payment Date on which the proceeds,
if any, of a Liquidation Event with respect to such REO Property would be
distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust Estate, minus the sum (i) if such REO
Property was acquired before the Payment Date in any calendar month, the
principal portion of the Monthly Payment due on the Due Date in the calendar
month of acquisition, to the extent advanced by the Servicer and distributed
pursuant to Section 8.02 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 8.02 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Payment Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, zero.
"Stayed Funds": As defined in the Servicing Agreement.
"Sub-Servicer": Ocwen Federal Bank FSB, a federally-chartered
savings bank, as Sub-Servicer under the Sub-Servicing Agreement, and its
permitted successors and assigns thereunder, including any successor
sub-servicer appointed pursuant to the Sub-Servicing Agreement.
"Sub-Servicing Agreement": The Sub-Servicing Agreement, dated
as of November 1, 1999, between the Servicer and the Sub-Servicer, providing
among other things for the sub-servicing of the Mortgage Loans which the
Servicer is obliged to service under the
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Servicing Agreement, 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 sub-servicer.
"TIA": The Trust Indenture Act of 1939, as it may be amended
from time to time.
"Three Month Rolling Average Delinquency Percentage": With
respect to each Group and any Payment Date, the average of the Delinquency
Percentages of such Group as of the last day of each of the three (or one or
two, in case of the first and second Payment Dates) preceding calendar months.
"Total Available Funds": As to any Payment Date and with
respect to either Class of Notes, the sum of (i) the Available Funds for such
Payment Date and Class, (ii) any Crossover Amount available from the other Class
on such Payment Date and (iii) any amount withdrawn from the Reserve Account and
deposited to the Note Account for the related Class.
"Total Expected Losses": With respect to any Payment Date,
cumulative Realized Losses of such Group occurring from the Closing Date through
and including such Payment Date.
"Transferor": As defined in Section 8.07(a).
"Trust Agreement": That certain Trust Agreement, dated as of
November 1, 1999, among the Sponsor, as sponsor, Bankers Trust Company, as Trust
Paying Agent, and Wilmington Trust Company, as Owner Trustee.
"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 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 Bankers Trust Company.
"Twelve Month Loss Amount": With respect to each Group and any
Payment Date, an amount equal to the aggregate of all related Realized Losses
during the previous twelve Due Periods.
"Underwriter": First Union Securities Corp., a North Carolina
corporation, as underwriter of the Notes pursuant to the Underwriting Agreement,
dated November 18, 1999, between the Underwriter and the Sponsor.
"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.
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"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b)
the value thereof as determined by a review appraisal conducted by Meritage in
the event any such review appraisal determines an appraised value ten percent or
more lower than the value thereof as determined by the appraisal referred to in
clause (i)(a) above and (ii) the purchase price paid for the related Mortgaged
Property by the Mortgagor with the proceeds of the Mortgage Loan; PROVIDED,
HOWEVER, (A) in the case of a Refinanced Mortgage Loan, such value of the
Mortgaged Property is based solely upon the lesser of (1) the value determined
by an appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of FNMA and FHLMC and (2) the value thereof as determined
by a review appraisal conducted by Meritage in the event any such review
appraisal determines an appraised value ten percent or more lower than the value
thereof as determined by the appraisal referred to in clause (ii)(A)(1) above
and (B) in the case of a Mortgage Loan originated in connection with a
"lease-option purchase," such value of the Mortgaged Property is based on the
lower of the value determined by an appraisal made for the originator of such
Mortgage Loan at the time of origination or the sale price of such Mortgaged
Property if the "lease option purchase price" was set less than 12 months prior
to origination, and is based on the value determined by an appraisal made for
the originator of such Mortgage Loan at the time of origination if the "lease
option purchase price" was set 12 months or more prior to origination.
"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-1 with respect to the Class A-1 Notes and Exhibit A-2 with respect to
the Class A-2 Notes, each attached hereto. Each Note may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may, consistently herewith, be determined by the Authorized Officers
of the Owner Trustee executing such Notes on behalf of the Issuer, as evidenced
by their execution thereof. Any portion of the text of any Note may be set forth
on the reverse thereof with an appropriate reference on the face of the Note.
The Definitive Notes may be produced in any manner determined
by the Authorized Officers of the Owner Trustee executing such Notes, as
evidenced by their execution thereof.
Section 2.02. Forms of Certificate of Authentication.
The form of the Authenticating Agent's certificate of
authentication is as follows:
This is one of the Notes referred to in the within mentioned
Indenture.
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BANKERS TRUST COMPANY, as Authenticating Agent
By:__________________________________________
Authorized Signatory
Section 2.03. General Provisions With Respect to Principal and
Interest Payments.
The Notes shall be designated generally as the "Asset-Backed
Notes, Series 1999-2" of the Issuer.
The aggregate principal amount of Notes that may be
authenticated and delivered under the Indenture is limited to $85,000,000 Class
A-1 Notes and $40,000,000 Class A-2 Notes, except for the Notes authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Notes pursuant to Sections 2.06, 2.07, or 9.06 of this Indenture. The
Notes shall consist of two classes, each having an Original Note Balance, Note
Interest Rate for the initial Interest Period and Final Maturity Date as
follows:
Note Interest
Designation Original Note Rate for the Initial Final
Balance Interest Period Maturity Date
Class A-1 $85,000,000 LIBOR + 0.35% December 25, 2030
Class A-2 $40,000,000 LIBOR + 0.38% December 25, 2030
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, 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 related Note shall be
applied first to the interest then due and payable on such Note and then to the
principal thereof. All computations of interest accrued on any Note shall be
made on the basis of the actual number of days elapsed in the related Interest
Period in a year of 360 days.
Interest on the Notes shall accrue at the related Note
Interest Rate during each Interest Period on the Outstanding 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 2.08.
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
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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 issuance 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, 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.
(a) 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
(b) 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
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successor, with the approval of the Note Insurer, or, in the absence of such
appointment, shall assume the duties of Note Registrar.
(c) 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.
(d) 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 the office or
agency of the Issuer to be maintained as provided in Section 3.02. 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.
(e) 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.
(f) 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 his attorney duly authorized in writing.
(g) 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.
(h) The Note Registrar shall not register the transfer of any
Note (other than the transfer of a Note to the nominee of a Clearing Agency)
unless the transferee has executed and delivered a certification in the form and
substance attached hereto as Exhibit E to the effect that either (i) the
transferee is not (A) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to the provisions of Title I of ERISA or (B) a plan (as defined in
Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the
"Code")) that is subject to Section 4975 of the Code (each of the foregoing, a
"Benefit Plan"), and is not acting on behalf of or investing the assets of a
Benefit Plan, or (ii) that the transferee's acquisition and continued holding of
the Note will be covered by a U.S. Department of Labor Prohibited Transaction
Class Exemption. Each transferee 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
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Note Registrar to hold 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, an
Authorized Officer of the Owner Trustee shall execute and upon its request the
Authenticating Agent shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a new Note or Notes of
the same tenor and aggregate initial principal amount bearing a number not
contemporaneously outstanding. If, after the delivery of such new Note, a bona
fide purchaser of the original Note in lieu of which such new Note was issued
presents for payment such original Note, the Issuer and the Note Registrar shall
be entitled to recover such new Note from the person to whom it was delivered or
any person taking therefrom, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expenses incurred by the Issuer, the Note Insurer 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, the Note Registrar and the Authenticating Agent)
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
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Redemption Price for any Note called for redemption, if such redemption will
result in payment of the then entire unpaid principal amount of such Note),
which shall be payable as provided in subsection (b) below of this Section 2.08.
A fee may be charged by the Indenture Trustee to a Noteholder of Definitive
Notes for any payment made by wire transfer. Any installment of interest or
principal not punctually paid or duly provided for shall be payable as soon as
funds are available to the Indenture Trustee for payment thereof, or if Section
5.07 applies, pursuant to Section 5.07.
(b) All reductions in the principal amount of a Note (or one
or more Predecessor Notes) effected by payments of installments of principal
made on any Payment Date shall be binding upon all Holders of such Note and of
any Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not such payment is noted on such Note.
The final installment of principal of each Note (including the Redemption Price
of any Note called for optional redemption, if such optional redemption will
result in payment of the entire unpaid principal amount of such Note) shall be
payable only upon presentation and surrender thereof on or after the Payment
Date therefor at the Indenture Trustee's presenting office located within the
United States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire
remaining unpaid principal amount of any Note will become due and payable on the
next Payment Date other than pursuant to a redemption pursuant to Article X, it
shall, no later than two days prior to such Payment Date, telecopy or hand
deliver to each Person in whose name a Note to be so retired is registered at
the close of business on such otherwise applicable Record Date a notice to the
effect that:
(i) the Indenture Trustee expects that funds sufficient
to pay such final installment will be available in the 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 solely on the Servicer Remittance Report delivered to the
Indenture Trustee pursuant to the Servicing Agreement, shall be delivered by the
Indenture Trustee to the Issuer or the designee of the Issuer on each Payment
Date for the Issuer's or such designees review of the information contained
therein and to the Issuer, any designee of the Issuer, the Note Insurer, the
Rating Agencies, the Underwriter and each Noteholder on each Payment Date. Such
report shall
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constitute the report required pursuant to Section 8.08. In addition, on each
Payment Date the Indenture Trustee shall forward to the Underwriter and
Bloomberg the electromagnetic tape or disk containing certain Mortgage Loan
information required to be delivered to the Indenture Trustee by the Servicer
pursuant to Section 3.01 of the Servicing Agreement; PROVIDED, HOWEVER, that the
Indenture Trustee shall not forward any such tape or disk that separately sets
forth the Premium or the Premium Percentage. None of the Indenture Trustee, the
Paying Agent or the Owner Trustee shall have any responsibility to recalculate,
verify or recompute information contained in any such tape or disk or any such
Servicer Remittance Report, except to the extent necessary to attempt to
reconciliate any errors between such tape or disk and the Indenture Trustee's
calculations as described in Section 2.08(d).
(e) If the Issuer or the Issuer's designee, believes the
Payment Date Statement contains an inaccuracy, the Issuer or the Issuer's
designee shall promptly notify the Indenture Trustee and the Indenture Trustee
and the Issuer agree to cooperate to promptly produce a revised Payment Date
Statement that they both agree is accurate.
(f) Within 90 days after the end of each calendar year, the
Indenture Trustee will be required to furnish to each person who at any time
during the calendar year was a Noteholder, if requested in writing by such
person, a statement containing the information set forth in subclauses (i) 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.
(g) The Issuer agrees to designate the Manager to review the
Payment Date Statement. The Issuer may change such designation from time to time
by written notice to the Indenture Trustee.
Section 2.09. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any
Note, the Issuer, the Indenture Trustee, the Authenticating Agent, 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
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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.
On the Closing Date, the Notes may be executed by an
Authorized Officer of the Owner Trustee and delivered to the Authenticating
Agent for authentication, and thereupon the same shall be authenticated and
delivered by the Authenticating Agent, upon Issuer Request. On or prior to the
Closing Date, the Issuer shall deliver 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 Indenture
Trustee, Authenticating Agent and the Note Insurer or upon which the
Authenticating Agent and the Note Insurer is expressly permitted to rely,
complying with the requirements of Section 11.01, reasonably satisfactory in
form and substance to the Authenticating Agent and the Note Insurer.
In rendering the opinions described 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
described 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, the Authenticating Agent and the
Note Insurer at the Closing Date shall be conclusively evidenced by the delivery
on the Closing Date of the Ambac Insurance Policy.
(d) An Officers' Certificate of the Issuer complying with the
requirements of Section 11.01 and stating that:
(i) the Issuer is not in Default under this Indenture
and the issuance of the Notes will not result in any breach of any of
the terms, conditions or provisions of, or constitute a default under,
the Trust Agreement or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by which it
is bound, or any order of any court or administrative agency entered in
any proceeding to which the
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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.
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of each of the Company Sale
Agreement, the Sponsor Sale Agreement and the Funding Co. Sale Agreement.
(g) An executed counterpart of the Guarantee.
Section 2.12. Book-Entry Notes.
(a) The notes, upon original issuance, will be issued in the
form of typewritten Notes representing the Book-Entry Notes, to be delivered to
the initial Clearing Agency, or its custodian by, or on behalf of, the Issuer.
The Book-Entry Notes shall be registered initially on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no
Beneficial Owner thereof will receive a Definitive Note representing such
Beneficial Owner's interest in such Note, except as provided in Section 2.13.
Unless and until Definitive Notes have been issued to such Beneficial Owners
pursuant to Section 2.13:
(i) the provisions of this Section shall be in full
force and effect;
(ii) the Note Registrar, the Note Insurer and the
Indenture Trustee shall be entitled to deal with the Clearing Agency
for all purposes of this Indenture (including the payment of principal
of and interest on the Notes and the giving of instructions or
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directions hereunder) as the sole holder of the Notes (subject to
Section 8.16 hereof), and shall have no obligation to the Beneficial
Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Beneficial Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between such Beneficial Owners and
the Clearing Agency and/or the Clearing Agency Participants pursuant to
the Note Depository Agreement. Unless and until Definitive Notes are
issued pursuant to Section 2.13, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Note Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from Beneficial Owners
and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes and has delivered such instructions to the Indenture Trustee.
(b) Except as provided in Section 2.06, registration of
Book-Entry Notes may not be transferred by the Note Registrar except to another
Clearing Agency that agrees to hold such Book-Entry Notes for the respective
Beneficial Owners. Beneficial Owners shall hold their respective ownership
interests in and to such Book-entry Notes through the book-entry facilities of
the Clearing Agency. Except as provided below, Beneficial Owners shall not be
entitled to Definitive Notes.
(c) All transfers by Beneficial Owners of their respective
ownership interests in the Book-Entry Notes shall be made in accordance with the
procedures established by the Clearing Agency Participant or brokerage firm
representing such Beneficial Owner. Each Clearing Agency Participant shall only
transfer the ownership interests in the Book-Entry Notes of the Beneficial
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Clearing Agency's normal procedures.
(d) The Indenture Trustee is hereby initially appointed as the
Book-Entry Custodian and hereby agrees to act as such in accordance herewith and
in accordance with the agreement that it has with the Clearing Agency
authorizing it to act as such. The Book-Entry Custodian may, and, if it is no
longer qualified to act as such, the Book-Entry Custodian shall, appoint, by a
written instrument delivered to the Issuer, the Servicer, the Note Insurer and,
if the Indenture Trustee is not the Book-Entry Custodian, the Indenture Trustee,
any other transfer agent (including the Clearing Agency or any successor
Clearing Agency) to act as Book-Entry Custodian under such conditions as the
predecessor Book-Entry Custodian and the Clearing Agency or any successor
Clearing Agency may prescribe, provided that the predecessor Book-Entry
Custodian shall not be relieved of any of its duties or responsibilities by
reason of
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any such appointment of other than the Clearing Agency. If the Indenture Trustee
resigns or is removed in accordance with the terms hereof, the successor trustee
or, if it so elects, the Clearing Agency shall immediately succeed to its
predecessor's duties as Book-Entry Custodian. The Issuer shall have the right to
inspect, and to obtain copies of, any Book-Entry Notes held by the Book-Entry
Custodian.
(e) Whenever a notice or other communication to the
Noteholders is required under this Indenture, unless and until Definitive Notes
shall have been issued to the Beneficial Owners pursuant to Section 2.13, the
Indenture Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Beneficial Owners.
(f) 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 will be terminated upon the occurrence of any of
the following:
(i) The Clearing Agency or the Issuer 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 Issuer or 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 the
Beneficial Owners of no less than 51% of the Note Balance of both
Classes of the Book-Entry Notes advise the Indenture Trustee and the
Clearing Agency in writing, through the related Clearing Agency
Participants, that the continuation of a book-entry system through the
Clearing
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Agency to the exclusion of any Definitive Notes being issued to any
person other than the Clearing Agency or its nominee is no longer in
the best interests of such Beneficial Owners.
Upon the occurrence of any event described in subsection (a)
above, the Indenture Trustee shall use its Best 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 Outstanding 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 Certificate(s)
representing the Book-Entry Notes 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, (i) all references herein
to obligations imposed upon or to be performed by the Clearing Agency shall be
deemed to be imposed upon and performed by the Indenture Trustee to the extent
applicable to such Definitive Notes, (ii) the provisions herein relating to
Definitive Notes shall be applicable and (iii) the Indenture Trustee shall
recognize the Holders of the Definitive Notes as Noteholders hereunder.
Section 2.14. Reserved.
Section 2.15. Certain Available Information.
The Indenture Trustee shall maintain at its Corporate Trust
Office and shall make available free of charge during normal business hours upon
reasonable prior written notice for review by any Holder of a Note or any Person
identified to the Indenture Trustee as a prospective transferee of a Note,
originals or copies of the following items: (A) this Indenture and any
amendments hereof entered into pursuant to Article IX hereof, (B) all monthly
reports required to be delivered to Noteholders pursuant to Section 8.08 since
the Closing Date, and all other notices, reports, statements and written
communications delivered to the Noteholders pursuant to this Indenture since the
Closing Date, (C) any and all Officers' Certificates delivered to the Indenture
Trustee by the Servicer since the Closing Date to evidence the Servicer's
determination that any P&I Advance was, or if made, would be a Nonrecoverable
P&I Advance and (D) any and all other Officers' Certificates delivered to the
Indenture Trustee since the Closing Date pursuant to this Indenture. Copies and
mailing of any and all of the foregoing items will be available from the
Indenture Trustee upon request at the expense of the person requesting the same.
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
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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, and the Indenture
Trustee, as initial Note Registrar agrees, to maintain its corporate trust
office at a location where Notes may be surrendered for registration of transfer
or exchange, and where notices and demands to or upon the Issuer in respect of
the Notes and this Indenture may be served.
The Issuer may also from time to time at its own expense
designate one or more other offices or agencies within the United States of
America where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED, HOWEVER,
any designation of an office or agency for payment of Notes shall be subject to
Section 3.03. The Issuer will give prompt written notice to the Indenture
Trustee and the Note Insurer of any such designation or rescission and of any
change in the location of any such other office or agency.
Section 3.03. Money for Note Payments to be Held in Trust.
All payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the related Note Account
pursuant to Section 8.02(c) or Section 5.07 shall be made on behalf of the
Issuer by the Paying Agent, and no amounts so withdrawn from the related Note
Account for payments of Notes shall be paid over to the Issuer under any
circumstances except as provided in this Section 3.03 or in Section 5.07 or
Section 8.02.
With respect to Definitive Notes, if the Issuer shall have a
Paying Agent that is not also the Note Registrar, such Note Registrar shall
furnish to the Paying Agent, 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 shall be appointed by Issuer Order and at
the expense of the Issuer. The Issuer
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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:
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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;
(v) if such Paying Agent is not the Indenture Trustee,
at any time during the continuance of any Default by the Issuer, 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
(vi) 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
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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), 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 it is or shall be necessary to protect
the validity and enforceability of this Indenture, the Notes, the Servicing
Agreement, the Sub-Servicing Agreement, the Insurance Agreement, the Management
Agreement, the Sponsor Sale Agreement, the Funding Co. Sale Agreement and the
Guarantee.
(b) Subject to Section 3.09(vii), the prior consent of the
Note Insurer, and receipt from the Rating Agencies of a written statement that
their ratings and shadow ratings of the Notes in effect immediately prior to
such merger or consolidation will not be qualified, reduced or withdrawn as a
result thereof, any entity into which the Issuer may be merged or with which it
may be consolidated, or any entity resulting from any merger or consolidation to
which the Issuer shall be a party, shall be the successor Issuer under this
Indenture without the execution or filing of any paper, instrument or further
act to be done on the part of the parties hereto, anything in any agreement
relating to such merger or consolidation, by which any such Issuer may seek to
retain certain powers, rights and privileges therefore obtaining for any period
of time following such merger or consolidation to the contrary notwithstanding
(other than Section 3.09(vii)).
(c) Upon any consolidation or merger of or other succession to
the Issuer in accordance with this Section 3.04, the Person formed by or
surviving such consolidation or merger (if other than the Issuer) may exercise
every right and power of, and shall have all of the obligations of, the Issuer
under this Indenture with the same effect as if such Person had been named as
the Issuer herein.
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Section 3.05. Protection of Trust Estate.
(a) The Issuer or a designee on its behalf, which the Issuer
agrees that as of the Closing Date shall be the Manager, 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 it shall have been
notified by the Indenture Trustee in writing that 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 Cap
Agreement, the Servicing Agreement, the Sub-Servicing Agreement, the
Company Sale Agreement, the Management Agreement, the Funding Co. Sale
Agreement, the Sponsor Sale Agreement or the Guarantee; 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 at the
date of the most recent Opinion of Counsel delivered pursuant to Section 3.06
(or from the jurisdiction in which it was held, or to which it is intended to be
removed, as described in the Opinion of Counsel delivered at the Closing Date
pursuant to Section 2.11(c), if no Opinion of Counsel has yet been delivered
pursuant to Section 3.06) or cause or permit ownership or the pledge of any
portion of the Trust Estate that consists of book-entry securities to be
recorded on the books of a Person located in a different jurisdiction from the
jurisdiction in which such ownership or pledge was recorded at such time unless
the Indenture Trustee shall have first received an Opinion of Counsel to the
effect that the lien and security interest created by this Indenture with
respect to such property will continue to be maintained after giving effect to
such action or actions.
Section 3.06. Opinions as to Trust Estate.
On or before April 30, 2000 and each April 30 thereof, the
Issuer or its designee, which as of the Closing Date the Issuer agrees shall be
the Manager, shall furnish to the Indenture Trustee and the Note Insurer an
Opinion of Counsel reasonably satisfactory in form and substance to the
Indenture Trustee and the Note Insurer either stating that, in the opinion of
such counsel, such action has been taken as is necessary to maintain the lien
and security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe all such action, if any, that will, in the opinion of such
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counsel, be required to be taken to maintain the lien and security interest of
this Indenture with respect to the Trust Estate until May 1st in the following
calendar year.
Section 3.07. Performance of Obligations; Servicing Agreement.
(a) The Issuer shall punctually perform and observe all of its
obligations under this Indenture 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
documents or instruments contained in any Mortgage File 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
any Mortgage File, except as expressly permitted in this Indenture, the
Servicing Agreement or such document included in the Mortgage File or other
instrument.
(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 the terms hereof or thereof;
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(iv) incur, issue, assume or otherwise become liable
for any 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 encumbrance permitted under the Sponsor Sale
Agreement) 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.
Not later than 90 days following the end of the fiscal year of
the Issuer beginning in 1999, the Issuer shall deliver to the Indenture Trustee,
the Note Insurer and the Underwriter a written statement, signed by an
Authorized Officer of the Owner Trustee, stating as to the signer thereof, that:
(i) a certificate, opinion or letter of a
Certificateholder, the Sponsor and the Servicer as contemplated by
Section 11.01(c) regarding the fulfillment by the Issuer during such
year of its obligations under this Indenture has been received by the
Issuer; and
(ii) to the best of such Authorized Officer's
knowledge, based solely on such certificate, opinion or letter, 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.
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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, 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, the Servicing Agreement, the Insurance Agreement or the
Trust Agreement and the Issuer will not, directly or indirectly, make or cause
to be made payments to or distributions from the Note Account except in
accordance with this Indenture.
Section 3.12. Treatment of Notes as Debt for Tax Purposes.
The Issuer shall treat the Notes as indebtedness for all
federal and state tax purposes.
Section 3.13. Notice of Events of Default.
The Issuer shall give the Indenture Trustee, the Note Insurer,
the Rating Agencies and the Underwriter prompt written notice of each Event of
Default hereunder, each default on the part of the Servicer of its obligations
under the Servicing Agreement, each default on the part of the Company of its
obligations under the Company Sale Agreement, each default on the part of
Funding Co. of its obligations under the Funding Co. Sale Agreement, and each
default on the part of the Sponsor of its obligations under the Sponsor 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,
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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 (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 Servicer, the Majority Certificateholder, or the Note
Insurer and the Servicer, the Majority Certificateholder, or
the Note Insurer 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 later of (a) eighteen months after payment in
full of all outstanding obligations under the Notes, and (b) the date
on which the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer (including, without limitation, any
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 party redeeming the Notes, 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.
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Section 4.02. Application of Trust Money.
All money deposited with the Indenture Trustee pursuant to
Sections 3.03 and 4.01 shall be held in trust and applied by it, in accordance
with the provisions of the Notes and this Indenture, to the payment, either
directly or through any Paying Agent, as the Indenture Trustee may determine, to
the Persons entitled thereto, of the principal and interest for whose payment
such money has been deposited with the Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event of Default.
"Event of Default", wherever used herein, means, with respect
to each Class of 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):
(a) if the Issuer shall default in the payment on any Payment
Date of any payment of interest on such Class of Notes at the respective Note
Formula Rate or Monthly Principal on any Note in such Class or fail to pay the
Notes in such Class 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);
(b) if, with respect to the related Class of Notes, 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;
(c) if, with respect to the related Class of Notes, the Issuer
shall breach, or default in the due observance or performance of, any other of
its covenants in this Indenture, the Servicing Agreement, the Sponsor Sale
Agreement or the Insurance Agreement, 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 the related Class, 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;
(d) 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, the Servicing Agreement, the Sponsor
Sale Agreement or the Insurance Agreement, 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 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 related Class of
the Outstanding Notes, with the prior written consent of the Note Insurer,
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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;
(e) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Issuer in an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or
(f) 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.
(g) the occurrence of any event described in (a) - (f) above
with respect to the other Class.
Section 5.02. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default occurs and is continuing, then and in
every such case, but with the consent of the Note Insurer in the absence of a
Note Insurer Default, the Indenture Trustee may, and on request of the Holders
of Notes representing not less than 50% of the Note Balance of the Outstanding
Notes of the related Class, shall, declare such Notes to be immediately due and
payable by a notice in writing to the Issuer (and to the Indenture Trustee if
given by Noteholders of the related Class of Notes), 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 related Class of 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
the related Class, 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:
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(a) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(i) all payments of principal of, and interest on, all
the related 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
(ii) 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
(b) all Events of Default, other than the nonpayment of the
principal of the related 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 in the absence of a Note
Insurer Default, proceed to protect and enforce its rights and the rights of the
Noteholders of the related Class of Notes 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 of the related Class of Notes 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 Mortgage Loans in the Group related to the
Class of 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 such Class of Notes may be
sought or obtained by the Indenture Trustee or any Noteholder of the related
Class of Notes 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 of the related Class 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 in the absence of a Note
Insurer Default or the Holders of the related Class of Notes representing
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not less than 50% of the Note Balance of the Outstanding Notes of the related
Class with the prior written consent of the Note Insurer (subject to Section
5.17, to the extent applicable) may, for the benefit of the Noteholders of the
related Class of Notes and the Note Insurer, do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then payable on such Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer moneys
adjudged due, subject in all cases to the provisions of Sections 3.01 and 5.03;
(b) in accordance with Section 5.17, sell the Trust Estate or
any portion thereof or rights or interest therein, at one or more public or
private Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee or the Holders of the Notes of the
related Class of Notes and the Note Insurer hereunder; and
(e) refrain from selling the Mortgage Loans in the Group
related to such Class of Notes 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 such Class of Notes shall then be
due and payable as provided in this Indenture or in the related Class of Notes
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, or at the
direction of, the Note Insurer in the absence of a Note Insurer Default, be
entitled and empowered, by intervention in such Proceeding or otherwise to:
(a) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of such 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 of the related Class of Notes and the Note
Insurer allowed in such Proceeding, and
(b) 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 of the related Class
of Notes and the Note Insurer to make such payments to the
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Indenture Trustee and, in the event that the Indenture Trustee shall consent to
the making of such payments directly to the Noteholders of the related Class of
Notes 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 related Class of 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 of the related Class
of Notes or the Note Insurer in any such Proceeding.
Section 5.06. Indenture Trustee May Enforce Claims Without
Possession of Notes.
All rights of action and claims under this Indenture or any of
the Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Indenture Trustee at
the direction of the Note Insurer shall be brought in its own name as trustee of
an express trust, and any recovery of judgment shall be for the ratable benefit
of the Holders of the related Class of 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 (a) of Section 5.07.
Section 5.07. Application of Money Collected.
If the Class of Notes has been declared due and payable
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, any money collected by the Indenture Trustee with
respect to each Class of Notes pursuant to this Article or otherwise and any
other monies that may then be held or thereafter received by the Indenture
Trustee as security for such Class of Notes shall be applied in the following
order, at the date or dates fixed by the Indenture Trustee and, in case of the
payment of the entire amount due on account of principal of, and interest on,
such Class of Notes, upon presentation and surrender thereof:
(a) first, to the Indenture Trustee, any unpaid Indenture
Trustee's Fees then due with respect to the related Group 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;
(b) second, to the Servicer, any amounts required to pay the
Servicer for any unpaid Servicing Fees with respect to the related Group then
due and to reimburse the Servicer for P&I Advances previously made by, and not
previously reimbursed or retained by, the Servicer and, upon the final
liquidation of the related Mortgage Loans or the final liquidation of the Trust
Estate, Servicing Advances with respect to the related Group previously made by,
and not previously reimbursed or retained by, the Servicer;
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(c) 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;
(d) fourth, to the payment of the Note Balance of the
Outstanding Notes of such Class, up to the amount of their respective
Outstanding Note Balances, ratably, without preference or priority of any kind;
(e) fifth, such amounts set forth in (c) and (d) above with
respect to the other Class.
(f) sixth, to the payment to the Note Insurer, as subrogee to
the rights of the Noteholders, (A) the aggregate amount necessary to reimburse
the Note Insurer for any unreimbursed Insured Payments for such Class paid by
the Note Insurer on prior Payment Dates, together with interest thereon at the
"Late Payment Rate" specified in the Insurance Agreement from the date such
Insured Payments were paid by the Note Insurer to such Payment Date, (B) the
amount of any unpaid Premium for such Class then due, together with interest
thereon at the "Late Payment Rate" specified in the Insurance Agreement from the
date such amounts were due, (C) any other amounts due and owing to the Note
Insurer under the Insurance Agreement and (D) such amounts set forth in (A), (B)
and (C) above with respect to the other Class;
(g) seventh, to the Class A-1 or Class A-2 Noteholders, any
amounts due them as a result of Prepayment Interest Shortfalls and shortfalls in
interest resulting from application of the Relief Act with respect to Mortgage
Loans in the related Group;
(h) eighth, to the payment of the entire outstanding Available
Funds Cap Rate Carry Forward Amount then due and unpaid upon the Outstanding
Notes of the related Class through the day preceding the date on which such
payment is made; and
(i) ninth, to the Owner Trustee and the Issuer, certain
amounts reimbursable to them with respect to the related Class pursuant to the
Indenture or the Trust Agreement;
(j) tenth, to the payment of the remainder, if any, to the
Issuer or any other Person legally entitled thereto.
Section 5.08. Limitation on Suits.
No Holder of a Class of 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:
(a) such Holder has previously given written notice to the
Indenture Trustee and the Note Insurer of a continuing Event of Default;
(b) the Holders of Notes representing not less than 25% of the
Note Balance of the Outstanding Notes of the related Class 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;
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(c) 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;
(d) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute any such
Proceeding;
(e) 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
the related Class; and
(f) the consent of the Note Insurer shall have been obtained;
it being understood and intended that no one or more Holders of a Class
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 such Class 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 the related Class of Notes.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of a
Class of Notes, each representing less than 50% of the Note Balances of the
Outstanding Notes of the related Class, the Indenture Trustee in its sole
discretion may determine what action, if any, shall be taken notwithstanding any
other provision herein to the contrary.
Section 5.09. Unconditional Right 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 installment 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.
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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 in the absence of a Note
Insurer Default), as the case may be.
Section 5.13. Control by Noteholders.
Subject to Section 8.16 hereof, the Holders of Notes
representing more than 50% of the Note Balance of the Outstanding Notes of a
Class of Notes on the applicable Record Date shall, with the consent of the Note
Insurer in the absence of a Note Insurer Default, have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Indenture Trustee or exercising any trust or power conferred on the
Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture;
(b) 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) (i),
unless Section 5.17(b) (ii) is applicable; and
(c) 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.
Subject to Section 8.16 hereof, the Holders of Notes
representing more than 50% of the Note Balance of the Outstanding Notes of a
Class of Notes on the applicable Record Date may on behalf of the Holders of all
the Notes, and with the consent of the Note Insurer in the absence of a Note
Insurer Default, waive any past Default hereunder and its consequences, except a
Default:
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(a) in the payment of principal or any installment of interest
on any Note; or
(b) 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 of the related Class of Notes,
or to any suit instituted by any Noteholder of such Class of for the enforcement
of the payment of any Required Payment Amount on any Note on or after the
related Payment Date or for the enforcement of the payment of principal of any
Note on or after the 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.
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(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: (i) the Holders of Notes representing not less than
50% of the Note Balance of the Notes then Outstanding of the related Class of
Notes consent to or direct the Indenture Trustee to make such Sale; or (ii) 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.
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 of the related
Class of 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 clause (ii) of subsection (b)
of this Section 5.17 has not been established 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
reject all bids.
(d) In connection with a Sale of all or any portion of the
Trust Estate:
(i) 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;
(ii) 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;
(iii) the Indenture Trustee shall execute and deliver
an appropriate instrument of conveyance transferring its interest in
any portion of the Trust Estate related to the Class of Notes in
connection with a Sale thereof;
(iv) 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
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Trust Estate related to the Class of Notes in connection with a Sale
thereof, and to take all action necessary to effect such Sale; and
(v) 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 granted as security for any other
securities 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 securities 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:
(i) 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
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(ii) 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:
(i) This paragraph does not limit the effect of
subsection (b) of this Section 6.01;
(ii) The Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless
it is proved that the Indenture Trustee was negligent in ascertaining
the pertinent facts; and
(iii) The Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.13 or
5.17 or exercising any trust or power conferred upon the Indenture
Trustee under this Indenture.
(d) 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(b), 5.01(e) or 5.01(f) or any Default described in
Section 5.01(c) or 5.01(d) 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, or to institute, conduct or defend any
litigation hereunder or in relation hereto at the request, order or direction of
any of the Noteholders pursuant to the provisions of this Indenture, or to make
any investigation into the facts or matters stated in any resolution, note,
statement, instrument, opinion, report, notice, request, order, approval, bond
or other paper 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
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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 8.15 shall at all times retain possession of the Mortgage Files in
the State of New York or the State of Illinois, except for those Mortgage Files
or portions thereof released to the Servicer pursuant to this Indenture or the
Servicing Agreement.
(i) The Indenture Trustee shall have no duty (A) to see to any
recording, filing, or depositing of this Indenture or any agreement referred to
herein or any financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such recording or filing
or depositing or to any rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, any part of the Trust Fund
other than from funds available in the Note Accounts, (D) to confirm or verify
the contents of any reports or certificates of the Servicer delivered to the
Indenture Trustee pursuant to this Indenture believed by the Indenture Trustee
to be genuine and to have been signed or presented by the proper party or
parties.
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 Underwriter 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. Concurrently
with the mailing of any such notice to the Holders of the Notes, the Indenture
Trustee shall transmit by mail a copy of such notice to the Rating Agencies.
Section 6.03. Rights of Indenture Trustee.
(a) Except as otherwise provided in Section 6.01, the
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Indenture Trustee need
not investigate any fact or matter stated in any such document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the 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.
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(e) The right of the Indenture Trustee to perform any
discretionary act enumerated in this Indenture shall not be construed as a duty,
and the Indenture Trustee shall not be answerable for other than its negligence
or willful misconduct in the performance of such act.
(f) The Indenture Trustee shall not be required to give any
bond or surety in respect of the execution of the Trust Fund created hereby or
the powers granted hereunder.
(g) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, attorneys or custodians, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent,
attorney or custodian appointed by the Indenture Trustee with due care.
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 an 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).
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Section 6.08. Indenture Trustee's Capital and Surplus.
The Indenture Trustee shall at all times be a corporation or
banking association organized and doing business under the laws of the United
States or any state thereof, be authorized under such laws to exercise corporate
trust powers, be subject to supervision or examination by federal or state
authorities, and have a combined capital and surplus of at least $50,000,000 or
shall be a member of a bank holding company system, the aggregate combined
capital and surplus of which is at least $50,000,000. 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, 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, each Rating Agency, and
the Servicer. 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. Any successor Indenture Trustee must be approved by the Note
Insurer and the Rating Agencies.
(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 of both
Classes, delivered to the Indenture Trustee and to the Issuer.
(d) If at any time:
(i) 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
(ii) 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
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Trustee any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Indenture; PROVIDED,
HOWEVER, if the Issuer and the Note Insurer do not join in such
appointment within fifteen (15) days after the receipt by it of a
request to do so, or in case an Event of Default has occurred and is
continuing, the Indenture Trustee may petition a court of competent
jurisdiction to make such appointment, or (ii) subject to Section 5.15,
and, in the case of a conflicting interest as described in clause (1)
above, unless the Indenture Trustee's duty to resign has been stayed as
provided in TIA Section 310(b), the Note Insurer or any Noteholder who
has been a bona fide Holder of a Note for at least six months may, on
behalf of himself and all others similarly situated, with the consent
of the Note Insurer, petition any court of competent jurisdiction for
the removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Issuer, by an Issuer Order, shall promptly
appoint a successor Indenture Trustee acceptable to the Note Insurer and the
Rating Agencies. 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 of both Classes 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
(subject to approval by the Rating Agencies) 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 and the Rating Agencies, 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
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deliver any and all instruments for more fully and certainly vesting in and
confirming to such successor Indenture Trustee all such rights, powers and
trusts.
No successor Indenture Trustee shall accept its appointment
unless (i) at the time of such acceptance such successor Indenture Trustee shall
be qualified and eligible under this Article and (ii) the Note Insurer and the
Rating Agencies have approved such appointment.
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 311(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
requirements of this Indenture or of any jurisdiction in which any of the Trust
Estate may at the time be located, the Indenture Trustee shall have power to
appoint, and, upon the written request of the Indenture Trustee, of the Note
Insurer or of the Holders of Notes representing more than 50% of the Note
Balance of the Outstanding Notes of both Classes with respect to which a
co-trustee or separate trustee is being appointed with the consent of the Note
Insurer, the Issuer shall for such purpose join 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.
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Should any written instrument from the Issuer be required by
any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Issuer.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms:
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) Any Act of Noteholders delivered to the Indenture Trustee
shall be deemed to have been delivered to each such co-trustee and separate
trustee.
(f) Any separate trustee or co-trustee may, at any time,
constitute the Indenture Trustee, its agent or attorney-in-fact, with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Indenture on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Indenture Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
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Section 6.14. Authenticating Agents.
Issuer shall appoint an Authenticating Agent with power to act
on its behalf and subject to its direction in the authentication and delivery of
the Notes designated for such authentication by the Issuer and containing
provisions therein for such authentication (or with respect to which the Issuer
has made other arrangements, satisfactory to the Indenture Trustee and such
Authenticating Agent, for notation on the Notes of the authority of an
Authenticating Agent appointed after the initial authentication and delivery of
such Notes) in connection with transfers and exchanges under Section 2.06, as
fully to all intents and purposes as though the Authenticating Agent had been
expressly authorized by that Section to authenticate and deliver Notes. For all
purposes of this Indenture (other than in connection with the authentication and
delivery of Notes pursuant to Sections 2.05 and 2.11 in connection with their
initial issuance), the authentication and delivery of Notes by the
Authenticating Agent pursuant to this Section shall be deemed to be the
authentication and delivery of Notes "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 for the Indenture Trustee hereunder and has an
office for presentation of Notes in the United States of America. The Indenture
Trustee shall initially be the Authenticating Agent and shall be the Note
Registrar as provided in Section 2.06. The office from which the Indenture
Trustee shall perform its duties as Note Registrar and Authenticating Agent
shall be at the Indenture Trustee's offices located at 123 Washington Street,
New York, New York 10006. 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
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Indenture Trustee shall be entitled to be reimbursed for such payments pursuant
to Section 8.02. 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) The Indenture Trustee shall cause a Custodian on its
behalf to review, for the benefit of the Noteholders and the Note Insurer, 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 deliver, or
cause to be delivered, to the Issuer, Meritage, the Company, Funding Co., the
Sponsor, the Note Insurer and the Servicer on the Closing Date, an Initial
Certification with respect to each Mortgage Loan covered thereby to the effect
that, except as specifically noted on a schedule of exceptions thereto, (A) all
documents required to be contained in the related 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 related
Mortgage File.
(b) On each of (i) the 45th day after the Closing Date and
(ii) the 270th day after the Closing Date, the Indenture Trustee shall deliver,
or cause a Custodian on its behalf to deliver, to the Issuer, Meritage, the
Sponsor, the Company, Funding Co., the Note Insurer and the Servicer, on the
date referred to in clause (i) of this subsection an Interim Certification, and
on the date referred to in clause (ii) of this subsection (b), a Final
Certification, 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 related 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 related Mortgage File.
(c) It is understood that before making the Initial
Certification, the Interim Certifications and the Final Certification, the
Indenture Trustee, or a Custodian on its behalf, shall examine the related
Mortgage File to confirm that:
(i) 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;
(ii) except for the endorsement to the Indenture
Trustee, 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;
(iii) the principal amount of the indebtedness secured
by the related Mortgage is identical to the original principal amount
of the related Mortgage Note;
(iv) the Assignment of the related Mortgage from
Meritage to the Indenture Trustee is in the form required pursuant to
Section 4(b)(iv) of the Company
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Sale Agreement, and bears an original signature of Meritage and any
other necessary party (or signatures purporting to be that of Meritage
and any such other party) or, if photocopies are permitted, that such
copies bear a reproduction of such signature or signatures;
(v) 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;
(vi) 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
(vii) 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 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 (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);
PROVIDED THAT, with respect to the Initial Certification, the scope of such
review shall only include those items described in clauses (i) (solely with
respect to each Mortgage Note), (iv) and (v) above.
(d) In giving the Initial Certification, the Interim
Certifications and the Final Certification, the Indenture Trustee shall be under
no duty or obligation (i) 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 (ii) 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.
(e) No later than the fifth Business Day of each third month,
commencing in March, 2000, the Indenture Trustee shall deliver, or cause a
Custodian on its behalf to deliver, to the Company, Funding Co., Meritage, 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
(i) 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 (ii) an
original recorded Assignment of the Mortgage to the Indenture Trustee, if
required to be recorded pursuant to the
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Company Sale Agreement and the Servicing Agreement, 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.
(a) On each Payment Date, the Indenture Trustee shall be
entitled to receive its Indenture Trustee Fee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of any express
trust) from amounts deposited into the Note Accounts on the related Servicer
Remittance Date. The Indenture Trustee Fee constitutes compensation for all
services rendered by the Indenture Trustee in the exercise and performance of
any of the powers and duties hereunder. The Indenture Trustee does not and will
not have any lien on the Trust Estate for payment of any such fees or expenses.
(b) This Section 6.16 shall survive the termination of this
Indenture or the resignation or removal of the Indenture Trustee as regards
rights accrued prior to such resignation or removal.
ARTICLE VII
NOTEHOLDERS' LISTS
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) semi-annually, 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.
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(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
Section 7.03. Reports by Indenture Trustee.
(a) Within 60 days after December 31 of each year (the
"reporting date"), commencing with the year after the issuance of the Notes, (i)
the Indenture Trustee shall, if required by TIA Section 313(a), mail to all
Holders a brief report dated as of such reporting date that complies with TIA
Section 313(a); (ii) the Indenture Trustee shall, to the extent not set forth in
the Payment Date Statement pursuant to Section 2.08(d), also mail to Holders of
Notes and the Note Insurer with respect to which it has made advances, any
reports with respect to such advances that are required by TIA Section
313(b)(2); and, the Indenture Trustee shall also mail to Holders of Notes and
the Note Insurer any reports required by TIA Section 313(b)(1). For purposes of
the information required to be included in any such reports pursuant to TIA
Sections 313(a)(2), 313(b)(1) (if applicable), or 313(b)(2), the principal
amount of indenture securities outstanding on the date as of which such
information is provided shall be the Note Balance of the then Outstanding Notes
covered by the report.
(b) A copy of each report required under this Section 7.03
shall, at the time of such transmission to Holders of Notes and the Note Insurer
be filed by the Indenture Trustee with the Commission and with each securities
exchange upon which the Notes are listed. The Issuer will notify the Indenture
Trustee when the Notes are listed on any securities exchange.
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.
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If the Indenture Trustee shall not have received the
Remittable Funds by close of business on any related Servicer Remittance 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 to the Servicer of the Servicer's
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 Servicer Remittance
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 to remit the
Remittable Funds on any Servicer Remittance 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 V of the Servicing
Agreement. In addition, if a default occurs in any other performance required
under the Servicing Agreement, the Indenture Trustee may, with the consent of
the Note Insurer, 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 of both Classes 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. Establishment of Accounts;
(a) The Issuer hereby directs the Indenture Trustee to
establish for each Class of Notes, 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 related Note Account
pursuant to Section 8.04, (iv) all amounts received pursuant to Section 8.05,
(v) amounts withdrawn from the Reserve Account and deposited into such Note
Account in accordance with Section 8.18 hereof and (vi) all other amounts
received for deposit in the related Note Account, including the payment of any
Purchase Price or Cap Payment received by the Indenture Trustee. The Indenture
Trustee shall allocate any Cap Payment between the two Note Accounts based on
the related outstanding Note Balance of the Class A-1 Notes and Class A-2 Notes
as of the immediately preceding Payment Date. All amounts that are deposited
from time to time in the related Note Account are subject to
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withdrawal by the Indenture Trustee for the purposes set forth in subsections
(c) and (e) of this Section 8.02. All funds withdrawn from the related 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 Account (other than amounts
received pursuant to Section 8.05) 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 Account shall be for the benefit of the Issuer and on each
Payment Date, any such amounts may be released from the Note Account and paid to
the Issuer for deposit in the Certificate Distribution Account established and
maintained pursuant to the Trust Agreement. Any loss resulting from such
investment of moneys deposited in a Note Account shall be reimbursed immediately
as incurred to such Note Account by the Issuer. Subject to Section 6.01 and the
preceding sentence, the Issuer shall not in any way be held liable by reason of
any insufficiency in such Note Account.
(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
Premium, the Indenture Trustee Fee for the related Group, and, provided notice
is given to the Indenture Trustee no later than the 4th Business Day prior to
the Payment Date, amounts required to pay the Servicer any unpaid related
Servicing Fees then due and to reimburse the Servicer for related P&I Advances
and Servicing Advances 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 the related Note Account (unless otherwise specified herein),
in the amounts required, for application on such Payment Date as follows:
(i) first, to the payment to the Note Insurer, as
subrogee to the rights of the Noteholders, out of Total Available Funds
for such Class, the aggregate amount necessary to reimburse the Note
Insurer for any unreimbursed payments of Insured Payments and unpaid
Premiums (together with interest thereon at the Late Payment Rate
specified in the Insurance Agreement); PROVIDED, HOWEVER, that the Note
Insurer shall be paid unreimbursed Insured Payments and unpaid related
Premiums (and any interest thereon) only after each Class of
Noteholders has received Note Interest and any Overcollateralization
Deficit with respect to such Payment Date;
(ii) second, to the Class A-1 or Class A-2 Noteholders,
the Note Interest for such Class out of amounts then on deposit in the
related Note Account, with respect to such Payment Date;
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(iii) third, to the Class A-1 or Class A-2 Noteholders,
out of amounts then on deposit in the Note Account for such Class, the
amount of applicable Monthly Principal for the Notes of such Class with
respect to such Payment Date, to reduce the related Note Balance until
such Note Balance is reduced to zero;
(iv) fourth, to the Noteholders of the other Class, out
of amounts then on deposit in the Note Account not related to the Class
to be paid, any Note Interest for such other Class remaining unpaid
after application of clause (ii) above;
(v) fifth, to the Class A-1 or Class A-2 Noteholders,
out of amounts then on deposit in the Note Account for such Class, an
amount equal to any Overcollateralization Deficit for such Class
(computed as if the Monthly Principal for such Class on such Payment
Date had been paid) to reduce the related Note Balance of such Class
until such Note Balance is reduced to zero;
(vi) sixth, to the Class A-1 or Class A-2 Noteholders,
out of amounts then on deposit in the other Note Account, an amount
equal to any Overcollateralization Deficit for such Class (computed as
if clauses (i) through (v) above for such Class on such Payment Date
had been paid) to reduce the related Note Balance of such Class until
such Note Balance is reduced to zero;
(vii) seventh, to the Class A-1 or Class A-2
Noteholders, out of amounts then on deposit in the Note Account for
such Class, to reduce the Note Balance for such Class, the amount, if
any, equal to the lesser of (A) Excess Cash with respect to the related
Group for such Payment Date, and (B) the lesser of (1) the amount
necessary for the Overcollateralization Amount for such Class to equal
the Required Overcollateralization Amount for such Class on such
Payment Date (after paying the Monthly Principal to the related Class
for such Payment Date) and (2) the amount necessary to reduce the
related Note Balance to zero:
(viii) eighth, to the Note Insurer, any amounts due and
owing under the Insurance Agreement that are not described in clause
(i) above;
(ix) ninth, to the Reserve Account, in the event that
the Overcollateralization Amount with respect to Class A-1 or Class A-2
is less than the Required Overcollateralization Amount for such Class,
out of amounts on deposit in the Note Account related to the other
Class, to the extent of any such shortfall;
(x) tenth, to the Class A-1 or Class A-2 Noteholders,
the Available Funds Cap Carry Forward Amount related to such Class for
such Payment Date; and
(xi) eleventh, to the Class A-1 or Class A-2
Noteholders, any amounts due them as a result of Prepayment Interest
Shortfalls and shortfalls in interest resulting from application of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the
"Relief Act") with respect to Mortgage Loans in the related Group;
(xii) twelfth, to the Class A-1 or Class A-2
Noteholders, out of amounts then on deposit on the other Note Account,
an amount equal to any remaining shortfall in
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the amounts described in clauses (ix) and (x) preceding, in that order,
with respect to such Class;
(xiii) thirteenth, to the Owner Trustee, the Servicer
and the Issuer, in order of that priority, certain amounts reimbursable
to them with respect to the related Group pursuant to the Indenture,
the Trust Agreement, or the Servicing Agreement.
(d) Reserved.
(e) 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 shall have made, or, in accordance with Section 3.03, set aside from
amounts in the Note Account an amount sufficient to make, the payments required
to be made as set forth in Section 8.02(c) as indicated in such Payment Date
Statement, the Available Funds with respect to the current Payment Date, if any,
remaining in the related Note Account, after application thereof in accordance
Section 8.02(c)(i) - (xii), shall be withdrawn from the related 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 related Certificate holders.
(f) 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.
(g) 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
on each Servicer Remittance Date the Indenture Trustee shall release any such
amounts from the Collection Account to the Servicer.
Section 8.03. Reserved.
Section 8.04. Reserved.
Section 8.05. Claims Against the Ambac Insurance Policy.
(a) 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
related 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 Ambac 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
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thereof. The Indenture Trustee hereby agrees on behalf of each Noteholder (and
each Noteholder and Beneficial Owner, by acceptance of a Note or a beneficial
interest in a Note agrees) 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.
(i) 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, relating to a Preference Amount in respect of any payment
made on the Notes. Each Noteholder that pays any amount in respect of 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 Ambac Insurance
Policy. Each Noteholder, by its purchase of Notes, and the Indenture
Trustee hereby agree that, the Note Insurer (so long as no Note Insurer
Default exists) may at any time during the continuation of any
proceeding relating to a Preference Amount direct all matters relating
to such Preference Amount, including, without limitation, (i) the
direction of any appeal of any order relating to such Preference Amount
and (ii) the posting of any surety, supersedes or performance bond
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 with respect to 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.
(ii) Each Noteholder, by its purchase of Notes, and the
Indenture Trustee hereby agree that, unless an Note Insurer Default
exists and is continuing, the Note Insurer shall have the right to
direct all matters relating to the Notes in any proceeding in a
bankruptcy of the Issuer, including without limitation any proceeding
relating to a Preference Amount and the posting of any surety or bond
pending any such appeal.
(iii) With respect to a Preference Amount, the
Indenture Trustee shall be responsible for procuring and delivering the
items set forth in the Ambac Insurance Policy to the Note Insurer.
(b) Unless a Note Insurer Default exists and is continuing,
the Indenture Trustee shall cooperate at the Note Insurer's expense 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 and the Note Insurer shall reimburse the Indenture Trustee for all costs
incurred by its cooperation with such request.
(c) The Indenture Trustee shall surrender the Ambac Insurance
Policy to the Note Insurer for cancellation upon the expiration of the term of
the Ambac Insurance Policy as provided in the Ambac Insurance Policy.
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(d) With respect to any Payment Date on which an Insured
Payment is required to be made, the Indenture Trustee shall deliver to the Note
Insurer a Notice of Claim by no later than noon on the third Business Day prior
to such Payment Date in the manner set forth in the Ambac Insurance Policy.
(e) The Issuer hereby directs the Indenture Trustee to
establish one or more accounts that shall collectively be the "Policy Payments
Account", on or before the Closing Date. Upon receipt of an Insured Payment from
the Note Insurer, the Indenture Trustee shall promptly deposit such Insured
Payment in the Policy Payments Account. All amounts on deposit in the Policy
Payments Account shall remain uninvested. On each Payment Date, the Indenture
Trustee shall (i) transfer an amount equal to the Insured Payment with respect
to such Payment Date to the Note Account and (ii) return any money in the Policy
Payments Account which does not constitute on Insured Payment to the Note
Insurer. The Indenture Trustee shall distribute on each Payment Date, to the
Noteholders, the Insured Payment for such Payment Date from the Note Account in
accordance with the priorities set forth in Section 8.02.
Section 8.06. General Provisions Regarding the Note Account
and Mortgage Loans.
(a) Each Note Account shall relate solely to the related Class
of Notes and to the related Group of Mortgage Loans, Permitted Investments and
other property securing such Notes. Funds and other property in each Note
Account shall not be commingled with any other moneys or property of the Issuer
or any Affiliate thereof. Notwithstanding the foregoing, the Indenture Trustee
may hold any funds or other property received or held by it as part of a Note
Account in collective accounts maintained by it in the normal course of its
business and containing funds or property held by it for other Persons (which
may include the Issuer or an Affiliate), provided that such accounts are under
the sole control of the Indenture Trustee and the Indenture Trustee maintains
adequate records indicating the ownership of all such funds or property and the
portions thereof held for credit to the Note Account.
(b) If any amounts are needed for payment from the 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 the 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 Account. 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 Account, 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
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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 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. The cost of
obtaining such Opinion of Counsel shall not be borne by the Indenture Trustee.
Section 8.07. Releases of Defective Mortgage Loans.
-------------------------------------
(a) In the event a Responsible Officer of the Indenture
Trustee has actual knowledge, or written notice 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), of any materially
defective document in, or that a document is missing from (and never constituted
part of) a Mortgage File, or of the breach by Funding Co. of any representation,
warranty or covenant under the Funding Co. Sale Agreement, the breach by the
Sponsor of any representation, warranty or covenant under the Sponsor Sale
Agreement or the breach by the Company of any representation, warranty or
covenant under the Company Sale Agreement, in respect of any Mortgage Loan which
materially adversely affects the value of such Mortgage Loan or the interest
therein of the Noteholders of the related Class of Notes or the Note Insurer,
the Indenture Trustee shall promptly notify Meritage, the Company, Funding Co.,
the Sponsor, the Servicer and the Note Insurer and direct the party breaching
such representation, warranty or covenant to either (i) within 30 days after
Funding Co., the Company, the Sponsor, or Meritage (each a "Transferor")
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 30-day period
by depositing to the related Note Account an amount equal to the Purchase Price,
plus the amount of any related Realized Loss resulting from a Deficiency
Valuation, for such Mortgage Loan or (iii) substitute a Qualified Replacement
Mortgage Loan for such Defective Mortgage Loan and deposit any Purchase Price,
plus the amount of any Realized Loss resulting from a Deficiency Valuation,
required to be paid in connection with such substitution pursuant to Section 7
of the Funding Co. Sale Agreement, Section 7 of the Sponsor Sale Agreement or
Section 7 of the Company Sale Agreement. Upon any purchase of or substitution
for a Defective Mortgage Loan by either Funding Co., the Sponsor, the Company,
or Meritage as set forth above, the Indenture Trustee shall deliver or cause the
Custodian to deliver, the Mortgage File relating to such Defective Mortgage Loan
to Funding Co., the Sponsor, the Company or Meritage, as the case may be, 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 Funding Co.,
the Sponsor, the Company, or Meritage, as the case may be, from the lien of this
Indenture.
(b) Upon substitution of a Qualified Replacement Mortgage
Loan, the Indenture Trustee or a Custodian on its behalf, shall acknowledge
receipt of such Qualified Replacement Mortgage Loan or Loans and, (i) within ten
Business Days thereafter, review such documents as specified in Section 6.15(c)
and deliver to the Issuer, Meritage, the Company, Funding Co., the Sponsor, the
Note Insurer and the Servicer a certification substantially in the form of the
Initial Certification described in Section 6.15(a) with respect to such
Qualified Replacement Mortgage Loan or Loans and, (ii) within 270 days after
such substitution, review such documents as specified in Section 6.15(c) and
deliver to the parties set forth in clause (i) a
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certification substantially in the form of the Final Certification described in
Section 6.15(b) with respect to such Qualified Replacement Mortgage Loan or
Loans.
(c) Monthly Payments due with respect to Qualified Replacement
Mortgage Loans in the month of substitution shall be retained by the Transferor.
For the month of substitution, the Indenture Trustee on behalf of the
Noteholders and the Note Insurer shall be entitled to receive the Monthly
Payment due on such Deleted Mortgage Loan, and the Transferor shall thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Mortgage Loan. Upon such substitution, such Qualified Replacement
Mortgage Loan or Loans shall be subject in all respects to the terms of this
Indenture, including, all applicable representations and warranties included
herein in each case as of the date of substitution.
Section 8.08. Reports by Indenture Trustee to Noteholders;
Access to Certain Information.
On each Payment Date, the Indenture Trustee shall deliver the
written report required by Section 2.08(d) to Noteholders of record as of the
related Record Date (including the Clearing Agency, if any) and the Note
Insurer.
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, (d) any statements of
compliance delivered to the Indenture Trustee since the Closing Date as required
under the Servicing Agreement, (e) any Collection Account report statements
delivered to the Indenture Trustee as required under the Servicing Agreement and
(f) any Accountants' servicing reports delivered to the Indenture Trustee since
the Closing Date as required under the Servicing Agreement. Copies of any and
all of the foregoing items will be available from the Indenture Trustee upon
request; however, the Indenture Trustee will be permitted to require payment of
a sum sufficient to cover the reasonable costs and expenses of providing such
copies and shall not be required to provide such copies without reasonable
assurances that such sum will be paid.
Section 8.09. Trust Estate Mortgage Files.
(a) The Indenture Trustee shall release, or cause the
Custodian to release Mortgage Files or portions thereof to the Servicer on the
terms specified in the Servicing Agreement.
(b) The Indenture Trustee shall, at such time as there are no
Notes outstanding, release all of the Trust Estate to the Issuer when all of the
conditions of Section 4.01 have been satisfied.
Section 8.10. Amendment to Servicing Agreement.
The Indenture Trustee may, without the consent of any Holder,
enter into or consent to any amendment or supplement to the Servicing Agreement
for the purpose of
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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 Ambac Insurance Policy)
would not be adversely affected by such supplement or amendment or (ii) if its
own rights, duties or immunities would be adversely affected.
Section 8.11. Delivery of the Mortgage Files Pursuant to
Servicing Agreement.
As is appropriate for the servicing or foreclosure of any
Mortgage Loan, the Indenture Trustee shall deliver, or cause the Custodian to
deliver, to the Servicer the Mortgage Files for such Mortgage Loan upon receipt
by the Indenture Trustee 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 Noteholders.
Section 8.12. Servicer as Agent.
In order to facilitate the servicing of the Mortgage Loans by
the Servicer, the Servicer 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 Note
Account on or prior to the related Servicer Remittance Date.
Section 8.13. Termination of Servicer.
In accordance with the Servicing Agreement, in the event of an
event of default specified in Section 5.01 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 5.01 and Section 5.02
of the Servicing Agreement. If the Indenture Trustee terminates the Servicer,
the Indenture Trustee or the initial Sub-Servicer as applicable shall, pursuant
to Section 5.02 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.
Section 8.14. Investment of Funds in the Note Accounts and the
Reserve Account.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, the Issuer may direct any depository institution
maintaining the Note Accounts and
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the Reserve Account established pursuant to Section 8.18 hereof, (each, for
purposes of this Section 8.14, an "Investment Account"), to invest the funds in
such Investment Account in one or more Permitted Investments. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment Account shall be made in the name of the Indenture
Trustee (in its capacity as such) or in the name of a nominee of the Indenture
Trustee. The Indenture shall be entitled to sole possession (except with respect
to investment direction of funds held in such Investment Account) over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment shall be delivered directly to the Indenture
Trustee or its agent, together with any document of transfer necessary to
transfer title to such investment to the Indenture Trustee or its nominee. If no
investment direction is made as to any Investment Account, the Indenture Trustee
shall invest all funds on deposit in Permitted Investments described in
Paragraph (g) of the definition of "Permitted Investments". In the event amounts
on deposit in an Investment Account are at any time invested in a Permitted
Investment payable on demand, the Indenture Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may
otherwise mature hereunder in an amount equal to
the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be
withdrawn on such date; and
(y) demand payment of all amounts due thereunder
promptly upon determination by a Responsible
Officer of the Indenture Trustee that such
Permitted Investment would not constitute a
Permitted Investment in respect of funds
thereafter on deposit in the Investment Account.
(b) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, upon the request of the Note Insurer
or the Holders of Notes evidencing more than 50% of the Outstanding Note
Balance, shall take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings.
Section 8.15. Appointment of Custodians.
(a) Notwithstanding anything to the contrary in this
Indenture, the parties hereto and each Noteholder by its acceptance of its Note
acknowledge that the functions of the Indenture Trustee with respect to the
custody, acceptance, inspection, review and release of the Mortgage Files
pursuant to this Indenture and the related Initial Certification and Final
Certification shall be performed by LaSalle National Bank, as Custodian,
pursuant to the Custodial Agreement and that the Indenture Trustee shall in no
way be liable for any acts or omissions of the Custodian. The fees and expenses
of the Custodian shall be paid by the Servicers.
(b) The Servicer may, at the expense of the Servicer or the
successor Servicer, with the consent of the Issuer, the Indenture Trustee and
the Note Insurer (which consent shall
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not be unreasonably withheld), appoint a successor Custodian to hold all or a
portion of the Mortgage Files as agent for the Indenture Trustee. Each successor
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 FDIC; (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 successor 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 additional Custodians shall not relieve the Indenture Trustee from any
of its obligations hereunder, and the Indenture Trustee shall remain responsible
for all acts and omissions of any such Custodian. If the Servicer is appointed
as Custodian in accordance with this Section 8.15, it shall fulfill its
servicing and custodial duties and obligations through separate departments and,
if it maintains a trust department, shall fulfill its custodial duties and
obligations through such trust department. The appointment of a successor
Custodian shall be evidenced by a Custodial Agreement, substantially in the form
of Exhibit E hereto.
Section 8.16. Rights of the Note Insurer to Exercise Rights of
Noteholders.
By accepting its Notes, each Noteholder agrees that unless a
Note Insurer Default exists, the Note Insurer shall have the right to exercise
all rights of the Noteholders under this Indenture without any further consent
of the Noteholders, including, without limitation:
(a) the right to require the Servicer to effect foreclosures
upon Mortgage Loans upon failure of the Servicer to do so;
(b) the right to require Meritage to repurchase or substitute
for Defective Mortgage Loans pursuant to the Guarantee;
(c) the right to direct the actions of the Indenture Trustee
during the continuance of an Event of Default; and
(d) 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 8.05 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 (other than as the
deemed assignee and subrogee of the Noteholders to the extent the Note Insurer
has made Insured Payments for the benefit 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.
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Section 8.17. Trust Estate and Accounts Held for Benefit of
the Note Insurer.
The Indenture Trustee shall hold the Trust Estate and the
Mortgage Files for the benefit of the Noteholders and the Note Insurer and all
references in this Indenture and in the Notes to the benefit of Holders of the
Notes shall be deemed to include the Note Insurer (provided there does not exist
a Note Insurer Default).
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to the
Noteholders shall also be sent to the Note Insurer.
Section 8.18. Reserve Account
(a) The Issuer hereby directs the Indenture Trustee to
establish through its 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)(viii) hereof. The amount so deposited from Available
Funds with respect to Class A-1 shall be the "Class A-2 Cash O/C
Amount," and the amount so deposited from the Available Funds with
respect to Class A-2 shall be the "Class A-1 Cash O/C Amount."
(b) (i) If, on any Payment Date, and after taking into account
the application of the Class A-1 Available Funds plus any Crossover
Amount available from Group II (but not the proceeds of any Insured
Payment), the full amount of the Class A-1 Note Interest has not been
paid, and/or a Class A-1 Overcollateralization Deficit would result,
the Indenture Trustee shall withdraw from the Class A-1 Cash O/C Amount
then on deposit in the Reserve Account and deposit in the Note Account
for the Class A-1 Notes an amount equal to the lesser of (x) the Class
A-1 Cash O/C Amount then on deposit in the Reserve Account and (y) the
amount of such shortfall in the amount of the Class A-1 Note Interest
and the amount of such Class A-1 Overcollateralization Deficit.
(ii) If, on any Payment Date, and after taking into
account, the application of the Class A-2 Available Funds plus any
Crossover Amount available from the Group I (but not the proceeds of
any Insured Payment), the full amount of the Class A-2 Note Interest
has not been paid, and/or a Class A-2 Overcollateralization Deficit
would result, the Indenture Trustee shall withdraw from the Class A-2
Cash O/C Amount then on deposit in the Reserve Account and deposit in
the Note Account for the Class A-2 Notes an amount equal to the lesser
of (x) the Class A-2 O/C Cash Amount then on deposit in the Reserve
Account and (y) the amount of such shortfall in the amount of the Class
A-2 Note Interest and the amount of such Class A-2
Overcollateralization Deficit.
(iii) If, on any Payment Date, and after taking into
account the application of the Class A-1 Available Funds plus any
Crossover Amount available from Group II (but not the proceeds of any
Insured Payment), the full amount of the Class A-1 Note Interest has
not been paid, and/or a Class A-1 Overcollateralization Deficit would
result, the Indenture Trustee shall withdraw from the remaining Class
A-2 Cash O/C
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Amount then on deposit in the Reserve Account and deposit in the Note
Account for the Class A-1 Notes an amount equal to the lesser of (x)
the remaining Class A-2 Cash O/C Amount then on deposit in the Reserve
Account and (y) the amount of such shortfall in the amount of the Class
A-1 Note Interest and the amount of such Class A-1
Overcollateralization Deficit.
(iv) If, on any Payment Date, and after taking into
account, the application of the Class A-2 Available Funds plus any
Crossover Amount available from the Group I (but not the proceeds of
any Insured Payment), the full amount of the Class A-2 Note Interest
has not been paid, and/or a Class A-2 Overcollateralization Deficit
would result, the Indenture Trustee shall withdraw from the remaining
Class A-1 Cash O/C Amount then on deposit in the Reserve Account and
deposit in the Note Account for the Class A-2 Notes an amount equal to
the lesser of (x) the remaining Class A-1 O/C Cash Amount then on
deposit in the Reserve Account and (y) the amount of such shortfall in
the amount of the Class A-2 Note Interest and the amount of such Class
A-2 Overcollateralization Deficit.
(c) (i) If, on any Payment Date, (A) the sum of (x) the Class
A-1 Overcollateralization Amount, after taking into account all
distributions on such Payment Date other than any distribution of any
Class A-1 Overcollateralization Surplus, plus (y) the Class A-1 Cash
O/C Amount on deposit in the Reserve Account, after taking into account
any withdrawals therefrom pursuant to clause (b)(i) above, exceeds (B)
the Class A-1 Required Overcollateralization Amount for such Payment
Date (such excess being a "Class A-1 Aggregate O/C Surplus Amount"),
the lesser of (I) such Class A-1 Aggregate O/C Surplus Amount and (II)
the Class A-1 Cash O/C Amount shall be released from the Reserve
Account and distributed to the related Certificateholders as a
distribution with respect to Group I.
(ii) If, on any Payment Date, (A) the sum of (x) the Class
A-2 Overcollateralization Amount, after taking into account all
distributions on such Payment Date other than any distribution of any
Class A-2 Overcollateralization Surplus plus (y) the Class A-2 Cash O/C
Amount on deposit in the Reserve Account after taking into account any
withdrawals therefrom pursuant to clause (b)(ii) above exceeds (B) the
Class A-2 Required Overcollateralization Amount for such Payment Date
(such excess being a "Class A-2 Aggregate O/C Surplus Amount"), the
lesser of (I) such Class A-2 Aggregate O/C Surplus Amount and (II) the
Class A-2 Cash O/C Amount shall be released from the Reserve Account
and distributed to the related Certificateholders as a distribution
with respect to Group II.
(d) (i) As of any Payment Date, the lesser of (A) the excess
of (I) the Class A-1 Aggregate O/C Surplus Amount over (II) the amount
of the Class A-1 Cash O/C Amount released from the Reserve Account
pursuant to clause (c)(i) above and (B) the Class A-1 Monthly Principal
Available for such Payment Date is the "Class A-1 Overcollateralization
Surplus" for such Payment Date.
(ii) As of any Payment Date, the lesser of (A) the excess
of (I) the Class A-2 Aggregate O/C Surplus Amount over (II) the amount
of the Class A-2 Cash
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O/C Amount released from the Reserve Account pursuant to clause (c)(ii)
above and (B) the Class A-2 Monthly Principal Available for such
Payment Date is the "Class A-2 Overcollateralization Surplus" for such
Payment Date.
(e) So long as no Default or Event of Default shall have
occurred and be continuing, amounts held in the Reserve Account (other
than amounts received pursuant to Section 8.05) 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 Issuer and on
each Payment Date, any such amounts may be released from the Reserve Account and
paid to the Issuer for deposit in the Certificate Distribution Account
established and maintained pursuant to the Trust Agreement. Any loss resulting
from such investment of moneys deposited in a Reserve Account shall be
reimbursed immediately as incurred to such Reserve Account by the Issuer.
Subject to Section 6.01 and the preceding sentence, the Issuer shall not in any
way be held liable by reason of any insufficiency in such Reserve Account.
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:
(a) 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;
(b) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes;
(c) 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;
(d) 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; or
(e) 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
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provisions with respect to matters or questions arising under this Indenture,
which shall not be inconsistent with the provisions of this Indenture, provided
that such action shall not adversely affect in any material respect the
interests of the Holders of the Notes; and provided, further, that the amendment
shall be deemed not 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 Ambac Insurance Policy).
Section 9.02. Supplemental Indentures with Consent of
Noteholders.
With the consent of the Note Insurer and with the consent of
Holders of Notes representing not less than a majority of the Note Balance of
all Outstanding Notes of both Classes by Act of said Holders delivered to the
Issuer and the Indenture Trustee, the Issuer and the Indenture Trustee may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) 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);
(b) 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;
(c) 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;
(d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(e) permit the creation of any lien other than the lien of
this Indenture with respect to any part of the Trust Estate (except for
encumbrances permitted under the Sponsor Sale Agreement) 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;
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(f) 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
(g) incur any indebtedness, other than the Notes, that would
cause the Issuer or the Trust Estate to be treated as a "taxable mortgage pool"
within the meaning of Code Section 7701(i).
The Indenture Trustee may in its discretion determine whether
or not any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Indenture
Trustee shall mail to the Holders of the Notes to which such supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Indenture Trustee shall be
entitled to receive, and (subject to Section 6.01) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties
or immunities under this Indenture or otherwise. The Issuer shall cause executed
copies of any Supplemental Indentures to be delivered to the Rating Agencies.
Section 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes to which such supplemental indenture relates that have
theretofore been or thereafter are authenticated and delivered hereunder shall
be bound thereby.
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Section 9.05. Reserved.
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 the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Governing Documents.
The Indenture Trustee shall, upon Issuer Request, consent to
any proposed amendment to the Issuer's governing documents, or an amendment to
or waiver of any provision of any other document relating to the Issuer's
governing documents, such consent to be given without the necessity of obtaining
the consent of the Holders of any Notes upon receipt by the Indenture Trustee
of:
(a) 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
(b) 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 Ambac
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 of any provision of any document where the making of such amendment or
the giving of such waiver without obtaining the consent of the Indenture Trustee
is not prohibited by this Indenture or by the terms of the document that is the
subject of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
(a) The Notes may be redeemed in whole, but not in part, on
the Redemption Date at the Redemption Price at the option of the Servicer
PROVIDED, HOWEVER, that funds in an amount equal to the Redemption Price, plus
any amounts owed to the Note Insurer under the
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Insurance Agreement, any unreimbursed Nonrecoverable Advances and any
unreimbursed amounts due and owing to the Indenture Trustee hereunder, shall
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; and, provided further, however that if the exercise
of this option to redeem the Notes shall result in a drawing on the AMBAC
Insurance Policy, the Note Insurer shall have given its prior written consent.
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 Servicer or the Issuer, depending upon which party is
electing to redeem the Notes.
(b) Upon receipt of the notice from the Servicer of its
election to redeem the Notes pursuant to Section 10.01(a), the Indenture Trustee
shall prepare and deliver to the Servicer, 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 have been satisfied and
setting forth the amount, if any, to be withdrawn from the Note Accounts of the
Class A-1 Notes and the Class A-2 Notes and paid to the Servicer as
reimbursement for Nonrecoverable Advances and such other information as may be
required to accomplish such redemption.
(c) Upon payment of the Redemption Price to the Noteholders of
the related Class of Notes and all amounts owed under Section 10.01(a), the
Indenture Trustee shall promptly release to the party redeeming such Notes the
Mortgage Files for the remaining Mortgage Loans in the related Group, and the
Indenture Trustee shall execute without recourse all assignments, endorsements
and other instruments necessary to effectuate such transfer and as are necessary
to convey title to the related Mortgage Loans and to evidence the release of the
related Mortgage Loans from the lien of this Indenture. Any funds remaining in
the related Note Account after all payments due hereunder have been made shall
be remitted to the related Certificate Distribution Account established pursuant
to the Trust Agreement for the benefit of the Issuer.
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 party electing to redeem the Notes by
first class mail, postage prepaid, mailed not less than ten days prior to the
Redemption Date to each Holder of Notes to be redeemed, such Holders being
determined as of the Record Date for such Payment Date, and to the Note Insurer.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price at which the Notes will be redeemed,
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(c) 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 party electing to redeem
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
related Note Balance shall, until paid, bear interest from the Redemption Date
at the related 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 and the Note Insurer to take any action under any provision of
this Indenture, the Issuer shall furnish to the Indenture Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel, if requested by the Indenture Trustee, stating that in the opinion
of such counsel all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
(b) Every certificate, opinion or letter with respect to
compliance with a condition or covenant provided for in this Indenture,
including one furnished pursuant to specific requirements of this Indenture
relating to a particular application or request shall include the following:
(i) a statement that each individual signing such
certificate, opinion or letter has read such covenant or condition and
the definitions herein relating thereto;
(ii) 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;
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(iii) 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
(iv) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
(c) In furnishing any such certificate on behalf of the
Issuer, opinion or letter, an Authorized Officer of the Owner Trustee may,
without conducting any independent investigation, rely solely on a corresponding
certificate, opinion or letter of the Servicer, the Sponsor, Funding Co., or any
Certificateholder.
Section 11.02. Form of Documents Delivered to Indenture
Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any Opinion of Counsel may be based on the written opinion of other
counsel, in which event such Opinion of Counsel shall be accompanied by a copy
of such other counsel's opinion and shall include a statement to the effect that
such counsel believes that such counsel and the Indenture Trustee may reasonably
rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Wherever in this Indenture, in connection with any application
or certificate or report to the 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
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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:
(a) 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; or
(b) 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
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writing and mailed, first-class postage prepaid, to the Issuer addressed to it
at RBMG Funding Co. Mortgage Loan Trust 1999-2, 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
(c) the Note Insurer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder (unless specifically
provided otherwise herein) if in writing and mailed, first-class, postage
prepaid, to Ambac Assurance Corporation addressed to it at One State Street
Plaza, 17th Floor, New York, New York 10004, Attention: Structured Finance
Department-MBS (RBMG Funding Co. Mortgage Loan Trust 1999-2), or at any other
address previously furnished in writing to the Indenture Trustee by the Note
Insurer; or
(d) Funding Co. 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 RBMG Funding Co., 2820 West Charleston Boulevard,
Las Vegas, Nevada 89102, Attention: President or at any other address previously
furnished in writing to the Indenture Trustee by Funding Co.; or
(e) the Company 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 RBMG Asset Management Company, Inc., 2820 West
Charleston Boulevard, Las Vegas, Nevada 89102, Attention: President or at any
other address previously furnished in writing to the Indenture Trustee by the
Company; or
(f) the Underwriter by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class,
postage prepaid, to First Union Securities, Inc., 301 South College Street,
Charlotte, North Carolina 28288; or
(g) the Sponsor by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class,
postage prepaid, to Residential Asset Funding Corp. c/o First Union Securities
Inc., 301 South College Street, Charlotte, North Carolina 28288.
Notices required to be given to the Rating Agencies by the
Issuer or the Indenture Trustee shall be in writing, personally delivered or
mailed first-class postage pre-paid, to (i) in the case of Moody's, at the
following address: Moody's Investors Service, Inc., Residential Mortgage
Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in
the case of Standard & Poor's, at the following address: Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc., 26 Broadway
(15th Floor), New York, New York, 10004, Attention: Asset-Backed Surveillance
Department; or as to each of the foregoing, at such other address as shall be
designed by written notice to the other parties.
Section 11.05. Notices and Reports to Noteholders; Waiver of
Notices.
Where this Indenture provides for notice to Noteholders of any
event or the mailing of any report to Noteholders, such notice or report shall
be sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder
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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.
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.
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Section 11.11. Benefits of Indenture.
Other than as provided in Section 11.20 herein, 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
(except in the case of payment of Note Interest on a Payment 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 WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
Section 11.14. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 11.15. Recording of Indenture.
This Indenture is subject to recording in any appropriate
public recording offices, such recording to be effected by the Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.11(c) or 3.06.
Section 11.16. Issuer Obligation.
No recourse may be taken, directly or indirectly, with respect
to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on
the Notes or under this Indenture or
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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 Meritage, the Company,
Funding Co., the Sponsor, or the Issuer, or join in any institution against
Meritage, the Company, Funding Co., the Sponsor, 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 Issuer
with Meritage, Funding Co., the Sponsor, or the Company, (b) file an appropriate
memorandum of points and authorities or other brief in support of such
objection, or (c) endeavor to establish at the hearing on such objection that
the substantive consolidation of such entity would be materially prejudicial to
the Noteholders.
This Section 11.17 will survive for one year AND ONE DAY
following the termination of this Indenture.
Section 11.18. Inspection.
The Issuer agrees that, on reasonable prior notice, it will
permit any representative of the Indenture Trustee and the Note Insurer, during
the Issuer's normal business hours, to examine all of books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent Accountants selected by the
Indenture Trustee or the Note Insurer, as the case may be, and to discuss its
affairs, finances and accounts with its officers, employees and Independent
Accountants (and by this provision the Issuer hereby authorizes its Accountants
to discuss with such representatives such affairs, finances and accounts), all
at such reasonable times and as often as may be reasonably requested. Any
expense incident to the exercise by the Indenture Trustee of any right under
this Section 11.18 shall be borne by the Issuer.
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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 and the provisions 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 Ambac 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.
Section 11.21. Limitation on Liability of Owner Trustee.
This Indenture, and any Notes issued in connection herewith
and any other documents executed by the Issuer in connection herewith, have been
or will be executed on behalf of the Issuer, a Delaware business trust, by
Wilmington Trust Company solely in its capacity as trustee of such trust, and
not in its individual capacity. In no case shall Wilmington Trust Company (or
any entity acting as successor or additional trustee) be personally liable for
or on account of any of the statements, representatives, warranties, covenants
or obligations of the Issuer hereunder, any right to assert any such liabilities
against Wilmington Trust Company (or any entity acting as successor or
additional trustee) being hereby waived by the other parties hereto; provided,
however, that such waiver shall not effect the liability of Wilmington Trust
Company (or any entity acting as successor or additional trustee) to any Person
under any other agreement to the extent expressly agreed to in its individual
capacity thereunder.
Remainder of this page intentionally left blank
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee 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.
RBMG FUNDING CO. MORTGAGE LOAN TRUST
1999-2
By: Wilmington Trust Company,
not in its individual capacity,
but solely as Owner Trustee
By: /s/ Donald G. MacKelcan
--------------------------
Authorized Signatory
Name: Donald G. MacKelcan
Title: Vice President
BANKERS TRUST COMPANY,
as Indenture Trustee
By: /s/ Hermi Alignay
--------------------
Name: Hermi Alignay
Title: Assistant Secretary
106
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STATE OF DELAWARE )
)ss.:
COUNTY OF NEW CASTLE )
On the 29th day of November, 1999 before me, a notary public
in and for said State, personally appeared Donald G. MacKelcan, known to me to
be Financial Services Officer of Wilmington Trust Company, a corporation, not in
its individual capacity, but solely as Owner Trustee, that executed the within
instrument acting not in its individual capacity, but solely as trustee of RBMG
Funding Co. Mortgage Loan Trust 1999-2, and also known to me to be the person
who executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument on behalf of said trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Janel R. Havrilla
---------------------
Notary Public
Notarial Seal
Janel R. Havrilla
Notary Public-Delaware
My Commission Expires -
February 2, 2001
107
<PAGE>
STATE OF CALIFORNIA )
)ss.:
COUNTY OF ORANGE )
On the 26th day of November, 1999 before me, a notary public
in and for said State, personally appeared Hermi Alignay, known to me to be an
Assistant Secretary of Bankers Trust Company, a New York banking corporation
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Darin L. Rysan
------------------
Notary Public
Notarial Seal
Darin L. Rysan
Commission #1183149
Notary Public -
California
Orange County
My Commission Expires May 10, 2002
108
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[On File with Dewey Ballantine LLP]
<PAGE>
EXHIBIT A-1
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.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN OCWEN FEDERAL BANK
FSB, BANKERS TRUST COMPANY, AMBAC ASSURANCE CORPORATION OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS NOTE NOR ANY OF THE UNDERLYING MORTGAGE
LOANS, WITH LIMITED EXCEPTIONS, IS GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY
OF THE UNITED STATES OR ANY OTHER PERSON.
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 November 1, 1999
First Payment Date: December 27, 1999
Denomination: $85,000,000
Original Note Balance: $85,000,000
CUSIP No.: 74925XAE4
Note No.: A-1-1
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
ASSET-BACKED NOTES, SERIES 1999-2
RBMG Funding Co. Mortgage Loan Trust 1999-2, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of EIGHTY FIVE MILLION DOLLARS
($85,000,000) payable on each Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $85,000,000 and
the
A-1-1
<PAGE>
denominator of which is $85,000,000 (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-1 Notes pursuant to the Indenture dated as of
November 1, 1999 (the "Indenture"), between the Issuer and Bankers Trust
Company, a New York banking corporation, 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 December, 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 related Class of 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.
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 (the "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-1 Notes with respect to
such Payment Date, all as more specifically set forth in the Indenture.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the 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-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: November 30, 1999
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but solely
as Owner Trustee under the Trust
Agreement
By:_____________________________________
Authorized Signatory
A-1-3
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned
Indenture.
Date: November 30, 1999
BANKERS TRUST COMPANY,
as Authenticating Agent
By:______________________________________
Authorized Signatory
A-1-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Asset-Backed Notes, Series 1999-2, Class A-1 (herein called
the "Class A-1 Notes"), 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 1999-2, Class A-2 (herein called the "Class A-2
Notes" and collectively with the Class A-1 Notes, the "Notes"). 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-1 Notes are and will be equally and ratably secured by the
Mortgage Loans in Group I of the Trust Estate and the other collateral pledged
as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date
in an amount described on the face hereof.
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 the Class A-1 Notes shall
be due and payable on the date on which an Event of Default shall have occurred
and be continuing and the indenture Trustee, at the direction or upon the prior
written consent of Ambac Assurance Corporation (the "Note Insurer") in the
absence of a Note Insurer Default, or the Holders of the Class A-1 Notes
representing not less than 50% of the Note Balance of the Outstanding Notes of
the related Class of Notes with the prior written consent of the Note Insurer in
the absence of a Note Insurer Default have declared the related Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. All principal payments on the Class A-1 Notes shall be made pro rata
to the Class A-1 Noteholders entitled thereto.
The Note Insurer has issued a Ambac Insurance Policy in the name of the
Indenture Trustee for the benefit of the Noteholders, which policy guarantees
payments on each Payment Date to the Indenture Trustee for the benefit of the
Noteholders of the related Noteholders' Percentage Interest in the Required
Payment Amount for such Payment Date. Unless a Note Insurer Default shall be
continuing, subject to Section 8.16 of the Indenture, the Note Insurer shall be
deemed to be the Holder of 100% of the Note Balance of the Outstanding Notes of
the related Class of Notes for the purpose of exercising the rights, including
voting rights, of the Noteholders of the related Class of Notes under the
Indenture. In addition, on each Payment Date, after the Noteholders of the
related Class of Notes have been paid all amounts to which they are entitled,
the Note Insurer will be entitled to be reimbursed for any unreimbursed Insured
Amounts and any other amounts owed under the Ambac Insurance Policy.
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
A-1-5
<PAGE>
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 notation of payment. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Holder hereof as of the Record Date preceding such
Payment Date by notice mailed or transmitted by facsimile prior to such Payment
Date, and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's principal
Corporate Trust Office or at the office of the Indenture Trustee's agent
appointed for such purposes located in The City of New York.
As provided in the Indenture, the Notes may be redeemed in whole, but
not in part, at the option of the Servicer or the Note Insurer on any Payment
Date on and after the date on which the aggregate Outstanding Note Balance of
the Class A-1 Notes and the Class A-2 Notes is less than 10% of the aggregate
Outstanding Note Balance of the Class A-1 Notes and the Class A-2 Notes as of
the Closing Date.
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 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.
Each Beneficial Owner, by acceptance of a beneficial interest in a
Note, shall be deemed to represent either (i) that it is not (A) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and is not acting on
behalf of or investing the assets of a Benefit Plan, or (ii) that its
acquisition and continued holding of such beneficial interest will be covered by
a U.S. Department of Labor Prohibited Transaction Class Exemption.
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
A-1-6
<PAGE>
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 that by accepting the benefits of the Indenture that such Noteholder or
Beneficial Owner will not at any time institute against the Sponsor, the
Company, Funding Co., Meritage or the Issuer, or join in any institution against
the Sponsor, the Company, Funding Co., Meritage 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 Sponsor Sale
Agreement, the Company Sale Agreement, the Funding Co. Sale Agreement, the
Guarantee, the Cap Agreement or the Servicing 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, the Note Insurer
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 Note Insurer, 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 related Class of Notes under the
Indenture at any time by the Issuer with the consent of the Note Insurer and the
Holders of the Notes of the related Class representing a majority of the Note
Balance of all Outstanding Notes of such Class. The Indenture also contains
provisions permitting the Holders of Notes representing specified percentages of
the Note Balance of Outstanding Notes of the related Class of Notes, on behalf
of the Holders of all the Notes of such Class, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and
A-1-7
<PAGE>
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.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer, the Company, Funding Co. or
Meritage, the Owner Trustee in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
omission to perform any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED,
HOWEVER, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-1-8
<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:
A-1-9
<PAGE>
EXHIBIT A-2
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.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN OCWEN FEDERAL BANK
FSB, BANKERS TRUST COMPANY, AMBAC ASSURANCE CORPORATION OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS NOTE NOR ANY OF THE UNDERLYING MORTGAGE
LOANS, WITH LIMITED EXCEPTIONS, IS GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY
OF THE UNITED STATES OR ANY OTHER PERSON.
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 November 1, 1999
First Payment Date: December 27, 1999
Denomination: $40,000,000
Original Note Balance: $40,000,000
CUSIP No.: 74925XAF1
Note No.: A-2- 1
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
ASSET-BACKED NOTES, SERIES 1999-2
RBMG Funding Co. Mortgage Loan Trust 1999-2, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of FORTY MILLION DOLLARS) ($40,000,000)
payable on each Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $40,000,000 and the
denominator of which is $40,000,000 (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-2 Notes pursuant to the Indenture dated as of
November 1, 1999 (the "Indenture"), between the
A-2-1
<PAGE>
Issuer and Bankers Trust Company, a New York corporation, 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 December 25, 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.
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 (the "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-2 Notes with respect to
such Payment Date, all as more specifically set forth in the Indenture.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the 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.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: November 30, 1999
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but solely
as Owner Trustee under the Trust
Agreement
By:_____________________________________
Authorized Signatory
A-2-2
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned
Indenture.
Date: November 30, 1999
BANKERS TRUST COMPANY,
as Authenticating Agent
By:______________________________________
Authorized Signatory
A-2-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Asset-Backed Notes, Series 1999-2, Class A-2 (herein called
the "Class A-2 Notes"), 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 1999-2, Class A-1 (herein called the "Class A-1
Notes" and collectively with the Class A-2 Notes, the "Notes"). 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-2 Notes are and will be equally and ratably secured by the
Mortgage Loans in Group II of the Trust Estate and the other collateral pledged
as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date
in an amount described on the face hereof.
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 the Class A-2 Notes shall
be due and payable on the date on which an Event of Default shall have occurred
and be continuing and the indenture Trustee, at the direction or upon the prior
written consent of Ambac Assurance 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 of the related Class
of Notes with the prior written consent of the Note Insurer in the absence of a
Note Insurer Default have declared the related Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. All principal
payments on the Class A-2 Notes shall be made pro rata to the Class A-2
Noteholders entitled thereto.
The Note Insurer has issued a Ambac Insurance Policy in the name of the
Indenture Trustee for the benefit of the Noteholders, which policy guarantees
payments on each Payment Date to the Indenture Trustee for the benefit of the
Noteholders of the related Noteholders' Percentage Interest in the Required
Payment Amount for such Payment Date. Unless a Note Insurer Default shall be
continuing, subject to Section 8.16 of the Indenture, the Note Insurer shall be
deemed to be the Holder of 100% of the Note Balance of the Outstanding Notes of
the related Class of Notes for the purpose of exercising the rights, including
voting rights, of the Noteholders of the related Class of Notes under the
Indenture. In addition, on each Payment Date, after the Noteholders of the
related Class of Notes have been paid all amounts to which they are entitled,
the Note Insurer will be entitled to be reimbursed for any unreimbursed Insured
Amounts and any other amounts owed under the Ambac Insurance Policy.
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
A-2-4
<PAGE>
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that with respect to Notes registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Holder hereof as of the Record Date preceding such Payment
Date by notice mailed or transmitted by facsimile prior to such Payment Date,
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
As provided in the Indenture, the Notes may be redeemed in whole, but
not in part, at the option of the Servicer or the Note Insurer on any Payment
Date on and after the date on which the aggregate Outstanding Note Balance of
the Class A-1 Notes and the Class A-2 Notes is less than 10% of the aggregate
Outstanding Note Balance of the Class A-1 Notes and the Class A-2 Notes as of
the Closing Date.
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 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.
Each Beneficial Owner, by acceptance of a beneficial interest in a
Note, shall be deemed to represent either (i) that it is not (A) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and is not acting on
behalf of or investing the assets of a Benefit Plan, or (ii) that its
acquisition and continued holding of such beneficial interest will be covered by
a U.S. Department of Labor Prohibited Transaction Class Exemption.
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
A-2-5
<PAGE>
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 that by accepting the benefits of the Indenture that such Noteholder or
Beneficial Owner will not at any time institute against the Sponsor, the
Company, Funding Co., Meritage or the Issuer, or join in any institution against
the Sponsor, the Company, Funding Co., Meritage 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 Sponsor Sale
Agreement, the Company Sale Agreement, the Funding Co. Sale Agreement, the
Guarantee, the Cap Agreement or the Servicing 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, the Note Insurer
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 Note Insurer, 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 of the related Class of Notes
under the Indenture at any time by the Issuer with the consent of the Note
Insurer and the Holders of the related Class of Notes representing a majority of
the Note Balance of all Outstanding Notes of such Class. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Note Balance of Outstanding Notes of the related Class of
Notes, on behalf of the Holders of all the Notes of such Class, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note (or any one or more Predecessor Notes) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the amendment
A-2-6
<PAGE>
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.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer, the Company, Funding Co. or
Meritage, the Owner Trustee in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
omission to perform any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED,
HOWEVER, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-2-7
<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:
A-2-8
<PAGE>
OFFICER'S CERTIFICATE
RBMG Funding Co. Mortgage Loan Trust 1999-2 (the "Issuer"), hereby
certifies, as follows:
Each condition precedent specified in Section 2.14 of the
Indenture, dated as of November 1, 1999(the "Indenture")
between RBMG Funding Co. Mortgage Loan Trust 1999-2 and
Bankers Trust Company, as Indenture Trustee and each condition
precedent specified in the Additional Transfer Instrument has
been satisfied by the Issuer.
Capitalized terms not otherwise defined herein have the meanings set
forth in the Indenture.
IN WITNESS WHEREOF, I have hereunto signed my name.
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
By: Wilmington Trust Company,
not its individual capacity,
but solely as Owner Trustee
By:____________________________
Name:
Title:
Dated: November 30, 1999
<PAGE>
EXHIBIT C
FORM OF SERVICING AGREEMENT
[On File with Dewey Ballantine LLP]
C-1
<PAGE>
EXHIBIT D
FORM OF CUSTODIAL AGREEMENT
[On File with Dewey Ballantine LLP]
D-1
<PAGE>
EXHIBIT E
FORM OF INVESTMENT LETTER (ERISA)
[Date]
Bankers Trust Company,
1761 East St. Andrew Place
Santa Ana, California 92705-4934
Attention:
Re: Indenture, dated as of November 1, 1999, between
RBMG Funding Co. Mortgage Loan Trust 1999-2 and
Bankers Trust Company, as Indenture Trustee,
relating to RBMG Funding Co. Mortgage Loan Trust
1999-2, Asset-Backed Notes, Series 1999-2.
Ladies and Gentlemen:
___________________________________ (the "Transferee") has today
purchased in a private sale from ______________ $______________ of Asset Backed
Notes, issued by RBMG Funding Co. Mortgage Loan Trust 1999-2 pursuant to an
Indenture, dated as of November 1, 1999, between RBMG Funding Co. Mortgage Loan
Trust 1999-2 and Bankers Trust Company, as Indenture Trustee, relating to RBMG
Funding Co. Mortgage Loan Trust 1999-2, Asset-Backed Notes, Series 1999-2, (the
"Indenture"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Indenture. The undersigned hereby certifies and agrees
on behalf of the Purchaser either:
1. The transferee is not (A) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA or (B) a plan
(as defined in Section 4975(e)(i) of the Internal Revenue Code of 1986, as
amended (the "Code")) that is subject to Section 4975 of the Code (each of the
foregoing, a "Benefit Plan"), and is not acting on behalf of or investing the
assets of a Benefit Plan; or
2. The transferee's acquisition and continued holding of the Note will
be covered by a U.S. Department of Labor Prohibited Transaction Class Exemption.
Very truly yours,
NAME OF PURCHASER
By:____________________________
Name:
Title:
E-1
November 30, 1999
To the Parties Listed on
the Attached Annex A:
Re: RBMG Funding Co. Mortgage Loan Trust 1999-2
Asset Backed Notes, Series 1999-2
---------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the
issuance and delivery of certain notes denominated as RBMG Funding Co. Mortgage
Loan Trust 1999-2 Asset Backed Notes, Series 1999-2 Notes, Class A-1 and Class
A-2 (the "Notes") pursuant to the terms of the Indenture (the "Indenture"),
dated as of November 1, 1999, between the RBMG Funding Co. Mortgage Loan Trust
1999-2 (the "Issuer") and Bankers Trust Company, as indenture trustee (the
"Indenture Trustee"). Capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Indenture.
As special tax counsel, we have examined such documents as we
have deemed appropriate for the purposes of rendering the opinions set forth
below, including the following: (a) an executed copy of the Indenture and the
exhibits attached thereto and (b) certain representations and warranties made to
us by Meritage Mortgage Corporation and certain information provided by the
Underwriter.
In our examination we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such latter
documents.
We have examined the question of whether the Notes will be
treated as indebtedness for federal income tax purposes. Our analysis is based
on the provisions of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder as in effect on the date hereof and
on existing judicial and administrative interpretations thereof. These
authorities are subject to change and to differing interpretations, which could
apply retroactively. The opinion of special tax counsel is not binding on the
courts or the Internal Revenue Service (the "IRS").
<PAGE>
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
The IRS and the courts have set forth various factors to be taken into account
in determining whether or not a transaction constitutes the issuance of
indebtedness for federal income tax purposes, which we have reviewed as they
apply to this transaction.
Based on the foregoing, and such legal and factual
investigations as we have deemed appropriate, while no transaction closely
comparable to that contemplated in the Operative Documents has been the subject
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) The Trust will not constitute an association (or a
publicly traded partnership) taxable as a corporation or a taxable
mortgage pool.
We express no opinion on any matter not discussed in this
letter. This opinion is rendered as of the Closing Date, for the sole benefit of
the addressees hereof and it may not be relied on by any other party or quoted
without our express consent in writing.
Very truly yours,
/s/ Dewey Ballantine LLP
------------------------
2
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
<S> <C> <C> <C> <C> <C> <C>
First Union Securities, Inc. Standard & Poor's Ratings Services
301 South College Street, TW-06 55 Water Street
Charlotte, North Carolina 28288-0610 New York, New York 10041
Moody's Investors Service, Inc. RBMG Funding Co.
99 Church Street 2820 West Charleston Boulevard, Suite 17
New York, New York 10007 Las Vegas, Nevada 89102
RBMG Asset Management Company, Inc. Bankers Trust Company
2820 West Charleston Boulevard, Suite 17 1761 East St. Andrew Place
Las Vegas, Nevada 89102 Santa Ana, CA 92705-4934
Ambac Assurance Corporation
One State Street Plaza, 17th Floor
New York, NY 10004
Meritage Mortgage Corporation
5665 Southwest Meadows Road
Suite 500
Lake Oswego, Oregon 97035
</TABLE>
3
AMBAC ASSURANCE CORPORATION,
and
FIRST UNION SECURITIES, INC.
INDEMNIFICATION AGREEMENT
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
ASSET-BACKED NOTES
SERIES 1999-2
Dated as of November 18, 1999
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall
not be deemed to be part of this Indemnification Agreement. All capitalized
terms used in this Indemnification Agreement and not otherwise defined shall
have the meanings set forth in Article I of this Indemnification Agreement.)
Page
Section 1. DEFINED TERMS............................................1
Section 2. OTHER DEFINITIONAL PROVISIONS............................1
Section 3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER........2
Section 4. REPRESENTATIONS AND WARRANTIES OF THE NOTE INSURER.......2
Section 5. INDEMNIFICATION..........................................3
Section 6. AMENDMENTS, ETC..........................................5
Section 7. NOTICES..................................................5
Section 8. SEVERABILITY.............................................6
Section 9. GOVERNING LAW............................................6
Section 10. COUNTERPARTS............................................6
Section 11. HEADINGS................................................7
<PAGE>
INDEMNIFICATION AGREEMENT dated as of November 18, 1999 (the
"Indemnification Agreement"), by and among AMBAC ASSURANCE CORPORATION, as Note
Insurer and FIRST UNION SECURITIES, INC., as Underwriter.
Section 1. DEFINED TERMS. Unless the context clearly requires
otherwise, all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Indenture, the Servicing Agreement,
the Insurance Agreement or the Policy. For purposes of this Indemnification
Agreement, the following terms shall have the following meanings:
"Indenture" means the Indenture, dated as of November 1, 1999, relating
to the RBMG Funding Co. Mortgage Loan Trust 1999-2 Asset-Backed Notes, Series
1999-2, between RBMG Mortgage Loan Trust 1999-2, as the Issuer and Bankers Trust
Company, as the Indenture Trustee (as may be amended, modified or supplemented
from time to time).
"Insurance Agreement" means the Insurance and Indemnity Agreement (as
may be amended, modified or supplemented from time to time) dated as of November
30, 1999 by and among Ambac Assurance Corporation, as Note Insurer, Meritage
Mortgage Corporation, as Originator, Resource Bancshares Mortgage Group, Inc.,
as Servicer, Ocwen Federal Bank FSB, as Sub-Servicer, the Company, the Seller,
the Sponsor, the Issuer and the Indenture Trustee
"Note Insurer" means Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance corporation, or any successor thereto, as issuer of the Policy.
"Note Insurer Information" has the meaning given such term in Section
4.
"Notes" means the Class A-1 and Class A-2 Notes, each substantially in
the form of Exhibit A to the Indenture.
"Offering Document" means the Prospectus Supplement, dated November 18,
1999, in respect of the Notes, and any amendment or supplement thereto, and any
other offering document in respect of the Notes that makes reference to the
Policy excluding any structural term sheet, collateral term sheet or
computational materials.
"Servicing Agreement" means the Servicing Agreement, dated as of
November 1, 1999, by and among the Servicer, the Indenture Trustee and the
Issuer (as may be amended, modified or supplemented from time to time as set
forth therein).
"Securities Act" means the Securities Act of 1933, including, unless
the context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Underwriter" means First Union Securities, Inc.
"Underwriter Information" has the meaning given such term in Section 3.
<PAGE>
Section 2. OTHER DEFINITIONAL PROVISIONS. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Indemnification
Agreement shall refer to this Indemnification Agreement as a whole and not to
any particular provision of this Indemnification Agreement, and Section,
subsection, Schedule and Exhibit references are to this Indemnification
Agreement unless otherwise specified. The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such terms.
The words "include" and "including" shall be deemed to be followed by the phrase
"without limitation."
Section 3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER. The
Underwriter represents and warrants as of the Closing Date as follows:
(a) COMPLIANCE WITH LAWS. The Underwriter will comply in all
material respects with all legal requirements in connection with offers
and sales of the Notes and will make such offers and sales in the
manner to be provided in the Offering Document.
(b) OFFERING DOCUMENT. The Underwriter will not use, or
distribute to other broker-dealers for use, any Offering Document in
connection with the offer and sale of the Notes unless such Offering
Document includes such information relating to the Note Insurer as has
been furnished by the Note Insurer for inclusion therein and has been
approved by the Note Insurer.
(c) UNDERWRITER INFORMATION. All material provided by the
Underwriter for inclusion in the Offering Document (as revised from
time to time), shall be true and correct in all material respects, it
being understood and agreed that the only such information furnished by
the Underwriter consists of the following information (collectively,
the "Underwriter Information"): the information contained under the
heading "Underwriting" relating to the Underwriter in the Offering
Document.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE NOTE INSURER. The Note
Insurer represents and warrants to the Underwriter as follows:
(a) ORGANIZATION AND LICENSING. The Note Insurer is a duly
organized and licensed and validly existing Wisconsin stock insurance
corporation duly qualified to conduct an insurance business in the
State of New York.
(b) CORPORATE POWER. The Note Insurer has the corporate power
and authority to issue the Policy and execute this Indemnification
Agreement and to perform all of its obligations hereunder and
thereunder.
(c) AUTHORIZATION; APPROVALS. Proceedings legally required for
the issuance of the Policy and the execution, delivery and performance
of this Indemnification Agreement have been taken and all material
licenses, orders, consents or other authorizations or approvals of any
governmental boards or bodies legally required for the enforceability
of the Policy have been obtained; any proceedings not taken and any
licenses, authorizations or approvals not obtained are not material to
the enforceability of the Policy.
<PAGE>
(d) ENFORCEABILITY. The Policy, when issued, and this
Indemnification Agreement will each constitute a legal, valid and
binding obligation of the Note Insurer, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors'
rights generally and by general principles of equity and subject to
principles of public policy limiting the right to enforce the
indemnification provisions contained therein and herein, insofar as
such provisions relate to indemnification for liabilities arising under
federal securities laws.
(e) FINANCIAL INFORMATION. The consolidated financial
statements of the Note Insurer and subsidiaries as of December 31, 1998
and December 31, 1997, and for each of the years in the three-year
period ended December 31, 1998, prepared in accordance with generally
accepted accounting principles, included in the Annual Report on Form
10-K of Ambac Financial Group, Inc. (which was filed with the
Commission on March 30, 1999; Commission File No. 1-10777) and the
unaudited consolidated financial statements of the Note Insurer and
subsidiaries as of September 30, 1999 and for the periods ending
September 30, 1999 and September 30, 1998, included in the Quarterly
Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended
September 30, 1999 (which was filed with the Commission on November 12,
1999), which are incorporated by reference in the Offering Document
fairly present in all material respects the financial condition of the
Note Insurer as of such dates and for the periods covered by such
statements in accordance with generally accepted accounting principles
consistently applied. Since September 30, 1999, there has been no
material change in such financial condition of the Note Insurer that
would materially and adversely affect its ability to perform its
obligations under the Policy.
(f) NOTE INSURER INFORMATION. The information in the Offering
Document as of the date hereof under the caption "The Note Insurer and
the Financial Guaranty Insurance Policy" (together, the "Note Insurer
Information") is true and correct in all material respects and does not
contain any untrue statement of a material fact.
(g) RATING. The Note Insurer is not aware of any facts that if
disclosed to Moody's or S&P would be reasonably expected to result in a
downgrade of the rating of the financial strength of the Note Insurer
by either of such Rating Agencies.
(h) NO LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best of the Note Insurer=s knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would
materially and adversely affect its ability to perform its obligations
under the Policy or this Indemnification Agreement.
(i) SECURITIES ACT REGISTRATION. The Policy is exempt from
registration under the Securities Act.
Section 5. INDEMNIFICATION.
<PAGE>
(a) The Underwriter hereby agrees to pay, and to protect,
indemnify and save harmless, the Note Insurer and its officers,
directors, shareholders, employees, agents and each Person, if any, who
controls the Note Insurer within the meaning of either Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act from
and against, any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or
expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of (i)
any nature arising out of or by reason of any untrue statement of a
material fact or an omission to state a material fact necessary in
order to make the statements therein in light of the circumstances in
which they were made not misleading, contained in the Underwriter
Information provided by the Underwriter or (ii) a breach of any of the
representations and warranties by the Underwriter contained in Section
3.
(b) The Note Insurer agrees to pay, and to protect, indemnify
and save harmless, the Underwriter and its respective officers,
directors, shareholders, employees, agents and each Person, if any, who
controls the Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising
out of or by reason of (i) any untrue statement of a material fact or
an omission to state a material fact necessary in order to make the
statements therein in light of the circumstances in which they were
made not misleading, contained in the Note Insurer Information or (ii)
a breach of any of the representations and warranties of the Note
Insurer contained in Section 4.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") in respect of which the indemnification provided
in this Section 5(a) or (b) may be sought from the Underwriter, on the
one hand, or the Note Insurer, on the other (each, an "Indemnifying
Party") hereunder, each such Indemnified Party shall promptly notify
the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
expenses. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof at
the expense of the Indemnified Party; provided, however, that the fees
and expenses of such separate counsel shall be at the expense of the
Indemnifying Party if (i) the Indemnifying Party has agreed to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed to
assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party, and the Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the Indemnifying Party (in which case, if the Indemnified
Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Party,
<PAGE>
it being understood, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by the Indemnified
Party). The Indemnifying Party shall not be liable for any settlement
of any such action or proceeding effected without its written consent
to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if
there is a final judgment for the plaintiff in any such action or
proceeding with respect to which the Indemnifying Party shall have
received notice in accordance with this subsection (c), the
Indemnifying Party agrees to indemnify and hold the Indemnified Parties
harmless from and against any loss or liability by reason of such
settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party
(other than due to application of this Section), each Indemnifying
Party shall contribute to the losses incurred by the Indemnified Party
on the basis of the relative fault of the Indemnifying Party, on the
one hand, and the Indemnified Party, on the other hand.
The relative fault of each Indemnifying Party, on the
one hand, and each Indemnified Party, on the other, shall be determined
by reference to, among other things, whether the breach of, or alleged
breach of, any of its representations and warranties set forth herein
was within the control of, the Indemnifying Party or the Indemnified
Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Section 6. AMENDMENTS, ETC. This Indemnification Agreement may be
amended, modified, supplemented or terminated only by written instrument or
written instruments signed by the parties hereto.
Section 7. NOTICES. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
(a) To the Note Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - MBS
Telecopy No.: 212-363-1459
Confirmation: 212-668-0340
<PAGE>
(b) To the Underwriter:
First Union Securities, Inc.
301 South College Street, TW09
Charlotte, North Carolina 28288
Attention: Structured Finance
Telecopy No.: (212) 891-5085
Confirmation: (212) 891-5021
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 8. SEVERABILITY. In the event that any provision of this
Indemnification Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 9. GOVERNING LAW. This Indemnification Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
Section 10. COUNTERPARTS. The Indemnification Agreement may be executed
in counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
Section 11. HEADINGS. The headings of Sections and the Table of
Contents contained in this Indemnification Agreement are provided for
convenience only. They form no part of this Indemnification Agreement and shall
not affect its construction or interpretation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Note Insurer
By: /s/ Jeffrey D. Nabi
----------------------
Name: Jeffrey D. Nabi
---------------
Title: Vice President
--------------
FIRST UNION SECURITIES, INC.,
as Underwriter
By: /s/ Carolyn Eskridge
-----------------------
Name: Carolyn Eskridge
----------------
Title: Senior Vice President
---------------------
AMBAC ASSURANCE CORPORATION
as Note Insurer,
MERITAGE MORTGAGE CORPORATION
as Originator,
RBMG, INC.
as Servicer,
OCWEN FEDERAL BANK FSB
as Sub-Servicer,
RBMG ASSET MANAGEMENT COMPANY, INC.
as Company,
RBMG FUNDING CO.
as Seller,
RESIDENTIAL ASSET FUNDING CORPORATION
as Sponsor,
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
as Issuer
and
BANKERS TRUST COMPANY
as Indenture Trustee
INSURANCE AND INDEMNITY AGREEMENT
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2
ASSET-BACKED NOTES,
SERIES 1999-2
Dated as of November 30, 1999
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Agreement. All capitalized terms used in this
Agreement and not otherwise defined shall have the meanings set forth in Article
I of this Agreement.)
Page
----
ARTICLE I
DEFINITIONS.......................................................1
Section 1.01 DEFINED TERMS........................................1
Section 1.02 OTHER DEFINITIONAL PROVISIONS........................6
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS.........................6
Section 2.01 REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR,
THE SERVICER, THE COMPANY AND THE SELLER..........................6
Section 2.02 AFFIRMATIVE COVENANTS OF THE ORIGINATOR, THE SERVICER,
THE COMPANY AND THE SELLER.......................................12
Section 2.03 NEGATIVE COVENANTS OF THE ORIGINATOR, THE SERVICER,
THE COMPANY AND THE SELLER.......................................18
Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE SUB-SERVICER..18
Section 2.05 AFFIRMATIVE COVENANTS OF THE SUB-SERVICER...........22
Section 2.06 NEGATIVE COVENANTS OF THE SUB-SERVICER..............26
Section 2.07 REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.......27
Section 2.08 AFFIRMATIVE COVENANTS OF THE SPONSOR................30
Section 2.09 NEGATIVE COVENANTS OF THE SPONSOR...................33
Section 2.10 REPRESENTATIONS AND WARRANTIES OF THE ISSUER........34
Section 2.11 AFFIRMATIVE COVENANTS OF THE ISSUER.................36
Section 2.12 NEGATIVE COVENANTS OF THE ISSUER....................39
Section 2.13 REPRESENTATIONS AND WARRANTIES OF THE NOTE INSURER..40
ARTICLE I
THE POLICY; REIMBURSEMENT........................................42
Section 3.01 ISSUANCE OF THE POLICY..............................42
Section 3.02 PAYMENT OF FEES AND PREMIUM.........................44
Section 3.03 REIMBURSEMENT OBLIGATION............................45
Section 3.04 INDEMNIFICATION WITH RESPECT TO THE ORIGINATOR, THE
SERVICER, THE COMPANY AND THE SELLER.............................46
(i)
<PAGE>
Section 3.05 INDEMNIFICATION WITH RESPECT TO THE SUB-............49
Section 3.06 INDEMNIFICATION WITH RESPECT TO THE SPONSOR.........52
Section 3.07 PAYMENT PROCEDURE...................................54
ARTICLE IV
FURTHER AGREEMENTS...............................................54
Section 4.01 EFFECTIVE DATE; TERM OF THE INSURANCE AGREEMENT.....54
Section 4.02 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.......55
Section 4.03 OBLIGATIONS ABSOLUTE................................55
Section 4.04 ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS........57
Section 4.05 LIABILITY OF THE NOTE INSURER.......................58
Section 4.06 ANNUAL SERVICING AUDIT AND CERTIFICATION............58
ARTICLE V
DEFAULTS AND REMEDIES............................................58
Section 5.01 DEFAULTS............................................58
Section 5.02 REMEDIES; NO REMEDY EXCLUSIVE.......................60
Section 5.03 WAIVERS.............................................60
ARTICLE VI
MISCELLANEOUS....................................................61
Section 6.01 AMENDMENTS, ETC.....................................61
Section 6.02 NOTICES.............................................61
Section 6.03 SEVERABILITY........................................63
Section 6.04 GOVERNING LAW.......................................64
Section 6.05 CONSENT TO JURISDICTION.............................64
Section 6.06 CONSENT OF THE NOTE INSURER.........................65
Section 6.07 COUNTERPARTS........................................65
Section 6.08 HEADINGS............................................65
Section 6.09 TRIAL BY JURY WAIVED................................65
Section 6.10 LIMITED LIABILITY...................................65
Section 6.11 ENTIRE AGREEMENT....................................66
Section 6.12 INDENTURE TRUSTEE...................................66
(ii)
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT (as may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of
November 30, 1999, by and among AMBAC ASSURANCE CORPORATION, as Note Insurer,
MERITAGE MORTGAGE CORPORATION, as Originator, RBMG, INC., as Servicer, OCWEN
FEDERAL BANK FSB, as Sub-Servicer, RBMG ASSET MANAGEMENT COMPANY, INC., as
Company, RBMG FUNDING CO., as Seller, RESIDENTIAL ASSET FUNDING CORPORATION, as
Sponsor, RBMG FUNDING CO. MORTGAGE LOAN TRUST 1999-2, as Issuer and BANKERS
TRUST COMPANY, as Indenture Trustee.
WHEREAS, the Indenture , dated as of November 1, 1999, relating to the
RBMG Funding Co. Mortgage Loan Trust 1999-2 Asset-Backed Notes, Series 1999-2,
between the Issuer and the Indenture Trustee (as may be amended, modified or
supplemented from time to time as set forth therein, the "Indenture") provides
for, among other things, the issuance of Notes representing indebtedness secured
by the Trust Fund established thereby;
WHEREAS, the Note Insurer has issued the Policy, pursuant to which it has
agreed to pay to the Indenture Trustee for the benefit of the Holders certain
payments in respect of the Notes;
WHEREAS, the Note Insurer shall be paid a Premium as set forth herein; and
WHEREAS, the Sponsor, the Servicer, the Sub-Servicer and the Seller and
the Company have undertaken certain obligations in consideration for the Note
Insurer's issuance of its Policy;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINED TERMS. Unless the context clearly requires otherwise,
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Indenture or the Policy described below. For
purposes of this Insurance Agreement, the following terms shall have the
following meanings:
"Business Day" means any day that is not a Saturday, Sunday or other day
on which commercial banking institutions in the State of New York, the State of
Nevada or the State of California or in the city in which the principal
corporate trust office of the Indenture Trustee is located, are authorized or
obligated by law or executive order to be closed.
"Cap Trigger Event" has the meaning given such term in the letter
agreement, dated November 30, 1999, between the Originator and the Note Insurer.
"Closing Date" means November 30, 1999.
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"Commission" means the Securities and Exchange Commission.
"Company" means RBMG Asset Management Company, Inc. in its capacity as
Company.
"Company Documents" means this Insurance Agreement, the Company Sale
Agreement, the Funding Co. Sale Agreement, the Sponsor Sale Agreement, the Trust
Agreement, the Notes, the Indenture, the Servicing Agreement, the Sub-Servicing
Agreement, the Guarantee and the Cap Agreement.
"Company Information" means all information with respect to the Offering
Document under the following headings: "Summary ," "Transaction Overview
,","Description of the Mortgage Pool," "Underwriting Standards," "RBMG,"
"Certain Prepayment and Yield Considerations" and "Servicing of the Mortgage
Loans." Company Information also means information with respect to the Offering
Document under the heading "Risk Factors," except for the subsections
"Book-entry registration may reduce the liquidity of the notes," "Potential
delays in receipt of payments on the notes," "An investment in the notes may be
an illiquid investment" and "Year 2000 issue may adversely affect the
distributions to noteholders," and "Description of the Notes," except for the
subsection "Book Entry Registration and Definitive Notes."
"Company Sale Agreement" means the Loan Sale Agreement, dated as of
November 1, 1999, between the Company and the Seller.
"Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"Event of Default" means any Event of Default specified in Section 5.01 of
this Insurance Agreement.
"Excess Cash" has the meaning given in the Indenture.
"Financial Statements" means, with respect to the Originator and the
Servicer, consolidated statements of financial condition as of December 31,
1996, 1997 and 1998 and the statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1998 and the notes thereto.
"Funding Co. Sale Agreement" means the Loan Sale Agreement, dated as of
November 1, 1999, between the Seller and the Sponsor.
"Guarantee" means the Guarantee, dated as of November 1, 1999, by Meritage
Mortgage Corporation, as Guarantor, in favor of the Sponsor, the Issuer and the
Indenture Trustee.
"Holder" has the meaning given such term in the Policy.
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"Indemnification Agreement" means the agreement dated as of November 18,
1999 between the Note Insurer and the Underwriter.
"Indenture" has the meaning given such term in the first recital hereof.
"Indenture Trustee" means Bankers Trust Company, a New York banking
corporation existing under the laws of the State of New York, as Indenture
Trustee under the Indenture, and its successors.
"Insurance Agreement" has the meaning given such term in the initial
paragraph hereof.
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Issuer" means RBMG Funding Co. Mortgage Loan Trust 1999-2 in its capacity
as Issuer.
"Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest publicly announced from time to time by Citibank, N.A. as
its prime or base lending rate (any change in such rate of interest to be
effective on the date such change is announced by Citibank, N.A.), plus 2% per
annum and (ii) the then applicable rate of interest on the Notes and (b) the
maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days.
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person on a consolidated basis with its subsidiaries or
(ii) the ability of such Person to perform its obligations, if any, under any of
the Company Documents.
"Monthly Loss Rate" means, with respect to any Payment Date, the fraction
expressed as a percentage, equal to (x) twelve times the sum of all Realized
Losses that occurred during the related Collection Period with respect to the
Mortgage Loans over (y) the Stated Principal Balance at the beginning of the
related Collection Period.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereto.
"Note Insurer" means Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance corporation, or any successor thereto, as issuer of the Policy.
"Note Insurer Information" has the meaning given such term in Section
3.04(a)(v).
"Notes" means the Class A-1 and Class A-2 Notes, each substantially in the
form of Exhibit A to the Indenture.
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"Offering Document" means the Prospectus Supplement, dated November 18,
1999, in respect of the Notes, and any amendment or supplement thereto, and any
other offering document in respect of the Notes prepared by the Sponsor that
makes reference to the Policy.
"Originator" means Meritage Mortgage Corporation in its capacity as
Originator.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).
"Policy" means the certificate guaranty insurance policy, #AB0322BE,
together with all endorsements thereto, issued by the Note Insurer to the
Indenture Trustee, for the benefit of the Holders of the Notes.
"Pool Delinquency Rate" means with respect to any Collection Period, the
fraction, expressed as a percentage, equal to (x) the aggregate Stated Principal
Balance of all Mortgage Loans 60 or more days delinquent (including, with
respect to all Mortgage Loans, all foreclosures and REO Properties) as of the
close of business on the last day of such Collection Period over (y) the Stated
Principal Balance of all Mortgage Loans.
"Premium" means the premium payable in accordance with the Policy.
"Premium Percentage" shall mean 0.23% per annum.
"Registration Statement" means the registration statement on Form S-3 (No.
333-81721), including the prospectus, relating to the Notes, at the time it
became effective.
"Required Overcollateralization Amount" means, as of any Payment Date, the
greatest of (a) (i) prior to the Stepdown Date 4.75% (or upon the occurrence of
a Cap Trigger Event, 5.50%) of the Aggregate Stated Principal Balance as of the
Cut-off Date or (ii) on or after the Stepdown Date 9.50% (or upon the occurrence
of a Cap Trigger Event, 11.00%) of the Aggregate Stated Principal Balance, (b)
the amount equal to the sum of the aggregate Stated Principal Balances of the
three largest Mortgage Loans and (c) the product of the (i) two and (ii) (1) 50%
of the sum of the aggregate Stated Principal Balances of the Mortgage Loans
which are 90 days or more delinquent (including all foreclosures and REO
Properties) minus (2) the product of (x) three and (y) the current monthly
Excess Spread; provided, however, the Required Overcollateralization Amount
shall increase to 7.00% of the Aggregate Stated Principal Balance as of the
Cut-off Date, prior to the Stepdown Date, or 14.00% of the current Aggregate
Stated Principal Balance, on or after the Stepdown Date, upon the occurrence of
a Trigger Event.
"Rolling Three Month Excess Spread" means, with respect to any Payment
Date, commencing with the fourth Payment Date, the percentage equal to the
average amount of Excess Cash for the immediately preceding three months.
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"Rolling Twelve Month Loss Rate" means, with respect to any Payment Date,
commencing on the twelfth Payment Date, the percentage equal to the average of
Monthly Loss Rates for the immediately preceding twelve months.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and any successor thereto.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Seller" means RBMG Funding Co. in its capacity as Seller.
"Servicer" means RBMG, Inc. in its capacity as Servicer.
"Servicer Termination Delinquency Rate Trigger" means as of any Payment
Date commencing with the seventh Payment Date, the fraction, expressed as a
percentage, equal to the average of the Pool Delinquency Rate for each of the
six immediately preceding Collection Periods with respect to the Mortgage Loans
exceeds 10.25%.
"Servicer Termination Loss Trigger" means, with respect to any Payment
Date, upon the occurrence of the Rolling Twelve Month Loss Rate exceeding 1.25%.
"Servicing Agreement" means the Servicing Agreement, dated as of November
1, 1999, among the Servicer, the Indenture Trustee and the Issuer.
"Sponsor" means Residential Asset Funding Corporation in its capacity as
Sponsor.
"Sponsor Information" has the meaning given such term in Section
3.06(a)(iv).
"Sponsor Sale Agreement" means the Loan Sale Agreement, dated as of
November 1, 1999, between the Sponsor and the Issuer.
"Stepdown Date" means the 36th Payment Date.
"Sub-Servicer" means Ocwen Federal Bank FSB, a national banking
association existing under the laws of the United States of America, in its
capacity as Sub-Servicer.
"Sub-Servicer Information" has the meaning given such term in Section
3.05(a)(iv).
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"Sub-Servicing Agreement" means the Sub-Servicing Agreement, dated as of
November 1, 1999, between the Servicer and the Sub-Servicer.
"Transaction" means the transactions contemplated by the Company
Documents, including the transactions described in the Offering Document.
"Trigger Event" means the occurrence of both (i) the Rolling Three Month
Excess Spread is less than 2.00% and (ii) the fixed-rate Mortgage Loans exceed
30% of the current Aggregate Stated Principal Balance.
"Trust Fund" means the trust created pursuant to the Trust Agreement.
"Trust Agreement" means the Trust Agreement dated as of November 1, 1999,
among the Sponsor, the Owner Trustee and Bankers Trust Company, as trust paying
agent.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underwriter" means First Union Securities, Inc.
"Underwriting Agreement" means the Underwriting Agreement dated as of
November 18, 1999 among the Underwriter and the Sponsor with respect to the
offer and sale of the Notes, as may be amended, modified or supplemented from
time to time.
"Underwriter Information" has the meaning given such term in the
Indemnification Agreement.
Section 1.02 OTHER DEFINITIONAL PROVISIONS. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Insurance
Agreement shall refer to this Insurance Agreement as a whole and not to any
particular provision of this Insurance Agreement, and Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01 REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR, THE
SERVICER, THE COMPANY AND THE SELLER. The Originator, the Servicer, the Company
and the Seller represent and warrant (each with respect to itself only) as of
the Closing Date as follows:
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(a) DUE ORGANIZATION AND QUALIFICATION.
(i) In the case of the Originator, it is a corporation, duly
organized, validly existing and in good standing under the laws of
Oregon. It is duly qualified to do business, is in good standing and
has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as described
in the Offering Document and the performance of its obligations
under the Company Documents in each jurisdiction in which the
failure to obtain such approvals would render any Company Document
unenforceable in any respect or would have a material adverse effect
upon the Transaction.
(ii) In the case of the Servicer, it is a corporation, duly
organized, validly existing and in good standing under the laws of
Delaware. It is duly qualified to do business, is in good standing
and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as described
in the Offering Document and the performance of its obligations
under the Company Documents in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would render
any Company Document unenforceable in any respect or would have a
material adverse effect upon the Transaction.
(iii) In the case of the Company, it is a corporation, duly
organized, validly existing and in good standing under the laws of
Nevada. It is duly qualified to do business, is in good standing and
has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as described
in the Offering Document and the performance of its obligations
under the Company Documents in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would render
any Company Document unenforceable in any respect or would have a
material adverse effect upon the Transaction.
(iv) In the case of the Seller, it is a corporation, duly
organized, validly existing and in good standing under the laws of
Nevada. It is duly qualified to do business, is in good standing and
has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as described
in the Offering Document and the performance of its obligations
under the Company Documents in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would render
any Company Document unenforceable in any respect or would have a
material adverse effect upon the Transaction.
(b) POWER AND AUTHORITY.
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(i) The Originator has full right, power and authority to
conduct its business as currently conducted and as described in the
Offering Document, to enter into, execute, deliver and perform its
obligations under the Company Documents and to consummate the
Transaction.
(ii) The Servicer has all necessary corporate power and
authority to conduct its business as currently conducted and as
described in the Offering Document, to enter into, execute, deliver
and perform its obligations under the Company Documents and to
consummate the Transaction.
(iii) The Company has all necessary corporate power and
authority to conduct its business as currently conducted and as
described in the Offering Document, to enter into, execute, deliver
and perform its obligations under the Company Documents and to
consummate the Transaction.
(iv) The Seller has all necessary corporate power and
authority to conduct its business as currently conducted and as
described in the Offering Document, to enter into, execute, deliver
and perform its obligations under the Company Documents and to
consummate the Transaction.
(c) DUE AUTHORIZATION.
(i) The execution, delivery and performance of the Company
Documents by the Originator has been duly authorized by all
necessary actions and does not require any additional approvals or
consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders
of the Originator, which have not previously been obtained or given
by the Originator.
(ii) The execution, delivery and performance of the Company
Documents by the Servicer has been duly authorized by all necessary
corporate action and does not require any additional approvals or
consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders
of the Servicer, which have not previously been obtained or given by
the Servicer.
(iii) The execution, delivery and performance of the Company
Documents by the Company has been duly authorized by all necessary
corporate action and does not require any additional approvals or
consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders
of the Company, which have not previously been obtained or given by
the Company.
(iv) The execution, delivery and performance of the Company
Documents by the Servicer has been duly authorized by all necessary
corporate action and does
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not require any additional approvals or consents, or other action by
or any notice to or filing with any Person, including any
governmental entity or any of the stockholders of the Servicer,
which have not previously been obtained or given by the Servicer.
(d) NONCONTRAVENTION. The execution and delivery by the Originator,
the Servicer, the Company and the Seller of the Company Documents to which
any is a party, the consummation of the Transaction and the satisfaction
of the terms and conditions of the Company Documents do not and will not:
(i) conflict with or result in any breach or violation of any
provision of the charter or bylaws of the Originator, the Servicer,
the Company or the Seller or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Originator, the Servicer, the
Company or the Seller or any of its respective material properties,
including regulations issued by any administrative agency or other
governmental authority having supervisory powers over the
Originator, the Servicer, the Company or the Seller;
(ii) constitute a default by the Originator, the Servicer, the
Company or the Seller under, result in the acceleration of any
obligation under, or breach any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which the
Originator, the Servicer, the Company or the Seller either is a
party or by which any of their properties are or may be bound or
affected; or
(iii) result in or require the creation of any lien upon or in
respect of any assets of the Originator, the Servicer, the Company
or the Seller, except as contemplated by the Company Documents;
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Originator, the Servicer,
the Company or the Seller, any of their subsidiaries, any properties or
rights of any of the Originator, the Servicer, the Company or the Seller
or any of their subsidiaries or any of the Mortgage Loans pending or, to
the Originator's, the Servicer's, the Company's or the Seller's knowledge
after reasonable inquiry, threatened, which, in any case, if decided
adversely to the Originator, the Servicer, the Company or the Seller or
any such subsidiary could result in a Material Adverse Change with respect
to the Originator, the Servicer, the Company or the Seller, respectively.
(f) VALID AND BINDING OBLIGATIONS. The Company Documents (other than
the Notes), when executed and delivered by the Sponsor, the Originator,
the Servicer, the Company and the Seller, will constitute the legal, valid
and binding obligations of the Originator, the Servicer, the Company and
the Seller, enforceable in accordance with their respective terms, except
as such enforceability may be limited by insolvency, reorganization,
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moratorium or other similar laws affecting creditors' rights generally and
general equitable principles and public policy considerations as to rights
of indemnification for violations of federal securities laws. The Notes,
when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the
benefits of the Indenture. The Originator, the Servicer, the Company and
the Seller will not at any time in the future deny that the Company
Documents constitute the legal, valid and binding obligations of the
Originator, the Servicer, the Company and the Seller, respectively.
(g) FINANCIAL INFORMATION. The Financial Statements of the
Originator and the Servicer, copies of which have been furnished to the
Note Insurer, (i) present fairly in all material respects the financial
condition and results of operations of the Originator, the Servicer, the
Company and the Seller as of the dates and for the periods indicated and
(ii) have been prepared in accordance with regulatory accounting
principles applicable to a national banking association consistently
applied, except as noted therein (subject as to interim statements to
normal year-end adjustments). Since the date of the most recent Financial
Statements with respect to the Originator and the Servicer, there has been
no Material Adverse Change in respect of the Originator and the Servicer.
Except as disclosed in the Financial Statements, the Originator and the
Servicer are not subject to any contingent liabilities or commitments
that, individually or in the aggregate, have a material possibility of
causing a Material Adverse Change in respect of the Originator or the
Servicer.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Originator, the Servicer, the
Company or the Seller in the conduct of its business violates any law,
regulation, judgment, agreement, order or decree applicable to the
Originator, the Servicer, the Company or the Seller, respectively, that,
if enforced, could result in a Material Adverse Change with respect to the
Originator, the Servicer, the Company or the Seller.
(i) TAXES. Each of the Originator, the Servicer, the Company and the
Seller have filed or have participated in the filing of a consolidated
filing with their parent corporation prior to the date hereof all federal
and state tax returns that are required to be filed prior to the date
hereof and has paid or made provisions for the payment of all taxes to the
extent that such taxes have become due other than (i) taxes or other
charges which are not yet delinquent or are being contested in good faith
and have not been finally determined or (ii) information returns, tax
returns, taxes or other governmental charges, the failure to file, pay or
make provisions for, either individually or in the aggregate, are not
likely in the reasonable judgment of the Originator, the Servicer, the
Company or the Seller, as applicable, to constitute a Material Adverse
Change on the Originator, the Servicer, the Company or the Seller. Any
taxes, fees and other governmental charges payable by the Originator, the
Servicer, the Company or the Seller in connection with the Transaction,
the execution and delivery of the Company Documents and the issuance of
the Notes have been paid or shall have been paid at or prior to the
Closing Date.
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(j) ACCURACY OF INFORMATION. Neither the Company Documents nor other
information relating to the Mortgage Loans, the operations of the
Originator, the Servicer, the Company or the Seller or the financial
condition of the Originator, the Servicer, the Company or the Seller
(collectively, the "Documents"), as amended, supplemented or superseded,
furnished to the Note Insurer by the Originator, the Servicer, the Company
or the Seller contains any statement of a material fact which was untrue
or misleading in any material respect when made. None of the Originator,
the Servicer, the Company or the Seller has knowledge of any circumstances
that could reasonably be expected to cause a Material Adverse Change with
respect to the Originator, the Servicer, the Company or the Seller. Since
the furnishing of the Documents, there has been no change nor any
development or event involving a prospective change known to the
Originator, the Servicer, the Company or the Seller that would render any
of the Documents untrue or misleading in any material respect.
(k) COMPLIANCE WITH SECURITIES LAWS. The offer and sale of the Notes
comply in all material respects with all requirements of law, including
all registration requirements of applicable federal securities laws.
Without limiting the foregoing, the Offering Document does not contain any
untrue statement of a material fact and does not omit to state a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to the Note Insurer
Information, with respect to the Sponsor Information or with respect to
the Underwriter Information. The Servicing Agreement, the Sub-Servicing
Agreement, the Company Sale Agreement, the Funding Co. Sale Agreement, and
the Sponsor Sale Agreement is not, and the Indenture is, required to be
qualified under the Trust Indenture Act and the Trust Fund is not required
to be registered as an "investment company" under the Investment Company
Act.
(l) COMPANY DOCUMENTS. Each of the representations and warranties of
the Originator, the Servicer, the Company and the Seller contained in the
Company Documents is true and correct in all material respects and the
Originator, the Servicer, the Company and the Seller hereby make each such
representation and warranty to, and for the benefit of, the Note Insurer
as if the same were set forth in full herein.
(m) SOLVENCY; FRAUDULENT CONVEYANCE. The Originator, the Servicer,
the Company and the Seller are each solvent and will not be rendered
insolvent by the Transaction and, after giving effect to the Transaction,
none of the Originator, the Servicer, the Company or the Seller will be
left with less than applicable regulatory capital requirements with which
to engage in its business, and the Originator, the Servicer, the Company
and the Seller do not intend to incur, or believe that it has incurred,
debts beyond its ability to pay as they mature. The Originator, the
Servicer, the Company and the Seller do not contemplate the commencement
of insolvency, liquidation or consolidation proceedings or the appointment
of a receiver, liquidator, conservator, trustee or similar official in
respect of the Originator, the Servicer, the Company or the Seller or any
of their respective assets. The
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amount of consideration being received by the Company and Seller, upon the
sale of the Mortgage Loans constitutes reasonably equivalent value and
fair consideration for the interest in the Mortgage Loans backing the RBMG
Funding Co. Mortgage Loan Trust 1999-2, Asset-Backed Certificates, Series
1999-2.
(n) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Originator is Lake Oswego, Oregon.
(o) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Servicer is Columbia, South Carolina.
(p) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Company is Las Vegas, Nevada.
(q) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Seller is Las Vegas, Nevada.
Section 2.02 AFFIRMATIVE COVENANTS OF THE ORIGINATOR, THE SERVICER, THE
COMPANY AND THE SELLER. The Originator, the Servicer, the Company and the Seller
hereby agree that during the term of this Insurance Agreement, unless the Note
Insurer shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each of the
Originator, the Servicer, the Company and the Seller shall comply with the
terms and conditions of and perform its respective obligations under the
Company Documents to which it is a party in all cases in which failure to
so comply or perform would result in a default thereunder and shall comply
with all material requirements of any law, rule or regulation applicable
to it.
(b) CORPORATE EXISTENCE.
(i) Subject to Section 2.03(c) hereof, each of the Originator,
the Servicer, the Company and the Seller and its successors and
permitted assigns shall maintain its corporate existence and shall
at all times continue to be duly organized under the laws of the
state of its incorporation or another state and duly qualified and
duly authorized (as described in subsections 2.01(a), (b) and (c)
hereof) and shall conduct its business in accordance with the terms
of its charter and bylaws.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
Each of the Originator, the Servicer, the Company and the Seller shall
keep or cause to be kept in reasonable detail books and records of account
of its assets and business, including books and records relating to the
Transaction. The Seller shall clearly reflect in its books and records the
transfer of the Mortgage Loans to the Trust Fund as a sale of the Seller's
interest in the Mortgage Loans. The Originator, the Servicer, the Company
and the Seller shall furnish or cause to be furnished to the Note Insurer:
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(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 120 days after the close of each fiscal year of the
Originator and the Servicer, the audited consolidated statement of
financial condition of Resource Bancshares Mortgage Group, Inc. (the
"Parent") and its consolidated subsidiaries, including the
Originator and the Servicer, as of the end of such fiscal year and
the related audited consolidated statements of income, retained
earnings and cash flows for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures for
the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by the audit
opinion of the Parent's independent accountants (which shall be a
nationally recognized independent public accounting firm or
otherwise acceptable to the Note Insurer) and by the certificate
specified in Section 2.02(d).
(ii) QUARTERLY FINANCIAL STATEMENTS. (A) Upon the reasonable
request of the Note Insurer following any Material Adverse Change of
the Originator or the Servicer or the reasonable belief of the Note
Insurer that a Material Adverse Change of the Originator or the
Servicer has occurred, as soon as available, and (B) in any event
within 60 days after the close of each of the first three quarters
of each fiscal year of the Originator or the Servicer, the unaudited
consolidated statement of financial condition of the Parent,
including the Originator and the Servicer, and its consolidated
subsidiaries as of the end of such quarter, and the related
unaudited consolidated statements of income, retained earnings and
cash flows for the portion of the fiscal year the ended, all in
reasonable and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting
principles, consistently applied (subject to normal year-end
adjustments), and accompanied by the certificate specified in
Section 2.02(d).
(iii) INITIAL REPORT. On or before the Closing Date, a copy of
the electronic report to be delivered to the Indenture Trustee on
the Closing Date setting forth as to each Mortgage Loan, the
information required under the definition of "Mortgage Loan
Schedule" at Section 1.01 of the Servicing Agreement.
(iv) CERTAIN INFORMATION. Upon the reasonable request of the
Note Insurer, copies of any requested proxy statements, financial
statements, reports and registration statements that the Originator,
the Servicer, the Company or the Seller file with, or deliver to,
the Commission or any national securities exchange.
(v) OTHER INFORMATION. (A) Promptly upon receipt thereof,
copies of all schedules, financial statements or other similar
reports delivered to or by the Originator, the Servicer, the Company
and the Seller, pursuant to the terms of the Servicing Agreement,
the Company Sale Agreement or the Funding Co. Sale
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Agreement, (B) promptly upon request, such other data as the Note
Insurer may reasonably request and (C) all information required to
be furnished to the Indenture Trustee or to the Holders of the Notes
simultaneously with the furnishing thereof to the Indenture Trustee
or the Holders of the Notes, as the case may be.
(d) COMPLIANCE CERTIFICATE. The Originator and the Servicer shall
deliver to the Note Insurer, at the time that the delivery of the
financial statements of the Originator and the Servicer are required
pursuant to subsection 2.02(c)(i) and (ii) certificates of one (or more)
of its officers stating that:
(i) a review of the performance of the Originator or the
Servicer, as applicable, under the Company Documents to which it is
a party during such period has been made under such officer's
supervision;
(ii) to the best of such officer's knowledge following
reasonable inquiry, no Default or Event of Default has occurred, or
if a Default or Event of Default has occurred, specifying the nature
thereof and, if the Originator or the Servicer has a right to cure
pursuant to Section 5.01, stating in reasonable detail (including,
if applicable, any supporting calculations) the steps, if any, being
taken by the Originator or the Servicer to cure such Default or
Event of Default or to otherwise comply with the terms of the
agreement to which such Default or Event of Default relates;
(iii) the attached financial statements submitted in
accordance with subsection 2.02(c)(i) or (ii), if applicable,
present fairly in all material respects the financial condition and
results of operations of the Parent and its consolidated
subsidiaries, including the Originator and the Servicer, as of the
dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments); and
(iv) the Servicer has in full force and effect a fidelity bond
(or direct surety bond) and an errors and omissions policy in
accordance with the terms and requirements of Section 2.13 of the
Servicing Agreement.
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Originator, the Servicer, the Company and the Seller shall, upon the
reasonable request of the Note Insurer, permit the Note Insurer or its
authorized agents:
(i) to inspect the books and records of the Originator, the
Servicer, the Company and the Seller as they may relate to the Notes
(other than the names of Mortgagors and strategic plans which are
unrelated to the Notes), the obligations of
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the Originator, the Servicer, the Company and the Seller under the
Company Documents and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Originator, the Servicer, the Company and the Seller with the Chief
Operating Officer and the Chief Financial Officer of the Originator,
the Servicer, the Company and the Seller; and
(iii) with the Originator's, the Servicer's, the Company's and
the Seller's consent, which consent shall not be unreasonably
withheld or delayed, to discuss the affairs, finances and accounts
of the Originator, the Servicer, the Company and the Seller with the
Originator, the Servicer, the Company and the Seller and the
independent accountants of the Originator, the Servicer, the Company
and the Seller, provided that an officer of the Originator, the
Servicer, the Company and the Seller, as applicable, shall have the
right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Originator, the Servicer, the Company or the Seller, as the case may be.
The Note Insurer agrees that it and its shareholders, directors,
agents, accountants and attorneys shall keep confidential any matter of
which it becomes aware through such inspections or discussions (unless
readily available from public sources), except as may be otherwise
required by regulation, law or court order or requested by appropriate
governmental authorities or as necessary to preserve its rights or
security under or to enforce the Company Documents, provided that the
foregoing shall not limit the right of the Note Insurer to make such
information available to its regulators, securities rating agencies,
reinsurers, credit and liquidity providers, counsel and accountants.
(f) NOTICE OF MATERIAL EVENTS. The Originator, the Servicer, the
Company and the Seller shall be obligated promptly to inform the Note
Insurer in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or
against the Originator, the Servicer, the Company or the Seller that
would likely result in a Material Adverse Change with respect to the
Originator, the Servicer, the Company or the Seller, or the
promulgation of any proceeding or any proposed or final rule which
would likely result in a Material Adverse Change with respect to the
Originator, the Servicer, the Company or the Seller;
(ii) any change in the location of the principal office of the
Originator, the Servicer, the Company and the Seller;
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(iii) the occurrence of any Default or Event of Default
involving the Originator, the Servicer, the Company or the Seller or
any Material Adverse Change in respect of the Originator, the
Servicer, the Company or the Seller;
(iv) the commencement of any proceedings by or against the
Originator, the Servicer, the Company or the Seller under any
applicable reorganization, liquidation, rehabilitation, insolvency
or other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, conservator, Indenture Trustee or
similar official shall have been, or may be, appointed or requested
for the Originator, the Servicer, the Company or the Seller or any
of their assets; or
(v) the receipt of notice that (A) any license, permit,
charter, registration or approval necessary for the conduct of the
Originator's, the Servicer's, the Company's or the Seller's business
is to be, or may be suspended or revoked or (B) the Originator, the
Servicer, the Company or the Seller is to cease and desist any
practice, procedure or policy employed by the Originator, the
Servicer, the Company or the Seller in the conduct of its business,
but only if such suspension, revocation or cessation may result in a
Material Adverse Change with respect to the Originator, the
Servicer, the Company or the Seller.
(g) FINANCING STATEMENTS AND FURTHER ASSURANCES. The Originator, the
Servicer, the Company or the Seller will cause to be filed all necessary
financing statements or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed
in such manner and in such places as may be required by law to preserve
and protect fully the interest of the Indenture Trustee in the Trust Fund.
The Originator, the Servicer, the Company and the Seller shall, upon the
request of the Note Insurer, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, within ten
days of such request, such amendments hereto and such further instruments
and take such further action as may be reasonably necessary to effectuate
the intention, performance and provisions of the Company Documents. In
addition, the Originator, the Servicer, the Company and the Seller agree
to cooperate with S&P and Moody's in connection with any review of the
Transaction that may be undertaken by S&P and Moody's after the date
hereof.
(h) MAINTENANCE OF LICENSES. The Originator, the Servicer, the
Company and the Seller and any successors thereof shall maintain all
licenses, permits, charters and registrations which are material to the
conduct of their business.
(i) RETIREMENT OF NOTES. The Originator, the Servicer, the Company
and the Seller shall instruct the Indenture Trustee, upon a retirement or
other payment of all of the Notes, to surrender the Policy to the Note
Insurer for cancellation.
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(j) DISCLOSURE DOCUMENT. Each Offering Document delivered with
respect to the Notes shall clearly disclose that (i) the Policy is not
covered by the property/casualty insurance certificate fund specified in
Article 76 of the New York Insurance Law and (ii) in the event that the
Note Insurer were to become insolvent, any claims arising under the Policy
would be excluded from coverage by the California Insurance Guaranty
Association, established pursuant to the laws of the State of California.
(k) THIRD-PARTY BENEFICIARY. The Originator, the Servicer, the
Company and the Seller agree that the Note Insurer shall have all rights
of a third-party beneficiary in respect of the Servicing Agreement, the
Company Sale Agreement and the Funding Co. Sale Agreement and hereby
incorporates and restates its representations, warranties and covenants as
set forth therein for the benefit of the Note Insurer; provided that the
remedy for any breach of a representation and warranty of the Originator,
the Servicer, the Company and the Seller in Section 8.07(a) of the
Indenture and the remedy with respect to any defective Mortgage Loans
under Section 8.07(a) of the Indenture shall be limited to the remedies
specified in the Indenture.
(l) SERVICING OF MORTGAGE LOANS. All Mortgage Loans will be serviced
in compliance with the Servicing Agreement and the Sub-Servicing
Agreement.
(m) CLOSING DOCUMENTS. The Originator, the Servicer, the Company and
the Seller shall provide or cause to be provided to the Note Insurer an
executed original copy of each document executed in connection with the
Transaction within 30 Business Days after the date of closing.
(n) NOTE ACCOUNT. For so long as RBMG, Inc. is the Servicer, monies
on deposit in the Note Account shall be invested in Permitted Investments
maturing as provided in the Servicing Agreement.
(o) DUE DILIGENCE. The Note Insurer shall have the right, so long as
any Notes remain outstanding, to conduct an ongoing review of the
Servicer's practices as Servicer through reviews of the Mortgage Loans,
"drive-by" reappraisals of Mortgaged Properties and reviews of servicing
practices. Such ongoing due diligence shall be conducted at the expense of
the Note Insurer and in a reasonable manner convenient to the Servicer and
the Note Insurer.
Section 2.03 NEGATIVE COVENANTS OF THE ORIGINATOR, THE SERVICER, THE
COMPANY AND THE SELLER. The Originator, the Servicer, the Company and the Seller
hereby agree that during the term of this Insurance Agreement, unless the Note
Insurer shall otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Originator, the Servicer, the Company
and the Seller shall not take any action, or fail to take any action, if
such action or failure to take action may result in a Material Adverse
Change specified in clause (ii) of the definition of
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Material Adverse Change with respect to the Originator, the Servicer, the
Company or the Seller, respectively, or may not interfere with the
enforcement of any rights of the Note Insurer under or with respect to any
of the Company Documents. The Originator, the Servicer, the Company and
the Seller shall give the Note Insurer written notice of any such action
or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure
to act or (ii) promptly prior to the date of consummation of such action
or failure to act. The Originator, the Servicer, the Company and the
Seller shall furnish to the Note Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.
(b) AMENDMENTS, ETC. The Originator, the Servicer, the Company and
the Seller shall not modify or amend, or consent to any modification or
amendment of, any of the terms, provisions or conditions of the Company
Documents to which it is a party without the prior written consent of the
Note Insurer thereto, but excluding any amendment to the Offering Document
required by law and excluding any modifications or amendments to which
Note Insurer's consent is not required by the terms of the related Company
Documents.
(c) LIMITATION ON MERGERS, ETC. The Originator, the Servicer, the
Company and the Seller shall not consolidate with or merge with or into
any Person or transfer all or substantially all of its assets to any
Person or liquidate or dissolve except as provided in the Servicing
Agreement and the Indenture or as permitted hereby. The Originator, the
Servicer, the Company and the Seller shall furnish to the Note Insurer all
information requested by it that is reasonably necessary to determine
compliance with this paragraph.
(d) SUCCESSORS. None of the Indenture Trustee, the Originator, the
Servicer, the Company or the Seller shall terminate or designate, or
consent to the termination or designation of, any successor Servicer,
Custodian or Indenture Trustee without the prior written approval of the
Note Insurer, which approval shall not be unreasonably withheld,
conditioned or delayed.
Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE SUB-SERVICER. The
Sub-Servicer represents and warrants as of the Closing Date as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Sub-Servicer is duly
organized, validly existing and in good standing as a federal savings bank
under the laws of the United States. It is duly qualified to do business,
is in good standing and has obtained all necessary licenses, permits,
charters, registrations and approvals (together, "approvals") necessary
for the conduct of its business as currently conducted and as described in
the Offering Document and the performance of its obligations under the
Company Documents in each jurisdiction in which the failure to obtain such
approvals would render any Company Document unenforceable in any respect
or would have a material adverse effect upon the Transaction.
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(b) POWER AND AUTHORITY. The Sub-Servicer has all necessary
corporate power and authority to conduct its business as currently
conducted and as described in the Offering Document, to enter into,
execute, deliver and perform its obligations under the Company Documents
and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
the Company Documents by the Sub-Servicer has been duly authorized by all
necessary corporate action and does not require any additional approvals
or consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders of
the Sub-Servicer, which have not previously been obtained or given by the
Sub-Servicer.
(d) NONCONTRAVENTION. The execution and delivery by the Sub-Servicer
of the Company Documents to which any is a party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the
Company Documents do not and will not:
(i) conflict with or result in any breach or violation of any
provision of the charter or bylaws of the Sub-Servicer or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Sub-Servicer or any of its respective material properties,
including regulations issued by any administrative agency or other
governmental authority having supervisory powers over the
Sub-Servicer;
(ii) constitute a default by the Sub-Servicer under, result in
the acceleration of any obligation under, or breach any provision of
any loan agreement, mortgage, indenture or other agreement or
instrument to which the Sub-Servicer either is a party or by which
any of their properties are or may be bound or affected; or
(iii) result in or require the creation of any lien upon or in
respect of any assets of the Sub-Servicer, except as otherwise
expressly contemplated by the Company Documents;
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Sub-Servicer, any of their
subsidiaries, any properties or rights of any of the Sub-Servicer or any
of their subsidiaries or any of the Mortgage Loans pending or, to the
Sub-Servicer's knowledge after reasonable inquiry, threatened, which, in
any case, if decided adversely to the Sub-Servicer or any such subsidiary
could result in a Material Adverse Change with respect to the
Sub-Servicer.
(f) VALID AND BINDING OBLIGATIONS. The Company Documents (other than
the Notes), when executed and delivered by the Sub-Servicer, will
constitute the legal, valid and binding obligations of the Sub-Servicer,
enforceable in accordance with their respective terms,
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except as such enforceability may be limited by insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles and public policy
considerations as to rights of indemnification for violations of federal
securities laws. The Notes, when executed, authenticated and delivered in
accordance with the Indenture, will be validly issued and outstanding and
entitled to the benefits of the Indenture. The Sub-Servicer will not at
any time in the future deny that the Company Documents constitute the
legal, valid and binding obligations of the Sub-Servicer.
(g) FINANCIAL INFORMATION. The Financial Statements of the
Sub-Servicer, copies of which have been furnished to the Note Insurer, (i)
present fairly in all material respects the financial condition and
results of operations of the Sub-Servicer as of the dates and for the
periods indicated and (ii) have been prepared in accordance with
regulatory accounting principles applicable to a national banking
association consistently applied, except as noted therein (subject as to
interim statements to normal year-end adjustments). Since the date of the
most recent Financial Statements with respect to the Sub-Servicer, there
has been no Material Adverse Change in respect of the Sub-Servicer. Except
as disclosed in the Financial Statements, the Sub-Servicer are not subject
to any contingent liabilities or commitments that, individually or in the
aggregate, have a material possibility of causing a Material Adverse
Change in respect of the Sub-Servicer.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Sub-Servicer in the conduct
of its business violates any law, regulation, judgment, agreement, order
or decree applicable to the Sub-Servicer that, if enforced, could result
in a Material Adverse Change with respect to the Sub-Servicer.
(i) TAXES. The Sub-Servicer has filed or has participated in the
filing of a consolidated filing with their parent corporation prior to the
date hereof all federal and state tax returns that are required to be
filed prior to the date hereof and has paid or made provisions for the
payment of all taxes to the extent that such taxes have become due other
than (i) taxes or other charges which are not yet delinquent or are being
contested in good faith and have not been finally determined or (ii)
information returns, tax returns, taxes or other governmental charges, the
failure to file, pay or make provisions for, either individually or in the
aggregate, are not likely in the reasonable judgment of the Sub-Servicer,
as applicable, to constitute a Material Adverse Change on the
Sub-Servicer.
(j) ACCURACY OF INFORMATION. Neither the Company Documents nor other
information relating to the Mortgage Loans, the operations of the
Sub-Servicer or the financial condition of the Sub-Servicer (collectively,
the "Sub-Servicer Documents"), as amended, supplemented or superseded,
furnished to the Note Insurer by the Sub-Servicer contains any statement
of a material fact which was untrue or misleading in any material respect
when made. The Sub-Servicer has no knowledge of any circumstances that
could reasonably be expected to cause a Material Adverse Change with
respect to the Sub-Servicer. Since the furnishing of the Sub-Servicer
Documents, there has been no change nor any
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development or event involving a prospective change known to the
Sub-Servicer that would render any of the Sub-Servicer Documents untrue or
misleading in any material respect.
(k) COMPANY DOCUMENTS. The representations of the Sub-Servicer
contained in the Company Documents are true and correct in all material
respects and the Sub-Servicer hereby make each such representation and
warranty to, and for the benefit of, the Note Insurer as if the same were
set forth in full herein; provided that the remedy for any breach of a
representation and warranty of the Sub-Servicer in Section 2.3 of the
Sub-Servicing Agreement and the remedy with respect to any defective
Mortgage Loans under Section 2.3 of the Sub-Servicing Agreement shall be
limited to the remedies specified in the Sub-Servicing Agreement.
(l) SOLVENCY; FRAUDULENT CONVEYANCE. The Sub-Servicer is solvent and
will not be rendered insolvent by the Transaction and, after giving effect
to the Transaction, the Sub-Servicer will not be left with less than
applicable regulatory capital requirements with which to engage in its
business, and the Sub-Servicer does not intend to incur, or believe that
it has incurred, debts beyond its ability to pay as they mature. The
Sub-Servicer does not contemplate the commencement of insolvency,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the
Sub-Servicer or any of its respective assets.
(m) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Sub-Servicer is West Palm Beach, Florida.
Section 2.05 AFFIRMATIVE COVENANTS OF THE SUB-SERVICER. The Sub-Servicer
hereby agrees that during the term of this Insurance Agreement, unless the Note
Insurer shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Sub-Servicer
shall comply with the terms and conditions of and perform its respective
obligations under the Company Documents to which it is a party in all
cases in which failure to so comply or perform would result in a default
thereunder and shall comply with all material requirements of any law,
rule or regulation applicable to it.
(b) CORPORATE EXISTENCE. Subject to Section 2.06(c) hereof, the
Sub-Servicer and its successors and permitted assigns shall maintain its
corporate existence and shall at all times continue to be duly organized
under the laws of the United States and duly qualified and duly authorized
(as described in subsections 2.04(a), (b) and (c) hereof) and shall
conduct its business in accordance with the terms of its charter and
bylaws.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Sub-Servicer shall keep or cause to be kept in reasonable detail books
and records of account of its assets and business, including books and
records relating to the Transaction. The Sub-
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Servicer shall furnish or cause to be furnished to the Note Insurer,
within 30 days of receipt of written request of the Note Insurer:
(i) ANNUAL FINANCIAL STATEMENTS. The audited consolidated
statement of financial condition of the Sub-Servicer and their
respective consolidated subsidiaries as of the end of a fiscal year
and the related audited consolidated statements of operations,
stockholders' equity and cash flows for such fiscal year, all in
reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the preceding
fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the
audit opinion of the Sub-Servicer's independent accountants (which
shall be a nationally recognized independent public accounting firm
or otherwise acceptable to the Note Insurer) and by the certificate
specified in Section 2.05(d).
(ii) QUARTERLY FINANCIAL STATEMENTS. (A) Upon the reasonable
request of the Note Insurer following any Material Adverse Change of
the Sub-Servicer or the reasonable belief of the Note Insurer that a
Material Adverse Change of the Sub-Servicer has occurred, as soon as
available, and (B) in any event within 60 days after the close of
each of the first three quarters of each fiscal year of the
Sub-Servicer, the unaudited consolidated statement of financial
condition of the Sub-Servicer and its respective consolidated
subsidiaries as of the end of such quarter, and the related
unaudited consolidated statements of operations, stockholders'
equity and cash flows for the portion of the fiscal year the ended,
all in reasonable and stating in comparative form the respective
figures for the corresponding date and period in the preceding
fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied (subject to normal
year-end adjustments), and accompanied by the certificate specified
in Section 2.05(d).
(iii) CERTAIN INFORMATION. Upon the reasonable request of the
Note Insurer, copies of any requested proxy statements, financial
statements, reports and registration statements that the
Sub-Servicer files with, or delivers to, the Commission or any
national securities exchange.
(iv) OTHER INFORMATION. (A) Promptly upon receipt thereof,
copies of all schedules, financial statements or other similar
reports delivered to or by the Sub-Servicer, pursuant to the terms
of the Sub-Servicing Agreement, (B) promptly upon request, such
other data as the Note Insurer may reasonably request and (C) all
information required to be furnished to the Indenture Trustee or to
the Holders of the Notes simultaneously with the furnishing thereof
to the Indenture Trustee or the Holders of the Notes, as the case
may be.
(d) COMPLIANCE CERTIFICATE. The Sub-Servicer shall deliver to the
Note Insurer, at the time that the delivery of the financial statements of
the Sub-Servicer are required
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pursuant to subsection 2.05(c)(i) and (ii) certificates of one (or more)
of its officers stating that:
(i) a review of the performance of the Sub-Servicer, as
applicable, under the Company Documents to which it is a party
during such period has been made under such officer's supervision;
(ii) to the best of such officer's knowledge following
reasonable inquiry, no Default or Event of Default has occurred, or
if a Default or Event of Default has occurred, specifying the nature
thereof and, if the Sub-Servicer has a right to cure pursuant to
Section 5.01, stating in reasonable detail (including, if
applicable, any supporting calculations) the steps, if any, being
taken by the Sub-Servicer to cure such Default or Event of Default
or to otherwise comply with the terms of the agreement to which such
Default or Event of Default relates; and
(iii) the attached financial statements submitted in
accordance with subsection 2.05(c)(i) or (ii), if applicable,
present fairly in all material respects the financial condition and
results of operations of the Sub-Servicer as of the dates and for
the periods indicated, in accordance with regulatory accounting
principles consistently applied (subject as to interim statements to
normal year-end adjustments).
(iv) the Sub-Servicer has in full force and effect a fidelity
bond (or direct surety bond) and an errors and omissions policy in
accordance with the terms and requirements of Section 3.5 of the
Sub-Servicing Agreement.
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Sub-Servicer shall, upon the reasonable request of the Note Insurer,
permit the Note Insurer or its authorized agents:
(i) to inspect the books and records of the Sub-Servicer as
they may relate to the Notes, the obligations of the Sub-Servicer
under the Company Documents and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Sub-Servicer with the Chief Operating Officer and the Chief
Financial Officer of the Sub-Servicer; and
(iii) with the Sub-Servicer's consent, which consent shall not
be unreasonably withheld or delayed, to discuss the affairs,
finances and accounts of the Sub-Servicer with the Sub-Servicer and
the independent accountants of the Sub-Servicer, provided that an
officer of the Sub-Servicer, as applicable, shall have the right to
be present during such discussions.
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Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Sub-Servicer, as the case may be.
The Note Insurer agrees that it and its shareholders, directors,
agents, accountants and attorneys shall keep confidential any matter of
which it becomes aware through such inspections or discussions (unless
readily available from public sources), except as may be otherwise
required by regulation, law or court order or requested by appropriate
governmental authorities or as necessary to preserve its rights or
security under or to enforce the Company Documents, provided that the
foregoing shall not limit the right of the Note Insurer to make such
information available to its regulators, securities rating agencies,
reinsurers, credit and liquidity providers, counsel and accountants.
(f) NOTICE OF MATERIAL EVENTS. The Sub-Servicer shall be obligated
promptly to inform the Note Insurer in writing of the occurrence of any of
the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or
against the Sub-Servicer that would likely result in a Material
Adverse Change with respect to the Sub-Servicer, or the promulgation
of any proceeding or any proposed or final rule which would likely
result in a Material Adverse Change with respect to the
Sub-Servicer;
(ii) any change in the location of the principal office of the
Sub-Servicer;
(iii) the occurrence of any Default or Event of Default
involving the Sub-Servicer or any Material Adverse Change in respect
of the Sub-Servicer;
(iv) the commencement of any proceedings by or against the
Sub-Servicer under any applicable reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Sub-Servicer or any of their assets;
or
(v) the receipt of notice that (A) any license, permit,
charter, registration or approval necessary for the conduct of the
Sub-Servicer's business is to be, or may be suspended or revoked or
(B) the Sub-Servicer is to cease and desist any practice, procedure
or policy employed by the Sub-Servicer in the conduct of its
business, but only if such suspension, revocation or cessation may
result in a Material Adverse Change with respect to the
Sub-Servicer.
(g) FINANCING STATEMENTS AND FURTHER ASSURANCES. The Sub-Servicer
shall, upon the request of the Note Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within ten days of such request, such
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amendments hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Company Documents. In addition, the
Sub-Servicer agrees to cooperate with S&P and Moody's in connection with
any review of the Transaction that may be undertaken by S&P and Moody's
after the date hereof.
(h) MAINTENANCE OF LICENSES. The Sub-Servicer and any successors
thereof shall maintain all licenses, permits, charters and registrations
which are material to the conduct of its business.
(i) THIRD-PARTY BENEFICIARY. The Sub-Servicer agrees that the Note
Insurer shall have all rights of a third-party beneficiary in respect of
the Sub-Servicing Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of the Note Insurer; provided that the remedy for any breach of a
representation and warranty of the Sub-Servicer in Section 2.3 of the
Sub-Servicing Agreement and the remedy with respect to any defective
Mortgage Loans under Section 2.3 of the Sub-Servicing Agreement shall be
limited to the remedies specified in the Sub-Servicing Agreement.
(j) SERVICING OF MORTGAGE LOANS. All Mortgage Loans will be serviced
in compliance with the Servicing Agreement.
(k) NOTE ACCOUNT. For so long as Ocwen is the Sub-Servicer, monies
on deposit in the Note Account shall be invested in Permitted Investments
maturing as provided in the Servicing Agreement.
(l) DUE DILIGENCE. The Note Insurer shall have the right, so long as
any Notes remain outstanding, to conduct an ongoing review of the
Sub-Servicer's practices as Sub-Servicer through reviews of the Mortgage
Loans, "drive-by" reappraisals of Mortgaged Properties and reviews of
servicing practices. Such ongoing due diligence shall be conducted at the
expense of the Note Insurer and in a reasonable manner convenient to the
Sub-Servicer and the Note Insurer.
Section 2.06 NEGATIVE COVENANTS OF THE SUB-SERVICER. The Sub-Servicer
hereby agrees that during the term of this Insurance Agreement, unless the Note
Insurer shall otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Sub-Servicer shall not take any
action, or fail to take any action, if such action or failure to take
action may result in a Material Adverse Change specified in clause (ii) of
the definition of Material Adverse Change with respect to the
Sub-Servicer, or may not interfere with the enforcement of any rights of
the Note Insurer under or with respect to any of the Company Documents.
The Sub-Servicer shall give the Note Insurer written notice of any such
action or failure to act on the earlier of: (i) the date
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upon which any publicly available filing or release is made with respect
to such action or failure to act or (ii) promptly prior to the date of
consummation of such action or failure to act. The Sub-Servicer shall
furnish to the Note Insurer all information requested by it that is
reasonably necessary to determine compliance with this paragraph.
(b) AMENDMENTS, ETC. The Sub-Servicer shall not modify or amend, or
consent to any modification or amendment of, any of the terms, provisions
or conditions of the Company Documents to which it is a party without the
prior written consent of the Note Insurer thereto, but excluding any
amendment to the Offering Document required by law and excluding any
modifications or amendments to which Note Insurer's consent is not
required by the terms of the related Company Documents.
(c) SUCCESSORS. The Sub-Servicer shall not terminate or designate,
or consent to the termination or designation of, any successor Servicer,
Custodian or Indenture Trustee without the prior written approval of the
Note Insurer, which approval shall not be unreasonably withheld,
conditioned or delayed.
Section 2.07 REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The Sponsor
represents and warrants as of the Closing Date as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Sponsor is a
corporation, duly organized, validly existing and in good standing under
the laws of the State of North Carolina. The Sponsor is duly qualified to
do business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as currently conducted and as
described in the Offering Document and the performance of its obligations
under the Company Documents to which it is a party in each jurisdiction in
which the failure to be so qualified or to obtain such approvals would
render any Company Document to which it is a party unenforceable in any
respect or would have a material adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. The Sponsor has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute, deliver and perform its
obligations under the Company Documents to which it is a party and to
consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
the Company Documents to which it is a party by the Sponsor have been duly
authorized by all necessary corporate action and do not require any
additional approvals or consents, or other action by or any notice to or
filing with any Person, including any governmental entity or any of the
stockholders of the Sponsor, which have not previously been obtained or
given by the Sponsor.
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(d) NONCONTRAVENTION. The execution and delivery by the Sponsor of
the Company Documents to which it is a party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the
Company Documents to which it is a party do not and will not:
(i) conflict with or result in any breach or violation of any
provision of the charter or bylaws of the Sponsor or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination
or award currently in effect having applicability to the Sponsor or
any of its respective material properties, including regulations
issued by any administrative agency or other governmental authority
having supervisory powers over the Sponsor, which conflict, breach
or violation reasonably could result in a Material Adverse Change;
(ii) constitute a default by the Sponsor under, result in the
acceleration of any obligation under, or breach any provision of any
loan agreement, mortgage, indenture or other agreement or instrument
to which the Sponsor is a party or by which any of its properties
are or may be bound or affected, which default, acceleration or
breach could reasonably result in a Material Adverse Change; or
(iii) result in or require the creation of any lien upon or in
respect of (a) any assets of the Sponsor, which lien reasonably
could result in a Material Adverse Change or (b) the Mortgage Loans,
in either case, except as otherwise expressly contemplated by the
Company Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Sponsor, any of its
subsidiaries, any properties or rights of the Sponsor or any of its
subsidiaries or, to the Sponsor's knowledge, threatened, which, in any
case, if decided adversely to the Sponsor or any of its subsidiaries could
result in a Material Adverse Change with respect to the Sponsor.
(f) VALID AND BINDING OBLIGATIONS. The Company Documents to which it
is a party, when executed and delivered by the Sponsor, will constitute
the legal, valid and binding obligations of the Sponsor, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general equitable
principles and public policy considerations as to rights of
indemnification for violations of federal securities laws. The Notes, when
executed, authenticated and delivered in accordance with the Indenture,
will be validly issued and outstanding and entitled to the benefits of the
Indenture. The Sponsor will not at any time in the future deny that the
Company Documents to which the Sponsor is a party, constitute the legal,
valid and binding obligations of the Sponsor.
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(g) COMPLIANCE WITH LAW, ETC. No current practice, procedure or
policy employed, or proposed to be employed, by the Sponsor in the conduct
of its business violates any law, regulation, judgment, agreement, order
or decree applicable to the Sponsor that, if enforced, could result in a
Material Adverse Change with respect to the Sponsor.
(h) TAXES. The Sponsor has filed prior to the date hereof all
federal and state tax returns that are required to be filed and has paid
all taxes, including any assessments received by it that are not being
contested in good faith, to the extent that such taxes have become due.
Any taxes, fees and other governmental charges payable by the Sponsor in
connection with the Transaction, the execution and delivery of the Company
Documents to which it is a party and the issuance of the Notes have been
paid or shall have been paid at or prior to the Closing Date if such
taxes, fees or other governmental charges were due on or prior to the
Closing Date.
(i) ACCURACY OF INFORMATION. Neither information supplied by the
Sponsor contained in the Company Documents to which it is a party nor
other material information relating to the operations of the Sponsor or
the financial condition of the Sponsor (collectively, the "Sponsor
Documents"), as amended, supplemented or superseded, furnished to the Note
Insurer in writing or in electronic format by the Sponsor contains any
statement of a material fact with respect to the Sponsor which was untrue
or misleading in any material respect when made. The Sponsor has no
knowledge of any circumstances that could reasonably be expected to cause
a Material Adverse Change with respect to the Sponsor. Since the
furnishing of the Sponsor Documents, there has been no change nor any
development or event involving a prospective change known to the Sponsor
that would render any of the Sponsor Documents untrue or misleading in any
material respect.
(j) COMPLIANCE WITH SECURITIES LAWS. At the time the Registration
Statement became effective, the Registration Statement complied in all
material respects with the requirements of the Securities Act and the
regulations thereunder. The Sponsor will comply with the Securities Act,
the Securities Exchange Act and the regulations thereunder so as to permit
the completion of the offer and sale of the Notes as contemplated by the
Underwriting Agreement. Based on representations made to the Sponsor by
the Underwriter in the Underwriting Agreement, the offer and sale of the
Notes will comply in all material respects with all requirements of law.
The Sponsor Information in the Offering Document does not contain any
untrue statement of a material fact and does not omit to state a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to the Note Insurer
Information, with respect to the Underwriter Information or the Company
Information. The Sponsor Sale Agreement is not, and the Indenture is,
required to be qualified under the Trust Indenture Act and the Trust Fund
is not required to be registered as an "investment company" under the
Investment Company Act. The Sponsor will satisfy any of the information
reporting requirements of the Securities Exchange Act arising out of the
Transaction to which it or the Trust Fund are subject.
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(k) COMPANY DOCUMENTS. The representations and warranties of the
Sponsor contained in the Company Documents are true and correct in all
material respects and the Sponsor hereby makes each such representation
and warranty to, and for the benefit of, the Note Insurer as if the same
were set forth in full herein.
(l) SOLVENCY; FRAUDULENT CONVEYANCE. The Sponsor is solvent and will
not be rendered insolvent by the Transaction and, after giving effect to
the Transaction, the Sponsor will not be left with an unreasonably small
amount of capital with which to engage in the ordinary course of its
business, and the Sponsor does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay as they mature. The Sponsor does
not contemplate the commencement of insolvency, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of the Sponsor or any
of its assets. The amount of consideration being received by the Sponsor
upon the sale of the Notes constitutes reasonably equivalent value and
fair consideration for the interest in the Mortgage Loans evidenced by the
RBMG Funding Co. Mortgage Loan Trust 1999-2, Asset-Backed Notes, Series
1999-2. The Sponsor is not transferring the Mortgage Loans to the Trust
Fund or selling the Notes, as provided in the Company Documents, with any
intent to hinder, delay or defraud any of the Sponsor's creditors.
(m) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Sponsor is Charlotte, North Carolina.
Section 2.08 AFFIRMATIVE COVENANTS OF THE SPONSOR. The Sponsor hereby
agrees that during the term of this Insurance Agreement, unless the Note Insurer
shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Sponsor
shall comply with the terms and conditions of and perform its respective
obligations under the Company Documents to which it is a party in all
cases in which failure to so comply or perform would result in a default
thereunder and shall comply with all material requirements of any law,
rule or regulation applicable to it in all circumstances where
noncompliance reasonably could result in a Material Adverse Change with
respect to the Sponsor.
(b) CORPORATE EXISTENCE. The Sponsor and its successors and
permitted assigns shall maintain its corporate existence and shall at all
times continue to be duly organized under the laws of the State of North
Carolina and duly qualified and duly authorized (as described in
subsections 2.07(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its charter and bylaws.
(c) FINANCIAL STATEMENTS; OTHER INFORMATION. The Sponsor shall keep
or cause to be kept in reasonable detail books and records of account of
its assets and business, including books and records relating to the
Transaction, and shall clearly reflect therein the
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transfer of the Mortgage Loans to the Trust Fund as a sale of the
Sponsor's interest in the Mortgage Loans. The Sponsor shall furnish or
cause to be furnished to the Note Insurer promptly upon request, such
other data as the Note Insurer may reasonably request and all information
required to be furnished to the Indenture Trustee or to the Holders of the
Notes simultaneously with the furnishing thereof to the Indenture Trustee
or the Holders of the Notes, as the case may be.
(d) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Sponsor shall, upon the reasonable request of the Note Insurer, permit the
Note Insurer or its authorized agents:
(i) to inspect the books and records of the Sponsor as they
may relate to the Notes, the obligations of the Sponsor under the
Company Documents to which it is a party and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Sponsor with the Chief Operating Officer and the Chief Financial
Officer of the Sponsor; and
(iii) with the Sponsor's consent, to discuss the affairs,
finances and accounts of the Sponsor with the Sponsor's independent
accountants, provided that an officer of the Sponsor shall have the
right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Sponsor.
(e) NOTICE OF MATERIAL EVENTS. The Sponsor shall be obligated
promptly to inform the Note Insurer in writing of the occurrence of any of
the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or
against the Sponsor that (A) would be required to be disclosed to
the Commission or the Sponsor's shareholders or (B) would likely
result in a Material Adverse Change with respect to the Sponsor, or,
to the best of the Sponsor's knowledge, the promulgation of any
proceeding or any proposed or final rule which would likely result
in a Material Adverse Change with respect to the Sponsor;
(ii) any change in the location of the principal office of the
Sponsor;
(iii) the occurrence of any Material Adverse Change in respect
of the Sponsor;
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(iv) the commencement of any proceedings by or against the
Sponsor under any applicable reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Sponsor or any of its assets; or
(v) the receipt of notice that (A) any license, permit,
charter, registration or approval necessary for the conduct of the
Sponsor's business are to be, or may be suspended or revoked or (B)
the Sponsor is to cease and desist any practice, procedure or policy
employed by the Sponsor in the conduct of its business, and such
cessation may reasonably result in a Material Adverse Change with
respect to the Sponsor.
(f) FURTHER ASSURANCES. The Sponsor shall, upon the request of the
Note Insurer, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, within ten days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Company Documents. In addition, the
Sponsor agrees to cooperate with S&P and Moody's in connection with any
review of the Transaction that may be undertaken by S&P and Moody's after
the date hereof.
(g) MAINTENANCE OF LICENSES. The Sponsor and any of its successors
shall maintain all licenses, permits, charters and registrations which are
material to the conduct of its business.
(h) DISCLOSURE DOCUMENT. Each Offering Document delivered with
respect to the Notes shall clearly disclose that (i) the Policy is not
covered by the property/casualty insurance certificate fund specified in
Article 76 of the New York Insurance Law and (ii) in the event that the
Note Insurer were to become insolvent, any claims arising under the Policy
would be excluded from coverage by the California Insurance Guaranty
Association, established pursuant to the laws of the State of California.
(i) THIRD-PARTY BENEFICIARY. The Sponsor agrees that the Note
Insurer shall have all rights of a third-party beneficiary in respect of
the Sponsor Sale Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of the Note Insurer.
(j) CLOSING DOCUMENTS. The Sponsor shall provide or cause to be
provided to the Note Insurer an executed original copy of each document
executed in connection with the Transaction to which it is a party within
30 Business Days after the date of closing.
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Section 2.09 NEGATIVE COVENANTS OF THE SPONSOR. The Sponsor hereby agrees
that during the term of this Insurance Agreement, unless the Note Insurer shall
otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Sponsor shall not take any action, or
fail to take any action, if such action or failure to take action may
result in a Material Adverse Change specified in clause (ii) of the
definition of Material Adverse Change with respect to the Sponsor, or may
not interfere with the enforcement of any rights of the Note Insurer under
or with respect to any of the Company Documents. The Sponsor shall give
the Note Insurer written notice of any such action or failure to act on
the earlier of: (i) the date upon which any publicly available filing or
release is made with respect to such action or failure to act or (ii)
promptly prior to the date of consummation of such action or failure to
act. The Sponsor shall furnish to the Note Insurer all information
requested by it that is reasonably necessary to determine compliance with
this paragraph.
(b) AMENDMENTS, ETC. The Sponsor shall not modify or amend, or
consent to any modification or amendment of, any of the terms, provisions
or conditions of the Company Documents to which it is a party without the
prior written consent of the Note Insurer thereto, but excluding any
amendment to the Offering Document required by law and excluding any
modifications or amendments to which Note Insurer's consent is not
required by the terms of the related Company Document.
(c) LIMITATION ON MERGERS, ETC. The Sponsor shall not consolidate
with or merge with or into any Person or transfer all or substantially all
of its assets to any Person or liquidate or dissolve except as provided in
the Company Documents to which it is a party or as permitted hereby. The
Sponsor shall furnish to the Note Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.
(d) SUCCESSORS. The Sponsor shall not terminate or designate, or
consent to the termination or designation of, any successor Servicer,
Custodian or Indenture Trustee without the prior written approval of the
Note Insurer, which approval shall not be unreasonably withheld,
conditioned or delayed.
Section 2.10 REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
represents and warrants as of the Closing Date as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is a business
trust, duly organized, validly existing and in good standing under the
laws of Delaware and the United States of America. The Issuer is duly
qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Company Documents in each
jurisdiction in which the failure to be so qualified or to obtain such
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approvals would render any Company Document unenforceable in any respect
or would have a material adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. The Issuer has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute, deliver and perform their
obligations under the Company Documents and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
the Company Documents by the Issuer has been duly authorized by all
necessary corporate action and does not require any additional approvals
or consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders of
the Trust or the Owner Trustee, which have not previously been obtained or
given by the Trust or the Owner Trustee.
(d) NONCONTRAVENTION. The execution and delivery by the Issuer of
the Company Documents to which it is a party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the
Company Documents do not and will not:
(i) conflict with or result in any breach or violation of any
provision of the charter or bylaws of the Issuer or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination
or award currently in effect having applicability to the Issuer or
any of its respective material properties, including regulations
issued by any administrative agency or other governmental authority
having supervisory powers over the Issuer;
(ii) constitute a default by the Issuer under, result in the
acceleration of any obligation under, or breach any provision of any
loan agreement, mortgage, indenture or other agreement or instrument
to which the Issuer either is a party or by which any of their
properties are or may be bound or affected; or
(iii) result in or require the creation of any lien upon or in
respect of any assets of the Issuer, except as otherwise expressly
contemplated by the Company Documents;
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Issuer, any of their
subsidiaries, any properties or rights of the Issuer or any of their
subsidiaries or any of the Mortgage Loans pending or, to the Issuer's
knowledge after reasonable inquiry, threatened, which, in any case, if
decided adversely to the Issuer or any such subsidiary could result in a
Material Adverse Change with respect to the Issuer.
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(f) VALID AND BINDING OBLIGATIONS. The Company Documents (other than
the Notes), when executed and delivered by the Issuer, will constitute the
legal, valid and binding obligations of the Issuer, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles and
public policy considerations as to rights of indemnification for
violations of federal securities laws. The Notes, when executed,
authenticated and delivered in accordance with the Indenture, will be
validly issued and outstanding and entitled to the benefits of the
Indenture. The Issuer will not at any time in the future deny that the
Company Documents constitute the legal, valid and binding obligations of
the Issuer.
(g) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Issuer that, if enforced, would result in a
Material Adverse Change with respect to the Issuer.
(h) TAXES. The Issuer has filed prior to the date hereof all federal
and state tax returns that are required to be filed and has paid all
taxes, including any assessments received by it that are not being
contested in good faith, to the extent that such taxes have become due.
Any taxes, fees and other governmental charges payable by the Issuer in
connection with the Transaction, the execution and delivery of the Company
Documents and the issuance of the Notes have been paid or shall have been
paid at or prior to the Closing Date.
(i) ACCURACY OF INFORMATION. Neither the Company Documents nor other
information relating to the Mortgage Loans, the operations of the Issuer
or the financial condition of the Issuer (collectively, the "Issuer
Documents"), as amended, supplemented or superseded, furnished to the Note
Insurer by the Issuer contains any statement of a material fact which was
untrue or misleading in any material respect when made. The Issuer has no
knowledge of any circumstances that could reasonably be expected to cause
a Material Adverse Change with respect to the Issuer. Since the furnishing
of the Issuer Documents, there has been no change nor any development or
event involving a prospective change known to the Issuer that would render
any of the Issuer Documents untrue or misleading in any material respect.
(j) COMPLIANCE WITH SECURITIES LAWS. The offer and sale of the Notes
comply in all material respects with all requirements of law, including
all registration requirements of applicable securities laws. Without
limiting the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to the Note Insurer
Information or with respect to the Underwriter Information. Neither the
offer nor sale of the Notes by the Issuer have been or will be in
violation of the Securities Act or any other federal or state securities
laws. The Indenture is required to be qualified under
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the Trust Indenture Act, and the Trust Fund is not required to be
registered as an "investment company" under the Investment Company Act.
The Issuer will satisfy or cause to be satisfied any of the information
reporting requirements of the Securities Exchange Act arising out of the
Transaction to which it or the Trust Fund are subject.
(k) COMPANY DOCUMENTS. Each of the representations and warranties of
the Issuer contained in the Company Documents is true and correct in all
material respects and the Issuer hereby make each such representation and
warranty to, and for the benefit of, the Note Insurer as if the same were
set forth in full herein.
(l) SOLVENCY; FRAUDULENT CONVEYANCE. The Issuer is solvent and will
not be rendered insolvent by the Transaction and, after giving effect to
the Transaction, the Issuer will not be left with an unreasonably small
amount of capital with which to engage in its business, and the Issuer
does not intend to incur, or believe that it has incurred, debts beyond
its ability to pay as they mature. The Issuer does not contemplate the
commencement of insolvency, liquidation or consolidation proceedings or
the appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Issuer or any of their assets. The amount of
consideration being received by the Issuer, as Issuer, upon the sale of
the Notes constitutes reasonably equivalent value and fair consideration
for the interest in the Mortgage Loans evidenced by the RBMG Funding Co.
Mortgage Loan Trust 1999-2, Asset-Backed Notes, Series 1999-2. The Issuer
is not transferring or selling the Notes, as provided in the Company
Documents, with any intent to hinder, delay or defraud any of the Issuer's
creditors.
(m) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Issuer is Wilmington, Delaware.
Section 2.11 AFFIRMATIVE COVENANTS OF THE ISSUER. The Issuer hereby agrees
that during the term of this Insurance Agreement, unless the Note Insurer shall
otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer shall
comply with the terms and conditions of and perform its respective
obligations under the Company Documents to which it is a party in all
cases in which failure to so comply or perform would result in a default
thereunder and shall comply with all material requirements of any law,
rule or regulation applicable to it.
(b) CORPORATE EXISTENCE. The Issuer and its successors and permitted
assigns shall maintain its corporate existence and shall at all times
continue to be duly organized under the laws of the United States and duly
qualified and duly authorized (as described in subsections 2.10(a), (b)
and (c) hereof) and shall conduct its business in accordance with the
terms of its certificate of trust and the Trust Agreement.
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(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Issuer shall keep or cause to be kept in reasonable detail books and
records of account of its assets and business, including books and records
relating to the Transaction, and shall clearly reflect therein the
transfer of the Mortgage Loans to the Trust Fund and the sale of the RBMG
Funding Co. Mortgage Loan Trust 1999-2, Asset-Backed Notes, Series 1999-2
as a sale of the Sponsor's interest in the Mortgage Loans evidenced by the
Notes. The Issuer shall furnish or cause to be furnished to the Note
Insurer:
(d) INITIAL REPORT. On or before the Closing Date, a copy of the
magnetic tape to be delivered to the Indenture Trustee on the Closing Date
setting forth as to each Mortgage Loan, the information required to be
included in the Schedule of Mortgage Loans.
(e) CERTAIN INFORMATION. Upon the reasonable request of the Note
Insurer, copies of any requested financial statements, reports and
registration statements that the Issuer files with, or delivers to, the
Commission or any national securities exchange.
(f) OTHER INFORMATION. (A) Promptly upon receipt thereof, copies of
all schedules, financial statements or other similar reports delivered to
or by the Issuer, pursuant to the terms of the Sale and Servicing
Agreement, (B) promptly upon request, such other data as the Note Insurer
may reasonably request and (C) all information required to be furnished to
the Indenture Trustee or to the Holders simultaneously with the furnishing
thereof to the Indenture Trustee or the Holders, as the case may be.
(g) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Issuer shall, upon the reasonable request of the Note Insurer, permit the
Note Insurer or its authorized agents:
(i) to inspect the books and records of the Issuer as they may
relate to the Notes (other than the names and addresses of
Mortgagors and strategic plans which are unrelated to the Notes),
the obligations of the Issuer under the Company Documents and the
Transaction;
(ii) to discuss the affairs, finances and accounts of the
Issuer with the Sponsor on behalf of the Issuer; and
(iii) with the Issuer's consent, which consent shall not be
unreasonably withheld or delayed, to discuss the affairs, finances
and accounts of the Issuer with the Issuer's independent
accountants, provided that an officer of the Issuer shall have the
right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Issuer.
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(h) NOTICE OF MATERIAL EVENTS. The Issuer shall be obligated
promptly to inform the Note Insurer in writing of the occurrence of any of
the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or
against the Issuer that (A) could be required to be disclosed to the
Commission or the Issuer's shareholders or (B) would likely result
in a Material Adverse Change with respect to the Issuer, or the
promulgation of any proceeding or any proposed or final rule which
would likely result in a Material Adverse Change with respect to the
Issuer;
(ii) any change in the location of the principal office of the
Issuer;
(iii) the occurrence of any Event of Default, or any Material
Adverse Change in respect of the Issuer;
(iv) the commencement of any proceedings by or against the
Issuer under any applicable reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Issuer or any of their assets; or
(v) the receipt of notice that (A) any license, permit,
charter, registration or approval necessary for the conduct of the
Issuer's business are to be, or may be suspended or revoked or (B)
the Issuer is to cease and desist any practice, procedure or policy
employed by the Issuer in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to
the Issuer.
(i) FINANCING STATEMENTS AND FURTHER ASSURANCES. The Issuer will
cause to be filed all necessary financing statements or other instruments,
and any amendments or continuation statements relating thereto, necessary
to be kept and filed in such manner and in such places as may be required
by law to preserve and protect fully the interest of the Indenture Trustee
in the Trust Fund. The Issuer shall, upon the request of the Note Insurer,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within ten days of such request,
such amendments hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Company Documents. In addition, the
Issuer agrees to cooperate with S&P and Moody's in connection with any
review of the Transaction that may be undertaken by S&P and Moody's after
the date hereof.
(j) MAINTENANCE OF LICENSES. The Issuer and any successors thereof
shall maintain all licenses, permits, charters and registrations which are
material to the conduct of their business.
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(k) RETIREMENT OF NOTES. The Issuer shall instruct the Indenture
Trustee, upon a retirement or other payment of all of the Notes, to
surrender the Policy to the Note Insurer for cancellation.
(l) DISCLOSURE DOCUMENT. Each Offering Document delivered with
respect to the Notes shall clearly disclose that (i) the Policy is not
covered by the property/casualty insurance certificate fund specified in
Article 76 of the New York Insurance Law and (ii) in the event that the
Note Insurer were to become insolvent, any claims arising under the Policy
would be excluded from coverage by the California Insurance Guaranty
Association, established pursuant to the laws of the State of California.
(m) THIRD-PARTY BENEFICIARY. The Issuer agrees that the Note Insurer
shall have all rights of a third-party beneficiary in respect of the
Indenture and hereby incorporates and restates its representations,
warranties and covenants as set forth therein for the benefit of the Note
Insurer.
(n) CLOSING DOCUMENTS. The Issuer shall provide or cause to be
provided to the Note Insurer an executed original copy of each document
executed in connection with the Transaction within 30 Business Days after
the date of closing.
Section 2.12 NEGATIVE COVENANTS OF THE ISSUER. The Issuer hereby agrees
that during the term of this Insurance Agreement, unless the Note Insurer shall
otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Issuer shall not take any action, or
fail to take any action, if such action or failure to take action may
result in a Material Adverse Change specified in clause (ii) of the
definition of Material Adverse Change with respect to the Issuer,
respectively, or may not interfere with the enforcement of any rights of
the Note Insurer under or with respect to any of the Company Documents.
The Issuer shall give the Note Insurer written notice of any such action
or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure
to act or (ii) promptly prior to the date of consummation of such action
or failure to act. The Issuer shall furnish to the Note Insurer all
information requested by it that is reasonably necessary to determine
compliance with this paragraph.
(b) AMENDMENTS, ETC. The Issuer shall modify or amend, or consent to
any modification or amendment of, any of the terms, provisions or
conditions of the Company Documents to which it is a party without the
prior written consent of the Note Insurer thereto, but excluding any
amendment to the Offering Document required by law and excluding any
modifications or amendments to which Note Insurer's consent is not
required.
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(c) LIMITATION ON MERGERS, ETC. The Issuer shall not consolidate
with or merge with or into any Person or transfer all or substantially all
of its assets to any Person or liquidate or dissolve except as provided in
the Indenture or as permitted hereby. The Issuer shall furnish to the Note
Insurer all information requested by it that is reasonably necessary to
determine compliance with this paragraph.
Section 2.13 REPRESENTATIONS AND WARRANTIES OF THE NOTE INSURER. The Note
Insurer represents and warrants to the Indenture Trustee, the Issuer, the
Sponsor, the Originator, the Servicer, the Company and the Seller as follows:
(a) ORGANIZATION AND LICENSING. The Note Insurer is a duly organized
and validly existing Wisconsin stock insurance corporation duly qualified
to conduct an insurance business in the State of New York.
(b) CORPORATE POWER. The Note Insurer has the corporate power and
authority to issue the Policy and execute and deliver this Insurance
Agreement and to perform all of its obligations hereunder and thereunder.
(c) AUTHORIZATION; APPROVALS. Proceedings legally required for the
issuance of the Policy and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or
other authorizations or approvals of the Note Insurer's Board of Directors
or stockholders or any governmental boards or bodies legally required for
the enforceability of the Policy have been obtained; any proceedings not
taken and any licenses, authorizations or approvals not obtained are not
material to the enforceability of the Policy.
(d) ENFORCEABILITY. The Policy, when issued, and this Insurance
Agreement will each constitute a legal, valid and binding obligation of
the Note Insurer, enforceable in accordance with its terms, subject to
insolvency, reorganization, moratorium, receivership and other similar
laws affecting creditors' rights generally and by general principles of
equity and subject to principles of public policy limiting the right to
enforce the indemnification provisions contained therein and herein,
insofar as such provisions relate to indemnification for liabilities
arising under federal securities laws.
(e) FINANCIAL INFORMATION. The consolidated financial statements of
the Note Insurer and subsidiaries as of December 31, 1998 and December 31,
1997 and for each of the years in the three-year period ended December 31,
1998 prepared in accordance with generally accepted accounting principles,
included in the Annual Report on Form 10-K of Ambac Financial Group, Inc.
(which was filed with the Commission on March 30, 1999; Commission File
No. 1-10777) and the unaudited consolidated financial statements of the
Note Insurer and subsidiaries as of September 30, 1999 and for the periods
ending September 30, 1999 and September 30, 1998, included in the
Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. for the
period ended September 30, 1999 (which was filed with the
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Commission on November 12, 1999), fairly present in all material respects
the financial condition of the Note Insurer as of such dates and for the
periods covered by such statements in accordance with generally accepted
accounting principles consistently applied. Since September 30, 1999,
there has been no material change in such financial condition of the Note
Insurer that would materially and adversely affect its ability to perform
its obligations under the Policy.
(f) NOTE INSURER INFORMATION. The Note Insurer Information is true
and correct in all material respects and does not contain any untrue
statement of a material fact.
(g) NO LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best of the Note Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would
materially and adversely affect its ability to perform its obligations
under the Policy or this Insurance Agreement.
(h) The execution by the Note Insurer of this Insurance Agreement
will not, and the satisfaction of the terms hereof will not, conflict with
or result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of the Note Insurer, or any
restriction contained in any contract, agreement or instrument to which
the Note Insurer is a party or by which it is bound or constitute a
default under any of the foregoing.
(i) CONFIDENTIAL INFORMATION. The Note Insurer agrees that it and
its shareholders, directors, agents, accountants and attorneys shall not
use or disclose any information provided to the Note Insurer pursuant to
or in connection with this Insurance Agreement or the issuance of the
Policy or otherwise related to the Transactions, including any matter of
which it becomes aware during the inspections conducted or discussions had
pursuant to Sections 2.02(e), 2.05(e), 2.08(d) and 2.11(g), unless such
information is readily available from public sources or except as may be
otherwise required by regulation, law or court order or requested by
appropriate governmental authorities or as necessary to preserve its
rights or security under or to enforce the Company Documents; provided,
however, that the foregoing shall not limit the right of the Note Insurer
to make such information available to its regulators, securities rating
agencies, reinsurers, credit and liquidity providers, counsel and
accountants. If the Note Insurer is requested or required (by oral
questions, interrogatories, requests for information or documents
subpoena, civil investigative demand or similar process) to disclose any
information provided to the Note Insurer pursuant to or in connection with
this Insurance Agreement or the issuance of the Policy or otherwise
related to the Transactions, including any information of which it becomes
aware through such inspections or discussions, the Note Insurer will
promptly notify the Originator, the Servicer, the Company, the Seller, the
Sponsor and the Issuer of such request(s) so that the Originator, the
Servicer, the Company, the Seller, the Sponsor and the Issuer may seek an
appropriate
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protective order and/or waive the Note Insurer's compliance with the
provisions of this Insurance Agreement. If, in the absence of a protective
order or the receipt of a waiver hereunder, the Note Insurer is,
nonetheless, in the opinion of its counsel (which shall be delivered to
the Originator, the Servicer, the Company, the Seller, the Sponsor and the
Issuer), compelled to disclose such information to any tribunal or else
stand liable for contempt or suffer other censure of significant penalty,
the Note Insurer may disclose such information to such tribunal that the
Note Insurer is compelled to disclose, provided that a copy of all
information disclosed is provided to the Originator, the Servicer, the
Company, the Seller, the Sponsor and the Issuer promptly upon such
disclosure.
(j) RATING. The Note Insurer is not aware of any facts that if
disclosed to Moody's or S&P would be reasonably expected to result in a
downgrade of the rating of the claims paying ability of the Note Insurer
by either of such Rating Agencies.
(k) SECURITIES ACT REGISTRATION. The Policy is exempt from
registration under the Securities Act.
ARTICLE I
THE POLICY; REIMBURSEMENT
Section 3.01 ISSUANCE OF THE POLICY. The Note Insurer agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) PAYMENT OF INITIAL PREMIUM AND EXPENSES. The Note Insurer shall
have been paid by the Originator, the fees and expenses payable on the
Closing Date in accordance with Section 3.02;
(b) COMPANY DOCUMENTS. The Note Insurer shall have received a copy
of each of the Company Documents, in form and substance reasonably
satisfactory to the Note Insurer, duly authorized, executed and delivered
by each party thereto;
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. The Note Insurer shall have
received (i) a copy of the charter and bylaws of the Originator, the
Servicer, the Sub-Servicer, the Company, the Seller, the Sponsor and the
Issuer and (ii) a certificate of the Secretary or Assistant Secretary of
the Originator, the Servicer, the Sub-Servicer, the Company, the Seller,
the Sponsor and the Issuer stating that attached thereto is a true,
complete and correct copy of resolutions duly adopted by the Board of
Directors or a duly authorized Committee of the Originator, the Servicer,
the Sub-Servicer, the Company, the Seller, the Sponsor and the Issuer
authorizing the issuance of the Notes, the execution, delivery and
performance by the Originator, the Servicer, the Sub-Servicer, the
Company, the Seller, the Sponsor and the Issuer of the Company Documents
to which it is a party and the consummation of the
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Transaction and that such charter, bylaws and resolutions are in full
force and effect without amendment or modification on the Closing Date;
(d) INCUMBENCY CERTIFICATE. The Note Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of the Originator,
the Servicer, the Sub-Servicer, the Company, the Seller, the Sponsor and
the Issuer certifying the names and signatures of the officers of the
Originator, the Servicer, the Sub-Servicer, the Company, the Seller, the
Sponsor and the Issuer authorized to execute and deliver the Company
Documents to which it is a party;
(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The representations
and warranties of the Originator, the Servicer, the Sub-Servicer, the
Company, the Seller, the Sponsor and the Issuer set forth or incorporated
by reference in this Insurance Agreement shall be true and correct on and
as of the Closing Date as if made on the Closing Date, and the Note
Insurer shall have received a certificate of appropriate officers of the
Originator, the Servicer, the Sub-Servicer, the Company, the Seller, the
Sponsor and the Issuer to that effect;
(f) OPINIONS OF COUNSEL. The Note Insurer shall have received all
opinions of counsel addressed to any of Moody's, S&P, the Indenture
Trustee, the Originator, the Servicer, the Sub-Servicer, the Company, the
Seller, the Sponsor, the Issuer and the Underwriter, in respect of the
Originator, the Servicer, the Sub-Servicer, the Company, the Seller, the
Sponsor and the Issuer, the other parties to the Company Documents and the
Transaction in form and substance reasonably satisfactory to the Note
Insurer, addressed to the Note Insurer and opinions addressing such
matters as the Note Insurer may reasonably request, and the counsel
providing each such opinion shall have been instructed by its client to
deliver such opinion to the addressees thereof;
(g) APPROVALS, ETC. The Note Insurer shall have received true and
correct copies of all approvals, licenses and consents, if any, including
any required approval of the shareholders of the Originator, the Servicer,
the Sub-Servicer, the Company, the Seller, the Sponsor and the Issuer,
required in connection with the Transaction;
(h) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or threatened before any court, governmental or administrative
agency or arbitrator in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with any of the Company
Documents or the consummation of the Transaction;
(i) LEGALITY. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transaction illegal or
otherwise prevent the consummation thereof;
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(j) SATISFACTION OF CONDITIONS OF THE UNDERWRITING AGREEMENT. All
conditions in the Underwriting Agreement relating to the Underwriter's
obligation to purchase the Notes shall have been satisfied, without taking
into account any waiver by the Underwriters of any condition unless such
waiver has been approved by the Note Insurer. The Note Insurer shall have
received copies of each of the documents, and shall be entitled to rely on
each of the documents, required to be delivered to the Underwriter
pursuant to the Underwriting Agreement;
(k) ISSUANCE OF RATINGS. The Note Insurer shall have received
confirmation that the risk insured by the Policy constitutes at least a
"BBB" risk by S&P and a "Baa2" risk by Moody's and that the Notes, when
issued, will be rated "AAA" by S&P and "Aaa" by Moody's;
(l) NO DEFAULT. No Default or Event of Default shall have occurred;
(m) ADDITIONAL ITEMS. The Note Insurer shall have received such
other documents, instruments, approvals or opinions reasonably requested
by the Note Insurer as may be reasonably necessary to effect the
Transaction, including evidence reasonably satisfactory to the Note
Insurer that the conditions precedent, if any, in the Company Documents
have been satisfied; and
(n) SATISFACTORY DOCUMENTATION. The Note Insurer and its counsel
shall have determined that all documents, certificates and opinions to be
delivered in connection with the Notes conform to the terms of the
Indenture, the Trust Agreement, the Registration Statement, the Offering
Document and this Insurance Agreement.
Section 3.02 PAYMENT OF FEES AND PREMIUM.
(a) LEGAL AND ACCOUNTING FEES. The Originator shall pay or cause to
be paid to the Note Insurer, on the Closing Date, legal, appraisal and
accounting fees in an amount not to exceed $65,000, incurred by the Note
Insurer in connection with the issuance of the policy. Any additional fees
of the Note Insurer's auditors payable in respect of any amendment or
supplement to the Offering Document incurred after the Closing Date shall
be paid by the Originator on demand.
(b) RATING AGENCY FEES. The Originator shall promptly pay the
initial fees of S&P and Moody's with respect to the Notes and the
transactions contemplated hereby following receipt of a statement with
respect thereto. All periodic and subsequent fees of S&P or Moody's with
respect to, and directly allocable to, the Notes shall be for the account
of, and shall be billed to the Originator. The fees for any other rating
agency shall be paid by the party requesting such other agency's rating
unless such other agency is a substitute for S&P or Moody's in the event
that S&P or Moody's is no longer rating the Notes, in which case the fees
for such agency shall be paid by the Originator.
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(c) [Reserved]
(d) [Reserved]
(e) PREMIUM.
(i) In consideration of the issuance by the Note Insurer of
the Policy, the Note Insurer shall be entitled to receive the
Premium as and when due in accordance with and from the funds
specified by Section 8.02(c) of the Indenture.
(ii) The Premium paid under the Indenture shall be
nonrefundable without regard to whether any Notice for Payment is
delivered to the Note Insurer requiring the Note Insurer to make any
payment under the Policy or any other circumstances relating to the
Notes or provision being made for payment of the Notes prior to
maturity. The Premium due on each Payment Date shall be an amount
equal to 1/12th of the product of Premium Percentage and the Note
Balance (after giving effect to any distributions of principal to be
made on the Notes on such Payment Date); provided that the initial
premium will be equal to $23,958.33 and will be paid on the Closing
Date.
Section 3.03 REIMBURSEMENT OBLIGATION.
(a) As and when due in accordance with and from the funds specified
in Section 8.02(c) of the Indenture, the Note Insurer shall be entitled to
reimbursement for any payment made by the Note Insurer under the Policy,
which reimbursement shall be due and payable on the date that any amount
is paid thereunder, in an amount equal to the amount to be so paid and all
amounts previously paid that remain unreimbursed, together with interest
on any and all amounts remaining unreimbursed (to the extent permitted by
law, if in respect of any unreimbursed amounts representing interest) from
the date such amounts became due until paid in full (after as well as
before judgment), at a rate of interest equal to the Late Payment Rate.
(b) The Originator agrees to pay to the Note Insurer as follows: any
and all charges, fees, costs and expenses that the Note Insurer may
reasonably pay or incur, including reasonable attorneys' and accountants'
fees and expenses ("Reimbursable Expenses") in connection with (i) the
enforcement, defense or preservation of any rights in respect of any of
the Company Documents, including defending, monitoring or participating in
any litigation or proceeding (including any insolvency proceeding in
respect of any Transaction participant or any affiliate thereof) relating
to any of the Company Documents, any party to any of the Company Documents
(in its capacity as such a party) or the Transaction, or (ii) any
amendment, waiver or other action with respect to, or related to, any
Company Document, whether or not executed or completed.
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(c) The Originator agrees to pay to the Note Insurer as follows:
interest on any and all amounts described in subclause (b) of this Section
3.03 for which such party is responsible from the date payable or paid by
such party until payment thereof in full, and interest on any and all
amounts described in Section 3.02 (a) and (b) for which such party is
responsible from the date due until payment thereof in full and interest
on any and all amounts described in Section 3.04 for which such party is
responsible from the date due until payment thereof in full and interest
on any and all amounts described in Section 3.04 for which such party is
responsible from the date due until payment thereof in full, in each case,
payable to the Note Insurer at the Late Payment Rate.
Section 3.04 INDEMNIFICATION WITH RESPECT TO THE ORIGINATOR, THE SERVICER,
THE COMPANY AND THE SELLER.
(a) In addition to any and all of the Note Insurer's rights of
reimbursement, indemnification, subrogation and to any other rights of the
Note Insurer pursuant hereto or under law or in equity, the Originator,
the Servicer, the Company and the Seller, severally and not jointly, each
agree to pay, and to protect, indemnify and save harmless, the Note
Insurer and its officers, directors, shareholders, employees, agents and
each Person, if any, who controls the Note Insurer within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against, any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs
or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any
nature arising out of or relating to the transactions contemplated by the
Company Documents by reason of:
(i) any omission or action (other than of or by the Note
Insurer or the Underwriter and other than any omission or action
which is expressly required by the Originator, the Servicer, the
Company and the Seller in the Company Documents) in connection with
the offering, issuance, sale or delivery of any of the RBMG Funding
Co. Mortgage Loan Trust 1999-2, Asset-Backed Notes, Series 1999-2 by
the Originator, the Servicer, the Company and the Seller;
(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Originator, the Servicer, the
Company and the Seller in connection with any Transaction arising
from or relating to the Company Documents;
(iii) the violation by the Originator, the Servicer, the
Company or the Seller of any domestic or foreign law, rule or
regulation, or any judgment, order or decree applicable to it, which
violation reasonably could result in a Material Adverse Change;
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(iv) the breach by the Originator, the Servicer, the Company
or the Seller of any representation, warranty or covenant under any
of the Company Documents or the occurrence, in respect of the
Originator, the Servicer, the Company or the Seller, under any of
the Company Documents of any Event of Default or any event which,
with the giving of notice or the lapse of time or both, would
constitute any Event of Default; or
(v) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or the Registration
Statement or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as such claims, losses,
liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs
of investigations) arise out of or are based upon any untrue
statement in the an Offering Document other than the Sponsor
Information, Underwriter Information and information furnished by
the Note Insurer in writing expressly for use therein (such
information so furnished being referred to herein as "Note Insurer
Information"), it being understood that, in respect of the initial
Offering Document, the Note Insurer Information is limited to the
information with respect to the Note Insurer included under the
caption "The Note Insurer and the Financial Guaranty Policy" and the
financial statements of the Note Insurer incorporated by reference
therein.
(b) The Note Insurer agrees to pay, and to protect, indemnify and
save harmless, the Originator, the Servicer, the Company and the Seller
and its respective officers, directors, shareholders, employees, agents
and each Person, if any, who controls the Originator, the Servicer, the
Company and the Seller within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement or alleged untrue statement of a material
fact contained in the Note Insurer Information in any Offering Document,
in light of the circumstances under which they were made, not misleading
or a breach of any of the representations and warranties of the Note
Insurer contained in Section 2.13.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") in respect of which the indemnity provided in Section 3.04(a) or
(b) may be sought from the Originator, the Servicer, the Company and the
Seller, on the one hand, or the Note Insurer, on the other (each, an
"Indemnifying Party") hereunder, each such Indemnified Party shall
promptly notify the Indemnifying Party in
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writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to the Indemnified Party
and the payment of all expenses. The Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in
the defense thereof at the expense of the Indemnified Party; provided,
however, that the fees and expenses of such separate counsel shall be at
the expense of the Indemnifying Party if (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) the Indemnifying Party shall
have failed to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to the Indemnified Party in any such
action or proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the Indemnified
Party and the Indemnifying Party, and the Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Indemnifying Party (in which case, if the Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys
at any time for the Indemnified Parties, which firm shall be designated in
writing by the Indemnified Party). The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected
without its written consent to the extent that any such settlement shall
be prejudicial to the Indemnifying Party, but, if settled with its written
consent, or if there is a final judgment for the plaintiff in any such
action or proceeding with respect to which the Indemnifying Party shall
have received notice in accordance with this subsection (c), the
Indemnifying Party agrees to indemnify and hold the Indemnified Parties
harmless from and against any loss or liability by reason of such
settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party (other
than due to application of this Section), each Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each indemnified Party, on the
other, shall be determined by reference to, among other things, whether
the breach of, or alleged breach of, any of its representations and
warranties set forth are within the control of, the Indemnifying Party or
the Indemnified Party, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such breach.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
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Section 3.05 INDEMNIFICATION WITH RESPECT TO THE SUB-SERVICER.
(a) In addition to any and all of the Note Insurer's rights of
reimbursement, indemnification, subrogation and to any other rights of the
Note Insurer pursuant hereto or under law or in equity, the Sub-Servicer
agrees to pay, and to protect, indemnify and save harmless, the Note
Insurer and its officers, directors, shareholders, employees, agents and
each Person, if any, who controls the Note Insurer within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against, any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs
or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any
nature arising out of or relating to the breach by the Sub-Servicer of any
of its representations or warranties contained in Section 2.04 or arising
directly out of or relating directly to the Transaction contemplated by
the Company Documents by reason of:
(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Sub-Servicer in connection with
any Transaction arising from or relating to the Company Documents;
(ii) the violation by the Sub-Servicer of any domestic or
foreign law, rule or regulation, or any judgment, order or decree
applicable to it, which violation reasonably could result in a
Material Adverse Change;
(iii) the breach by the Sub-Servicer of any of its
representations, warranties or covenants under any of the Company
Documents to which it is a party or the occurrence, in respect of
the Sub-Servicer, under any of the Company Documents of any Event of
Default or any event which, with the giving of notice or the lapse
of time or both, would constitute any Event of Default; or
(iv) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document and the entire
Registration Statement, other than in the Underwriter Information,
Company Information, the Servicer Information and Note Insurer
Information (such information, the "Sub-Servicer Information") or
any omission or alleged omission to state in the Sub-Servicer
Information a material fact required to be stated in the
Sub-Servicer Information or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading, except insofar as such claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of
investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or omission or
alleged omission of a material fact in information included in the
Note Insurer Information, the Company Information, the Subservicer
Information or the Underwriter Information.
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(b) The Note Insurer agrees to pay, and to protect, indemnify and
save harmless, the Sub-Servicer and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls the Sub-Servicer
within the meaning of either Section 15 of the Securities Act or Section
20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Note Insurer Information or any omission or alleged omission to
state in the Note Insurer Information a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, (ii) any
failure of the Note Insurer to make a payment required to be made under
the Policy or (iii) a breach of any of the representations and warranties
of the Note Insurer contained in Section 2.13.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party") in respect of which the indemnity
provided in Section 3.05(a) or (b) may be sought from the Sub-Servicer, on
the one hand, or the Note Insurer, on the other (each, an "Indemnifying
Party") hereunder, each such Indemnified Party shall promptly notify the
Indemnifying Party in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all expenses. The
Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof at the expense of
the Indemnified Party; provided, however, that the fees and expenses of
such separate counsel shall be at the expense of the Indemnifying Party if
(i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
the Indemnifying Party shall have failed within a reasonable period of
time to assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and
the Indemnifying Party, and the Indemnified Party shall have been advised
by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
Indemnifying Party (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Party, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Parties, which firm shall be designated in writing by the
Indemnified Party and shall be reasonably satisfactory to the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of
any such action or proceeding effected without its written
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consent, which consent shall not be unreasonably withheld, conditioned or
delayed, but, if settled with its written consent, or if there is a final
judgment for the plaintiff in any such action or proceeding with respect
to which the Indemnifying Party shall have received notice in accordance
with this subsection (c), the Indemnifying Party agrees to indemnify and
hold the Indemnified Party harmless from and against any loss or liability
by reason of such settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless the Indemnified Party (other
than due to application of this Section), the Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the
other, shall be determined by reference to, among other things, whether
the breach of, or alleged breach of, any of its representations and
warranties set forth are within the control of, the Indemnifying Party or
the Indemnified Party, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such breach.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
Section 3.06 INDEMNIFICATION WITH RESPECT TO THE SPONSOR.
(a) In addition to any and all of the Note Insurer's rights of
reimbursement, indemnification, subrogation and to any other rights of the
Note Insurer pursuant hereto or under law or in equity, the Sponsor agrees
to pay, and to protect, indemnify and save harmless, the Note Insurer and
its officers, directors, shareholders, employees, agents and each Person,
if any, who controls the Note Insurer within the meaning of either Section
15 of the Securities Act or Section 20 of the Securities Exchange Act from
and against, any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising out
of or relating to the breach by the Sponsor of any of its representations
or warranties contained in Section 2.07 or arising directly out of or
relating directly to the Transaction contemplated by the Company Documents
by reason of:
(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Sponsor in connection with any
Transaction arising from or relating to the Company Documents;
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(ii) the violation by the Sponsor of any domestic or foreign
law, rule or regulation, or any judgment, order or decree applicable
to it, which violation reasonably could result in a Material Adverse
Change;
(iii) the breach by the Sponsor of any of its representations,
warranties or covenants under any of the Company Documents to which
it is a party or the occurrence, in respect of the Sponsor, under
any of the Company Documents of any Event of Default or any event
which, with the giving of notice or the lapse of time or both, would
constitute any Event of Default; or
(iv) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document and the entire
Registration Statement, other than in the Underwriter Information,
Company Information, the Subservicer Information and Note Insurer
Information (such information, the "Sponsor Information") or any
omission or alleged omission to state in the Sponsor Information a
material fact required to be stated in the Sponsor Information or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
insofar as such claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants
and auditors and reasonable costs of investigations) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact in
information included in the Note Insurer Information, the Company
Information, the Subservicer Information or the Underwriter
Information.
(b) The Note Insurer agrees to pay, and to protect, indemnify and
save harmless, the Sponsor and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls the Sponsor within
the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Note Insurer Information or any omission or alleged omission to
state in the Note Insurer Information a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, (ii) any
failure of the Note Insurer to make a payment required to be made under
the Policy or (iii) a breach of any of the representations and warranties
of the Note Insurer contained in Section 2.13.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party") in respect of which the indemnity
provided in Section 3.06(a) or (b) may be sought from the Sponsor, on the
one hand, or the Note Insurer, on the other (each, an "Indemnifying
Party") hereunder,
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each such Indemnified Party shall promptly notify the Indemnifying Party
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all expenses. The Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof at the expense of the Indemnified
Party; provided, however, that the fees and expenses of such separate
counsel shall be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party shall have failed within a reasonable period of time to
assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and
the Indemnifying Party, and the Indemnified Party shall have been advised
by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
Indemnifying Party (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Party, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Parties, which firm shall be designated in writing by the
Indemnified Party and shall be reasonably satisfactory to the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of
any such action or proceeding effected without its written consent, which
consent shall not be unreasonably withheld, conditioned or delayed, but,
if settled with its written consent, or if there is a final judgment for
the plaintiff in any such action or proceeding with respect to which the
Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Party harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless the Indemnified Party (other
than due to application of this Section), the Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the
other, shall be determined by reference to, among other things, whether
the breach of, or alleged breach of, any of its representations and
warranties set forth are within the control of, the Indemnifying Party or
the Indemnified Party, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such breach.
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No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
Section 3.07 PAYMENT PROCEDURE. In the event of any payment by the Note
Insurer, the Indenture Trustee and the Originator, the Servicer, the Company,
the Seller, the Sponsor and the Issuer agree to accept the voucher or other
evidence of payment as prima facie evidence of the propriety thereof and the
liability, if any, described in Section 3.03 therefor to the Note Insurer. All
payments to be made to the Note Insurer under this Insurance Agreement shall be
made to the Note Insurer in lawful currency of the United States of America in
immediately available funds at the notice address for the Note Insurer as
specified in the Indenture on the date when due or as the Note Insurer shall
otherwise direct by written notice to the other parties hereto. In the event
that the date of any payment to the Note Insurer or the expiration of any time
period hereunder occurs on a day that is not a Business Day, then such payment
or expiration of time period shall be made or occur on the next succeeding
Business Day with the same force and effect as if such payment was made or time
period expired on the scheduled date of payment or expiration date.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01 EFFECTIVE DATE; TERM OF THE INSURANCE AGREEMENT. This
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Note Insurer is no longer subject
to a claim under the Policy and the Policy shall have been surrendered to the
Note Insurer for cancellation and (b) all amounts payable to the Note Insurer by
the Sponsor, the Originator, the Servicer, the Company and the Seller hereunder
or from any other source hereunder or under the Company Documents and all
amounts payable under the Notes have been paid in full; provided, however, that
the provisions of Sections 3.02, 3.03, 3.04, 3.05 and 3.06 hereof shall survive
any termination of this Insurance Agreement.
Section 4.02 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
(a) Except at such times as a Note Insurer Default (as defined in
the Indenture) shall exist or shall have occurred, neither the Sponsor,
the Servicer, the Sub-Servicer or the Indenture Trustee shall grant any
waiver of rights under any of the Company Documents to which any of them
is a party without the prior written consent of the Note Insurer, which
shall not be unreasonably withheld, conditioned or delayed and any such
waiver without prior written consent of the Note Insurer shall be null and
void and of no force or effect.
(b) To the extent permitted by law, the Issuer, the Sponsor, the
Originator, the Servicer, the Sub-Servicer, the Company and the Seller
agree that each will, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, such supplements
hereto and such further instruments as the Note Insurer may
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reasonably request and as may be required in the Note Insurer's reasonable
judgment to effectuate the intention of or facilitate the performance of
this Insurance Agreement.
Section 4.03 OBLIGATIONS ABSOLUTE.
(a) The obligations of the Issuer, the Sponsor, the Originator, the
Servicer, the Sub-Servicer, the Company and the Seller hereunder shall be
absolute and unconditional and shall be paid or performed strictly in
accordance with this Insurance Agreement under all circumstances
irrespective of:
(i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver, with respect to any
of the Company Documents or the Notes;
(ii) any exchange or release of any other obligations
hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that the Issuer, the Sponsor, the
Originator, the Servicer, the Sub-Servicer, the Company and the
Seller may have at any time against the Note Insurer or any other
Person;
(iv) any document presented in connection with the Policy
proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) any payment by the Note Insurer under the Policy against
presentation of a certificate or other document that does not
strictly comply with terms of the Policy;
(vi) any failure of the Issuer, the Sponsor, the Originator,
the Servicer, the Sub-Servicer, the Company and the Seller to
receive the proceeds from the sale of the Notes; and
(vii) any other circumstances, other than payment in full,
that might otherwise constitute a defense available to, or discharge
of, the Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company and the Seller in respect of any Company
Document.
(b) The Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company and the Seller and any and all others who are
now or may become liable for all or part of the obligations of the Issuer,
the Sponsor, the Originator, the Servicer, the Sub-Servicer, the Company
or the Seller under this Insurance Agreement agree to be bound by this
Insurance Agreement and (i) to the extent permitted by law, waive and
renounce any and all
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redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness and obligations evidenced
by any Company Document or by any extension or renewal thereof; (ii) waive
presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor and notice of protest; (iii) waive all notices in
connection with the delivery and acceptance hereof and all other notices
in connection with the performance, default or enforcement of any payment
hereunder, except as required by the Company Documents; (iv) waive all
rights of abatement, diminution, postponement or deduction, or to any
defense other than payment, or to any right of setoff or recoupment
arising out of any breach under any of the Company Documents, by any party
thereto or any beneficiary thereof, or out of any obligation at any time
owing to the Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company or the Seller; (v) agree that its liabilities
hereunder shall, except as otherwise expressly provided in this Section
4.03, be unconditional and without regard to any setoff, counterclaim or
the liability of any other Persons for the payment hereof; (vi) agree that
any consent, waiver or forbearance hereunder with respect to an event
shall operate only for such event and not for any subsequent event; (vii)
consent to any and all extensions of time that may be granted by the Note
Insurer with respect to any payment hereunder or other provisions hereof
and to the release of any security at any time given for any payment
hereunder, or any part thereof, with or without substitution, and to the
release of any Person or entity liable for any such payment; and (viii)
consent to the addition of any and all other makers, endorsers, guarantors
and other obligors for any payment hereunder, and to the acceptance of any
and all other security for any payment hereunder, and agree that the
addition of any such obligors or security shall not affect the liability
of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Issuer, the
Sponsor, the Originator, the Servicer, the Sub-Servicer the Company and
the Seller from pursuing any rights or remedies it may have against any
Person in a separate legal proceeding.
Section 4.04 ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Except with respect to or in connection with a merger or other transaction
permitted under Section 2.03(c), 2.06(c), 2.09(c) and 2.12(c) hereof, the
Issuer, the Sponsor, the Originator, the Servicer, the Sub-Servicer, the
Company and the Seller may not assign their respective rights under this
Insurance Agreement, or delegate any of its duties hereunder, without the
prior written consent of the Note Insurer. Any assignments made in
violation of this Insurance Agreement shall be null and void.
(b) The Note Insurer shall have the right to give participations in
its rights under this Insurance Agreement and to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions as
the Note Insurer may in its discretion determine; provided, however, that
no such participation or reinsurance agreement or arrangement shall
relieve the
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Note Insurer of any of its obligations hereunder or under the Policy and
provided further that any reinsurer or participant will not have any
rights against the Trust, the Issuer, the Sponsor, the Originator, the
Servicer, the Sub-Servicer, the Company, the Seller, the Holders of the
Notes or the Indenture Trustee and that the Trust, the Issuer, the
Sponsor, the Originator, the Servicer, the Sub-Servicer, the Company, the
Seller, the Holders of the Notes and the Indenture Trustee shall have no
obligation to have any communication or relationship with any reinsurer or
participant in order to enforce the obligations of the Note Insurer
hereunder and under the Policy.
(c) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right,
remedy or claim, express or implied, upon any Person, including,
particularly, any Holder, other than the Note Insurer against the Issuer,
the Sponsor, the Originator, the Servicer, the Sub-Servicer, the Company
and the Seller or the Issuer, the Sponsor, the Originator, the Servicer,
the Sub-Servicer, the Company and the Seller against the Note Insurer and
all the terms, covenants, conditions, promises and agreements contained
herein shall be for the sole and exclusive benefit of the parties hereto
and their successors and permitted assigns. Neither the Indenture Trustee
nor any Holder shall have any right to payment from any Premiums paid or
payable hereunder or under the Indenture or from any amounts paid by the
Issuer, the Sponsor, the Originator, the Servicer, the Sub-Servicer, the
Company and the Seller pursuant to Sections 3.02 or 3.03.
Section 4.05 LIABILITY OF THE NOTE INSURER. Neither the Note Insurer nor
any of its officers, directors or employees shall be liable or responsible for:
(a) the use that may be made of the Policy by the Indenture Trustee or for any
acts or omissions of the Indenture Trustee in connection therewith; or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered to the
Note Insurer in connection with any claim under the Policy, or of any signatures
thereon, even if such documents or signatures should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged (unless the Note
Insurer shall have actual knowledge thereof). In furtherance and not in
limitation of the foregoing, the Note Insurer may accept documents that appear
on their face to be in order, without responsibility for further investigation.
Section 4.06 ANNUAL SERVICING AUDIT AND CERTIFICATION. The annual
servicing audit required pursuant to Section 2.20 of the Servicing Agreement and
Section 3.10 of the Sub-Servicing Agreement shall be performed by an independent
third party acceptable to the Note Insurer. Any one of the five major nationally
recognized firms of independent public accountants is deemed to be acceptable.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01 DEFAULTS. The occurrence of any of the following events shall
constitute an Event of Default hereunder:
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(a) Any representation or warranty made by the Issuer, the Sponsor,
the Originator, the Servicer, the Sub-Servicer, the Company or the Seller
hereunder or under the Company Documents, or in any certificate furnished
hereunder or under the Company Documents, shall prove to be untrue or
incomplete in any material respect; provided, however, that if the Issuer,
the Sponsor, the Originator, the Servicer, the Sub-Servicer, the Company
or the Seller effectively cures any such defects in any representation or
warranty under any Transaction Document or certificate or report furnished
under any Company Document, within the time period specified in the
related document as the cure period therefor, such defect shall not in and
of itself constitute an Event of Default;
(b) (i) the Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company or the Seller shall fail to pay when due any
amount payable by the Issuer, the Sponsor, the Originator, the Servicer,
the Sub-Servicer, the Company or the Seller unless such amounts are paid
in full within the cure period therefor, respectively, hereunder or (ii) a
legislative body has enacted any law that declares or a court of competent
jurisdiction shall find or rule that this Insurance Agreement or the
Company Documents are not valid and binding on the Issuer, the Sponsor,
the Originator, the Servicer, the Sub-Servicer, the Company or the Seller;
(c) The occurrence and continuance of an "Event of Default" under
the Indenture;
(d) Any failure on the part of the Issuer, the Sponsor, the
Originator, the Servicer, the Sub-Servicer, the Company or the Seller duly
to observe or perform in any material respect any other of the covenants
or agreements on the part of the Issuer, the Sponsor, the Originator, the
Servicer, the Sub-Servicer, the Company or the Seller contained in this
Insurance Agreement or in any other Company Document which continues
unremedied beyond any cure period provided therein, or, in the case of
this Insurance Agreement, for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Issuer, the Sponsor, the Originator, the Servicer,
the Sub-Servicer, the Company or the Seller by the Note Insurer (with a
copy to the Indenture Trustee) or by the Indenture Trustee (with a copy to
the Note Insurer); provided, further, that if such failure shall be of a
nature that it cannot be cured within 30 days, such failure shall not
constitute an Event of Default hereunder, if within such 30-day period the
Issuer, the Sponsor, the Originator, the Servicer, the Sub-Servicer, the
Company or the Seller, as the case may be, shall have given notice to the
Note Insurer of corrective action it proposes to take, which corrective
action is agreed, in writing by the Note Insurer to be satisfactory and
the Issuer, the Sponsor, the Originator, the Servicer, the Sub-Servicer,
the Company or the Seller shall thereafter pursue such corrective action
diligently until such default is cured;
(e) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any
present or future federal or state
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insolvency or similar law or the appointment of a conservator or receiver
or liquidator or other similar official in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company or the Seller and such decree or order shall
have remained in force undischarged or unstayed for a period of 90
consecutive days;
(f) The Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company and the Seller shall consent to the appointment
of a conservator or receiver or liquidator or other similar official in
any involuntary insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to the Issuer, the
Sponsor, the Originator, the Servicer, the Sub-Servicer, the Company or
the Seller or of or relating to all or substantially all of its property
and if the Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company and the Seller shall fail to take appropriate
action resulting in the withdrawal or dismissal of such proceeding within
30 Business Days; or
(g) The Issuer, the Sponsor, the Originator, the Servicer, the
Sub-Servicer, the Company and the Seller shall admit in writing its
inability to pay its debts generally as they become due, file a petition
to take advantage of or otherwise voluntarily commence a case or
proceeding under any applicable insolvency, reorganization or other
similar statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations.
(h) The occurrence of a Servicer Termination Delinquency Rate
Trigger or a Servicer Termination Loss Trigger.
Section 5.02 REMEDIES; NO REMEDY EXCLUSIVE.
(a) Upon the occurrence of an Event of Default, the Note Insurer may
take whatever action at law or in equity as may appear necessary or
desirable in its judgment to collect the amounts, if any, then due under
this Insurance Agreement or the Indenture or to enforce performance and
observance of any obligation, agreement or covenant of the Issuer, the
Sponsor, the Originator, the Servicer, the Sub-Servicer, the Company or
the Seller under this Insurance Agreement or the Indenture.
(b) Unless otherwise expressly provided, no remedy herein conferred
or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies
given under this Insurance Agreement, the Indenture or existing at law or
in equity. No delay or omission to exercise any right or power accruing
under this Insurance Agreement or the Indenture upon the happening of any
event set forth in Section 5.01 shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Note Insurer to exercise any remedy
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reserved to the Note Insurer in this Article, it shall not be necessary to
give any notice, other than such notice as may be required by this
Article.
Section 5.03 WAIVERS.
(a) No failure by the Note Insurer to exercise, and no delay by the
Note Insurer in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by the Note Insurer of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein
to the Note Insurer are declared in every case to be cumulative and not
exclusive of any remedies provided by law or equity.
(b) The Note Insurer shall have the right, to be exercised in its
complete discretion, to waive any Event of Default hereunder, by a writing
setting forth the terms, conditions and extent of such waiver signed by
the Note Insurer and delivered to the Issuer, the Sponsor, the Originator,
the Servicer, the Sub-Servicer, the Company or the Seller, as the case may
be. Unless such writing expressly provides to the contrary, any waiver so
granted shall extend only to the specific event or occurrence which gave
rise to the Event of Default so waived and not to any other similar event
or occurrence which occurs subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01 AMENDMENTS, ETC. This Insurance Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto. The Issuer, the Sponsor, the
Originator, the Servicer, the Sub-Servicer, the Company and the Seller agree to
provide a copy of any amendment to this Insurance Agreement promptly to the
Indenture Trustee and the rating agencies maintaining a rating on any of the
Notes at the request of the Issuer, the Sponsor, the Originator, the Servicer,
the Sub-Servicer, the Company or the Seller. No act or course of dealing shall
be deemed to constitute an amendment, modification, supplement or termination
hereof.
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Section 6.02 NOTICES. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
(a) To the Note Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - MBS
Telecopy No.: 212-363-1459
Confirmation: 212-668-0340
(in each case in which notice or other communication to the
Note Insurer refers to an Event of Default, a claim on the
Policy or with respect to which failure on the part of the
Note Insurer to respond shall be deemed to constitute consent
or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the
general counsel of each of the Issuer, the Sponsor, the
Originator, the Servicer, the Company, the Seller and the
Indenture Trustee and shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
(b) To the Originator:
Meritage Mortgage Corporation
6000 SW Meadows Road
Lake Oswego, Oregon 97035
Attention: Larry Reed
Facsimile: (503) 598-8613
Telephone: (503) 598-5270
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(c) To the Servicer:
RBMG, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Attention: Peter Greene
Facsimile: (803) 213-4165
Telephone: (803) 213-4200
(d) To the Sub-Servicer:
Ocwen Federal Bank FSB
1675 Palm Beach Lakes Boulevard, Suite 1002
West Palm Beach, Florida 33401
Attention: Senior V.P., Law Dept.
Facsimile: (561) 681-8163
Telephone: (561) 681-8661
(e) To the Company:
RBMG Asset Management Company, Inc.
2820 West Charleston Boulevard
Las Vegas, Nevada 89102
Attention: President
Facsimile: (702) 822-2469
Telephone: (702) 822-2401
(f) To the Seller:
RBMG Funding Co.
2820 West Charleston Boulevard
Las Vegas, Nevada 89102
Attention: President
Facsimile: (702) 822-2469
Telephone: (702) 822-2401
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(g) To the Sponsor:
Residential Asset Funding Corporation
301 South College Street, TW-06
Charlotte, North Carolina 28288-0166
Facsimile: (212) 891-5085
Telephone: (212) 891-5021
(h) To the Issuer:
RBMG Funding Co. Mortgage Loan Trust 1999-2
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Facsimile: (302) 651-1576
Telephone: (302) 651-1118
(i) To the Indenture Trustee:
Bankers Trust Company
1761 East St. Andrew Place
Santa Ana, California 92705
Attn: RBMG 1999-2
Facsimile: (714) 247-6329
Telephone: (714) 247-6000
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03 SEVERABILITY. In the event that any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 6.04 GOVERNING LAW. This Insurance Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 6.05 CONSENT TO JURISDICTION.
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(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of the United States District Court for the
Southern District of New York and any court in the State of New York
located in the City and County of New York, and any appellate court from
any thereof, in any action, suit or proceeding brought against it and to
or in connection with any of the Company Documents or the Transaction or
for recognition or enforcement of any judgment, and the parties hereto
hereby irrevocably and unconditionally agree that all claims in respect of
any such action or proceeding may be heard or determined in such New York
state court or, to the extent permitted by law, in such federal court. The
parties hereto agree that a final unappealable judgment in any such
action, suit or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. To the extent permitted by applicable law, the parties
hereto hereby waive and agree not to assert by way of motion, as a defense
or otherwise in any such suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that the related
documents or the subject matter thereof may not be litigated in or by such
courts.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
(c) Service on the Issuer, Originator, the Servicer, the Company,
the Seller and the Issuer may be made by mailing or delivering copies of
the summons and complaint and other process which may be served in any
suit, action or proceeding to the Servicer addressed as follows: Meritage
Mortgage Corporation, 6000 SW Meadows Road, Lake Oswego, Oregon 97035,
Attention: Larry Reed, Facsimile: (503) 598-8613, Telephone: (503) 598-
5270; RBMG, Inc., as Servicer, 7909 Parklane Road, Columbia, South
Carolina 29223, Attention: Peter Greene, Facsimile: (803) 213-4165,
Telephone: (803) 213-4200; Ocwen Federal Bank FSB, as Sub-Servicer, Ocwen
Federal Bank FSB, 1675 Palm Beach Lakes Boulevard, Suite 1002, West Palm
Beach, Florida 33401, Attention: Senior V.P., Law Dept., Facsimile: (561)
681-8163, Telephone: (561) 681-8661; RBMG Asset Management Company, Inc.,
as Company, 2820 West Charleston Boulevard, Las Vegas, Nevada 89102,
Attention: President, Facsimile: (702) 822-2469; Telephone: (702)
822-2401; RBMG Funding Co., as Seller, 2820 West Charleston Boulevard, Las
Vegas, Nevada 89102, Attention: President, Facsimile: (702) 822-2469,
Telephone: (702) 822-2401; Residential Asset Funding Corporation, as
Sponsor, 301 South College Street, TW-06, Charlotte, North Carolina
28288-0166, Facsimile: (212) 891-5085, Telephone: (212) 891-5021; and RBMG
Funding Co. Mortgage Loan Trust 1999-2, as Issuer, c/o Wilmington Trust
Company, 1100 North Market Street, Wilmington, Delaware 19890, Facsimile:
(302) 651-1576, Telephone: (302) 651-1118. Such address may be changed by
the applicable party or parties, with the prior written consent of the
Note Insurer, by written notice to the other parties hereto.
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(d) Nothing contained in this Insurance Agreement shall limit or
affect any party's right to serve process in any other manner permitted by
law or to start legal proceedings relating to any of the Company Documents
against any other party or its properties in the courts of any
jurisdiction.
Section 6.06 CONSENT OF THE NOTE INSURER. In the event that the consent of
the Note Insurer is required under any of the Company Documents, the
determination whether to grant or withhold such consent shall be made by the
Note Insurer in its sole discretion without any implied duty towards any other
Person, except as otherwise expressly provided therein.
Section 6.07 COUNTERPARTS. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08 HEADINGS. The headings of Articles and Sections and the Table
of Contents contained in this Insurance Agreement are provided for convenience
only and shall not affect its construction or interpretation.
Section 6.09 TRIAL BY JURY WAIVED. Each party hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Company Documents or any of the transactions contemplated thereunder.
Each party hereto (A) certifies that no representative, agent or attorney of any
party hereto has represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and (B) acknowledges
that it has been induced to enter into the Company Documents to which it is a
party by, among other things, this waiver.
Section 6.10 LIMITED LIABILITY. No recourse under any Company Document or
the Underwriting Agreement shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate or shareholder of any
party hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Company Documents or the Underwriting Agreement, the Notes or the Policy, it
being expressly agreed and understood that each Company Document or the
Underwriting Agreement is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity, or
by statute or constitution, of every such officer, employee, director, affiliate
or shareholder for breaches of any party hereto of any obligations under any
Company Document or the Underwriting Agreement is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Insurance Agreement.
Section 6.11 ENTIRE AGREEMENT. This Insurance Agreement and the Policy set
forth the entire agreement between the parties with respect to the subject
matter hereof and thereof, and this Insurance Agreement supersedes and replaces
any agreement or understanding that may have existed between the parties prior
to the date hereof in respect of such subject matter.
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Section 6.12 INDENTURE TRUSTEE. The Indenture Trustee hereby acknowledges
and agrees to perform all its obligations and duties pursuant to the Company
Documents to which it is a party thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all
as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION
as Note Insurer
By: /s/ Jeffrey D. Nabi
-----------------------------
Name: Jeffrey D. Nabi
Title: Vice President
MERITAGE MORTGAGE CORPORATION
as Originator
By: /s/ Larry Reed
-----------------------------
Name: Larry Reed
Title: President and CEO
RBMG, INC.
as Servicer
By: /s/ Gregory A. Samp
-----------------------------
Name: Gregory A. Samp
Title: Executive Vice President
OCWEN FEDERAL BANK FSB
as Sub-Servicer
By: /s/ Ronald M. Faris
-----------------------------
Name: Ronald M. Faris
Title: Executive Vice-President
RBMG ASSET MANAGEMENT COMPANY, INC.
as Company
By: /s/ Richard M. Linn
-----------------------------
Name: Richard M. Linn
Title: Treasurer
<PAGE>
RBMG FUNDING CO.
as Seller
By: /s/ Richard M. Linn
-----------------------------
Name: Richard M. Linn
Title: Treasurer
RESIDENTIAL ASSET FUNDING
CORPORATION
as Sponsor
By: /s/ Shanker Merchant
-----------------------------
Name: Shanker Merchant
Title: Senior Vice President
RBMG FUNDING CO. MORTGAGE LOAN
TRUST 1999-2
as Issuer
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee
By: /s/ Donald G. MacKelcan
-----------------------------
Name: Donald G. MacKelcan
Title: Vice President
BANKERS TRUST COMPANY
as Indenture Trustee
By: /s/ Paul T. Liu
-----------------------------
Name: Paul T. Liu
Title: Vice President
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ambac Assurance Corporation:
We consent to the incorporation by reference in the registration statement (No.
333-81721) of Residential Asset Securities Corporation (the "Registrant") and in
the Prospectus Supplement of the Registrant (the "Prospectus Supplement"), via
the Form 8-K of the Registrant dated December 10, 1999, of our report dated
January 27, 1999 on the consolidated financial statements of Ambac Assurance
Corporation and subsidiaries as of December 31, 1998 and 1997, and for each of
the years in the three-year period ended December 31, 1998 which report appears
in the Form 10-K of Ambac Financial Group, Inc., which was filed with the
Securities and Exchange Commission on March 30, 1999 and to the reference to our
firm under the heading "Experts" in the Prospectus Supplement.
/s/ KPMG LLP
- -------------------
KPMG LLP
New York, New York
December 10, 1999
