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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) January 29, 1999
Residential Asset Funding Corporation
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(Exact name of registrant as specified in its charter)
North Carolina 333-64775 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 28202-6001
Charlotte, North Carolina ----------
(Address of Principal Executive (Zip Code)
Offices)
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 Bonds 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. 333-64775) (the "Registration Statement").
Pursuant to the Registration Statement, NovaStar Mortgage Funding Trust, Series
1999-1 (the "Issuer") issued $160,000,000 in aggregate principal amount of its
NovaStar Home Equity Loan Asset-Backed Bonds, Series 1999-1, Class A-1 Bonds,
Class A-2 Bonds, Class A-3 Bonds and Class A-4 Bonds (the "Bonds"), on January
22, 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 Bonds.
The Bonds were issued pursuant to an Indenture (the "Indenture")
attached hereto as Exhibit 4.1, dated as of January 1, 1999, among the Issuer,
First Union National Bank, as the bond administrator (the "Bond Administrator"),
and The Chase Manhattan Bank, as indenture trustee, in its capacity as indenture
trustee (the "Indenture Trustee"). The Bonds represent non-recourse obligations
of the Issuer, which obligations are secured by the pledge by the Issuer to the
Indenture Trustee of mortgage loans and certain related property.
The Trust Estate will consist primarily of the following (i) four
groups of fixed rate and adjustable rate, conventional, monthly payment, first
lien mortgage loans (the "Mortgage Loans") to be pledged to the Indenture
Trustee for the benefit of the holders of the Bonds, (ii) all collections in
respect of principal and interest of the Mortgage Loans received after the
Cut-off Date or the Subsequent Cut-off Date as applicable (other than payments
due on or before the applicable Cut-off Date), (iii) the amounts on deposit in
any Collection Account, (iv) certain policies maintained by the Mortgagors or by
or on behalf of the Servicer or any related subservicer in respect of the
Mortgage Loans, (v) an assignment of the Transferor's rights under the Purchase
Agreement, (vi) an assignment of the Issuer's rights under the Servicing
Agreement or any Subservicing Agreement, (vii) amounts on deposit in the
Interest Coverage Account and the Pre-Funding Account, (viii) an assignment of
the Issuer's rights under the Converted Loan Purchase Agreement, and (xi)
proceeds of the foregoing.
Interest distributions on each Class of Bonds are based on the
aggregate principal balance thereof and the then applicable Bond Interest Rate
thereof. For each Payment Date prior to the Payment Date on which the aggregate
Principal Balance of the Mortgage Loans is reduced to less than 10% of the sum
of the Principal Balance of the Initial Mortgage Loans as of the Cut-off Date
and the original Pre-Funded Amount, the Bond Interest Rate for the Class A-1
Bonds will equal one month LIBOR plus 0.43%, the Bond Interest Rate for the
Class A-2 Bonds will equal one month LIBOR plus 0.52%, the Bond Interest Rate
for the Class A-3 Bonds will equal 6.285%, and the Bond Interest Rate for the
Class A-4 Bonds will equal 6.386%. For each Payment Date after the Payment Date
on which the aggregate Principal Balance of the Mortgage Loans is reduced to
less than 10% of the sum of the Principal Balance of the Initial Mortgage Loans
as of the Cut-off Date and the original Pre-Funded Amount, the Bond Interest
Rate for the Class A-1 Bonds will increase by 0.43%, the Bond Interest Rate for
the Class A-2 Bonds will increase by 0.52%, the Bond Interest Rate for the Class
A-3 Bonds will increase by 0.50%, and the Bond Interest Rate for the Class A-4
Bonds will increase by 0.50%.
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As of January 1, 1999, the Mortgage Loans possessed the
characteristics described in the Prospectus dated November 10, 1998 and the
Prospectus Supplement dated January 22, 1999 filed pursuant to Rule 424(b)(5) of
the Act on January 29, 1999.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibit 1.1. Underwriting Agreement, dated January 22, 1999, between
Residential Asset Funding Corporation and Wheat First Securities,
Inc., acting through First Union Capital Markets, a division of
Wheat First Securities, Inc.
Exhibit 4.1. Indenture, dated as of January 1, 1999, among the
Issuer, the Bond Administrator, and the Indenture Trustee.
Exhibit 4.2. Service Agreement, dated January 1, 1999, among the
Servicer, the Back-up Servicer, the Bond Administrator, the
Indenture Trustee and the Issuer.
Exhibit 8.1. Opinion of Dewey Ballantine LLP regarding tax matters,
dated January 22, 1999.
Exhibit 10.1. Indemnification Agreement, dated as of January 22,
1999, among Financial Security Assurance Inc., NovaStar Mortgage,
Inc., NovaStar Mortgage Funding Corporation II, Residential Asset
Funding Corporation, NovaStar Mortgage Funding Trust, Series 1999-1
and Wheat First Securities, Inc., acting through First Union Capital
Markets, a division of Wheat First Securities, Inc.
Exhibit 23.1. Consent of PricewaterhouseCoopers L.L.P. regarding
financial statements of Financial Security Assurance Inc. and
Subsidiaries.
Exhibit 25.1. Form T-1 Statement of Eligibility.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.
RESIDENTIAL ASSET FUNDING CORPORATION,
as Depositor and on behalf of NovaStar Mortgage
Funding Trust, Series 1999-1
Registrant
By:/s/ Carolyn Eskridge
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Name: Carolyn Eskridge
Title: Senior Vice President
Dated: January 29, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
Exhibit 1.1. Underwriting Agreement, dated January 22, 1999, between
Residential Asset Funding Corporation and Wheat First
Securities, Inc., acting through First Union Capital Markets,
a division of Wheat First Securities, Inc.
Exhibit 4.1. Indenture, dated as of January 1, 1999, among the Issuer,
the Bond Administrator, and the Indenture Trustee .
Exhibit 4.2 Servicing Agreement, dated January 1, 1999, among the
Servicer, the Back-up Servicer, the Bond Administrator, the
Indenture Trustee and the Issuer.
Exhibit 8.1. Opinion of Dewey Ballantine LLP regarding tax matters,
dated January 22, 1999.
Exhibit 10.1. Indemnification Agreement, dated as of January 22, 1999,
among Financial Security Assurance Inc., NovaStar Mortgage,
Inc., NovaStar Mortgage Funding Corporation II, Residential
Asset Funding Corporation, NovaStar Mortgage Funding Trust,
Series 1999-1 and Wheat First Securities, Inc., acting through
First Union Capital Markets, a division of Wheat First
Securities, Inc.
Exhibit 23.1. Consent of PricewaterhouseCoopers L.L.P. regarding
financial statements of Financial Security Assurance Inc.
and Subsidiaries.
Exhibit 25.1. Form T-1 Statement of Eligibility.
Exhibit 1.1
EXECUTION COPY
NOVASTAR MORTGAGE FUNDING TRUST,
SERIES 1999-1
ASSET BACKED BONDS
SERIES 1999-1
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
First Union Capital Markets
301 South College Street
Charlotte, North Carolina 28202-6001
January 22, 1999
Dear Sirs:
Residential Asset Funding Corporation (the "Depositor") proposes,
subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated January 22, 1999 (the
"Standard Provisions"), between the Depositor and Wheat First Securities, Inc.,
acting through First Union Capital Markets, a division of Wheat First
Securities, Inc. ("First Union") to issue and sell to you (the "Underwriter")
the securities specified in Schedule I hereto (the "Offered Securities") in the
amounts set forth in Schedule I hereto. The Depositor agrees that each of the
provisions of the Standard Provisions is incorporated herein by reference in its
entirety, and shall be deemed to be a part of this Agreement to the same extent
as if such provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Underwriting Agreement. Each reference to the
"Representative" herein and in the provisions of the Standard Provisions so
incorporated by reference shall be deemed to refer to you. Unless otherwise
defined herein, terms defined in the Standard Provisions are used herein as
therein defined. The Prospectus Supplement and the accompanying Prospectus
relating to the Offered Securities (together, the "Prospectus") are incorporated
by reference herein.
Subject to the terms and conditions set forth herein and in the
Standard Provisions incorporated herein by reference, the Depositor agrees to
cause the Issuer to issue and sell to the Underwriter, and the Underwriter
agrees to purchase from the Depositor, at the time and place and at the purchase
price to the Underwriter and in the manner set forth in Schedule I hereto, the
original principal balance of the Offered Securities.
[Remainder of Page Intentionally Left Blank]
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If the foregoing is in accordance with your understanding, please
sign and return to us two counterparts hereof, and upon acceptance hereof by
you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Yours truly,
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ Shanker Merchant
----------------------
Name: Shanker Merchant
Title: Senior Vice President
Accepted as of the date hereof:
WHEAT FIRST SECURITIES, INC.
acting through FIRST UNION CAPITAL MARKETS,
a division of Wheat First Securities, Inc.
By: /s/ Carolyn Eskridge
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Name: Carolyn Eskridge
Title: Senior Vice President
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE I
Issuer: NovaStar Mortgage Funding Trust, Series
1999-1.
Title of Offered NovaStar Mortgage Funding Trust, Series
Securities: 1999-1, Home Equity Loan Asset Backed Bonds,
Series 1999-1, Class A-1, Class A-2, Class
A-3 and Class A-4.
Terms of Offered The Offered Securities shall have the terms
Securities: 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 January 1, 1999 among the Issuer,
First Union National Bank, as Trust
Administrator and The Chase Manhattan Bank,
as Indenture Trustee.
Purchase Commitment: Wheat First Securities, Inc.,acting through
First Union Capital Markets Price, a division
of Wheat First Securities, Inc.: $160,000,000
Purchase Price: The purchase price for the Offered
Securities shall be 100% of the aggregate
principal balance of the Class A-1 Bonds,
Class A-2 Bonds, Class A-3 Bonds and the
Class A-4 Bonds, as of the Closing Date.
Specified funds for Federal Funds (immediately available funds).
payment of Purchase Price:
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services.
Closing Date: On or about January 29, 1999 at 10:00 A.M.
eastern standard time or at such other time
as the Depositor and the Underwriter shall
agree.
Closing Location: Offices of Dewey Ballantine LLP, 1301 Avenue
of the Americas, New York, New York 10019.
Representative: Wheat First Securities, Inc., acting through
First Union Capital Markets, a division of
Wheat First Securities, Inc.
Address for Notices, etc.: First Union Capital Markets
One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6001
Attn: Evan Peverley
I-1
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
January 22, 1999
From time to time, Residential Asset Funding Corporation, a North
Carolina corporation (the "Depositor") may enter into one or more underwriting
agreements (each, an "Underwriting Agreement") that provide for the sale of
designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriter" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
Underwriter. The standard provisions set forth herein (the "Standard
Provisions") may be incorporated by reference in any Underwriting Agreement.
This Agreement shall not be construed as an obligation of the Depositor to sell
any securities or as an obligation of any of the Underwriters to purchase such
securities. The obligation of the Depositor to sell any securities and the
obligation of any of the Underwriters to purchase any of the securities shall be
evidenced by the Underwriting Agreement with respect to the securities specified
therein. An Underwriting Agreement shall be in the form of an executed writing
(which may be in counterparts), and may be evidenced by an exchange of
telegraphic communications or any other rapid transmission device designed to
produce a written record of the communications transmitted. The obligations of
the Underwriters under this Agreement and each Underwriting Agreement shall be
several and not joint. Unless otherwise defined herein, the terms defined in the
Underwriting Agreement are used herein as defined in the Prospectus referred to
below.
SECTION 1. THE OFFERED SECURITIES. The Depositor proposes to cause the Issuer to
sell, pursuant to the Underwriting Agreement to the Underwriter or Underwriters
named therein, asset backed bonds (the "Offered Securities") representing
obligations of the Issuer, which obligations are secured by a pledge of mortgage
loans (the "Mortgage Loans") and certain related property. The Offered
Securities will be issued pursuant to an indenture (the "Indenture") dated as of
January 1, 1999 among the Issuer, First Union National Bank, as trust
administrator (the "Trust Administrator") and The Chase Manhattan Bank, a New
York banking corporation, as indenture trustee (the "Indenture Trustee"). The
underlying loans were originated or acquired by NovaStar Mortgage, Inc. ("NMI",
in its capacity as seller, the "Seller", and in its capacity as servicer, the
"Servicer"). The Seller has conveyed its interest in the Mortgage Loans to
NovaStar Mortgage Funding Corporation II, a special purpose corporation and a
wholly-owned subsidiary of the Seller (the "Transferor"). The Transferor, in
turn, will convey the Mortgage Loans to the Depositor pursuant to a purchase
agreement (the "Purchase Agreement") which will in turn convey the Mortgage
Loans to the Issuer pursuant to the Purchase Agreement. The Mortgage Loans are
to be serviced pursuant to a Servicing Agreement dated as of January 1, 1999, by
and among the Issuer, NMI and the Indenture Trustee.
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (File No. 333-64775),
including a prospectus relating to the Offered 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.
<PAGE>
SECTION 2. OFFERING BY THE UNDERWRITER. Upon the execution of the Underwriting
Agreement with respect to any Offered Securities and the authorization by the
Representative of the release of such Offered Securities, the several
Underwriters propose to offer for sale to the public the Offered Securities at
the prices and upon the terms set forth in the Prospectus.
SECTION 3. PURCHASE, SALE AND DELIVERY OF THE OFFERED SECURITIES. Unless
otherwise specified in the Underwriting Agreement, payment for the Offered
Securities shall be made by wire transfer of immediately available funds to or
at the direction of the Depositor at the time and place set forth in the
Underwriting Agreement, upon delivery to the Representative for the respective
accounts of the several Underwriters of the Offered Securities registered in
definitive form and in such names and in such denominations as the
Representative shall request in writing not less than five full business days
prior to the date of delivery. The time and date of such payment and delivery
with respect to the Offered Securities are herein referred to as the "Closing
Date."
SECTION 4. CONDITIONS OF THE UNDERWRITER' OBLIGATIONS. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and NMI
made in any certificates delivered pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required to be made by or
on behalf of the Depositor under the 1933 Act and the Securities Exchange Act of
1934, as amended (the "1934 Act") prior to the sale of the Offered Securities
shall have been duly taken or made;
(b) (i) No stop order suspending the effectiveness of the Registration Statement
shall be in effect; (ii) no proceedings for such purpose shall be pending before
or threatened by the Commission, or by any authority administering any state
securities or "Blue Sky" laws; (iii) any requests for additional information on
the part of the Commission shall have been complied with to the Representative's
reasonable satisfaction; (iv) since the respective dates as of which information
is given in the Registration Statement and the Prospectus except as otherwise
stated therein, there shall have been no material adverse change in the
condition, financial or otherwise, earnings, affairs, regulatory situation or
business prospects of the Depositor; (v) there are no material actions, suits or
proceedings pending before any court or governmental agency, authority or body
or threatened, affecting the Depositor or the transactions contemplated by the
Underwriting Agreement; (vi) the Depositor is not in violation of its charter or
its by-laws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which it is a party or by
which it or its properties may be bound, which violations or defaults separately
or in the aggregate would have a material adverse effect on the Depositor; and
(vii) the Representative shall have received, on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Depositor, to
the foregoing effect;
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(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; (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 not have discovered and disclosed to the Depositor
on or prior to the Closing Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of a fact or omits to state a fact which, in the opinion of Dewey Ballantine
LLP, counsel for the Representative, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(e) All corporate proceedings and other legal matters relating to the
authorization, form and validity of the Trust Agreement, the Indenture, the
Purchase Agreement, the Servicing Agreement, the Issuer, the Bonds, the
Registration Statement and the Prospectus, and all other legal matters relating
to this Agreement and the transactions contemplated hereby shall be satisfactory
in all respects to the Representative and its counsel, and the Depositor shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(f) The Representative shall have received, on the Closing Date, a 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 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;
(g) The Representative shall have received, on the Closing Date, an opinion of
Dewey Ballantine LLP, special counsel for the Depositor, dated the Closing Date,
in form and substance satisfactory to the Representative and containing opinions
substantially to the effect set forth in Exhibit A hereto;
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(h) The Representative shall have received, on the Closing Date, an opinion of
Stinson, Mag & Fizzell, P.C., counsel for NMI and the Transferor, dated the
Closing Date, in form and substance reasonably satisfactory to the
Representative and counsel for the Underwriter;
(i) 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 B hereto;
(j) The Representative shall have received, on the Closing Date, an opinion of
counsel for the Trust Administrator, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the Underwriter and
containing opinions substantially to the effect set forth in Exhibit B hereto;
(k) The Representative shall have received, on the Closing Date, an opinion of
Dewey Ballantine LLP, counsel for the Underwriter, dated the Closing Date, with
respect to the incorporation of the Depositor, the validity of the Offered
Securities, the Registration Statement, the Prospectus and other related matters
as the Underwriter may reasonably require, and the Depositor shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters;
(l) 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;
(m) The Representative shall have received, on or prior to the date of first use
of the Prospectus Supplement relating to the Offered Securities, and on the
Closing Date if requested by the Representative, letters of independent
accountants of the Depositor in the form and reflecting the performance of the
procedures previously requested by the Representative;
(n) The Representative shall have received, on the Closing Date, a copy of the
indemnification side letter agreement (the "Indemnification Side Letter") duly
executed by the Depositor, the Seller and NovaStar Financial, Inc., a Maryland
corporation ("NFI") at or prior to the Closing Date;
(o) The Depositor shall have furnished or caused to be furnished to the
Representative on the Closing Date a certificate of an executive officer of the
Depositor satisfactory to the Representative as to the accuracy of the
representations and warranties of the Depositor herein at and as of such Closing
Date as if made as of such date, as to the performance by the Depositor of all
of its obligations hereunder to be performed at or prior to such Closing Date,
and as to such other matters as the Representative may reasonably request;
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(p) NMI shall have furnished or caused to be furnished to the Representative on
the Closing Date a certificate of officers of NMI in form and substance
reasonably satisfactory to the Representative;
(q) The Bond Guaranty Insurance Policy (the "Bond 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;
(r) The Representative shall have received, on the Closing Date, an opinion of
counsel to Financial Security Assurance, Inc. (the "Bond 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 C hereto;
(s) 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 Bond
Insurer's claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act;
(t) 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 of the Bond Insurer, since [December 31, 1997],
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;
(u) 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 Bond Insurer to the effect that the signer of such
certificate has carefully examined the Bond Insurance Policy, the Insurance
Agreement, dated the Closing Date, among the Bond Insurer, the Issuer, NMI, the
Depositor and the Indenture Trustee (the "Insurance Agreement"), the
Indemnification Agreement dated as of the Closing Date, among the Bond Insurer,
NovaStar Mortgage, Inc., as Seller and Servicer, the Transferor and Wheat First
Securities, Inc., acting through First Union Capital Markets, a division of
Wheat First Securities, Inc. (the "Indemnification Agreement"), and the related
documents and that, to the best of his or her knowledge based on reasonable
investigation:
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(i) there are no actions, suits or proceedings pending or threatened
against or affecting the Bond Insurer which, if adversely
determined, individually or in the aggregate, would adversely affect
the Bond Insurer's performance under the Bond Insurance Policy, the
Indemnification Agreement or the Insurance Agreement;
(ii) each person who, as an officer or representative of the Bond
Insurer, signed or signs the Bond Insurance Policy, the
Indemnification Agreement, 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
BOND INSURER" is true and correct in all material respects and does
not omit to state a material fact with respect to the description of
the Bond Insurance Policy or the ability of the Bond Insurer to meet
its payment obligations under the Bond Insurance Policy;
(iv) the tables regarding the Bond Insurer's capitalization set forth
under the heading "THE BOND INSURER" present fairly the
capitalization of the Bond Insurer as of September 30, 1998;
(v) on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (i) any intended or potential
downgrading or (ii) any review or possible changes in rating the
direction of which has not been indicated, in the rating accorded
the claims paying ability of the Bond 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 Bond Insurer as of December 31,
1997 and the related statement of income and retained earnings for
the fiscal year then ended, and the accompanying footnotes, together
with an opinion thereon of PricewaterhouseCoopers L.L.P.,
independent certified public accountants, copies of which are
incorporated by reference in the Prospectus, fairly present in all
material respects the financial condition of the Bond Insurer as of
such date and for the period covered by such statements in
accordance with generally accepted accounting principles
consistently applied; and
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(vii) to the best knowledge of such officer, since September 30, 1998 no
material adverse change has occurred in the financial position of
the Bond Insurer other than as set forth in the Prospectus.
The officer of the Bond Insurer certifying to items (v)-(vii) shall
be an officer in charge of a principal financial function. The Bond
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.
(viii) The Representative shall have been furnished such further
information, ertificates, documents and opinions as the
Representative mayreasonably request.
SECTION 5. COVENANTS OF THE DEPOSITOR. In further consideration of the
agreements of the Underwriter contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of the Registration
Statement and any amendments thereto including exhibits and as many copies of
the Prospectus and any supplements and amendments thereto as the Representative
may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting Agreement, the
Depositor will prepare a prospectus supplement setting forth the principal
amount, notional amount or stated amount, as applicable, of Offered Securities
covered thereby, the price at which the Offered Securities are to be purchased
by the Underwriter from the Depositor, either the initial public offering price
or prices or the method by which the price or prices at which the Offered
Securities are to be sold will be determined, the selling concessions and
reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the Depositor will
not file any amendment to the Registration Statement or any supplement to the
Prospectus of which the Representative shall not previously have been advised
and furnished with a copy a reasonable time prior to the proposed filing or to
which the Representative shall have reasonably objected. The Depositor will use
its best efforts to cause any amendment to the Registration Statement to become
effective as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as it is
able with all requirements imposed upon it by the 1933 Act and the rules and
regulations thereunder to the extent necessary to permit the continuance of
sales or of dealings in the Offered Securities in accordance with the provisions
hereof and of the Prospectus, and the Depositor will prepare and file with the
Commission, promptly upon request by the Representative, any amendments to the
Registration Statement or supplements to the Prospectus which may be necessary
or advisable in connection with the distribution of the Offered Securities by
the Underwriter, and will use its best efforts to cause the same to become
effective as promptly as possible. The Depositor will advise the Representative,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement or any amended Registration Statement has become
effective or any supplement to the Prospectus or any amended Prospectus has been
filed. The Depositor will advise the Representative, promptly after it receives
notice or obtains knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of the Prospectus, or the suspension of
the qualification of the Offered Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose, or of any request made by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information, and the Depositor will use its best efforts to prevent the issuance
of any such stop order or any order suspending any such qualification, and if
any such order is issued, to obtain the lifting thereof as promptly as possible.
7
<PAGE>
(c) If, at any time when a prospectus relating to the Offered Securities is
required to be delivered under the 1933 Act, any event occurs as a result of
which the Prospectus as then amended or supplemented would include any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
for any other reason to amend or supplement the Prospectus to comply with the
1933 Act, to promptly notify the Representative thereof and upon their request
to prepare and file with the Commission, at the Depositor's own expense, an
amendment or supplement which will correct such statement or omission or any
amendment which will effect such compliance.
(d) During the period when a prospectus is required by law to be delivered in
connection with the sale of the Offered Securities pursuant to the Underwriting
Agreement, the Depositor will file, on a timely and complete basis, all
documents that are required to be filed by the Depositor with the Commission
pursuant to Sections 13, 14, or 15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under the securities or
"Blue Sky" laws of such jurisdictions as the Representative shall reasonably
request and to pay all expenses (including fees and disbursements of counsel) in
connection with such qualification of the eligibility of the Offered Securities
for investment under the laws of such jurisdictions as the Representative may
designate provided that in connection therewith the Depositor shall not be
required to qualify to do business or to file a general consent to service of
process in any jurisdiction.
(f) To make generally available to the Depositor's security holders, as soon as
practicable, but in any event not later than eighteen months after the date on
which the filing of the Prospectus, as amended or supplemented, pursuant to Rule
424 under the 1933 Act first occurs, an earnings statement of the Depositor
covering a twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the 1933 Act
and the applicable rules and regulations of the Commission thereunder
(including, at the option of the Depositor, Rule 158).
(g) For so long as any of the Offered Securities remain outstanding, to furnish
to the Representative upon request in writing copies of such financial
statements and other periodic and special reports as the Depositor may from time
to time distribute generally to its creditors or the holders of the Offered
Securities and to furnish to the Representative copies of each annual or other
report the Depositor shall be required to file with the Commission.
8
<PAGE>
(h) For so long as any of the Offered Securities remain outstanding, the
Depositor will, or will cause the Servicer to, furnish to the Representative, as
soon as available, a copy of (i) the annual statement of compliance delivered by
the Servicer to the Indenture Trustee under the Servicing Agreement, (ii) the
annual independent public accountants' servicing report furnished to the
Indenture Trustee pursuant to the Servicing Agreement, (iii) each report
regarding the Offered Securities mailed to the holders thereof, and (iv) from
time to time, such other information concerning such securities as the
Representative may reasonably request.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor
represents and warrants to, and agrees with, each Underwriter, as of the date of
the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating to the mortgage
backed securities and the offering thereof from time to time in accordance with
Rule 415 under the 1933 Act has been filed with the Commission and such
Registration Statement, as amended to the date of the Underwriting Agreement,
has become effective. No stop order suspending the effectiveness of such
Registration Statement has been issued and no proceeding for that purpose has
been initiated or threatened by the Commission. A prospectus supplement
specifically relating to the Offered Securities will be filed with the
Commission pursuant to Rule 424 under the 1933 Act; provided, however, that a
supplement to the Prospectus prepared pursuant to Section 5(b) hereof shall be
deemed to have supplemented the Base Prospectus only with respect to the Offered
Securities to which it relates. The conditions to the use of a registration
statement on Form S-3 under the 1933 Act, as set forth in the General
Instructions on Form S-3, and the conditions of Rule 415 under the 1933 Act,
have been satisfied with respect to the Depositor and the Registration
Statement. There are no contracts or documents of the Depositor that are
required to be filed as exhibits to the Registration Statement pursuant to the
1933 Act or the rules and regulations thereunder that have not been so filed.
9
<PAGE>
(b) On the effective date of the Registration Statement, the Registration
Statement and the Base Prospectus conformed in all material respects to the
requirements of the 1933 Act and the rules and regulations thereunder, and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; on the date of the Underwriting Agreement and as of the
Closing Date, the Registration Statement and the Prospectus conform, and as
amended or supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations thereunder, and
on the date of the Underwriting Agreement and as of the Closing Date, neither of
such documents, any Computational Materials nor any ABS Term Sheets includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and neither of such documents as amended or supplemented, if applicable, will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the foregoing does not apply to
statements or omissions in any of such documents based upon written information
furnished to the Depositor by any Underwriter specifically for use therein.
"Computational Materials" shall mean those materials delivered within the
meaning of the no-action letter dated May 20, 1994 issued by the Division of
Corporation Finance of the Commission to Kidder, Peabody Acceptance Corporation
I, Kidder, Peabody & Co., Incorporated, and Kidder Structured Asset Corporation
and the no-action letter dated May 27, 1994 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association for
which the filing of such material is a condition of the relief granted in such
letters. "ABS Term Sheet" shall mean those materials delivered in the form of
"Structural Term Sheets" or "Collateral Term Sheets," in each case within the
meaning of the no-action letter dated February 13, 1995 issued by the Division
of Corporation Finance of the Commission to the Public Securities Association
for which the filing of such material is a condition of the relief granted in
such letter.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
there has been no material adverse change in the condition, financial or
otherwise, earnings, affairs, regulatory situation or business prospects of the
Depositor, whether or not arising in the ordinary course of the business of the
Depositor.
(d) The Depositor has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of North Carolina.
(e) The Depositor has all requisite power and authority (corporate and other)
and all requisite authorizations, approvals, orders, licenses, certificates and
permits of and from all government or regulatory officials and bodies to own its
properties, to conduct its business as described in the Registration Statement
and the Prospectus and to execute, deliver and perform this Agreement, the Trust
Agreement, dated January 29, 1999, among the Transferor, the Depositor,
Wilmington Trust Company, as the Owner Trustee, The Chase Manhattan Bank, as
trust paying agent (the "Trust Agreement"), the Insurance Agreement, the
Indemnification Agreement, the Purchase Agreement, dated as of January 1, 1999,
between the Depositor and the Issuer (the "Purchase Agreement"), and the
Indemnification Side Letter, 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, and certificates are in full force and effect; and, except as
set forth or contemplated in the Registration Statement or the Prospectus, there
are no legal or governmental proceedings pending or, to the best knowledge of
the Depositor, threatened that would result in a material modification,
suspension or revocation thereof.
10
<PAGE>
(f) The Offered Securities have been duly authorized, and when the Offered
Securities are issued and delivered pursuant to the Underwriting Agreement, the
Offered Securities will have been duly executed, issued and delivered and will
be entitled to the benefits provided by the Indenture, subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the rights of creditors generally, and to
general principles of equity (regardless of whether the entitlement to such
benefits is considered in a proceeding in equity or at law), and will conform in
substance to the description thereof contained in the Registration Statement and
the Prospectus, and will in all material respects be in the form contemplated by
the Indenture.
(g) The execution and delivery by the Depositor of this Agreement, the
Underwriting Agreement, the Trust Agreement, the Purchase Agreement, the
Insurance Agreement, the Indemnification Agreement and the Indemnification Side
Letter (collectively, the "Depositor Agreements") are within the corporate power
of the Depositor and neither the execution and delivery by the Depositor of the
Depositor Agreements, nor the consummation by the Depositor of the transactions
therein contemplated, nor the compliance by the Depositor with the provisions
thereof, will conflict with or result in a breach of, or constitute a default
under, the charter or the by-laws of the Depositor or any of the provisions of
any law, governmental rule, regulation, judgment, decree or order binding on the
Depositor or its properties, or any of the provisions of any indenture,
mortgage, contract or other instrument to which the Depositor is a party or by
which it is bound, or will result in the creation or imposition of a lien,
charge or encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument, except such as have been
obtained under the 1933 Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Offered
Securities by the Underwriter.
(h) The Underwriting Agreement has been, and at the Closing Date the Trust
Agreement, the Purchase Agreement, the Insurance Agreement, the Indemnification
Agreement and the Indemnification Side Letter will have been, duly authorized,
executed and delivered by the Depositor.
(i) At the Closing Date, each of the Depositor Agreements will constitute a
legal, valid and binding obligation of the Depositor, enforceable against the
Depositor, in accordance with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting the rights of creditors generally, and to general
principles of equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at law).
11
<PAGE>
(j) No filing or registration with, notice to, or consent, approval,
non-disapproval, authorization or order or other action of, any court or
governmental authority or agency is required for the consummation by the
Depositor of the transactions contemplated by the Depositor Agreements, except
such as have been obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities or "Blue Sky"
laws, in connection with the purchase and distribution of the Offered Securities
by the Underwriter.
(k) The Depositor owns or possesses or has obtained all material governmental
licenses, permits, consents, orders, approvals and other authorizations
necessary to lease, own or license, as the case may be, and to operate, its
properties and to carry on its business as presently conducted and has received
no notice of proceedings relating to the revocation of any such license, permit,
consent, order or approval, which singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would materially adversely affect
the conduct of the business, results of operations, net worth or condition
(financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus, there are no
legal or governmental proceedings pending to which the Depositor is a party or
of which any property of the Depositor is the subject which, if determined
adversely to the Depositor would individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise), earnings,
affairs, or business or business prospects of the Depositor and, to the best of
the Depositor's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a "mortgage related
security" as such term is defined in Section 3(a)(41) of the 1934 Act.
(n) 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, as amended.
(o) Any taxes, fees and other governmental charges in connection with the
execution and delivery of the Depositor Agreements, and issuance of the Offered
Securities have been or will be paid at or prior to the Closing Date.
12
<PAGE>
SECTION 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Depositor agrees to
indemnify and hold harmless each Underwriter (including Wheat First Securities,
Inc., acting through First Union Capital Markets, a division of Wheat First
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, the Prospectus, any Computational
Materials, any ABS Term Sheets, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Depositor will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with (1) written information
furnished to the Depositor by any Underwriter through the Representative
specifically for use therein or (2) information regarding NovaStar Mortgage,
Inc., or the Mortgage Loans, except to the extent that the Depositor has been
indemnified by NovaStar Mortgage, Inc., or (3) information supplied by the Bond
Insurer. This indemnity agreement will be in addition to any liability which the
Depositor may otherwise have.
(b)Each Underwriter will indemnify and hold harmless the Depositor,
each of the Depositor's directors, each of the Depositor's officers who signed
the Registration Statement and each person, if any, who controls the Depositor,
within the meaning of the 1933 Act, against any losses, claims, damages or
liabilities to which the Depositor, or any such director, officer or controlling
person may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, any
Computational Materials, any ABS Term Sheets or any amendment or supplement
thereto, or any other prospectus relating to the Offered Securities, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statements or alleged untrue statements or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Depositor by any Underwriter through the Representative
specifically for use therein; and each Underwriter will reimburse any legal or
other expenses reasonably incurred by the Depositor or any such director,
officer or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. This indemnity agreement will be
in addition to any liability which such Underwriter may otherwise have. The
Depositor acknowledges that the statements set forth under the caption
"UNDERWRITING" in the Prospectus Supplement constitute the only information
furnished to the Depositor by or on behalf of any Underwriter for use in the
Registration Statement, the Prospectus, and each of the several Underwriters
represents and warrants that such statements are correct as to it.
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<PAGE>
(c)In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 7 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by the
Depositor on the one hand, and the Underwriter on the other, from the offering
of the Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriter's relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Depositor and the Underwriter agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriter were treated as one entity for such
purpose). No Underwriter or person controlling such Underwriter shall be
obligated to make contribution hereunder which in the aggregate exceeds the
total underwriting fee of the Offered Securities purchased by such Underwriter
under the Underwriting Agreement, less the aggregate amount of any damages which
such Underwriter and its controlling persons have otherwise been required to pay
in respect of the same or any substantially similar claim. The Underwriter's
obligation to contribute hereunder are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Depositor, each officer of the Depositor who signed the
Registration Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the 1933 Act, shall have the same rights to
contribution as the Depositor.
SECTION 8. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
representations, warranties, agreements, covenants, indemnities and other
statements of the Depositor, its officers and the several Underwriters set forth
in, or made pursuant to, the Underwriting Agreement shall remain in full force
and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
14
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SECTION 9. TERMINATION. (a) The Underwriting Agreement may be terminated by the
Depositor by notice to the Representative in the event that a stop order
suspending the effectiveness of the Registration Statement shall have been
issued or proceedings for that purpose shall have been instituted or threatened.
(b)The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that the Depositor shall
have failed, refused or been unable to perform all obligations and satisfy all
conditions to be performed or satisfied hereunder by the Depositor at or prior
to the Closing Date.
(c)Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other party other than
as provided in Sections 7 and 11 hereof.
SECTION 10. DEFAULT OF UNDERWRITER. If any Underwriter 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
Underwriters 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 Underwriters shall be obligated severally in proportion to
their respective commitments under the Underwriting Agreement to purchase the
Offered Securities which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters so defaults or default
and the aggregate principal amount of the Offered Securities with respect to
which such default or defaults occurs or occur is more than ten percent of the
aggregate principal amount, notional amount or stated amount, as applicable, of
Offered Securities to be sold under the Underwriting Agreement, as the case may
be, and arrangements satisfactory to the Representative and the Depositor for
the purchase of such Offered Securities by other persons (who may include one or
more of the non-defaulting Underwriters including the Representative) are not
made within 36 hours after any such default, the Underwriting Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Depositor except for the expenses to be paid or reimbursed by the Depositor
pursuant to Section 11 hereof. As used in the Underwriting Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10. Nothing herein shall relieve a defaulting Underwriter from liability
for its default.
15
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SECTION 11. EXPENSES. The Depositor agrees with the several Underwriters that:
(a) whether or not the transactions contemplated in the Underwriting Agreement
are consummated or the Underwriting Agreement is terminated, the Depositor will
pay all fees and expenses incident to the performance of its obligations under
the Underwriting Agreement, including, but not limited to, (i) the Commission's
registration fee, (ii) the expenses of printing and distributing the
Underwriting Agreement and any related underwriting documents, the Registration
Statement, the Prospectus, any amendments or supplements to the Registration
Statement or the Prospectus, and any Blue Sky memorandum or legal investment
survey and any supplements thereto, (iii) fees and expenses of rating agencies,
accountants and counsel for the Depositor, (iv) the expenses referred to in
Section 5(e) hereof, and (v) all miscellaneous expenses referred to in Item 30
of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees, disbursements and
expenses, reasonably incurred by the 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 Depositor if the
Underwriting Agreement is terminated by the Depositor pursuant to Section 9(a)
hereof or by the Representative on account of the failure, refusal or inability
on the part of the Depositor to perform all obligations and satisfy all
conditions on the part of the Depositor to be performed or satisfied hereunder;
and
(c) the Depositor will pay the cost of preparing the certificates for the
Offered Securities.
Except as otherwise provided in this Section 11, the Underwriters
agree to pay all of their expenses in connection with investigating, preparing
to market and marketing the Offered Securities and proposing to purchase and
purchasing the Offered Securities under the Underwriting Agreement, including
the fees and expenses of their counsel and any advertising expenses incurred by
them in making offers and sales of the Offered Securities.
SECTION 12. NOTICES. All communications under the Underwriting Agreement shall
be in writing and, if sent to the Underwriter, shall be mailed, delivered or
telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, and, if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
Residential Asset Funding Corporation, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28202-6001, Attention: Managing Director -
Asset Finance Group; provided, however, that any notice to any Underwriter
pursuant to the Underwriting Agreement shall be mailed, delivered or telegraphed
and confirmed to such Underwriter at the address furnished by it.
16
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SECTION 13. REPRESENTATIVE OF UNDERWRITER. Any Representative identified in the
Underwriting Agreement will act for the Underwriters of the Offered Securities
and any action taken by the Representative under the Underwriting Agreement will
be binding upon all of such Underwriters.
SECTION 14. SUCCESSORS. The Underwriting Agreement shall inure to the benefit of
and shall be binding upon the several Underwriters and the Depositor and their
respective successors and legal representatives, and nothing expressed or
mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 15. TIME OF THE ESSENCE. Time shall be of the essence in 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:
WHEAT FIRST SECURITIES, INC.
acting through FIRST UNION CAPITAL MARKETS,
a division of Wheat First 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 Depositor
(1) Each of the Depositor Documents constitutes the valid, legal and
binding agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(2) The Bonds, 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 Depositor Documents or the offer, issuance, sale or
delivery of the Bonds or the consummation of any other transaction contemplated
thereby by the Depositor, except such which have been obtained.
(4) The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not called
upon to express any opinion), at the time the Registration Statement became
effective, as of the date of execution of the Underwriting Agreement and as of
the date hereof comply as to form in all material respects with the requirements
of the 1933 Act and the rules and regulations thereunder, and the 1934 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.
A-1
<PAGE>
(6) The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE BONDS," to the extent such statements purport to
summarize certain provisions of the Bonds or of the Indenture, are fair and
accurate in all material respects.
(7) Neither the Depositor nor the Issuer is an "investment company"
or under the "control" of an "investment company" as such terms are defined in
the 1940 Act.
(8) For federal income tax purposes, the Bonds will be treated as a
"Real Estate Mortgage Investment Conduit."
Such counsel shall also have furnished to the Representative a
written statement, addressed to the Representative and dated the Closing Date,
in form and substance satisfactory to the Representative to the effect that no
facts have come to the attention of such counsel which lead them to believe
that: (a) the Registration Statement, at the time such Registration Statement
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except as to financial or statistical data
contained in the Registration Statement); (b) the Prospectus, as of its date and
as of the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (c) any document
incorporated by reference in the Prospectus or any further amendment or
supplement to any such incorporated document made by the Depositor prior to the
Closing Date contained, as of the time it became effective or was filed with the
Commission, as the case may be, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
A-2
<PAGE>
Exhibit B
Opinions of Counsel to
the Indenture
Trustee
--------------------
(1) The Indenture Trustee is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has the power and authority to enter into and to take all actions required
of it under the Indenture.
(2) The Indenture has been duly authorized, executed and delivered
by the Indenture Trustee and the Indenture constitutes the legal, valid and
binding obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except as enforceability thereof may be
limited by (A) bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, as such laws would
apply in the event of a bankruptcy, insolvency or reorganization or similar
occurrence affecting the Indenture Trustee, and (B) general principles of equity
regardless of whether such enforcement is sought in a proceeding at law or in
equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Indenture Trustee in connection with its execution and delivery of the Indenture
or the performance of its obligations thereunder.
(4) The Bonds 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.
B-1
<PAGE>
Exhibit C
Opinions of Counsel
to the Bond Insurer
(1) The Bond Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New York. The
Bond Insurer is validly licensed and authorized to issue the Note Insurance
Policy and perform its obligations under the Bond Insurance Policy in accordance
with the terms thereof, under the laws of the State of New York.
(2) The execution and delivery by the Bond Insurer of the Bond
Insurance Policy, the Insurance Agreement and the Indemnification Agreement are
within the corporate power of the Bond Insurer and have been authorized by all
necessary corporate action on the part of the Bond Insurer; the Bond Insurance
Policy has been duly executed and is the valid and binding obligation of the
Bond Insurer enforceable in accordance with its terms except that the
enforcement of the Bond 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 Bond Insurer is authorized to deliver the Indemnification
Agreement and the Insurance Agreement, and the Indemnification Agreement and the
Insurance Agreement have been duly executed and are the valid and binding
obligations of the Bond Insurer enforceable in accordance with their 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 Bond
Insurer, the lack of which would adversely affect the validity or enforceability
of the Bond Insurance Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the Bond
Insurance Policy, the form of each Bond Insurance Policy has been filed with,
and approved by, all governmental authorities having jurisdiction over the Bond
Insurer in connection with such Bond Insurance Policy.
(5) To the extent the Bond 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 1933 Act.
(6) The information set forth under the captions "THE INSURANCE
POLICY" and "THE BOND INSURER" in the Prospectus insofar as such statements
constitute a description of the Bond Insurance Policy, accurately summarizes the
Bond Insurance Policy.
C-1
Exhibit 4.1
DB DRAFT 2/8/99
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
Issuer
FIRST UNION NATIONAL BANK
Bond Administrator
and
THE CHASE MANHATTAN BANK
Indenture Trustee
INDENTURE
Dated as of January 1, 1999
------------------------------------------
Relating to
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
NOVASTAR HOME EQUITY LOAN ASSET-BACKED BONDS, SERIES 1999-1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions........................................................2
Section 1.01. Definitions.................................................2
Section 1.02. Incorporation by Reference of Trust Indenture Act...........2
Section 1.03. Rules of Construction.......................................3
ARTICLE II Original Issuance of Bonds........................................3
Section 2.01. Forms of the Bonds..........................................3
Section 2.02. Execution, Authentication and Delivery......................3
Section 2.03. Acceptance of Mortgage Loans by Bond Administrator on
behalf of the Indenture Trustee.............................4
Section 2.04. REMIC Matters...............................................6
ARTICLE III Covenants........................................................7
Section 3.01. Collection of Payments with respect to the Mortgage
Loans.......................................................7
Section 3.02. Maintenance of Office or Agency.............................7
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent........8
Section 3.04. Existence...................................................9
Section 3.05. Payment of Principal and Interest...........................9
Section 3.06. Protection of Trust Estate.................................12
Section 3.07. Opinions as to Trust Estate................................13
Section 3.08. Performance of Obligations.................................13
Section 3.09. Negative Covenants.........................................14
Section 3.10. Annual Statement as to Compliance..........................14
Section 3.11. Reserved...................................................15
Section 3.12. Representations and Warranties Concerning the Mortgage
Loans......................................................15
Section 3.13. Amendments to Servicing Agreement..........................15
Section 3.14. Servicer as Agent and Bailee of the Indenture Trustee......15
Section 3.15. Investment Company Act.....................................16
Section 3.16. Issuer May Consolidate, etc................................16
Section 3.17. Successor or Transferee....................................18
Section 3.18. No Other Business..........................................18
Section 3.19. No Borrowing...............................................18
Section 3.20. Guarantees, Loans, Advances and Other Liabilities..........18
Section 3.21. Capital Expenditures.......................................19
Section 3.22. Purchase of Mortgage Loans Pursuant to the Servicing
Agreement..................................................19
Section 3.23. Restricted Payments........................................19
Section 3.24. Notice of Events of Default................................20
Section 3.25. Further Instruments and Acts...............................20
Section 3.26. Statements to Bondholders..................................20
Section 3.27. Determination of Bond Interest Rate of Class A-1 and
Class A-2 Bonds............................................20
Section 3.28. Policy Payments Account....................................21
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Section 3.29. Servicing and Administration of the MI Policies............22
Section 3.30. Insolvency Proceedings.....................................22
ARTICLE IV The Bonds; Satisfaction and Discharge of Indenture...............23
Section 4.01. The Bonds..................................................23
Section 4.02. Registration of and Limitations on Transfer and
Exchange of Bonds; Appointment of Certificate
Registrar..................................................24
Section 4.03. Mutilated, Destroyed, Lost or Stolen Bonds.................26
Section 4.04. Persons Deemed Owners......................................26
Section 4.05. Cancellation...............................................27
Section 4.06. Book-Entry Bonds...........................................27
Section 4.07. Notices to Depository......................................28
Section 4.08. Definitive Bonds...........................................28
Section 4.09. Reserved...................................................29
Section 4.10. Satisfaction and Discharge of Indenture....................29
Section 4.11. Application of Trust Money.................................30
Section 4.12. Effect of Payments by the Bond Insurer; Subrogation........30
Section 4.13. Repayment of Monies Held by Paying Agent...................31
Section 4.14. Temporary Bonds............................................31
ARTICLE V Default and Remedies..............................................31
Section 5.01. Events of Default..........................................31
Section 5.02. Acceleration of Maturity; Rescission and Annulment.........32
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee.......................................32
Section 5.04. Remedies; Priorities.......................................35
Section 5.05. Optional Preservation of the Trust Estate..................37
Section 5.06. Limitation of Suits........................................38
Section 5.07. Unconditional Rights of Bondholders To Receive
Principal and Interest.....................................39
Section 5.08. Restoration of Rights and Remedies.........................39
Section 5.09. Rights and Remedies Cumulative.............................39
Section 5.10. Delay or Omission Not a Waiver.............................39
Section 5.11. Control by Bond Insurer....................................39
Section 5.12. Waiver of Past Defaults....................................40
Section 5.13. Undertaking for Costs......................................40
Section 5.14. Waiver of Stay or Extension Laws...........................41
Section 5.15. Sale of Trust Estate.......................................41
Section 5.16. Action on Bonds............................................42
Section 5.17. Performance and Enforcement of Certain Obligations.........43
ARTICLE VI The Indenture Trustee and the Bond Administrator.................43
Section 6.01. Duties of the Indenture Trustee and the Bond
Administrator..............................................43
Section 6.02. Rights of Indenture Trustee and Bond Administrator.........46
Section 6.03. Individual Rights of Indenture Trustee and Bond
Administrator..............................................47
Section 6.04. Indenture Trustee's and Bond Administrator's
Disclaimer.................................................47
Section 6.05. Notice of Event of Default.................................47
ii
<PAGE>
Section 6.06. Tax Administration of the Issuer...........................48
Section 6.07. Compensation and Indemnity.................................48
Section 6.08. Replacement of Indenture Trustee or Bond Administrator.....49
Section 6.09. Successor Indenture Trustee or Bond Administrator by
Merger.....................................................50
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee..........................................51
Section 6.11. Eligibility; Disqualification..............................52
Section 6.12. Preferential Collection of Claims Against Issuer...........52
Section 6.13. Representations and Warranties.............................52
Section 6.14. Directions to Indenture Trustee and the Bond
Administrator..............................................53
Section 6.15. The Agents.................................................54
ARTICLE VII Bondholders' Lists and Reports..................................54
Section 7.01. Issuer To Furnish Bond Administrator Names and
Addresses of Bondholders...................................54
Section 7.02. Preservation of Information; Communications to
Bondholders................................................54
Section 7.03. Reports by the Bond Administrator ; Issuer Fiscal Year.....54
Section 7.04. Reports by Indenture Trustee...............................55
Section 7.05. Statements to Bondholders..................................55
Section 7.06. Books and Records..........................................58
ARTICLE VIII Accounts, Disbursements and Releases...........................58
Section 8.01. Collection of Money........................................58
Section 8.02. Trust Accounts.............................................58
Section 8.03. Officer's Certificate......................................59
Section 8.04. Termination Upon Distribution to Bondholders...............59
Section 8.05. Release of Trust Estate....................................60
Section 8.06. Surrender of Bonds Upon Final Payment......................60
Section 8.07. Optional Redemption of the Bonds...........................60
Section 8.08. Pre-Funding Account........................................61
Section 8.09. Interest Coverage Account..................................61
ARTICLE IX Supplemental Indentures..........................................62
Section 9.01. Supplemental Indentures Without Consent of Bondholders.....62
Section 9.02. Supplemental Indentures With Consent of Bondholders........64
Section 9.03. Execution of Supplemental Indentures.......................65
Section 9.04. Effect of Supplemental Indenture...........................65
Section 9.05. Conformity with Trust Indenture Act........................66
Section 9.06. Reference in Bonds to Supplemental Indentures..............66
ARTICLE X Miscellaneous.....................................................66
Section 10.01.Compliance Certificates and Opinions, etc..................66
Section 10.02.Form of Documents Delivered to Indenture Trustee or
Bond Administrator.........................................68
Section 10.03.Acts of Bondholders........................................68
Section 10.04.Notices, etc., to Indenture Trustee, Bond
Administrator, Issuer, Bond Insurer and Rating
Agencies...................................................69
iii
<PAGE>
Section 10.05.Notices to Bondholders; Waiver.............................70
Section 10.06.Conflict with Trust Indenture Act..........................71
Section 10.07.Effect of Headings.........................................71
Section 10.08.Successors and Assigns.....................................71
Section 10.09.Separability...............................................71
Section 10.10.Benefits of Indenture......................................71
Section 10.11.Legal Holidays.............................................71
Section 10.12.Governing Law..............................................72
Section 10.13.Counterparts...............................................72
Section 10.14.Recording of Indenture.....................................72
Section 10.15.Issuer Obligation..........................................72
Section 10.16.No Petition................................................73
Section 10.17.Inspection.................................................73
Section 10.18.Limitation of Liability....................................73
EXHIBIT A FORM OF CLASS A-1 BONDS
EXHIBIT B FORM OF CLASS A-2 BONDS
EXHIBIT C FORM OF CLASS A-3 BONDS
EXHIBIT D FORM OF CLASS A-4 BONDS
EXHIBIT E FORM OF CLASS B BONDS
EXHIBIT F FORM OF CLASS IO BONDS
EXHIBIT G FORM OF TRUSTEE INITIAL CERTIFICATION
EXHIBIT H FORM OF TRUSTEE FINAL CERTIFICATION
EXHIBIT I FORM OF TRANSFEREE CERTIFICATION (144A QIB)
EXHIBIT J FORM OF TRANSFEREE CERTIFICATION (INVESTMENT COMPANY)
EXHIBIT L MORTGAGE LOAN SCHEDULE
iv
<PAGE>
This Indenture, dated as of January 1, 1999, among NovaStar Mortgage
Funding Trust, Series 1999-1, a Delaware business trust, as Issuer (the
"Issuer"), First Union National Bank, a national banking association, as Bond
Administrator (the "Bond Administrator"), and The Chase Manhattan Bank, a New
York banking corporation, as Indenture Trustee (the "Indenture Trustee").
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of each other
party and for the benefit of the Holders of the NovaStar Mortgage Funding Trust,
Series 1999-1 Home Equity Loan Asset-Backed Bonds (the "Bonds") and the Bond
Insurer.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing
Date, as trustee for the benefit of the Holders of the Bonds and the Bond
Insurer, all of the Issuer's right, title and interest in and to whether now
existing or hereafter created by (a) the Initial Mortgage Loans, the Subsequent
Mortgage Loans, the Eligible Substitute Mortgage Loans (and, in each case, the
related MI Policies) and the proceeds thereof and all rights under the Related
Documents (including the related Mortgage Files) and any title and hazard
insurance policies with respect to the Mortgaged Properties; (b) all funds on
deposit from time to time in the Collection Account allocable to the Mortgage
Loans excluding any investment income from such funds; (c) all funds on deposit
from time to time in the Payment Account and in all proceeds thereof, including
any income on funds deposited in, or investments made with funds deposited in,
the Payment Account, which income shall belong to, and be for the account of,
the Bond Administrator or the Indenture Trustee as provided herein; (d) all
funds on deposit from time to time in the Interest Coverage Account and the
Pre-Funding Account in each case including any income on funds deposited in, or
investments made with funds deposited in such accounts; (e) all rights under the
(i) Purchase Agreement as assigned to the Issuer and each Subsequent Transfer
Instrument, (ii) the Servicing Agreement and any Subservicing Agreements and
(iii) the MI Policies; and (f) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing and all payments
on or under, and all proceeds of every kind and nature whatsoever in respect of,
any or all of the foregoing and all payments on or under, and all proceeds of
every kind and nature whatsoever in the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing (collectively,
the "Trust Estate" or the "Collateral").
<PAGE>
The foregoing Grant is made in trust to secure (i) the payment of
principal of and interest on, and any other amounts owing in respect of, the
Bonds, (ii) the payment of all other amounts payable under this Indenture and
(iii) compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as trustee on behalf of the Holders of the
Bonds and the Bond Insurer, acknowledges such Grant, accepts the trust under
this Indenture in accordance with the provisions hereof and agrees to perform
its duties as Indenture Trustee as required herein. The Bond Administrator, on
behalf of the Indenture Trustee, agrees that it will hold the Bond Insurance
Policy in trust and that it will hold any proceeds of any claim made upon the
Bond Insurance Policy solely for the use and benefit of the Holders of the Bonds
in accordance with the terms hereof and the terms of the Bond Insurance Policy.
The Indenture Trustee further acknowledges that in the event (i) the
transfer of the Initial Mortgage Loans from the Seller to the Transferor, from
the Transferor to the Depositor or from the Depositor to the Issuer is
determined to be a financing, and/or (ii) the transfer of the Subsequent
Mortgage Loans by the Seller to the Transferor or by the Transferor to the
Issuer is determined to constitute a financing, then in each case the Bond
Administrator, on behalf of the Indenture Trustee, and the Indenture Trustee
hold the Mortgage Loans as the designee and bailee of the Transferor, the
Depositor and the Issuer, respectively, subject however, in each case, to a
prior lien in favor of the Bondholders and the Bond Insurer pursuant to the
terms of this Indenture.
ARTICLE I
Definitions
Section 1.01. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided herein or unless the context otherwise requires, capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the
definitions attached hereto as Appendix A, which is incorporated by reference
herein. All other capitalized terms used herein shall have the meanings
specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust
Indenture Act of 1939, as amended (the "TIA"), the provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
2
<PAGE>
"Commission" means the Securities and Exchange Commission.
"Indenture securities" means the Bonds.
"Indenture security holder" means a Bondholder.
"Indenture to be qualified" means this Indenture.
"Indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"Obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA by reference to another statute or defined by Commission
rules, have the meanings assigned to them by such definitions.
Section 1.03. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles as in effect from time
to time;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural include the
singular; and
(f) any agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such agreement,
instrument or statute as from time to time amended, modified or supplemented and
includes (in the case of agreements or instruments) references to all
attachments thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
3
<PAGE>
ARTICLE II
Original Issuance of Bonds
Section 2.01. Forms of the Bonds.
The Class-A-1 Bonds, the Class A-2 Bonds, the Class A-3 Bonds, the
Class A-4 Bonds, the Class B Bonds and the Class IO Bonds, together with the
related certificate of authentication, by the Bond Registrar as authenticating
agent on behalf of the Indenture Trustee, shall be in substantially the forms
set forth in Exhibits A-F hereto, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture.
The Bonds shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders).
Section 2.02. Execution, Authentication and Delivery.
The Bonds shall be executed in the name of and on behalf of the
Issuer by an Authorized Officer. The signature of any such Authorized Officer on
the Bonds may be manual or facsimile.
Bonds bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers shall bind the Issuer, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Bonds or did not hold such offices at the
date of such Bonds.
The Indenture Trustee shall upon Issuer Request cause the Bond
Registrar to authenticate and deliver six classes of Bonds for original issue,
Class A-1 Bonds in an aggregate principal amount of $75,000,000, Class A-2 Bonds
in an aggregate principal amount of $20,000,000, Class A-3 Bonds in an aggregate
principal amount of $45,000,000, Class A-4 Bonds in an aggregate principal
amount of $20,000,000, Class B Bonds in an aggregate principal amount of
$4,687,378.15 and Class IO Bonds in an aggregate notional amount of
$164,687,378.15.
Each Bond shall be dated the date of its authentication. The Bonds
shall be issuable as registered Class A-1 Bonds, Class A-2 Bonds, Class A-3
Bonds, Class A-4 Bonds, Class B Bonds and Class IO Bonds and shall be issuable
in a minimum initial Bond Principal Balance, or IO Notional Balance, as the case
may be, of $25,000 and in integral multiples of $1,000 in excess thereof.
4
<PAGE>
No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Bond Registrar by the manual signature of one of its authorized
signatories, and such certificate upon any Bond shall be conclusive evidence,
and the only evidence, that such Bond has been duly authenticated and delivered
hereunder.
Section 2.03. Acceptance of Mortgage Loans by Bond Administrator on behalf of
the Indenture Trustee.
(a) The Bond Administrator, on behalf of the Indenture Trustee, acknowledges
receipt of, subject to the review described below and any exceptions it notes
pursuant to the procedures described below, the documents (or certified copies
thereof) referred to in Section 2.1(b) of the Purchase Agreement and declares
that it holds and will continue to hold those documents and any amendments,
replacements or supplements thereto and all other assets of the Trust Estate in
trust for the use and benefit of all present and future Holders of the Bonds and
the Bond Insurer. No later than 45 days after the Closing Date and each
Subsequent Transfer Date (or, with respect to any Eligible Substitute Mortgage
Loan, within 5 Business Days after the receipt by the Bond Administrator, on
behalf of the Indenture Trustee, thereof and, with respect to any documents
received beyond 45 days after the Closing Date, promptly thereafter), the Bond
Administrator, on behalf of the Indenture Trustee, agrees, for the benefit of
the Bondholders and the Bond Insurer, to review each Mortgage File delivered to
it and to execute and deliver, or cause to be executed and delivered, to the
Seller and the Bond Insurer an initial certification in the form annexed hereto
as Exhibit G. In conducting such review, the Bond Administrator, on behalf of
the Indenture Trustee, will ascertain whether all required documents described
in Section 2.1(b) of the Purchase Agreement have been executed and received and
whether those documents relate, determined on the basis of the Mortgagor name,
original principal balance and loan number, to the Mortgage Loans it has
received, as identified in Exhibit L to this Indenture, as supplemented
(provided, however, that with respect to those documents described in subclause
(b)(vi) of such section, the Bond Administrator's obligations shall extend only
to documents actually delivered pursuant to such subclause). In performing any
such review, the Bond Administrator, on behalf of the Indenture Trustee, may
conclusively rely on the purported due execution and genuineness of any such
document and on the purported genuineness of any signature thereon. If the Bond
Administrator, on behalf of the Indenture Trustee, finds that any document
constituting part of the Mortgage File not to have been executed or received, or
to be unrelated to the Mortgage Loans identified in Exhibit L or Attachment B to
Exhibit 2 of the Purchase Agreement or to appear to be defective on its face,
the Bond Administrator, on behalf of the Indenture Trustee, shall promptly
notify the Seller and the Bond Insurer of such finding and the Seller's
obligation to cure such defect or repurchase or substitute for the related
Mortgage Loan.
5
<PAGE>
Pursuant to Section 5.11 of this Indenture, the Bond Insurer, so
long as no Bond Insurer Default exists, has the right to exercise any trust or
power conferred on the Indenture Trustee or the Bond Administrator. In
connection with the acceptance of the Subsequent Mortgage Loans by the Bond
Administrator on behalf of the Indenture Trustee, the Bond Insurer shall provide
a certificate (the "FSA Certificate") stating that the Subsequent Mortgage Loans
are acceptable to the Bond Insurer. Since the Bond Insurer is acting on behalf
of the Bondholders, the FSA Certificate will be binding upon those Bondholders.
The Bond Administrator on behalf of the Indenture Trustee shall not agree to any
transfer of Subsequent Mortgage Loans to it without (i) receipt of the FSA
Certificate and (ii) confirmation from the Rating Agencies that the purchase of
such Subsequent Mortgage Loans will not result in a downgrade, withdrawal or
qualification of the ratings then in effect for the Outstanding Bonds (without
regard to the Bond Insurance Policy).
(b) No later than 180 days after the Closing Date, the Bond Administrator, on
behalf of the Indenture Trustee, will review, for the benefit of the Bondholders
and the Bond Insurer, the Mortgage Files and will execute and deliver or cause
to be executed and delivered to the Seller and the Bond Insurer, a final
certification in the form annexed hereto as Exhibit H. In conducting such
review, the Bond Administrator, on behalf of the Indenture Trustee, will
ascertain whether an original of each document described in subclauses
(b)(ii)-(iv) of Section 2.1 of the Purchase Agreement required to be recorded
has been returned from the recording office with evidence of recording thereon
or a certified copy has been obtained from the recording office. If the Bond
Administrator, on behalf of the Indenture Trustee, finds any document
constituting part of the Mortgage File has not been received, or to be
unrelated, determined on the basis of the Mortgagor name, original principal
balance and loan number, to the Mortgage Loans identified in Exhibit L or
Attachment B to Exhibit 2 of the Purchase Agreement or to appear defective on
its face, the Bond Administrator, on behalf of the Indenture Trustee, shall
promptly notify the Seller and the Bond Insurer of such finding and the Seller's
obligation to cure such defect or repurchase or substitute for the related
Mortgage Loan.
(c) Upon deposit of the Repurchase Price in the Collection Account and
notification of the Bond Administrator, on behalf of the Indenture Trustee, by a
certification signed by a Servicing Officer (which certification shall include a
statement to the effect that the Repurchase Price has been deposited in the
Collection Account), the Bond Administrator, on behalf of the Indenture Trustee,
shall cause to be released to the Seller the related Mortgage File and shall
cause to be executed and delivered all instruments of transfer or assignment,
without recourse, furnished to it by the Seller as are necessary to vest in the
Seller title to and rights under the related Mortgage Loan. Such purchase shall
be deemed to have occurred on the date on which certification of the deposit of
the Repurchase Price in the Payment Account was received by the Indenture
Trustee. The Bond Administrator, on behalf of the Indenture Trustee, shall amend
the applicable Mortgage Loan Schedule to reflect such repurchase and shall
promptly notify the Servicer, the Bond Insurer and the Rating Agencies of such
amendment. The Indenture Trustee agrees to provide the Bond Administrator with
such power of attorneys as are necessary for the Bond Administrator to fulfill
its obligations under this Section 2.03 and otherwise under the Basic Documents.
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Section 2.04. REMIC Matters.
(a) The Class A-1 Bonds, the Class A-2 Bonds, the Class A-3 Bonds, the Class A-4
Bonds, the B-1 Component, the B-2 Component, the B-3 Component, the B-4
Component, the IO-1 Component, the IO-2 Component, the IO-3 Component and the
IO-4 Component are hereby designated as the "regular interests", and the
Certificates are designated the single class of "residual interests" in the
REMIC Trust for the purposes of the REMIC Provisions.
(b) The Closing Date will be the "startup day of the REMIC Trust within the
meaning of Section 860G(a)(9) of the Code.
(c) It is intended that the REMIC Trust formed under the Trust Agreement shall
constitute, and that the affairs of the REMIC Trust shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Indenture Trustee and the
Servicer agree to provide to the Bond Administrator, as agent for the REMIC
Trust's Tax Matters Person, at the Tax Matters Person's expense, any information
actually in the possession of the Indenture Trustee or within the control of the
Servicer necessary for the Bond Administrator, on behalf of the Tax Matters
Person, to complete its duties set forth in Section 5.03 of the Trust Agreement.
(d) In the event that any tax is imposed on "prohibited transactions" of the
REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of the REMIC as defined in Section 860G(c) of the Code, on
any contribution to the REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, such tax shall be paid by (i) the
Indenture Trustee, if such tax arises out of or results from the negligence or
willful breach or misconduct by the Indenture Trustee in the performance of any
of its obligations under the Basic Documents to which it is a party, (ii) the
Owner Trustee, if such tax arises out of or results from the gross negligence or
willful breach or misconduct by the Owner Trustee in the performance of any of
its obligations under the Basic Documents to which it is a party, (iii) the Bond
Administrator, if such tax arises out of or results from the negligence or
willful breach or misconduct by the Bond Administrator in the performance of any
of its obligations set forth under this Indenture, (iv) the Servicer, if such
tax arises out of or results from the negligence or willful breach or misconduct
by the Servicer in performance of any of its obligations under the Basic
Documents to which it is a party, or (v) the Holders of the Subordinate Bonds,
in proportion to their Percentage Interests. To the extent such tax is
chargeable against the Holders of the Subordinate Bonds, the Bond Administrator,
on behalf of the Indenture Trustee, is hereby authorized to retain from amounts
otherwise distributable to the Holders of the Subordinate Bonds on any
Distribution Date sufficient funds to reimburse the Bond Administrator, on
behalf of the Indenture Trustee, for the payment of such tax (to the extent that
the Bond Administrator, on behalf of the Indenture Trustee, has not been
previously reimbursed or indemnified therefor).
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(e) Following the Startup Day and at any time that any Bonds are outstanding,
(x) neither the Indenture Trustee nor the Bond Administrator shall knowingly
accept any contribution of assets to the REMIC Trust, unless such contribution
is accompanied by an Opinion of Counsel (at the expense of the Seller or the
Servicer) to the effect that the inclusion of such assets in the REMIC Trust
will not cause the REMIC Trust to fail to qualify as a REMIC or subject the
REMIC Trust to any tax under the REMIC Provisions or other applicable provisions
of federal, state and local law or ordinances and (y) the Bond Administrator
shall not release any assets unless it shall have received a properly executed
Request for Release from the Servicer.
ARTICLE III
Covenants
Section 3.01. Collection of Payments with respect to the Mortgage Loans.
Each of the Indenture Trustee and the Bond Administrator, on
behalf of the Indenture Trustee, shall establish and maintain an Eligible
Account (each a "Payment Account"), held in the name of the Indenture Trustee in
trust for the benefit of the Bondholders and the Bond Insurer. The Bond
Administrator, shall, subject to the terms of this paragraph, deposit in the
Payment Account established by it, (i) on the date of receipt (if received prior
to 3:00 p.m. Eastern Standard Time, and if not, then on the Business Day
following receipt) from the Servicer, each remittance received by the Bond
Administrator with respect to the Mortgage Loans and all other amounts required
to be deposited in such Payment Account, and (ii) amounts transferred from the
Pre-Funding Account and the Interest Coverage Account pursuant to Section 8.08
and 8.09 hereof. On the Business Day prior to each Payment Date, the Bond
Administrator shall remit all amounts in the Payment Account established by it
(other than any investment income thereon, which shall be retained by the Bond
Administrator as additional compensation) to the Indenture Trustee for deposit
in the Payment Account established by the Indenture Trustee. The Indenture
Trustee shall make all payments of principal of and interest on the Bonds,
subject to Section 3.03, as provided in Section 3.05 to the extent of monies on
deposit in the Payment Account established by it (other than any investment
income thereon, which shall be retained by the Indenture Trustee as additional
compensation).
Section 3.02. Maintenance of Office or Agency.
The Issuer will maintain within the United States of America, an
office or agency where, subject to satisfaction of conditions set forth herein,
Bonds may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Bonds and this
Indenture may be served. The Issuer hereby initially appoints the Bond
Administrator to serve as its agent for the foregoing purposes. If at any time
the Issuer shall fail to maintain any such office or agency or shall fail to
furnish the Bond Administrator with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Bond Administrator, and the Issuer hereby appoints the Bond Administrator as its
agent to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent.
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(a) As provided in Section 3.01, all payments of amounts due and payable with
respect to any Bonds that are to be made from amounts withdrawn from the Payment
Account pursuant to Section 3.01 shall be made on behalf of the Issuer by the
Indenture Trustee or by the Paying Agent, and no amounts so withdrawn from the
Payment Account for payments of Bonds shall be paid over to the Issuer except as
provided in this Section 3.03.
(b) 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
3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with respect to
the Bonds in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee and the Bond Insurer notice of any default by
the Issuer of which it has actual knowledge in the making of any payment
required to be made with respect to the Bonds;
(iii) at any time during the continuance of any such default, upon the written
request of the Indenture Trustee, forthwith pay to the Indenture Trustee,
all sums so held in trust by such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the Indenture
Trustee all sums held by it in trust for the payment of Bonds if at any
time it ceases to meet the standards required to be met by a Paying Agent
at the time of its appointment;
(v) comply with all requirements of the Code with respect to the withholding
from any payments made by it on any Bonds of any applicable withholding
taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith; and
(vi) not commence a bankruptcy proceeding against the Issuer in connection with
this Indenture.
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The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Request direct any Paying Agent to pay to the Indenture Trustee, all sums held
in trust by such Paying Agent, such sums to be held by the Indenture Trustee
upon the same trusts as those upon which the sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Subject to applicable laws with respect to escheat of funds, any
money held by the Indenture Trustee or any Paying Agent in trust for the payment
of any amount due with respect to any Bond (other than amounts paid under the
Bond Insurance Policy) and remaining unclaimed for one year after such amount
has become due and payable shall be discharged from such trust and be paid to
the Issuer upon receipt of an Issuer Request; and the Holder of such Bond shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee, or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee, with the consent of the
Bond Insurer, so long as no Bond Insurer Default exists, may also adopt and
employ, at the expense and direction of the Issuer, any other reasonable means
of notification of such repayment (including, but not limited to, mailing notice
of such repayment to Holders whose Bonds have been called but have not been
surrendered for redemption or whose right to or interest in monies due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. Existence.
The Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Bonds, the Mortgage Loans and each other instrument or agreement included in the
Trust Estate.
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Section 3.05. Payment of Principal and Interest.
(a) On each Payment Date from amounts on deposit with respect to a Group in the
Payment Account in accordance with Section 8.02 hereof, the Indenture Trustee
(based solely on the information provided to the Indenture Trustee by the Bond
Administrator pursuant to Section 3.26 hereof) shall pay, with respect to the
related Class of Bonds, to the Bondholders and to other Persons the amounts to
which they are entitled in the priority set forth below; provided, however, that
any amounts representing payments from the Bond Insurer shall only be used to
pay interest and principal to the related Class A Bondholders pursuant to
clauses (iii) and (iv):
(i) to the Bond Administrator, the Bond Administrator Fee (net of the
Indenture Trustee Fee, which the Indenture Trustee will retain), each with
respect to such Group;
(ii) to the Bond Insurer, the Bond Insurance Premium for the related Class of
Class A Bonds;
(iii) to the related Class A Bondholders, the related Interest Payment Amount
with respect to such Payment Date;
(iv) to the related Class A Bondholders, the related Principal Payment Amount
with respect to such Payment Date;
(v) to the holders of each other Class of Class A Bonds, the related Interest
Cross-Collateralization Amount with respect to other Groups, subject to
the provisions of Section 3.05(b) below;
(vi) to the holders of each other Class of Class A Bonds, the Principal
Cross-Collateralization Amount with respect to other Groups, subject to
the provisions of Section 3.05(b) below;
(vii) to the Bond Insurer, the Reimbursement Amount with respect to the related
Group;
(viii)to the Bond Insurer, the Reimbursement Cross-Collateralization Amount
with respect to other Groups, subject to the provisions of Section 3.05(b)
below;
(ix) to the related Class A Bondholders, in reduction of the related Bond
Principal Balance, the Subordination Increase Amount with respect to the
related Group;
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(x) to the holders of each other Class of Class A Bonds, in reduction of the
related Bond Principal Balance, the Subordination Increase
Cross-Collateralization Amount with respect to other Groups, subject to
the provisions of Section 3.05(b) below;
(xi) to the Class A-1 and Class A-2 Bondholders only, any related Carry-Forward
Amount;
(xii) to the Class A-1 and Class A-2 Bondholders only, the Carry-Forward
Cross-Collateralization Amount with respect to other Groups, subject to
the provisions of Section 3.05(b) below;
(xiii)to the Indenture Trustee and to the Bond Administrator, any amounts owing
to the Indenture Trustee and to the Bond Administrator relating to the
Mortgage Loans in the related Group under any Basic Documents remaining
unpaid;
(xiv) to the Servicer, any amounts owing to the Servicer pursuant to the
Servicing Agreement in connection with the indemnity by the Issuer
thereunder, and in the event there is a successor servicer, additional
compensation, if necessary, pursuant to Section 6.02(a) of the Servicing
Agreement;
(xv) to the holders of the Class B Bonds, the Interest Payment Amount on the
related Class B Component, and in reduction of the related Bond Principal
Balance on the related Class B Component, the related Principal Payment
Amount on the related Class B Component; and
(xvi) to the holders of the Class IO Bonds, the related Interest Payment Amount
for each IO Component; and
(xvii)any remaining amounts, to the Certificate Paying Agent for the
Certificateholders.
(b) The waterfall provisions stated in subparagraphs (v), (vi), (viii), (x) and
(xii) of paragraph (a) above provide for limited cross-collateralization (the
"Cross-Collateralization Provisions"), in which excess funds from one or more
Groups may be used to make payments otherwise due from one or more other Groups.
At each step in the waterfall containing Cross-Collateralization Provisions, the
Bond Administrator, on behalf of the Indenture Trustee, shall determine with
respect to each Group whether there is (x) excess cash available from such Group
for application with respect to payments due from other Groups (an "Excess
Group") or (y) a shortfall of cash available from such Group required to make
payments due from such Group (a "Shortfall Group"). If the aggregate amount of
cash required by all Shortfall Groups is greater than the aggregate amount of
cash available from all Excess Groups, then the available excess cash will be
applied to each Shortfall Group on a pro rata basis, in accordance with the
amount of the shortfall for each Shortfall Group. Alternatively, if the
aggregate amount of cash available from all Excess Groups is greater than the
aggregate amount of cash required by all Shortfall Groups, then the aggregate
amount of cash required by the Shortfall Groups will be applied from each of the
Excess Groups on a pro rata basis, in accordance with the amount of excess cash
available from each Excess Group. This process shall be followed at each step in
the waterfall containing Cross-Collateralization Provisions.
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(c) On each Payment Date, the Certificate Paying Agent shall deposit in the
Certificate Distribution Account all amounts it received pursuant to this
Section 3.05 for the purpose of distributing such funds to the
Certificateholders after payment of trust expenses to the Owner Trustee or the
Indenture Trustee pursuant to the Trust Agreement.
(d) Interest will accrue on the Class A-1 and Class A-2 Bonds during an Interest
Period on the basis of the actual number of days in such Interest Period and a
year assumed to consist of 360 days. Interest will accrue on the Class A-3 and
Class A-4 Bonds during an Interest Period on the basis of twelve 30-day months
in a 360-day year. Interest will accrue on each component of the Class B Bonds
and the Class IO Bonds on the same basis as the Classes of the Class A Bonds to
which such component relates.
(e) Any installment of interest or principal, if any, payable on any Class A
Bond that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, so long as such Class A Bonds are Book-Entry
Bonds registered in the name of the Depository or its nominee, be paid by wire
transfer to the Depository or its nominee. In the case of the Subordinated Bonds
and the Class A Bonds if such Class A Bonds are no longer Book-Entry Bonds, if
the related Holder shall have so requested at least five Business Days prior to
the related Record Date and, in the case of the Class A Bonds, such Holder holds
such Class A Bonds of an aggregate initial Bond Principal Balance of at least
$5,000,000, such installment shall be paid on such Payment Date to each Holder
of record on such Record Date, by wire transfer to an account specified in
writing by such Holder reasonably satisfactory to the Indenture Trustee, and in
all other cases or if no such instructions have been delivered to the Indenture
Trustee, by check to such Bondholder mailed to such Holder's address as it
appears in the Bond Register in the amount required to be distributed to such
Holder on such Payment Date; PROVIDED, HOWEVER, that the Indenture Trustee shall
not pay to such Holders any amount required to be withheld from a payment to
such Holder by the Code. The Indenture Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer.
(f) The principal of each Bond shall be due and payable in full on the Final
Scheduled Payment Date for such Bond. All principal payments on the Bonds shall
be made to the Bondholders entitled thereto in accordance with the Percentage
Interests represented by such Bonds. Upon notice to the Indenture Trustee, by
the Issuer, the Indenture Trustee shall notify the Person in whose name a Bond
is registered at the close of business on the Record Date preceding the Final
Scheduled Payment Date or other final Payment Date (including any final Payment
Date resulting from any redemption pursuant to Section 8.07 hereof). Such notice
shall to the extent practicable be mailed no later than five Business Days prior
to such Final Scheduled Payment Date or other final Payment Date and shall
specify that payment of the principal amount and any interest due with respect
to such Bond at the Final Scheduled Payment Date or other final Payment Date
will be payable only upon presentation and surrender of such Bond and shall
specify the place where such Bond may be presented and surrendered for such
final payment. No interest shall accrue on the Bonds on or after the Final
Scheduled Payment Date or any such other final Payment Date.
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Section 3.06. Protection of Trust Estate.
(a) The Issuer will from time to time prepare, 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 necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien and security interest (and the priority
thereof) of this Indenture or carry out more effectively the purposes
hereof;
(iii) perfect, publish notice of or protect the validity of any Grant made or to
be made by this Indenture;
(iv) cause the Issuer or the Servicer to enforce any of their rights with
respect to the Mortgage Loans or the Related Documents; and
(v) preserve and defend title to the Trust Estate and the rights of the
Indenture Trustee, the Bond Insurer and the Bondholders in such Trust
Estate against the claims of all persons and parties.
Except as otherwise provided in this Indenture, neither the Bond
Administrator, on behalf of the Indenture Trustee, nor the Indenture Trustee
shall 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 3.07 hereof, unless the Bond Administrator and 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.
The Issuer hereby designates the Bond Administrator, on behalf of
the Indenture Trustee, its agent and attorney-in-fact to sign any financing
statement, continuation statement or other instrument required to be signed
pursuant to this Section 3.06 upon the Issuer's preparation thereof and delivery
to the Bond Administrator, on behalf of the Indenture Trustee.
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Section 3.07. Opinions as to Trust Estate.
On the Closing Date, the Issuer shall furnish to the Indenture
Trustee, the Bond Administrator, the Bond Insurer and the Owner Trustee an
Opinion of Counsel either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording and filing of this
Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the lien and first priority security interest in the Collateral and
reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and first priority
security interest effective.
On or before February 1 in each calendar year, beginning in 2000,
the Issuer shall furnish to the Indenture Trustee, the Bond Administrator and
the Bond Insurer an Opinion of Counsel at the expense of the Issuer either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and first priority security
interest in the Collateral and reciting the details of such action or stating
that in the opinion of such counsel no such action is necessary to maintain such
lien and security interest. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and the execution and
filing of any financing statements and continuation statements that will, in the
opinion of such counsel, be required to maintain the lien and security interest
in the Collateral until January 31 in the following calendar year.
Section 3.08. Performance of Obligations.
The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate.
The Issuer, with the consent of the Bond Insurer so long as no Bond
Insurer Default exists, may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee or the Bond Administrator in an
Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer.
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The Issuer will not take any action or permit any action to be taken
by others which would release any Person from any of such Person's covenants or
obligations under any of the documents relating to the Mortgage Loans or under
any instrument included in the Trust Estate, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any of the documents relating to the Mortgage
Loans or any such instrument, except such actions as the Servicer is expressly
permitted to take in the Servicing Agreement. The Bond Administrator, on behalf
of the Indenture Trustee, as pledgee of the Mortgage Loans, shall with the
consent of, or direction of, the Bond Insurer, so long as no Bond Insurer
Default exists, be able to exercise the rights of the Issuer to direct the
actions of the Servicer pursuant to the Servicing Agreement.
Section 3.09. Negative Covenants.
So long as any Bonds are Outstanding, the Issuer shall not:
(a) except as expressly permitted by this Indenture, sell, transfer, exchange or
otherwise dispose of the Trust Estate, unless directed to do so by the Bond
Insurer or the Bond Administrator, on behalf of the Indenture Trustee, with the
consent of the Bond Insurer, so long as no Bond Insurer Default exists;
(b) claim any credit on, or make any deduction from the principal or interest
payable in respect of, the Bonds (other than amounts properly withheld from such
payments under the Code) or assert any claim against any present or former
Bondholder by reason of the payment of the taxes levied or assessed upon any
part of the Trust Estate;
(c) permit the validity or effectiveness of this Indenture to be impaired, or
permit the lien of this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any covenants
or obligations with respect to the Bonds under this Indenture except as may be
expressly permitted hereby, permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this Indenture)
to be created on or extend to or otherwise arise upon or burden the Trust Estate
or any part thereof or any interest therein or the proceeds thereof or permit
the lien of this Indenture not to constitute a valid first priority security
interest in the Trust Estate; or
(d) waive or impair, or fail to assert rights under, the Mortgage Loans, or
impair or cause to be impaired the Issuer's interest in the Mortgage Loans, the
Mortgage Loan Purchase Agreement or any other Basic Document, if any such action
would materially and adversely affect the interests of the Bondholders or the
Bond Insurer.
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Section 3.10. Annual Statement as to Compliance.
The Issuer will deliver to the Indenture Trustee, the Bond
Administrator and the Bond Insurer, within 90 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year 1998), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(a) a review of the activities of the Issuer during such year and of its
performance under this Indenture has been made under such Authorized Officer's
supervision; and
(b) to the best of such Authorized Officer's knowledge, based on such review,
the Issuer has complied with all conditions and covenants under this Indenture
throughout such year, or, if there has been a default in its compliance with any
such condition or covenant, specifying each such default known to such
Authorized Officer and the nature and status thereof.
Section 3.11. Reserved
Section 3.12. Representations and Warranties Concerning the Mortgage Loans.
The Indenture Trustee, as pledgee of the Mortgage Loans (and the
related MI Policies), has the benefit of the representations and warranties made
by the Seller in the Purchase Agreement concerning the Seller and the Mortgage
Loans (and the related MI Policies) to the same extent as though such
representations and warranties were made directly to the Indenture Trustee and
the Indenture Trustee and the Bond Administrator, on behalf of the Indenture
Trustee, have the right to enforce the remedies against the Seller provided in
such Purchase Agreement to the same extent as though such representations and
warranties were made directly to the Indenture Trustee. If a Responsible Officer
of the Indenture Trustee or the Bond Administrator has actual knowledge of any
breach of any representation or warranty made by the Seller in the Mortgage Loan
Purchase Agreement, the Indenture Trustee or the Bond Administrator, as the case
may be, shall promptly notify the Seller and the Bond Insurer of such finding
and the Seller's obligation to cure such breach or repurchase or substitute for
the related Mortgage Loan.
Section 3.13. Amendments to Servicing Agreement.
The Issuer covenants with the Indenture Trustee, the Bond
Administrator and the Bond Insurer that it will not enter into any amendment or
supplement to the Servicing Agreement without the prior written consent of the
Indenture Trustee, the Bond Administrator and the Bond Insurer. The Indenture
Trustee, as pledgee of the Mortgage Loans, and the Bond Administrator, may, with
the consent of the Bond Insurer so long as no Bond Insurer Default exists,
decline to enter into or consent to any such supplement or amendment if the Bond
Insurer's or Bondholders' rights, duties or immunities would be materially and
adversely affected thereby. The Indenture Trustee and/or the Bond Administrator
may, but shall not be obligated to, enter into any amendment or supplement to
the Servicing Agreement that affects the Indenture Trustee's and/or the Bond
Administrator's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
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Section 3.14. Servicer as Agent and Bailee of the Indenture Trustee.
Solely for purposes of perfection under Section 9-305 of the
Uniform Commercial Code or other similar applicable law, rule or regulation of
the state in which such property is held by the Servicer, the Issuer, the Bond
Administrator and the Indenture Trustee hereby acknowledge that the Servicer is
acting as agent and bailee of the Indenture Trustee in holding amounts on
deposit in the Collection Account, as well as its agent and bailee in holding
any Related Documents released to the Servicer, and any other items constituting
a part of the Trust Estate which from time to time come into the possession of
the Servicer. It is intended that, by the Servicer's acceptance of such agency,
the Indenture Trustee, as a secured party of the Mortgage Loans, will be deemed
to have possession of such Related Documents, such monies and such other items
for purposes of Section 9-305 of the Uniform Commercial Code of the state in
which such property is held by the Servicer.
Section 3.15. Investment Company Act.
The Issuer shall not become an "investment company" or under the
"control" of an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (or any successor or amendatory statute), and
the rules and regulations thereunder (taking into account not only the general
definition of the term "investment company" but also any available exceptions to
such general definition); provided, however, that the Issuer shall be in
compliance with this Section 3.15 if it shall have obtained an order exempting
it from regulation as an "investment company" so long as it is in compliance
with the conditions imposed in such order.
Section 3.16. Issuer May Consolidate, etc.
The Issuer shall not consolidate or merge with or into any other
Person, unless:
(a) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the laws
of the United States of America or any state or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form reasonably satisfactory to the
Indenture Trustee, the Bond Administrator and the Bond Insurer, the due and
punctual payment of the principal of and interest on all Bonds and to the
Certificate Paying Agent, on behalf of the Certificateholders, and the payment
of the Bond Insurance Premium and all other amounts payable to the Bond Insurer
and the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as provided
herein;
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(b) immediately after giving effect to such transaction, no Event of Default
shall have occurred and be continuing;
(c) the Rating Agencies shall have notified the Issuer that such transaction
shall not cause the rating of the Bonds to be reduced, suspended or withdrawn or
to be considered by either Rating Agency to be below investment grade without
taking into account the Bond Insurance Policy;
(d) the Issuer and the Bond Insurer shall have received an Opinion of Counsel
(and shall have delivered a copy thereof to the Indenture Trustee and to the
Bond Administrator) to the effect that such transaction will not (A) adversely
affect the status of the Bonds as indebtedness for federal income tax purposes,
or (B) cause the Trust to be subject to an entity level tax for federal income
tax purposes;
(e) any action that is necessary to maintain the lien and security interest
created by this Indenture shall have been taken;
(f) the Issuer shall have delivered to the Indenture Trustee, the Bond
Administrator and the Bond Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions precedent herein
provided for relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(g) the Bond Insurer, so long as no Bond Insurer Default exists, shall have
given its prior written consent.
The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties and
assets of the Issuer the conveyance or transfer of which is hereby
restricted shall be a United States citizen or a Person organized and
existing under the laws of the United States of America or any state,
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee in form satisfactory to the Bond
Administrator and the Indenture Trustee, the due and punctual payment of
the principal of and interest on all Bonds and to the Certificate Paying
Agent, on behalf of the Certificateholders, the payment of the Bond
Insurance Premium and all other amounts payable to the Bond Insurer, the
payment of the MI Premium and all other amounts payable to the MI Insurer
and the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein, expressly agree by means of such supplemental indenture
that all right, title and interest so conveyed or transferred shall be
subject and subordinate to the rights of the Holders of the Bonds and the
Bond Insurer, unless otherwise provided in such supplemental indenture,
expressly agree to indemnify, defend and hold harmless the Issuer, the
Indenture Trustee, the Bond Administrator and the Bond Insurer against and
from any loss, liability or expense arising under or related to this
Indenture and the Bonds and
expressly agree by means of such supplemental indenture that such Person
(or if a group of Persons, then one specified Person) shall make all
filings with the Commission (and any other appropriate Person) required by
the Exchange Act in connection with the Bonds;
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(ii) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such transaction
shall not cause the rating of the Bonds, or the rating of the Bonds
without taking into account the Bond Insurance Policy, to be reduced,
suspended or withdrawn;
(iv) the Issuer and the Bond Insurer shall have received an Opinion of Counsel
(and shall have delivered a copy thereof to the Indenture Trustee and the
Bond Administrator) to the effect that such transaction will not (A)
adversely affect the status of the Bonds as indebtedness for federal
income tax purposes, or (B) cause the Trust to be subject to an entity
level tax for federal income tax purposes;
(v) any action that is necessary to maintain the lien and security interest
created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee, the Bond
Administrator and the Bond Insurer an Officer's Certificate and an Opinion
of Counsel each stating that such conveyance or transfer and such
supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filing required by the Exchange Act);
and
(vii) the Bond Insurer, so long as no Bond Insurer Default exists, shall have
given its prior written consent.
Section 3.17. Successor or Transferee.
Upon any consolidation or merger of the Issuer in accordance with
Section 3.16(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Bonds immediately upon the delivery of written
notice to the Indenture Trustee, the Bond Administrator and the Bond Insurer of
such conveyance or transfer and approval of such transaction given by the Bond
Insurer to the Indenture Trustee or the Bond Administrator, on behalf of the
Indenture Trustee.
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Section 3.18. No Other Business.
The Issuer shall not engage in any business other than financing,
purchasing, owning, selling and managing the Mortgage Loans and the issuance of
the Bonds and Certificates in the manner contemplated by this Indenture and the
Basic Documents and all activities incidental thereto.
Section 3.19. No Borrowing.
The Issuer shall not issue, incur, assume, guarantee or otherwise
become liable, directly or indirectly, for any indebtedness except for the Bonds
and amounts due to the Bond Insurer under this Indenture and the Insurance
Agreement.
Section 3.20. Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by this Indenture or the Basic Documents,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
Section 3.21. Capital Expenditures.
The Issuer shall not make any expenditure (by long-term or
operating lease or otherwise) for capital assets (either realty or personalty).
Section 3.22. Purchase of Mortgage Loans Pursuant to the Servicing Agreement.
(a) Upon deposit of the Repurchase Price for a defaulted Mortgage
Loan in the Collection Account pursuant to Section 3.18 of the Servicing
Agreement and notification of the Bond Administrator, on behalf of the Indenture
Trustee, by a certification signed by a Servicing Officer (which certification
shall include a statement to the effect that the Repurchase Price has been
deposited in the Collection Account), the Bond Administrator, on behalf of the
Indenture Trustee, shall cause to be released to the Servicer the related
Mortgage File and shall cause to be executed and delivered all instruments of
transfer or assignment, without recourse, furnished to it by the Servicer as are
necessary to vest in the Servicer title to and rights under the related Mortgage
Loan. Such purchase shall be deemed to have occurred on the date on which
certification of the deposit of the Repurchase Price in the Collection Account
was received by the Bond Administrator, on behalf of the Indenture Trustee. The
Bond Administrator, on behalf of the Indenture Trustee, shall amend the
applicable Mortgage Loan Schedule to reflect such repurchase and shall promptly
notify the Servicer, the Indenture Trustee and the Bond Insurer of such
amendment.
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(a) Upon deposit of the Repurchase Price for such Converted Mortgage Loan in the
Collection Account pursuant to Section 3.20 of the Servicing Agreement and the
Converted Loan Purchase Agreement and notification of the Bond Administrator, on
behalf of the Indenture Trustee, by a certification signed by a Servicing
Officer (which certification shall include a statement to the effect that the
Repurchase Price has been deposited in the Collection Account), the Bond
Administrator, on behalf of the Indenture Trustee, shall cause to be released to
the Servicer or its assignee the related Mortgage File and shall cause to be
executed and delivered all instruments of transfer or assignment, without
recourse, furnished to it by the Servicer or its assignee as are necessary to
vest in the Servicer or its assignee title to and rights under the related
Mortgage Loan. Such purchase shall be deemed to have occurred on the date on
which certification of the deposit of the Repurchase Price in the Collection
Account was received by the Bond Administrator, on behalf of the Indenture
Trustee. The Bond Administrator, on behalf of the Indenture Trustee, shall amend
the applicable Mortgage Loan Schedule to reflect such purchase and shall
promptly notify the Servicer, the Indenture Trustee and the Bond Insurer of such
amendment.
Section 3.23. 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, (ii) redeem,
purchase, retire or otherwise acquire for value any such ownership or equity
interest or security or (iii) set aside or otherwise segregate any amounts for
any such purpose; PROVIDED, HOWEVER, that the Issuer may make, or cause to be
made, (x) distributions to the Owner Trustee and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under
this Indenture and the Trust Agreement and (y) payments to the Servicer pursuant
to the terms of the Servicing Agreement. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the Basic Documents.
Section 3.24. Notice of Events of Default.
The Issuer shall give the Indenture Trustee, the Bond Insurer, the
Bond Administrator and the Rating Agencies prompt written notice of each Event
of Default hereunder and under the Trust Agreement.
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Section 3.25. Further Instruments and Acts.
Upon request of the Indenture Trustee, the Bond Administrator or
the Bond 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.
Section 3.26. Statements to Bondholders.
No later than noon on the Business Day prior to each Payment Date,
the Bond Administrator shall forward, by facsimile transmission, the statement
prepared pursuant to Section 7.05 of this Indenture, together with all other
information reasonably necessary to make the distributions pursuant to Section
3.05 of this Indenture, to the Indenture Trustee. On each Payment Date, the
Indenture Trustee and the Certificate Registrar shall forward by mail to each
Bondholder and Certificateholder, respectively, the statement prepared pursuant
to Section 7.05 of this Indenture. Neither the Indenture Trustee nor the Bond
Administrator, shall have any responsibility to (i) verify information provided
by the Servicer to be included in such statement or (ii) include any information
required to be included in such statement if the Servicer has failed to timely
produce such information to the Bond Administrator, as required pursuant to the
Servicing Agreement.
Section 3.27. Determination of Bond Interest Rate of Class A-1 and Class A-2
Bonds.
On the Interest Determination Date, the Bond Administrator, on
behalf of the Indenture Trustee, shall determine One-Month LIBOR and as soon as
practical thereafter shall determine the Class A-1 Bond Interest Rate and the
Class A-2 Bond Interest Rate for the Interest Period following such Interest
Determination Date and shall inform the Issuer and, the Servicer at their
respective facsimile numbers given to the Bond Administrator in writing thereof.
Section 3.28. Policy Payments Account.
(a) If, on the second Business Day prior to the related Payment Date there is
not on deposit in the Payment Account an amount sufficient to pay Scheduled
Payments on the Class A Bonds due on such Payment Date, the Bond Administrator
shall give notice to the Bond Insurer by telephone or telecopy of the amount of
such deficiency by 12:00 noon, New York City time, on such Business Day
(b) At the time of the execution and delivery of this Indenture, and for the
purposes of this Indenture, the Indenture Trustee shall establish a separate
special purpose trust account in the name of the Indenture Trustee for the
benefit of Holders of the Class A Bonds referred to herein as the "Policy
Payments Account" and over which the Indenture Trustee shall have exclusive
control and sole right of withdrawal. The Indenture Trustee shall deposit any
amount paid under the Bond Insurance Policy in the Policy Payments Account and
distribute such amount only for purposes of making the Scheduled Payments for
which a claim was made. Such amounts shall be disbursed by the Indenture Trustee
to Holders pursuant to Section 3.05(a) hereof. It shall not be necessary for
such payments to be made by checks or wire transfers separate from the check or
wire transfer used to make payments on the Bonds with other funds available to
make such payments. However, the amount of any payment of principal of or
interest on the Bonds to be paid from the Policy Payments Account shall be noted
as provided in (d) below in the Payment Date Statement to be furnished to
Holders of the Bonds. Funds held in the Policy Payments Account shall not be
invested by the Indenture Trustee.
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(c) Any funds received by the Indenture Trustee as a result of any claim under
the Bond Insurance Policy shall be applied by the Indenture Trustee, together
with the funds, if any, to be withdrawn from the Payment Account, directly to
the payment in full of the Scheduled Payments due on the Class A Bonds
(including Class A Bonds held for the Indenture Trustee's own account). Funds
received by the Indenture Trustee as a result of any claim under the Bond
Insurance Policy shall be deposited by the Indenture Trustee in the Policy
Payments Account and used solely for payment to the Holders of Class A Bonds and
may not be applied to satisfy any costs, expenses or liabilities of the
Indenture Trustee. Any funds remaining in the Policy Payments Account following
a Payment Date shall promptly be remitted to the Bond Insurer.
(d) The Indenture Trustee shall keep a complete and accurate record of all funds
deposited by the Bond Insurer into the Policy Payments Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Class A Bond. The Bond Insurer shall have the right to inspect such
records at reasonable times upon one Business Day's prior notice to the
Indenture Trustee.
(e) Subject to and conditioned upon payment of any interest or principal with
respect to the Class A Bonds by or on behalf of the Bond Insurer, the Indenture
Trustee shall assign to the Bond Insurer all rights to the payment of interest
or principal on the Class A Bonds which are then due for payment to the extent
of all payments made by the Bond Insurer and the Bond Insurer may exercise any
option, vote, right, power or the like with respect to the Class A Bonds to the
extent it has made a principal payment pursuant to the Bond Insurance Policy.
The Indenture Trustee agrees that the Bond Insurer shall be subrogated to all of
the rights to payment of the Holders of the Obligations or in relation thereto
to the extent that any payment of principal or interest was made to such Holders
with payments made under the Bond Insurance Policy by the Bond Insurer.
Section 3.29. Servicing and Administration of the MI Policies.
The Bond Administrator, on behalf of the Indenture Trustee, agrees
that it will hold the MI Policies and the Issuer's rights thereunder, and all
payments received under the MI Policies, in trust solely for the use and benefit
of the Bondholders and the Bond Insurer in accordance with the terms hereof and
the terms of the Servicing Agreement. Subject to the provisions of Section 3.05
hereof, the Bond Administrator, on behalf of the Indenture Trustee, shall take
all such actions on behalf of the Issuer as are necessary to service and
administer the MI Policies and to perform the Issuer's obligations and enforce
the Issuer's rights under the MI Policies, which actions shall conform to the
standards of an institution prudently administering the MI Policies for its own
account; provided, however, that so long as no Servicing Default has occurred
and is continuing, the Servicer shall act as agent for the Indenture Trustee
with respect to the servicing and administering of the MI Policies pursuant to
Section 3.22 of the Servicing Agreement.
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Section 3.30. Insolvency Proceedings.
(a) In the event that the Indenture Trustee, or the Bond Administrator on behalf
of the Indenture Trustee, has received a certified copy of an order of the
appropriate court that any scheduled payment of principal of or interest on a
Class A Bond has been voided in whole or in part as a preference payment under
applicable bankruptcy law, the Indenture Trustee, or the Bond Administrator on
behalf of the Indenture Trustee, shall so notify the Bond Insurer, shall comply
with the provisions of the Bond Insurance Policy to obtain payment by the Bond
Insurer of such voided scheduled payment, and shall, at the time it provides
notice to the Bond Insurer, notify, by mail to Holders of the Class A Bonds
that, in the event that any Holder's scheduled payment is so recovered, such
Holder will be entitled to payment pursuant to the terms of the Bond Insurance
Policy, a copy of which shall be made available through the Indenture Trustee,
the Bond Insurer or the Fiscal Agent, if any, and the Indenture Trustee shall
furnish to the Bond Insurer or its Fiscal Agent, if any, its records evidencing
the payments of principal of and interest on the Class A Bonds, if any, which
have been made by the Indenture Trustee and subsequently recovered from Holders,
and the dates on which such payments were made.
(b) The Indenture Trustee shall promptly notify the Bond Insurer of either of
the following as to which it has actual knowledge: (i) the commencement of any
proceeding by or against the Issuer commenced under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") and (ii) the making
of any claim in connection with any Insolvency Proceeding seeking the avoidance
as a preferential transfer (a "Preference Claim") of any payment of principal
of, or interest on, the Class A Bonds. Each Holder, by its purchase of Bonds,
and the Indenture Trustee hereby agree that, so long as a the Bond Insurer
Default shall not have occurred and be continuing, the Bond Insurer may at any
time during the continuation of an Insolvency Proceeding direct all matters
relating to such Insolvency Proceeding, including, without limitation, (i) all
matters relating to any Preference Claim, (ii) the direction of any appeal of
any order relating to any Preference Claim at the expense of the Bond Insurer
but subject to reimbursement as provided in the Insurance Agreement and (iii)
the posting of any surety, supersedeas or performance bond pending any such
appeal. In addition, and without limitation of the foregoing, as set forth in
Section 4.12, the Bond Insurer shall be subrogated to, and each Holder and the
Indenture Trustee hereby delegate and assign, to the fullest extent permitted by
law the rights of the Indenture Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Insolvency Proceeding.
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(c) The Indenture Trustee shall furnish to the Bond Insurer or its Fiscal Agent
its records evidencing the Scheduled Payments of principal of and interest on
the Class A Bonds which have been made by the Indenture Trustee and subsequently
recovered from Bondholders, and the dates on which such payments were made.
ARTICLE IV
The Bonds; Satisfaction and Discharge of Indenture
Section 4.01. The Bonds.
The Class A Bonds shall be registered in the name of a nominee
designated by the Depository. Beneficial Owners will hold interests in the Class
A Bonds through the book-entry facilities of the Depository in minimum initial
Bond Principal Balances of $25,000 and integral multiples of $1,000 in excess
thereof. The Subordinated Bonds will not be held through the book-entry
facilities of the Depository. Pursuant to Section 4.08(a), the Subordinated
Bonds will be issued in the form of Definitive Bonds and, with respect to the
Class B Bonds, in minimum initial Bond Principal Balances of $25,000 and
integral multiples of $1,000 in excess thereof, and, with respect to the Class
IO Bonds, in minimum initial Percentage Interests of 10% and integral multiples
of 10% in excess thereof.
Subject to the last sentence of Section 4.12, the Bond Administrator
and the Indenture Trustee may for all purposes (including the making of payments
due on the Class A Bonds) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Class A Bonds for
the purposes of exercising the rights of Holders of Class A Bonds hereunder. In
addition, subject to the last sentence of Section 4.12, except as provided in
the next succeeding paragraph of this Section 4.01, the rights of Beneficial
Owners with respect to the Class A Bonds shall be limited to those established
by law and agreements between such Beneficial Owners and the Depository and
Depository Participants. Except as provided in Section 4.08 hereof, Beneficial
Owners shall not be entitled to definitive certificates for the Class A Bonds as
to which they are the Beneficial Owners. Requests and directions from, and votes
of, the Depository as Holder of the Class A Bonds shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners. The
Bond Administrator, on behalf of the Indenture Trustee, may establish a
reasonable record date in connection with solicitations of consents from or
voting by Bondholders and give notice to the Depository of such record date.
Without the consent of the Issuer and the Bond Administrator, on behalf of the
Indenture Trustee, no Class A Bond may be transferred by the Depository except
to a successor Depository that agrees to hold such Class A Bond for the account
of the Beneficial Owners.
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In the event The Depository Trust Company resigns or is removed as
Depository, the Bond Administrator, on behalf of the Indenture Trustee, with the
approval of the Issuer may appoint a successor Depository. If no successor
Depository has been appointed within 30 days of the effective date of the
Depository's resignation or removal, each Beneficial Owner shall be entitled to
certificates representing the Class A Bonds it beneficially owns in the manner
prescribed in Section 4.08.
The Bonds shall, on original issue, be executed on behalf of the
Issuer by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Bond Registrar and delivered by the Bond
Administrator on behalf of the Indenture Trustee to or upon the order of the
Issuer.
Section 4.02. Registration of and Limitations on Transfer and Exchange of
Bonds; Appointment of Bond Registrar.
The Issuer shall cause the Bond Administrator, as Bond Registrar,
to keep at the Corporate Trust Office of the Bond Registrar, a Bond Register in
which, subject to such reasonable regulations as it may prescribe, the Bond
Registrar shall provide for the registration of Bonds and of transfers and
exchanges of Bonds as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Bond at the Corporate Trust Office
of the Bond Registrar, the Issuer shall execute and the Bond Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Bonds in authorized initial Bond Principal Balances
evidencing the same aggregate Percentage Interests.
Subject to the foregoing, at the option of the Bondholders, Bonds
may be exchanged for other Bonds of the same class and in authorized initial
Bond Principal Balances evidencing the same aggregate Percentage Interests upon
surrender of the Bonds to be exchanged at the Corporate Trust Office of the Bond
Registrar. Whenever any Bonds are so surrendered for exchange, the Issuer shall
execute and the Bond Registrar shall authenticate and deliver the Bonds which
the Bondholder making the exchange is entitled to receive. Each Bond presented
or surrendered for registration of transfer or exchange shall (if so required by
the Bond Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer in form reasonably satisfactory to the Bond Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing
with such signature guaranteed by a commercial bank or trust company located or
having a correspondent located in the City of New York or the city in which any
Corporate Trust Office of the Bond Registrar is located. Bonds delivered upon
any such transfer or exchange will evidence the same obligations, and will be
entitled to the same rights and privileges, as the Bonds surrendered.
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No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Bond Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Bonds.
The Issuer hereby appoints the Bond Administrator to keep at its
Corporate Trust Office a Bond Register in which, subject to such reasonable
regulations as it may prescribe, the Bond Registrar shall provide for the
registration of Bonds and of transfers and exchanges thereof pursuant to this
Section. The Bond Administrator hereby accepts such appointment.
No transfer of any Subordinate Bond shall be made unless such
transfer is made in a transaction which does not require registration or
qualification under the Securities Act or qualification under any state
securities or "Blue Sky" laws. If such a transfer is to be made in reliance upon
an exemption from the Securities Act other than Rule 144A thereunder, (A) the
Indenture Trustee and the Bond Administrator shall receive an Opinion of Counsel
that such transfer may be made pursuant to an exemption from the Securities Act,
describing the applicable exemption and the basis therefor, which Opinion of
Counsel shall not be an expense of the Seller, the Transferor, the Depositor,
the Servicer, the Trust, the Bond Administrator, the Owner Trustee or the
Indenture Trustee or (B) the Bond Registrar shall require the transferee to
execute a certification, substantially in the form of Exhibit I hereto, setting
forth the facts surrounding such transfer. In the event that a transfer is to be
made in reliance on Rule 144A under the Securities Act, the Subordinate
Bondholder shall cause its prospective transferee to execute and deliver a
certificate substantially in the form of Exhibit I hereto; provided, however,
that with respect to any sale of a Subordinate Bond by an investment company
registered under the Investment Company Act of 1940, as amended, made in
reliance on Rule 144A, the Subordinate Bondholder may (in lieu of delivering a
certificate in the form of Exhibit I) deliver to the Bond Registrar a
certificate in the form of Exhibit J hereto with a copy of a Qualified
Institutional Buyer Certificate in the form of Addendum 1 thereto. The Servicer
promptly shall furnish to any Holder, or any prospective purchaser designated by
a Holder, the information required to be delivered to Holders and prospective
purchasers of Subordinate Bonds in connection with the resale of the Subordinate
Bonds to permit compliance with Rule 144A in connection with such resale. No
Subordinate Bond may be subdivided for resale or other transfer into a unit
smaller than a unit the initial offering price of which would have been in the
aggregate $1,000,000. No resale or other transfer of the Subordinate Bonds may
be made to a nonresident alien individual, foreign corporation or other
non-United States person.
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The Bond Registrar shall not register the transfer of any
Subordinated Bond unless the transferee has executed and delivered to the Bond
Registrar, a certification to the effect that the transferee is not (A) an
employee benefit plan (as defined in Section 3(3) of 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 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.
Notwithstanding any other provisions of this Section 4.02, on the
Closing Date, the Issuer will issue the Subordinated Bonds to the Depositor, the
Depositor will sell the Subordinated Bonds to the Transferor and the Transferor
will sell the Subordinated Bonds to NRFC, in each case without complying with
the foregoing provisions of this Section 4.02. On the Closing Date, the
Subordinated Bonds shall be issued and registered in the name of NRFC.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Bonds.
If (i) any mutilated Bond is surrendered to the Bond Registrar, or
the Bond Registrar, receives evidence to its satisfaction of the destruction,
loss or theft of any Bond, and (ii) there is delivered to the Bond Registrar,
such security or indemnity as may be required by it to hold the Issuer, the Bond
Insurer, the Bond Administrator and the Indenture Trustee harmless, then, in the
absence of notice to the Issuer, the Bond Registrar, the Bond Administrator or
the Indenture Trustee that such Bond has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute and, upon its request, the Bond Registrar shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Bond, a replacement Bond; provided, however, that if
any such destroyed, lost or stolen Bond, but not a mutilated Bond, shall have
become or within seven days shall be due and payable, instead of issuing a
replacement Bond, the Issuer may pay such destroyed, lost or stolen Bond when so
due or payable without surrender thereof. If, after the delivery of such
replacement Bond or payment of a destroyed, lost or stolen Bond pursuant to the
proviso to the preceding sentence, a bona fide purchaser of the original Bond in
lieu of which such replacement Bond was issued presents for payment such
original Bond, the Issuer, the Bond Insurer, the Bond Administrator and the
Indenture Trustee shall be entitled to recover such replacement Bond (or such
payment) from the Person to whom it was delivered or any Person taking such
replacement Bond from such Person to whom such replacement Bond was delivered or
any assignee of such Person, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer, the Bond Insurer, the Bond
Administrator or the Indenture Trustee in connection therewith.
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Upon the issuance of any replacement Bond under this Section 4.03,
the Issuer may require the payment by the Holder of such Bond 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 Bond Administrator and the Indenture Trustee) connected
therewith.
Every replacement Bond issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Bond shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Bond 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 Bonds duly issued hereunder.
The provisions of this Section 4.03 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 Bonds.
Section 4.04. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Bond,
the Issuer, the Bond Insurer, the Indenture Trustee, the Bond Administrator and
any agent of the Issuer, the Bond Insurer, the Indenture Trustee or the Bond
Administrator may treat the Person in whose name any Bond is registered (as of
the day of determination) as the owner of such Bond for the purpose of receiving
payments of principal of and interest, if any, on such Bond and for all other
purposes whatsoever, whether or not such Bond be overdue, and neither the
Issuer, the Bond Insurer, the Indenture Trustee, the Bond Administrator nor any
agent of the Issuer, the Bond Insurer, the Indenture Trustee or the Bond
Administrator shall be affected by notice to the contrary.
Section 4.05. Cancellation.
All Bonds surrendered for payment, registration of transfer,
exchange or redemption shall, if surrendered to any Person other than the Bond
Registrar, be delivered to the Bond Registrar, and shall be promptly canceled by
the Bond Registrar. The Issuer may at any time deliver to the Bond Registrar for
cancellation any Bonds previously authenticated and delivered hereunder which
the Issuer may have acquired in any manner whatsoever, and all Bonds so
delivered shall be promptly canceled by the Bond Registrar. No Bonds shall be
authenticated in lieu of or in exchange for any Bonds canceled as provided in
this Section 4.05, except as expressly permitted by this Indenture. All canceled
Bonds may be held or disposed of by the Bond Registrar in accordance with its
standard retention or disposal policy as in effect at the time unless the Issuer
shall direct by an Issuer Request that they be destroyed or returned to it;
provided, however, that such Issuer Request is timely and the Bonds have not
been previously disposed of by the Indenture Trustee.
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Section 4.06. Book-Entry Bonds.
The Class A Bonds, upon original issuance, will be issued in the
form of definitive Bonds representing the Book-Entry Bonds, to be delivered to
The Depository Trust Company, the initial Depository, by, or on behalf of, the
Issuer. Such Class A Bonds shall initially be registered on the Bond Register in
the name of Cede & Co., the nominee of the initial Depository, and no Beneficial
Owner will receive a Definitive Bond representing such Beneficial Owner's
interest in such Bond, except as provided in Section 4.08. Unless and until
definitive, fully registered Bonds (the "Definitive Bonds") have been issued to
Beneficial Owners pursuant to Section 4.08:
(a) the provisions of this Section 4.06 shall be in full force and effect;
(b) the Bond Registrar, the Bond Insurer and the Indenture Trustee, shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Class A Bonds and the
giving of instructions or directions hereunder) as the sole holder of the Class
A Bonds, and shall have no obligation to the Beneficial Owners of Class A Bonds;
(c) to the extent that the provisions of this Section 4.06 conflict with any
other provisions of this Indenture, the provisions of this Section 4.06 shall
control;
(d) subject to the last sentence of Section 4.12, the rights of Beneficial
Owners shall be exercised only through the Depository and shall be limited to
those established by law and agreements between such Beneficial Owners of Class
A Bonds and the Depository and/or the Depository Participants. Unless and until
Definitive Bonds are issued pursuant to Section 4.08, the initial Depository
will make book-entry transfers among the Depository Participants and receive and
transmit payments of principal of and interest on the Class A Bonds to such
Depository Participants; and
(e) subject to the last sentence of Section 4.12, whenever this Indenture
requires or permits actions to be taken based upon instructions or directions of
Holders of Class A Bonds evidencing a specified percentage of the Bond Principal
Balances of the Class A Bonds, the Depository shall be deemed to represent such
percentage only to the extent that it has received instructions to such effect
from Beneficial Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in the Class A
Bonds and has delivered such instructions to the Bond Administrator or the
Indenture Trustee.
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Section 4.07. Notices to Depository.
Whenever a notice or other communication to the Bondholders is
required under this Indenture, unless and until Definitive Bonds shall have been
issued to Beneficial Owners pursuant to Section 4.08, the Indenture Trustee or
the Bond Administrator, on behalf of the Indenture Trustee, as the case may be,
shall give all such notices and communications specified herein to be given to
Holders of the Class A Bonds to the Depository, and shall have no obligation to
the Beneficial Owners.
Section 4.08. Definitive Bonds.
(a) The Subordinate Bonds will be issued in the form of Definitive Bonds.
(b) If (i) the Bond Administrator or the Indenture Trustee determines that the
Depository is no longer willing or able to properly discharge its
responsibilities with respect to the Class A Bonds and the Bond Administrator,
on behalf of the Indenture Trustee, is unable to locate a qualified successor,
(ii) the Bond Administrator or the Indenture Trustee elects to terminate the
book-entry system through the Depository or (iii) after the occurrence of an
Event of Default, Beneficial Owners of Class A Bonds representing beneficial
interests aggregating at least a majority of the Bond Principal Balances of the
Class A Bonds advise the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Beneficial Owners, then the Depository shall notify all Beneficial Owners
and the Bond Registrar of the occurrence of any such event and of the
availability of Definitive Bonds to Beneficial Owners requesting the same. Upon
surrender to the Bond Registrar of the typewritten Bonds representing the
Book-Entry Bonds by the Depository, accompanied by registration instructions,
the Issuer shall execute and the Bond Registrar shall authenticate the
Definitive Bonds in accordance with the instructions of the Depository. None of
the Issuer, the Bond Registrar, the Bond Administrator, or 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 the issuance of Definitive Bonds, the Bond Administrator, the Indenture
Trustee and the Bond Registrar shall recognize the Holders of the Definitive
Bonds as Bondholders. The Bond Administrator, on behalf of the Indenture
Trustee, shall notify the Bond Insurer and the Indenture Trustee upon the
issuance of Definitive Bonds.
Section 4.09. Reserved
Section 4.10. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to
the Bonds, except as to (i) rights of registration of transfer and exchange,
(ii) substitution of mutilated, destroyed, lost or stolen Bonds, (iii) rights of
Bondholders (and the Bond Insurer, as subrogee of the Bondholders) to receive
payments of principal thereof and interest thereon, (iv) Sections 3.03, 3.04,
3.06, 3.09, 3.16, 3.18 and 3.19, (v) the rights, obligations and immunities of
the Indenture Trustee and the Bond Administrator hereunder (including the rights
of the Indenture Trustee and the Bond Administrator under Section 6.07 and the
obligations of the Indenture Trustee and the Bond Administrator under Section
4.11) and (vi) the rights of Bondholders as beneficiaries hereof with respect to
the property so deposited with the Indenture Trustee payable to all or any of
them, and the Bond Administrator, on behalf of the Indenture Trustee, on demand
of and at the expense of the Issuer, shall cause to be executed proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Bonds and shall release and deliver the Collateral to or upon the
order of the Issuer, when either:
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(a) all Bonds theretofore authenticated and delivered (other than (i) Bonds that
have been destroyed, lost or stolen and that have been replaced or paid as
provided in Section 4.03 hereof and (ii) Bonds for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.03) have been delivered to the Bond Registrar for
cancellation; or
(b) all Bonds not theretofore delivered to the Bond Registrar for cancellation
have become due and payable, will become due and payable at the Final Scheduled
Payment Date within one year, or
(c) have been called for early redemption pursuant to Section 8.07 hereof, and
the Issuer, in the case of (a) or (b) above, has irrevocably deposited or caused
to be irrevocably deposited with the Indenture Trustee, cash or direct
obligations of or obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire indebtedness on
such Bonds then outstanding not theretofore delivered to the Indenture Trustee
for cancellation when due on the Final Scheduled Payment Date or other final
Payment Date and has delivered to the Bond Administrator, the Indenture Trustee,
and the Bond Insurer a verification report from a nationally recognized
accounting firm certifying that the amounts deposited with the Indenture Trustee
are sufficient to pay and discharge the entire indebtedness of such Bonds, or,
in the case of (c) above, the Issuer shall have complied with all requirements
of Section 8.07 hereof;
(d) the Issuer has paid or caused to be paid all other sums payable hereunder
and under the Insurance Agreement by the Issuer as evidenced by the written
consent of the Bond Insurer; and
(e) the Issuer has delivered to the Indenture Trustee, the Bond Administrator
and the Bond Insurer an Officer's Certificate and an Opinion of Counsel, each
meeting the applicable requirements of Section 10.01 hereof, each stating that
all conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with and, if the Opinion of
Counsel relates to a deposit made in connection with Section 4.10(A)(2)b. above,
such opinion shall further be to the effect that such deposit will constitute an
"in-substance defeasance" within the meaning of Revenue Ruling 85-42, 1985-1
C.B. 36, and in accordance therewith, the Issuer will be the owner of the assets
deposited in trust for federal income tax purposes.
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Section 4.11. Application of Trust Money.
All monies deposited with the Indenture Trustee pursuant to Section
4.10 hereof shall be held in trust and applied by it, in accordance with the
provisions of the Bonds and this Indenture, to the payment, either directly or
through any Paying Agent or the Issuer, Certificate Paying Agent as designee of
the Issuer or the Bond Insurer, as applicable, as the Indenture Trustee may
determine, to the Holders of Bonds, of all sums due and to become due thereon
for principal and interest or otherwise; but such monies need not be segregated
from other funds except to the extent required herein or required by law.
Section 4.12. Effect of Payments by the Bond Insurer; Subrogation
(a) Anything herein to the contrary notwithstanding, any payment with respect to
the principal of or interest on the Class A Bonds which is made with moneys
received pursuant to the terms of the Bond Insurance Policy shall not be
considered payment by the Issuer of the Class A Bonds, shall not discharge the
Issuer in respect of its obligation to make such payment and shall not result in
the payment of or the provision for the payment of the principal of or interest
on the Class A Bonds within the meaning of Section 4.10 hereof. The Issuer and
the Indenture Trustee acknowledge that without the need for any further action
on the part of the Bond Insurer, the Issuer, the Indenture Trustee or the Bond
Registrar (i) to the extent the Bond Insurer makes payments, directly or
indirectly, on account of principal of or interest on the Class A Bonds to the
Holders of such Class A Bonds, the Bond Insurer will be fully subrogated to the
rights of such Holders to receive such principal and interest from the Issuer,
and (ii) the Bond Insurer shall be paid such principal and interest in its
capacity as a Holder of Class A Bonds but only from the sources and in the
manner provided herein for the payment of such principal and interest in each
case only after the Holders of the Class A Bonds have received payment of all
scheduled payments of principal and interest due thereon.
(b) Without limiting the provisions of Article V hereof or the rights or
interests of the Holders as otherwise set forth herein, so long as no Bond
Insurer Default exists, the Indenture Trustee shall cooperate in all respects
with any reasonable request by the Bond Insurer for action to preserve or
enforce the Bond Insurer's rights or interests under this Indenture, including,
without limitation, upon the occurrence and continuance of an Event of Default,
a request to take any one or more of the following actions:
(i) institute proceedings for the collection of all amounts then payable on
the Bonds, or under this Indenture in respect to the Bonds, enforce any
judgment obtained and collect from the Issuer moneys adjudged due;
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(ii) institute proceedings from time to time for the complete or partial
foreclosure of this Indenture; and
(iii) exercise 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 Bond Insurer hereunder.
Section 4.13. Repayment of Monies Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture
with respect to the Bonds, all monies then held by any Person other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Bonds shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.05 and thereupon such Person shall be
released from all further liability with respect to such monies.
Section 4.14. Temporary Bonds.
Pending the preparation of any Definitive Bonds, the Issuer may
execute and upon its written direction, the Bond Registrar may authenticate and
make available for delivery, temporary Bonds that are printed, lithographed,
typewritten, photocopied or otherwise produced, in any denomination,
substantially of the tenor of the Definitive Bonds in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Bonds may reasonably determine, as
evidenced by their execution of such Bonds.
If temporary Bonds are issued, the Issuer will cause Definitive
Bonds to be prepared without unreasonable delay. After the preparation of the
Definitive Bonds, the temporary Bonds shall be exchangeable for Definitive Bonds
upon surrender of the temporary Bonds at the office or agency of the Bond
Registrar, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Bonds, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Bonds of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Bonds shall in all respects
be entitled to the same benefits under this Indenture as Definitive Bonds.
ARTICLE V
Default and Remedies
Section 5.01. Events of Default.
The Issuer shall deliver to the Indenture Trustee, the Bond
Administrator and the Bond Insurer, within five days after learning of the
occurrence of a Default or an Event of Default, written notice in the form of an
Officer's Certificate of the occurrence of such Default or Event of Default, its
status and what action the Issuer is taking or proposes to take with respect
thereto.
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Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default should occur and be continuing, then and in
every such case the Indenture Trustee may (with the prior written consent of the
Bond Insurer), and, at the written direction of the Bond Insurer or if a Bond
Insurer Default exists, the Holders of Bonds representing not less than a
majority of the Bond Principal Balances of all Bonds, shall, declare the Bonds
to be immediately due and payable, by a notice in writing to the Issuer (and to
the Indenture Trustee if given by Bondholders), and upon any such declaration
the unpaid Bond Principal Balance of the Bonds, together with accrued and unpaid
interest thereon through the date of acceleration, shall become immediately due
and payable.
At any time after such declaration of acceleration of maturity with
respect to an Event of Default 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 V provided, the Bond Insurer or, if a Bond Insurer
Default exists, the Holders of Bonds representing a majority of the Bond
Principal Balances of all Bonds, by written notice to the Issuer, the Bond
Administrator and the Indenture Trustee, may waive the related Event of Default
and rescind and annul such declaration and its consequences if:
(a) the Issuer or the Bond Insurer has paid or deposited with the Indenture
Trustee, a sum sufficient to pay:
(i) all payments of principal and interest on the Bonds and all other amounts
that would then be due hereunder or upon the Class A Bonds if the Event of
Default giving rise to such acceleration had not occurred; and
(ii) all sums reasonably paid or advanced by the Indenture Trustee or the Bond
Administrator hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee or the Bond
Administrator and their respective agents and counsel; and
(b) all Events of Default, other than the nonpayment of the principal of the
Bonds that has become due solely by such acceleration, have been cured or waived
as provided in Section 5.12;
provided, however, the Bond Insurer, so long as no Bond Insurer Default exists,
may waive an Event of Default regardless of Section 5.02(a) (i) or (ii) above.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
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Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
The Issuer covenants that if (i) default is made in the payment of
any interest (including the Interest Payment Amount) on any Bond when the same
becomes due and payable, and such default continues for a period of five days,
or (ii) default is made in the payment of the principal (including the Principal
Payment Amount and the Subordination Increase Amount) of, or any installment of
the principal of, any Bond when the same becomes due and payable, the Issuer
shall, upon demand of the Indenture Trustee, at the direction of the Bond
Insurer, so long as no Bond Insurer Default exists, pay to the Indenture
Trustee, for the benefit of the Holders of Bonds and of the Bond Insurer, the
whole amount then due and payable on the Bonds for principal and interest, with
interest at the Bond Interest Rate upon the overdue principal, and in addition
thereto such further amount as shall be sufficient to cover the reasonable costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee or the Bond Administrator
and their respective agents and counsel.
In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, and at the direction of the Bond Insurer, so long as no Bond Insurer
Default exists, subject to the provisions of Section 10.16 hereof, may institute
a Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Bonds and collect in the manner provided by
law out of the property of the Issuer or other obligor the Bonds, wherever
situated, the monies adjudged or decreed to be payable.
If an Event of Default occurs and is continuing, the Indenture
Trustee, at the direction of the Bond Insurer, so long as no Bond Insurer
Default exists, subject to the provisions of Section 10.16 hereof may, as more
particularly provided in Section 5.04 hereof, in its discretion, proceed to
protect and enforce its rights and the rights of the Bondholders and the Bond
Insurer, by such appropriate Proceedings as the Indenture Trustee, at the
direction of the Bond Insurer, so long as no Bond Insurer Default exists, shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Indenture Trustee by this Indenture or
by law; provided, however, that reasonable indemnity is provided to the
Indenture Trustee by the Bond Insurer.
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In case there shall be pending, relative to the Issuer or any other
obligor upon the Bonds or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Bonds, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, at the direction of the Bond
Insurer, so long as no Bond Insurer Default exists, irrespective of whether the
principal of any Bonds shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of principal and
interest owing and unpaid in respect of the Bonds and to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all reasonable expenses
and liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee, except as a result of negligence or bad
faith), the Bond Administrator, the Bond Insurer and of the Bondholders allowed
in such Proceedings;
(b) unless prohibited by applicable law and regulations, to vote on behalf of
the Holders of Bonds in any election of a trustee, a standby trustee or Person
performing similar functions in any such Proceedings;
(c) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute all amounts received with respect to the
claims of the Bondholders, the Bond Insurer, the Bond Administrator and the
Indenture Trustee on their behalf; and
(d) to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Indenture Trustee, the
Bond Insurer, the Bond Administrator or the Holders of Bonds allowed in any
judicial proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Bondholders to make
payments to the Indenture Trustee or the Bond Administrator, and, in the event
that the Indenture Trustee, with the consent of the Bond Insurer, so long as no
Bond Insurer Default exists, shall consent to the making of payments directly to
such Bondholders, to pay to the Indenture Trustee or the Bond Administrator such
amounts as shall be sufficient to cover reasonable compensation to the Indenture
Trustee or Bond Administrator, each predecessor Indenture Trustee or Bond
Administrator and their respective agents, attorneys and counsel, all other
reasonable expenses and liabilities incurred and all advances made by the
Indenture Trustee or Bond Administrator and each predecessor Indenture Trustee
or Bond Administrator , except as a result of negligence or bad faith, and all
amounts due to the Bond Insurer.
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Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Bondholder any plan of reorganization, arrangement, adjustment or
composition affecting the Bonds or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Bondholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
All rights of action and of asserting claims under this Indenture,
or under any of the Bonds, may be enforced by the Indenture Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the reasonable
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders of the Bonds and the Bond Insurer,
subject to Section 5.05 hereof.
In any Proceedings brought by the Indenture Trustee with the consent
of the Bond Insurer, so long as no Bond Insurer Default exists (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Bonds, and it shall not be necessary to
make any Bondholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities.
If an Event of Default shall have occurred and be continuing and if
an acceleration has been declared and not rescinded pursuant to Section 5.02
hereof, the Indenture Trustee, subject to the provisions of Section 10.16 hereof
and with the consent of the Bond Insurer so long as no Bond Insurer Default
exists, may and, at the direction of the Bond Insurer so long as no Bond Insurer
Default exists, shall, do one or more of the following (subject to Section 5.05
hereof):
(a) institute Proceedings in its own name and as trustee of an express trust for
the collection of all amounts then payable on the Bonds or under this Indenture
with respect thereto, whether by declaration or otherwise, and all amounts
payable under the Insurance Agreement, enforce any judgment obtained, and
collect from the Issuer and any other obligor upon such Bonds monies adjudged
due;
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(b) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Trust Estate;
(c) exercise any remedies of a secured party under the UCC and take any other
appropriate action to protect and enforce the rights and remedies of the
Indenture Trustee, the Holders of the Bonds and the Bond Insurer; and
(d) 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;
provided, however, that so long as a Bond Insurer Default exists, the Indenture
Trustee may not sell or otherwise liquidate the Trust Estate following an Event
of Default, unless the Indenture Trustee obtains the consent of the Holders of
100% of the aggregate Bond Principal Balance of the Class A Bonds, the proceeds
of such sale or liquidation distributable to the Holders of the Class A Bonds
are sufficient to discharge in full all amounts then due and unpaid upon the
Class A Bonds for principal and interest and to reimburse the Bond Insurer for
any amounts drawn under the Bond Insurance Policy and any other amounts due to
the Bond Insurer under the Insurance Agreement or the Indenture Trustee
determines that the Mortgage Loans will not continue to provide sufficient funds
for the payment of principal of and interest on the Class A Bonds as they would
have become due if the Class A Bonds had not been declared due and payable, and
the Indenture Trustee obtains the consent of the Holders of a majority of the
aggregate Bond Principal Balance. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
shall not be required to, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
If the Indenture Trustee collects any money or property with respect
to any Group pursuant to this Article V, it shall pay out the money or property
with respect to each related Class of Bonds, to the Bondholders and to other
Persons the amounts to which they are entitled, in the priority set forth below;
provided, however, that any amounts representing Scheduled Payments from the
Bond Insurer under the Bond Insurance Policy shall only be used to pay interest
and principal to the related Class A Bondholders pursuant to clauses THIRD
through SIXTH below:
First: to the Indenture Trustee and the Bond Administrator for amounts
due under Section 6.07 hereof with respect to the related Class
of Bonds;
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Second: to the Bond Insurer, with respect to any Bond Insurance Premium
then due;
Third: to the Class A Bondholders for amounts due and unpaid on the
Class A Bonds with respect to interest, ratably, without
preference or priority of any kind within each such Class, based
on the related Interest Payment Amount due and payable on each
such Class (but not including any Prepayment Interest Shortfalls,
any Relief Act Shortfalls and the Carry-Forward Amount for such
Class) from amounts available in the Trust Estate from the Group
relating to such Class;
Fourth: : to the Class A Bondholders for amounts due and unpaid on the
related Class of Class A Bonds with respect to interest, ratably,
without preference or priority of any kind within each such
Class, based on the related Interest Payment Amount due and
payable on each such Class (but not including any Prepayment
Interest Shortfalls, any Relief Act Shortfalls and the
Carry-Forward Amount for such Class ) from amounts available in
the Trust Estate from any Group, determined in accordance with
the procedures set forth in Section 3.05(b);
Fifth: to the Class A Bondholders for amounts due and unpaid on the
related Class of Class A Bonds with respect to principal
(including, but not limited to, any Principal Payment Amount),
from amounts available in the Trust Estate from the Group
relating to such Class, ratably, without preference or priority
of any kind within each such Class, based on the Bond Principal
Balance of the related Class of Class A Bonds, until the Bond
Principal Balance of each such Class of Bonds is reduced to zero;
Sixth: to the Class A Bondholders for amounts due and unpaid on the
related Class of Class A Bonds with respect to principal
(including, but not limited to, any Principal Payment Amount),
from amounts available in the Trust Estate from any Group,
determined in accordance with the procedures set forth in Section
3.05(b), ratably, without preference or priority of any kind
within each such Class, based on the Bond Principal Balance of
the related Class of Class A Bonds, until the Bond Principal
Balance of each such Class of Bonds is reduced to zero;
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Seventh: to the Bond Insurer, the sum of (a) all payments previously paid
by the Bond Insurer under the Bond Insurance Policy which have
not previously been reimbursed, (b) any other amounts due to the
Bond Insurer pursuant to the Insurance Agreement, to the extent
not previously paid or reimbursed and (c) interest on the
foregoing as set forth in the Insurance Agreement from the date
such amounts become due until paid in full (including any Bond
Insurance Premium not paid pursuant to clause SECOND above);
------
Eighth: to the Bondholders of the Class A-1 Bonds and the Class A-2 Bonds
for amounts due and unpaid on each such Class with respect to each
related Carry-Forward Amount, ratably, without preference or
priority of any kind, based on the Carry-Forward Amount for each
such Class.
Ninth: to the Servicer, any amounts due and unpaid to the Servicer
pursuant to Section 5.03 of the Servicing Agreement in connection
with the indemnity by the Issuer thereunder, and in the event
there is a successor servicer, additional compensation, if
necessary, pursuant to Section 6.02(a) of the Servicing Agreement;
Tenth: to the holders of the Class B Bonds, for amounts due and payable as
interest thereon based on the Interest Payment Amount thereof;
Eleventh: to the holders of the Class B Bonds, for amounts due and payable
as principal thereon, based on the Principal Payment Amount
thereof;
Twelfth: to the holders of the Class IO Bond for amounts due and payable
as interest thereon based on the Class IO Interest Payment
Amount; and
Thirteenth: any remainder to the Certificate Paying Agent for distribution to
the Certificateholders.
The Indenture Trustee may fix a record date and payment date for any
payment to Bondholders pursuant to this Section 5.04. With respect to any
acceleration at the direction of the Bond Insurer, the first payment date after
the acceleration shall be the first Payment Date after the acceleration. At
least 15 days before such record date, the Indenture Trustee shall mail to each
Bondholder a notice that states the record date, the payment date and the amount
to be paid.
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Section 5.05. Optional Preservation of the Trust Estate.
If the Bonds have been declared to be due and payable under Section
5.02 following an Event of Default and such declaration and its consequences
have not been rescinded and annulled, the Indenture Trustee may, with the
consent of the Bond Insurer, and shall, at the direction of the Bond Insurer, so
long as no Bond Insurer Default exists, elect to take and maintain possession of
the Trust Estate. It is the desire of the parties hereto and the Bondholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Bonds (although the parties hereto understand that there exists
the possibility of a shortfall in collections of the related Mortgage Loans) and
other obligations of the Issuer including payment to the Bond Insurer, and the
Indenture Trustee shall take such desire into account when determining whether
or not to take and maintain possession of the Trust Estate. In determining
whether to take and maintain possession of the Trust Estate, the Indenture
Trustee may, but shall not be required to, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
Section 5.06. Limitation of Suits.
No Holder of any Bond shall have any right to institute any
Proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
subject to the provisions of Section 10.16 hereof:
(a) such Holder has previously given written notice to the Indenture Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% of the Bond Principal Balances of the Class
A Bonds have made a written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such notice of
request and offer of indemnity has failed to institute such Proceedings;
(e) no direction inconsistent with such written request has been given to the
Indenture Trustee during such 60-day period by the Holders of a majority of the
Bond Principal Balances of the Class A Bonds; and
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(f) such Holder or Holders have the consent of the Bond Insurer, unless a Bond
Insurer Default exists.
It is understood and intended that no one or more Holders of Bonds
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 Class A Bonds or to obtain or to seek to obtain priority or
preference over any Class A Holders or to enforce any right under this
Indenture, except in the manner herein provided.
Section 5.07. Unconditional Rights of Bondholders To Receive Principal and
Interest.
Except as otherwise set forth herein, the Holder of any Bond shall
have the right, which is absolute and unconditional, to receive payment of the
principal of and interest, if any, on such Bond on or after the respective due
dates thereof expressed in such Bond or in this Indenture to the extent funds
are available therefor from the Trust Estate and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies.
If the Indenture Trustee or any Bondholder 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 Bond Administrator, the Bond
Insurer or to such Bondholder, then and in every such case the Issuer, the
Indenture Trustee, the Bond Administrator, the Bond Insurer and the Bondholders
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 Bond Administrator, the Bond Insurer
and the Bondholders shall continue as though no such Proceeding had been
instituted.
Section 5.09. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the
Indenture Trustee, the Bond Administrator, the Bond Insurer or to the
Bondholders 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.
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Section 5.10. Delay or Omission Not a Waiver.
No delay or omission of the Indenture Trustee, the Bond
Administrator, the Bond Insurer or any Holder of any Bond 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 V or by law to the
Indenture Trustee, the Bond Administrator, the Bond Insurer or to the
Bondholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Bond Administrator, the Bond Insurer or
by the Bondholders, as the case may be.
Section 5.11. Control by Bond Insurer.
The Bond Insurer, or if a Bond Insurer Default exists, the Holders
of a majority of the Bond Principal Balances of Class A Bonds shall have the
right (subject to the provisions of Section 5.06) to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Bonds 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) if a Bond Insurer Default exists, subject to the express terms of Section
5.04, any direction to the Indenture Trustee to sell or liquidate the Trust
Estate shall be by Holders of Class A Bonds representing 100% of the Bond
Principal Balances of the Class A Bonds;
(c) if the conditions set forth in Section 5.05 hereof have been satisfied and
the Indenture Trustee, with the consent of the Bond Insurer, so long as no Bond
Insurer Default exists, elects to retain the Trust Estate pursuant to such
Section, then any direction to the Indenture Trustee by Holders of Class A Bonds
(other than with respect to the Bond Insurer exercising the rights of
Bondholders pursuant to the last sentence of Section 4.12) to sell or liquidate
the Trust Estate shall be of no force and effect; and
(d) if a Bond Insurer Default exists, the Indenture Trustee may take any other
action deemed proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Bondholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or, if a Bond Insurer Default exists,
might materially adversely affect the rights of any Bondholders not consenting
to such action.
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Section 5.12. Waiver of Past Defaults.
Prior to the declaration of the acceleration of the maturity of the
Bonds as provided in Section 5.02 hereof, the Bond Insurer, or if a Bond Insurer
Default exists, the Holders of Bonds of not less than a majority of the Bond
Principal Balances of the Bonds, may waive any past Event of Default and its
consequences except an Event of Default with respect to payment of principal of
or interest on any of the Bonds or in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Holder of each
Bond or the waiver of which would materially and adversely affect the interests
of the Bond Insurer or modify its obligation under the Bond Insurance Policy. In
the case of any such waiver, the Issuer, the Indenture Trustee, the Bond
Administrator and the Holders of the Bonds shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall
be deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Bond by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Indenture Trustee for
any action taken, suffered or omitted by it as Indenture Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 5.13 shall not apply to (a) any
suit instituted by the Indenture Trustee or the Bond Insurer, (b) any suit
instituted by any Bondholder, or group of Bondholders, in each case holding in
the aggregate more than 10% of the Bond Principal Balances of the Bonds or (c)
any suit instituted by any Bondholder for the enforcement of the payment of
principal of or interest on any Bond on or after the respective due dates
expressed in such Bond and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead or in any manner whatsoever,
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall 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.
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Section 5.15. Sale of Trust Estate.
(a) The power to effect any sale or other disposition (a "Sale") of any portion
of the Trust Estate pursuant to Section 5.04 hereof is expressly subject to the
provisions of Section 5.05 hereof and this Section 5.15. The power to effect any
such Sale 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 Bonds and
under this Indenture and under the Insurance Agreement shall have been paid. The
Indenture Trustee with the consent of the Bond Insurer, so long as no Bond
Insurer Default exists, may from time to time postpone any public Sale by public
announcement made at the time and place of such Sale. The Indenture Trustee
hereby expressly waives its right to any amount fixed by law as compensation for
any Sale.
The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
First: the Bond Insurer or, if a Bond Insurer Default
exists, the Holders of all Class A Bonds, consent to or direct
the Indenture Trustee to make, such Sale, or
Second: unless the Bond Insurer otherwise consents, the
proceeds of such Sale would be not less than the entire amount
which would be payable to the Bondholders under the Class A Bonds
and the Bond Insurer in respect of amounts drawn under the Bond
Insurance Policy and any other amounts due to the Bond Insurer
under the Insurance Agreement, in full payment thereof in
accordance with Section 5.02 hereof, on the Payment Date next
succeeding the date of such Sale, or
Third: the Indenture Trustee determines with the consent
of the Bond Insurer, so long as no Bond Insurer Default exists,
that the conditions for retention of the Trust Estate set forth
in Section 5.05 hereof cannot be satisfied (in making any such
determination, the Indenture Trustee may rely upon an opinion of
an Independent investment banking firm obtained and delivered as
provided in Section 5.05 hereof), and the Bond Insurer consents
to such Sale, or if a Bond Insurer Default exists, the Holders of
Class A Bonds representing at least 66-2/3% of the Bond Principal
Balances of the Class A Bonds consent to such Sale.
The purchase by the Indenture Trustee of all or any portion of the
Trust Estate at a private Sale shall not be deemed a Sale or other disposition
thereof for purposes of this Section 5.15(b).
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(b) In connection with a Sale of all or any portion of the Trust Estate,
(i) any Holder or Holders of Bonds may bid for and with the consent of the
Bond Insurer 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 Bonds or claims for
interest thereon in lieu of cash up to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon, and
such Bonds, 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 shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of the Trust Estate
in connection with a Sale thereof;
(iii) the Indenture Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take
all action necessary to effect such Sale; and
(iv) 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 monies.
Section 5.16. Action on Bonds.
The Indenture Trustee's right to seek and recover judgment on the
Bonds or under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Indenture Trustee,
the Bond Administrator, the Bond Insurer or the Bondholders 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 or upon any of the assets of the Issuer. Any money or property collected
by the Indenture Trustee shall be applied in accordance with Section 5.04(b)
hereof.
Section 5.17. Performance and Enforcement of Certain Obligations.
Promptly following a request from the Indenture Trustee to do so,
the Issuer, in its capacity as holder of the Mortgage Loans, shall take all such
lawful action as the Indenture Trustee or the Bond Insurer may request to cause
the Issuer to compel or secure the performance and observance by the Seller, the
Transferor and the Servicer, as applicable, of each of their obligations to the
Issuer under or in connection with the Purchase Agreement and the Servicing
Agreement, and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with the Purchase
Agreement and the Servicing Agreement to the extent and in the manner directed
by the Indenture Trustee, with the consent of the Bond Insurer, so long as no
Bond Insurer Default exists, as pledgee of the Mortgage Loans, including the
transmission of notices of default on the part of the Seller, the Transferor or
the Servicer thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Seller, the Transferor or
the Servicer of each of their obligations under the Purchase Agreement and the
Servicing Agreement. So long as no Bond Insurer Default exists, the Bond Insurer
shall have the right to approve or reject any proposed successor to the Servicer
(other than the Indenture Trustee) under the Servicing Agreement.
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The Indenture Trustee, as pledgee of the Mortgage Loans, subject to
the rights of the Bond Insurer under this Agreement and the Servicing Agreement
may, and at the direction (which direction shall be in writing or by telephone
(confirmed in writing promptly thereafter)) of the Bond Insurer or, if a Bond
Insurer Default exists, the Holders of 66-2/3% of the Bond Principal Balances of
the Class A Bonds (except as otherwise set forth in the Indenture), shall
exercise all rights, remedies, powers, privileges and claims of the Issuer
against the Seller, the Transferor or the Servicer under or in connection with
the Purchase Agreement and the Servicing Agreement, including the right or power
to take any action to compel or secure performance or observance by the Seller,
the Transferor or the Servicer, as the case may be, of each of their obligations
to the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Purchase Agreement and the Servicing
Agreement, as the case may be, and any right of the Issuer to take such action
shall not be suspended.
ARTICLE VI
The Indenture Trustee and the Bond Administrator
Section 6.01. Duties of the Indenture Trustee and the Bond Administrator.
If an Event of Default has occurred and is continuing, each of the
Indenture Trustee and the Bond Administrator shall exercise the rights and
powers vested in each of them by this Indenture and use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(a) Except during the continuance of an Event of Default:
(i) each of the Indenture Trustee and the Bond Administrator undertake to
perform such duties and only such duties as are specifically set forth in
this Indenture with respect to the Indenture Trustee and the Bond
Administrator, respectively, and no implied covenants or obligations shall
be read into this Indenture against the Indenture Trustee or the Bond
Administrator; and
(ii) in the absence of bad faith on its part, each of the Indenture Trustee
and the Bond Administrator, as the case may be, may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the
Indenture Trustee and/or the Bond Administrator, as applicable, and
conforming to the requirements of this Indenture; provided, however,
that each of the Indenture Trustee and the Bond Administrator, as the
case may be, shall examine the certificates and opinions delivered to
it to determine whether or not they conform to the requirements of this
Indenture; provided, further, however, that the Indenture Trustee shall
have no duty or responsibility to review any document, certificate,
instrument or opinion delivered solely to the Bond Administrator.
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(b) Neither the Indenture Trustee nor the Bond Administrator may be relieved
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 6.01;
(ii) the Indenture Trustee and the Bond Administrator shall not be liable for
any error of judgment made in good faith by its respective Responsible
Officer unless it is proved that the Indenture Trustee or the Bond
Administrator, respectively, was negligent in ascertaining the pertinent
facts; and
(iii) neither the Indenture Trustee nor the Bond Administrator shall be liable
with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it (A) pursuant to Sections 5.11
or 5.15 or (B) from the Bond Insurer, which it is entitled to give under
any of the Basic Documents.
Neither the Indenture Trustee nor the Bond Administrator shall be
liable for interest on any money received by the Indenture Trustee or the Bond
Administrator, as the case may be, except as the Indenture Trustee or the Bond
Administrator, respectively, may agree in writing with the Issuer.
Money held in trust by the Indenture Trustee or the Bond
Administrator need not be segregated from other trust funds except to the extent
required by law or the terms of this Indenture or the Trust Agreement.
No provision of this Indenture shall require the Indenture Trustee
or the Bond Administrator to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
Subject to the other provisions of this Agreement and without
limiting the generality of this Section 6.01, the Indenture Trustee shall have
no duty (A) to see to any recording, filing or depositing of this Agreement or
any agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance of any
such recording or filing or depositing or to any rerecording, refiling or
redepositing of any thereof, (B) to see to any insurance, (C) to see to the
payment or discharge of any tax, assessment, or other governmental charge or any
lien or encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Trust Fund other than from funds available in the
Payment Account, or (D) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Bond Administrator or the
Indenture Trustee believed by the Bond Administrator or the Indenture Trustee to
be genuine and to have been signed or presented by the proper party or parties.
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Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
(c) The Bond Administrator shall act in accordance with Sections 6.03 and 6.04
of the Servicing Agreement and shall act as successor to the Back-up Servicer to
the extent provided in Section 6.02 of the Servicing Agreement.
(d) For all purposes under this Indenture, neither the Indenture Trustee nor the
Bond Administrator shall be deemed to have notice or knowledge of any Default or
Event of Default unless a Responsible Officer assigned to and working in the
Indenture Trustee's or the Bond Administrator's, respectively, corporate trust
department has actual knowledge thereof or unless written notice of any event
which is in fact such an Event of Default or Default is received by the
Indenture Trustee or the Bond Administrator, respectively, at the Corporate
Trust Office, and such notice references the Bonds generally, the Issuer, the
Trust Estate or this Indenture.
The Indenture Trustee and the Bond Administrator are hereby
authorized to execute and shall execute the Servicing Agreement, the Purchase
Agreement, the Insurance Agreement and the Converted Loan Purchase Agreement,
and shall perform their respective duties and satisfy their respective
obligations thereunder. Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Indenture
Trustee or the Bond Administrator shall apply to the Indenture Trustee's and the
Bond Administrator's execution of the Servicing Agreement, the Purchase
Agreement, the Insurance Agreement and the Converted Loan Purchase Agreement,
and the performance of their respective duties and satisfaction of its
obligations thereunder.
Notwithstanding any term or provision in this Indenture to the
contrary, the rights and obligations of the Indenture Trustee as Indenture
Trustee under this Agreement shall not be diminished by the fact that the
Indenture Trustee may employ the services of the Bond Administrator to
accomplish the duties of the Indenture Trustee hereunder. Accordingly, any
references in this Indenture or the other Basic Documents alluding to a right or
obligation of the Bond Administrator (other than the obligation of the Bond
Administrator to act as successor Servicer pursuant to Section 6.02 of the
Servicing Agreement in the event of a Servicer Event of Default) shall be
construed to mean such right or obligation of the Indenture Trustee, which right
or obligation may be accepted or performed by the Bond Administrator on behalf
of the Indenture Trustee.
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Section 6.02. Rights of Indenture Trustee and Bond Administrator.
Each of the Indenture Trustee and the Bond Administrator may rely
and shall be protected in acting or refraining from acting on any resolution,
officer's certificate, opinion of counsel, certificate of auditors or other
certificate, statement, instrument, or document believed by it to be genuine and
to have been signed or presented by the proper person. The Indenture Trustee and
the Bond Administrator need not investigate any fact or matter stated in the
document.
Before either the Indenture Trustee or the Bond Administrator acts
or refrains from acting, it may require an Officer's Certificate or an Opinion
of Counsel reasonably satisfactory in form and substance to the Indenture
Trustee or the Bond Administrator, as the case may be, which Officer's
Certificate or Opinion of Counsel shall not be at the expense of the Indenture
Trustee, the Bond Administrator or the Trust Estate (except in the priority set
forth in Section 3.05(a)(xiv)). Neither the Indenture Trustee nor the Bond
Administrator shall be liable for any action either of them takes or omits to
take in good faith in reliance on an Officer's Certificate or Opinion of
Counsel.
The Indenture Trustee may execute any of its trusts or powers
hereunder and both the Indenture Trustee and the Bond Administrator may perform
any of their respective duties hereunder either directly or by or through agents
or attorneys or a custodian or nominee.
Neither the Indenture Trustee nor the Bond Administrator shall be
liable for any action either of them takes or omits to take in good faith which
it believes to be authorized or within its rights or powers; provided, however,
that the Indenture Trustee's conduct or the Bond Administrator's conduct, as the
case may be, does not constitute willful misconduct, negligence or bad faith.
Each of the Indenture Trustee and the Bond Administrator may consult
with counsel chosen by it with due care, and the advice or opinion of counsel
with respect to legal matters relating to this Indenture and the Bonds shall be
full and complete authorization and protection from liability in respect to any
action taken, omitted or suffered by either of them hereunder in good faith and
in accordance with the advice or opinion of such counsel.
The Indenture Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Indenture or to institute, conduct
or defend any litigation hereunder or in relation hereto at the request, order
or direction of any of the Bondholders, pursuant to the provisions of this
Indenture, unless such Bondholders shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby (which in the case of the Majority
Bondholders will be deemed to be satisfied by a letter agreement with respect to
such costs from such Majority Bondholders); nothing contained herein shall,
however, relieve the Indenture Trustee of the obligation, upon the occurrence of
a Servicer Event of Default of which a Responsible Officer of the Indenture
Trustee shall have actual knowledge (which has not been cured), to exercise such
of the rights and powers vested in it by this Indenture, and to use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
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The Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do by the Majority
Bondholders; provided, however, that if the payment within a reasonable time to
the Indenture Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of the
Indenture Trustee, not reasonably assured to the Indenture Trustee by the
security afforded to it by the terms of this Agreement, the Indenture Trustee
may require reasonable indemnity against such cost, expense or liability as a
condition to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Indenture Trustee,
shall be repaid by the Servicer upon demand from the Servicer's own funds.
The rights of the Indenture Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Indenture
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
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.
Section 6.03. Individual Rights of Indenture Trustee and Bond Administrator.
Each of the Indenture Trustee and the Bond Administrator in its
individual or any other capacity may become the owner or pledgee of Bonds and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee or Bond Administrator, as
applicable. Any Bond Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee and the Bond Administrator must
comply with Section 6.11 hereof.
Section 6.04. Indenture Trustee's and Bond Administrator's Disclaimer.
Neither the Indenture Trustee nor the Bond Administrator shall be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Bonds, neither the Indenture Trustee nor the Bond
Administrator shall be accountable for the Issuer's use of the proceeds from the
Bonds, and neither the Indenture Trustee nor the Bond Administrator shall be
responsible for any statement of the Issuer in the Indenture or in any document
issued in connection with the sale of the Bonds or in the Bonds other than the
Bond Registrar's certificate of authentication.
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Section 6.05. Notice of Event of Default.
If an Event of Default occurs and is continuing and if it is known
to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
give notice thereof to the Bond Insurer. The Indenture Trustee or the Bond
Administrator on behalf of the Indenture Trustee shall mail to each Bondholder
notice of the Event of Default within 10 days after a Responsible Officer has
actual knowledge thereof unless such Event of Default shall have been waived or
cured. Except in the case of an Event of Default in payment of principal of or
interest on any Bond, the Indenture Trustee may withhold the notice if and so
long as it in good faith determines that withholding the notice is in the
interests of Bondholders.
Section 6.06. Tax Administration of the Issuer.
The Bond Administrator, on behalf of the Issuer, based solely on
information timely provided by the Servicer, shall prepare and file (or cause to
be prepared and filed), on behalf of the Issuer, all tax returns and information
reports, tax elections and such annual or other reports of the Issuer as are
necessary for preparation of tax returns and information reports as provided in
Section 5.03 of the Trust Agreement, including without limitation Form 1099. All
tax returns and information reports shall be signed by the Owner Trustee, in the
name and on behalf of the Issuer upon presentation of such tax returns and
reports by the Bond Administrator to the Owner Trustee as provided in Section
5.03 of the Trust Agreement.
Section 6.07. Compensation and Indemnity.
The Issuer shall pay to the Indenture Trustee and to the Bond
Administrator on each Payment Date reasonable compensation for their respective
services. The amount of the Bond Administrator Fee (net of the Indenture Trustee
Fee) shall be paid to the Bond Administrator on each Payment Date pursuant to
Section 3.05(a)(i) of this Indenture, and all amounts owing to the Indenture
Trustee and to the Bond Administrator hereunder in excess of such amount shall
be paid solely as provided in Section 3.05(a)(xiii) hereof and Section 5.06 of
the Servicing Agreement. On each Payment Date, the Indenture Trustee shall be
entitled to retain the Indenture Trustee Fee from amounts otherwise
distributable to the Bond Administrator pursuant to Section 3.05(a)(i). The
Indenture Trustee's compensation and the Bond Administrator's compensation shall
not be limited by any law on compensation of a trustee of an express trust. The
Issuer shall reimburse the Indenture Trustee and the Bond Administrator for all
reasonable out-of-pocket expenses incurred or made by it hereunder or under any
of the other Bond Documents, including costs of collection, in addition to
compensation for its services, subject to the priorities established by Sections
3.05(a)(xiii) and 5.04 of this Indenture. Such expenses shall include reasonable
compensation and expenses, disbursements and advances of the Indenture Trustee's
and the Bond Administrator's respective agents, counsel, accountants and
experts. Subject to the priorities established in Section 3.05(a) and Section
5.04 of this Indenture, the Issuer shall indemnify the Indenture Trustee and the
Bond Administrator against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the administration
of this Trust Estate and the performance of its duties hereunder, including
without limitation, any such loss, liability or expense incurred by the
Indenture Trustee or the Bond Administrator in connection with any legal action.
The Indenture Trustee or the Bond Administrator, as the case may be, shall
notify the Issuer promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee or the Bond Administrator to so notify the Issuer shall
not relieve the Issuer of its obligations hereunder. The Issuer shall defend any
such claim, and the Indenture Trustee and the Bond Administrator may have
separate counsel and the Issuer shall pay the reasonable fees and expenses of
such counsel. The Issuer is not obligated to reimburse any expense or indemnify
against any loss, liability or expense incurred by the Indenture Trustee or the
Bond Administrator through the Indenture Trustee's or the Bond Administrator's
own willful misconduct, negligence or bad faith.
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The Issuer's payment obligations to the Indenture Trustee and the
Bond Administrator pursuant to this Section 6.07 shall survive the discharge of
this Indenture. When the Indenture Trustee or the Bond Administrator incurs
expenses after the occurrence of an Event of Default with respect to the Issuer,
the expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee or Bond Administrator.
No resignation or removal of the Indenture Trustee or the Bond
Administrator and no appointment of a successor Indenture Trustee or successor
Bond Administrator shall become effective until the acceptance of appointment by
the successor Indenture Trustee or successor Bond Administrator pursuant to this
Section 6.08. The Indenture Trustee or the Bond Administrator may resign at any
time by so notifying the Issuer, the Indenture Trustee, the Bond Administrator
and the Bond Insurer. The Bond Insurer or, if a Bond Insurer Default exists, the
Holders of a majority of Bond Principal Balances of the Bonds may remove the
Indenture Trustee or the Bond Administrator by so notifying the Issuer and the
Indenture Trustee or the Bond Administrator, as applicable, and the Bond Insurer
and may appoint a successor Indenture Trustee or successor Bond Administrator.
The Issuer shall, with the consent of the Bond Insurer, so long as no Bond
Insurer Default exists, remove the Indenture Trustee or the Bond Administrator,
as the case may be, if:
(a) the Indenture Trustee or the Bond Administrator fails to comply with Section
6.11 hereof;
(b) the Indenture Trustee or the Bond Administrator is adjudged a bankrupt or
insolvent;
(c) a receiver or other public officer takes charge of the Indenture Trustee or
the Bond Administrator or its respective property; or
(d) the Indenture Trustee or the Bond Administrator otherwise becomes incapable
of acting.
If the Indenture Trustee or the Bond Administrator resigns or is
removed or if a vacancy exists in the office of the Indenture Trustee or the
Bond Administrator for any reason (the Indenture Trustee or the Bond
Administrator, as applicable, in such event being referred to herein as the
retiring Indenture Trustee or the retiring Bond Administrator), the Issuer
shall, with the consent of the Bond Insurer, so long as no Bond Insurer Default
exists, promptly appoint a successor Indenture Trustee or Bond Administrator
reasonably acceptable to the Bond Insurer.
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A successor Indenture Trustee or successor Bond Administrator shall
deliver a written acceptance of its appointment to the retiring Indenture
Trustee or retiring Bond Administrator, the Bond Insurer, the Indenture Trustee,
the Bond Administrator and the Issuer. Thereupon, the resignation or removal of
the retiring Indenture Trustee or retiring Bond Administrator shall become
effective, and the successor Indenture Trustee or successor Bond Administrator
shall have all the rights, powers and duties of the Indenture Trustee or the
Bond Administrator under this Indenture. The successor Indenture Trustee or
successor Bond Administrator shall mail a notice of its succession to the
Bondholders. The retiring Indenture Trustee or retiring Bond Administrator shall
promptly transfer all property held by it as Indenture Trustee or Bond
Administrator to the successor Indenture Trustee or successor Bond
Administrator.
Subject to the foregoing provisions of this Section 6.08, the
Indenture Trustee may terminate the Bond Administrator at any time for failure
to perform its obligations hereunder or under the Basic Documents provided it or
a Bond Administrator acceptable to the Bond Insurer assumes the obligations of
the Bond Administrator.
If a successor Indenture Trustee or successor Bond Administrator
does not take office within 60 days after the retiring Indenture Trustee or
retiring Bond Administrator resigns or is removed, the retiring Indenture
Trustee or retiring Bond Administrator, as the case may be, the Issuer, the Bond
Insurer, the Indenture Trustee, the Bond Administrator or the Holders of a
majority of Bond Principal Balances of the Bonds may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee or
successor Bond Administrator.
Notwithstanding the replacement of the Indenture Trustee or the Bond
Administrator pursuant to this Section, the Issuer's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee or
retiring Bond Administrator.
Section 6.09. Successor Indenture Trustee or Bond Administrator by Merger.
If the Indenture Trustee or the Bond Administrator consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation, without any
further act, shall be the successor Indenture Trustee or successor Bond
Administrator, as applicable; provided, that such corporation or banking
association shall be otherwise qualified and eligible under Section 6.11 hereof.
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If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee or the Bond Administrator, as the case
may be, shall succeed to the trusts created by this Indenture and any of the
Bonds shall have been authenticated but not delivered, any such successor to the
Indenture Trustee or the Bond Administrator, as the case may be, may adopt the
certificate of authentication of any predecessor trustee and deliver such Bonds
so authenticated; and if at that time any of the Bonds shall not have been
authenticated, any successor to the Indenture Trustee or the Bond Administrator,
as the case may be, may authenticate such Bonds either in the name of any
predecessor hereunder or in the name of the successor to the Indenture Trustee
or the Bond Administrator, as the case may be; and in all such cases such
certificates shall have the full force as the Bonds or this Indenture provide
that such certificates of the Indenture Trustee or the Bond Administrator, as
the case may be, shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.
Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Bondholders and the Bond Insurer, such title to the Trust Estate, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee or the Bond
Insurer may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 6.11 hereof and notice to, and the consent of, the Bond
Insurer (but not the Bondholders) of the appointment of any co-trustee or
separate trustee shall be required.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed upon the
Indenture Trustee shall be conferred or imposed upon and exercised or performed
by the Indenture Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized to
act separately without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed the Indenture Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Estate or
any portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Indenture Trustee;
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(b) no trustee hereunder shall be personally liable by reason of any act or
omission of any other trustee hereunder; and
(c) the Indenture Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification.
Each of the Indenture Trustee and the Bond Administrator shall at
all times be reasonably acceptable to the Bond Insurer and authorized to
exercise corporate trust powers. Each of the Indenture Trustee and the Bond
Administrator shall have a combined capital and surplus of at least $50,000,000
as set forth in its most recent published annual report of condition and it or
its parent shall have a long-term debt rating of Baa3 or better by Moody's and
BBB or better by Standard & Poor's. The Indenture Trustee shall also satisfy the
requirements of TIA ss.310(a). The Indenture Trustee shall comply with TIA ss.
310(b), including the optional provision permitted by the second sentence of TIA
ss. 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA ss. 310(b)(1) are met. If at any time the Indenture Trustee or
the Bond Administrator shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect specified in Section 6.08 hereof.
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Section 6.12. Preferential Collection of Claims Against Issuer.
The Indenture Trustee shall comply with TIA ss. 311(a), excluding
any creditor relationship listed in TIA ss. 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated.
Section 6.13. Representations and Warranties.
(a) The Indenture Trustee hereby represents that:
(i) The Indenture Trustee is duly organized and validly existing as a New York
banking corporation in good standing under the laws of the State of New
York with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted;
(ii) The Indenture Trustee has the power and authority to execute and deliver
this Indenture and to carry out its terms; and the execution, delivery and
performance of this Indenture have been duly authorized by the Indenture
Trustee by all necessary corporate action;
(iii) The consummation of the transactions contemplated by this Indenture and
the fulfillment of the terms hereof do not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
organization or bylaws of the Indenture Trustee or any agreement or other
instrument to which the Indenture Trustee is a party or by which it is
bound; and
(iv) To the Indenture Trustee's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Indenture Trustee or its properties: (A)
asserting the invalidity of this Indenture, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Indenture
or (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Indenture Trustee of its
obligations under, or the validity or enforceability of, this Indenture.
(b) The Bond Administrator hereby represents that:
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(i) The Bond Administrator is duly organized and validly existing as a
national banking association in good standing under the laws of the United
States with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted;
(ii) The Bond Administrator has the power and authority to execute and deliver
this Indenture and to carry out its terms; and the execution, delivery and
performance of this Indenture have been duly authorized by the Bond
Administrator by all necessary corporate action;
(iii) The consummation of the transactions contemplated by this Indenture and
the fulfillment of the terms hereof do not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
organization or bylaws of the Bond Administrator or any agreement or other
instrument to which the Bond Administrator is a party or by which it is
bound; and
(iv) To the Bond Administrator's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Bond Administrator or its properties: (A)
asserting the invalidity of this Indenture, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Indenture
or (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Bond Administrator of its
obligations under, or the validity or enforceability of, this Indenture.
Section 6.14. Directions to Indenture Trustee and Bond Administrator.
The Indenture Trustee or the Bond Administrator on behalf of the
Indenture Trustee, as the case may be, is hereby directed:
(a) to accept the pledge of the Mortgage Loans and hold the assets of the Owner
Trust Estate in trust for the Bondholders and the Bond Insurer;
(b) to authenticate and deliver the Class A-1 Bonds, the Class A-2 Bonds, the
Class A-3 Bonds, the Class A-4 Bonds, the Class B Bonds and the Class IO Bonds
substantially in the form prescribed by Exhibits A, B, C, D, E and F,
respectively, in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the terms of
this Indenture.
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Section 6.15. The Agents.
The provisions of this Indenture relating to the limitations of the
Indenture Trustee's and the Bond Administrator's liability and to its indemnity
shall inure also to the Paying Agent, the Bond Registrar, the Certificate Paying
Agent and the Certificate Registrar.
ARTICLE VII
Bondholders' Lists and Reports
Section 7.01. Issuer To Furnish Bond Administrator Names and Addresses of
Bondholders.
The Issuer will furnish or cause to be furnished to the Bond
Administrator and the Indenture Trustee (a) not more than five days after each
Record Date, a list, in such form as the Bond Administrator and the Indenture
Trustee may reasonably require, of the names and addresses of the Holders of
Bonds as of such Record Date, (b) at such other times as the Bond Administrator,
the Indenture Trustee and the Bond Insurer 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 Bond Administrator is the Bond
Registrar, no such list shall be required to be furnished to the Bond
Administrator.
Section 7.02. Preservation of Information; Communications to Bondholders.
The Bond Administrator shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Bonds
contained in the most recent list furnished to the Bond Administrator as
provided in Section 7.01 hereof and the names and addresses of Holders of Bonds
received by the Bond Administrator in its capacity as Bond Registrar. The Bond
Administrator may destroy any list furnished to it as provided in such Section
7.01 upon receipt of a new list so furnished.
Bondholders may communicate pursuant to TIA ss.312(b) with other
Bondholders with respect to their rights under this Indenture or under the
Bonds.
The Issuer, the Indenture Trustee and the Bond Registrar shall have
the protection of TIA ss. 312(c).
Section 7.03. Reports by the Bond Administrator ; Issuer Fiscal Year.
The Bond Administrator, on behalf of the Issuer, shall:
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(a) file with the Commission, on behalf of the Issuer, the annual reports and
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) that the Issuer may be required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act. Such filings shall be as follows:
within 15 days after each Payment Date, the Bond Administrator, on behalf of the
Issuer, shall file with the Commission via the Electronic Data Gathering,
Analysis and Retrieval System, a Form 8-K with a copy of the statement to
Bondholders for such Payment Date as an exhibit thereto. Prior to January 31,
2000, the Bond Administrator, shall file a Form 15 Suspension Notification with
respect to the Trust Fund, if applicable. Prior to March 31, 2000, the Bond
Administrator, on behalf of the Issuer, shall file a Form 10-K, in substance
conforming to industry standards, with respect to the Trust Fund. The Issuer
hereby grants to the Bond Administrator, a limited power of attorney to execute
and file each such document on behalf of the Issuer. Such power of attorney
shall continue until the earlier of (i) receipt by the Bond Administrator, on
behalf of the Issuer, from the Issuer of written termination of such power of
attorney and (ii) the termination of the Trust Fund. The Bond Administrator, on
behalf of the Issuer, shall deliver to the Seller, the Indenture Trustee and the
Bond Insurer within three Business Days after filing any Form 8-K or Form 10-K
pursuant to this Section 7.03 a copy of such Form 8-K or Form 10-K, as the case
may be; and
(b) file with the Commission (with copies to the Seller and the Bond Insurer) in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this Indenture as
may be required from time to time by such rules and regulations.
Unless the Issuer otherwise notifies the Bond Administrator, the
fiscal year of the Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee.
If required by TIA ss. 313(a), within 60 days after each January 1
beginning with January 1, 2000, the Bond Administrator on behalf of the
Indenture Trustee shall mail to each Bondholder as required by TIA ss. 313(c)
and to the Bond Insurer a brief report dated as of such date that complies with
TIA ss. 313(a). The Bond Administrator, on behalf of the Indenture Trustee, also
shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to Bondholders
shall be filed by the Bond Administrator, on behalf of the Indenture Trustee,
with the Commission and each stock exchange, if any, on which the Bonds are
listed. The Issuer shall notify the Indenture Trustee, the Bond Administrator
and the Bond Insurer if and when the Bonds are listed on any stock exchange.
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Section 7.05. Statements to Bondholders.
(a) Subject to Section 3.26 of this Indenture, with respect to each
Payment Date, the Bond Administrator, on behalf of the Indenture Trustee, shall
deliver to each Certificateholder and Bondholder, the Bond Insurer, the
Indenture Trustee, the Seller, the Owner Trustee, the Certificate Paying Agent
and each Rating Agency, a statement setting forth the following information with
respect to each Group and each Class of Bonds, to the extent applicable:
(i) the aggregate amount of collections with respect to the Mortgage Loans in
each Group with respect to such Payment Date;
(ii) the Interest Payment Amount and the Principal Payment Amount for each
Class of Bonds for such Payment Date, and, with respect to the Class A-1
and Class A-2 Bonds, the Carry-Forward Amount for such Payment Date, and
the aggregate unpaid Carry-Forward Amount for all prior Payment Dates;
(iii) the amount of the aggregate distributions on the Class A-1 Bonds, the
Class A-2 Bonds, the Class A-3 Bonds, the Class A-4 Bonds, the Class B
Bonds and the Class IO Bonds for such Payment Date;
(iv) the Scheduled Payments, if any, paid by the Bond Insurer under the Bond
Insurance Policy for such Payment Date and the aggregate Scheduled
Payments for all prior Payment Dates paid by the Bond Insurer under the
Bond Insurance Policy and not yet reimbursed;
(v) the aggregate Principal Balance of the Mortgage Loans in each Group as of
the end of the preceding Due Period;
(vi) the number and aggregate Principal Balances of Mortgage Loans in each
Group (a) as to which the Monthly Payment is delinquent for 30-59 days,
60-89 days and 90 or more days (excluding any Mortgage Loans in
foreclosure or that have become REO Property), respectively, (b) in
foreclosure and (c) that have become REO Property, in each case as of
the end of the preceding Due Period; provided, however, that such
information will not be provided on the statements relating to the
first Payment Date;
(vii) the Weighted Average Mortgage Rate for each Group for the related Payment
Date;
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(viii) the related Required Subordination Amount, Subordination Amount,
Subordination Increase Amount, Net Monthly Excess Cashflow and
Subordination Reduction Amount for each Class of Class A Bonds on such
Payment Date;
(ix) the amount of any Advances and Compensating Interest payments for such
Payment Date for each Group;
(x) the aggregate Realized Losses with respect to the related Payment Date and
cumulative Realized Losses since the Closing Date for each Group;
(xi) the amount of any unpaid accrued interest on the Class A-1 Bonds, the
Class A-2 Bonds, the Class A-3 Bonds, the Class A-4 Bonds, the Class B
Bonds and the Class IO Bonds after such Payment Date;
(xii) the Bond Principal Balance of each Class of Bonds (IO Notional Balance, in
the case of the Class IO Bonds) after giving effect to the distribution of
principal on such Payment Date;
(xiii)the Bond Interest Rate for each Class of Bonds (or, in the case of the
Subordinated Bonds, each Component) and such Payment Date;
(xiv) the number and aggregate Principal Balance of Mortgage Loans repurchased
pursuant to the Purchase Agreement for the related Payment Date and
cumulatively since the Closing Date;
(xv) the Cumulative Loss Percentage, Delinquency Percentage, Delinquency
Amount and Rolling Delinquency Percentage for such Payment Date;
(xvi) the amount of any Prepayment Interest Shortfalls or Relief Act Shortfalls
for such Payment Date;
(xvii)the aggregate number and Principal Balance of Converted Mortgage Loans
purchased pursuant to the Converted Loan Purchase Agreement for the
related Payment Date and cumulatively since the Closing Date;
(xviii) the aggregate number and Principal Balance of Converted Mortgage Loans
remaining as of the related Payment Date;
(xix) the aggregate amount collected with respect to any prepayment penalties on
the Mortgage Loans for such Payment Date;
(xx) the aggregate number, Principal Balance and percentage of Mortgage Loans
for which claims were submitted to the MI Insurer and the aggregate
number, Principal Balance and percentage of Mortgage Loans for which
claims were rejected by the MI Insurer for the related Payment Date and
cumulatively since the Closing Date; and
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(xxi) if a MI Insurer Insolvency Event has occurred.
In addition, by January 31 of each calendar year following any year
during which the Bonds are outstanding, the Bond Administrator, on behalf of the
Indenture Trustee, shall furnish a report to each Bondholder of record if so
requested in writing at any time during each calendar year as to the amounts
reported pursuant to (ii) and (iii) with respect to the Bonds for such calendar
year.
The Bond Administrator, on behalf of the Indenture Trustee, in the
absence of manifest error may conclusively rely upon the Determination Date
Report provided by the Servicer pursuant to Section 4.01 of the Servicing
Agreement in its preparation of its Statement to the Bondholders pursuant to
this Section 7.05.
Section 7.06. Books and Records.
The Issuer hereby covenants with the Indenture Trustee, the Bond
Administrator and the Bond Insurer that, so long as any of the Bonds remain
Outstanding, it shall:
(a) at all times cause to be kept proper books of account and allow the
Indenture Trustee, the Bond Administrator and the Bond Insurer and any person
appointed by them, to whom the Issuer shall have no reasonable objection, access
to the books of account of the Issuer at all reasonable times, on reasonable
prior notice and during normal business hours;
(b) at all times conduct and continue to conduct business in its own corporate
name;
(c) at all times act and continue to act through its duly authorized officers
and agents; and
(d) so far as permitted by law, at all times cause to be given to the Indenture
Trustee, the Bond Administrator and the Bond Insurer such information as it
shall reasonably require for the purpose of the discharge of the duties, powers,
trusts, authorities and discretions vested in it by this Indenture or by
operation of law.
ARTICLE VIII
Accounts, Disbursements and Releases
Section 8.01. Collection of Money.
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Except as otherwise expressly provided herein, the Indenture
Trustee and the Bond Administrator, on behalf of 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
or the Bond Administrator, on behalf of the Indenture Trustee, respectively,
pursuant to this Indenture. The Indenture Trustee, shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Indenture Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in Article V.
Section 8.02. Trust Accounts.
On or prior to the Closing Date, the Issuer shall cause each of
the Indenture Trustee and the Bond Administrator on behalf of the Indenture
Trustee, to establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Bondholders and the Bond Insurer, a Payment Account as
provided in Section 3.01 hereof.
All monies deposited from time to time in the Payment Account (other
than investments made with such monies including all income or other gain from
such investments pursuant to this Indenture), including assumption fees and
prepayment penalties, and all deposits therein pursuant to this Indenture are
for the benefit of the Bondholders and the Bond Insurer.
By noon on the Business Day prior to each Payment Date, the Bond
Administrator shall remit funds in the Payment Account established by it to the
Indenture Trustee in accordance with Section 3.01.
On each Payment Date, the Indenture Trustee, shall distribute all
amounts on deposit in the Payment Account established by it to Bondholders in
respect of the Bonds and to such other persons in the order of priority set
forth in Section 3.05 hereof (except as otherwise provided in Section 5.04(b)
hereof).
Each of the Indenture Trustee and the Bond Administrator may invest
any funds in the Payment Account (other than the proceeds of the Bond Insurance
Policy) established by it in Eligible Investments, in its discretion, maturing
no later than the Business Day preceding each Payment Date (provided, however,
that with respect to Eligible Investments that consist of obligations of the
Indenture Trustee or their respective affiliates, such Eligible Investments may
mature on the related Payment Date) and in the case of the Bond Administrator,
no later than the Business Day preceding each Payment Date. Such Eligible
Investments shall not be sold or disposed of prior to their maturity. All income
or other gain from such investments may be released from the Payment Account and
paid to the Indenture Trustee or the Bond Administrator, as applicable, from
time to time as part of its compensation for acting as Indenture Trustee and
Bond Administrator, respectively.
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Section 8.03. Officer's Certificate.
The Indenture Trustee shall receive at least seven days' notice
when requested by the Issuer to take any action pursuant to Section 8.05(a)
hereof, accompanied by copies of any instruments to be executed, and the
Indenture Trustee shall also require, as a condition to such action, an
Officer's Certificate, in form and substance reasonably satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete such action, and concluding that all conditions
precedent to the taking of such action have been complied with.
Section 8.04. Termination Upon Distribution to Bondholders.
This Indenture and the respective obligations and responsibilities
of the Issuer, the Bond Administrator and the Indenture Trustee (other than
those obligations and responsibilities which by their terms should survive the
termination of this Indenture) created hereby shall terminate upon the
distribution to Bondholders, the Bond Insurer, the Certificate Paying Agent on
behalf of the Certificateholders, the Bond Administrator and the Indenture
Trustee of all amounts required to be distributed pursuant to Article III;
provided, however, that in no event shall the trust created hereby continue
beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.
Section 8.05. Release of Trust Estate.
Subject to the payment of its reasonable fees and expenses, the
Indenture Trustee may, and when required by the provisions of this Indenture
shall, execute instruments to release property from the lien of this Indenture,
or convey the Indenture Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Indenture.
(a) The Indenture Trustee shall, at such time as (i) there are no Bonds
Outstanding, (ii) all sums due to the Indenture Trustee and to the Bond
Administrator pursuant to this Indenture have been paid, and (iii) all sums due
to the Bond Insurer have been paid, release any remaining portion of the Trust
Estate that secured the Bonds from the lien of this Indenture.
(b) The Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.05 only upon receipt of a request from the Issuer
accompanied by an Officers' Certificate and an Opinion of Counsel stating that
all applicable requirements have been satisfied, and a letter from the Bond
Insurer stating that the Bond Insurer has no objection to such request from the
Issuer.
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Section 8.06. Surrender of Bonds Upon Final Payment.
By acceptance of any Bond, the Holder thereof agrees to surrender
such Bond to the Bond Registrar, on behalf of the Indenture Trustee, promptly,
prior to such Bondholder's receipt of the final payment thereon.
Section 8.07. Optional Redemption of the Bonds.
(a) Pursuant to Section 3.23 of the Servicing Agreement, the Servicer shall have
the option to purchase 100% of the Mortgage Loans, and cause a redemption of the
Bonds on or after any Payment Date on which the aggregate Principal Balance of
the Mortgage Loans in all four Groups is reduced to less than 10% of the Maximum
Collateral Amount. The aggregate purchase price for the Mortgage Loans in each
Group will be equal to the unpaid Bond Principal Balance of the related Class of
Bonds (or B Components in the case of the Class B Bonds) as of the Payment Date
on which the proposed redemption will take place in accordance with the
foregoing, together with accrued and unpaid interest thereon (and on the Class
IO Bonds) at the related Bond Interest Rate through such Payment Date (including
any related Carry-Forward Amount), plus an amount sufficient to pay in full all
amounts owing to the Bond Insurer, the Bond Administrator and the Indenture
Trustee under this Indenture and the Insurance Agreement and the Servicer under
the Servicing Agreement (which amounts shall be specified in writing upon
request of the Issuer by the Indenture Trustee, the Bond Administrator and the
Bond Insurer). Such redemption must constitute a "qualified liquidation" of the
REMIC established by the Issuer under Section 860F of the Code including,
without limitation, the requirement that the qualified liquidation takes place
over a period not to exceed 90 days.
(b) In order to exercise the foregoing option, the Servicer shall,
not less than 30 days prior to the proposed Payment Date on which such
redemption is to be made shall provide written notice of its exercise of such
option to the Bond Administrator, the Indenture Trustee, the Bond Insurer, the
Owner Trustee and the Issuer. Following receipt of the notice pursuant to the
foregoing, the Bond Administrator on behalf of the Indenture Trustee shall
provide notice to the Bondholders of the final payment on the Bonds, conduct a
qualified liquidation of the Trust Estate, and the Indenture Trustee shall apply
funds from such liquidation to make final payments of principal and interest on
the Bonds in accordance with Section 3.05(a) hereof, and this Indenture shall be
discharged, subject to the provisions of Section 4.10 hereof.
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Section 8.08. Pre-Funding Account.
(a) No later than the Closing Date, the Bond Administrator, on behalf of the
Indenture Trustee, shall establish and maintain in the name of the Indenture
Trustee one or more Eligible Accounts, which shall be titled "Pre-Funding
Account, The Chase Manhattan Bank as Indenture Trustee, on behalf of the
registered Bondholders of NovaStar Mortgage Funding Trust, Series 1999-1 Home
Equity Loan Asset-Backed Bonds" (the "Pre-Funding Account"). On the Closing
Date, the Original Pre-Funded Amount with respect to each Group shall be
deposited in the Pre-Funding Account from the proceeds of the sale of the Bonds
and retained therein. Funds deposited in the Pre-Funding Account shall be held
in the Pre-Funding Account, on behalf of the Indenture Trustee, for the Holders
of the Bonds and the Bond Insurer for the uses and purposes set forth in the
Indenture and the Purchase Agreement. If the Bond Administrator, on behalf of
the Indenture Trustee, shall not have received an investment direction from the
Issuer, the Bond Administrator, on behalf of the Indenture Trustee, will invest
funds deposited in the Pre-Funding Account in Eligible Investments of the kind
described in clause (vii) of the definition of Eligible Investments. The Issuer
shall be the owner of the Pre-Funding Account and shall report all items of
income, deduction, gain or loss arising therefrom. All income and gain realized
from investment of funds deposited in the Pre-Funding Account shall be
transferred to the Interest Coverage Account on each Payment Date.
(b) Amounts on deposit in the Pre-Funding Account shall be withdrawn by the Bond
Administrator, on behalf of the Indenture Trustee, as follows:
(i) On any Subsequent Transfer Date, the Bond Administrator, on behalf of
the Indenture Trustee, shall withdraw from the Pre-Funding Account an
amount with respect to each Group equal to 100% of the Principal
Balances of the Subsequent Mortgage Loans for such Group transferred
and assigned to the Indenture Trustee on such Subsequent Transfer Date
and pay such amount to or upon the order of the Transferor upon
satisfaction of the conditions set forth in Section 2.2 of the Purchase
Agreement with respect to such transfer and assignment; and
(ii) If the Pre-Funded Amount with respect to a Group has not been reduced to
zero during the Funding Period, on the Business Day prior to the Payment
Date following the end of the Funding Period, the Bond Administrator shall
deposit into the Payment Account established by the Indenture Trustee any
amounts remaining in the Pre-Funding Account with respect to such Group.
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Section 8.09. Interest Coverage Account.
(a) No later than the Closing Date, the Bond Administrator, on behalf of the
Indenture Trustee, shall establish and maintain in the name of the Indenture
Trustee one or more Eligible Accounts, titled "Interest Coverage Account, The
Chase Manhattan Bank, as Indenture Trustee, on behalf of the registered
Bondholders of NovaStar Mortgage Funding Trust, Series 1999-1 Home Equity Loan
Asset-Backed Bonds" (the "Interest Coverage Account"). On the Closing Date, the
Interest Coverage Amount with respect to each Group shall be deposited into the
Interest Coverage Account and retained therein. In addition, the Bond
Administrator, on behalf of the Indenture Trustee, shall deposit into the
Interest Coverage Account all income and gain on investments in the Pre-Funding
Account pursuant to Section 8.08. Funds deposited in the Interest Coverage
Account shall be held in the Interest Coverage Account, on behalf of the
Indenture Trustee, for the Holders of the Bonds and the Bond Insurer for the
uses and purposes set forth herein. The Issuer shall be the owner of the
Interest Coverage Account and shall report all items of income, deduction, gain
or loss arising therefrom.
(b) On the Business Day prior to each Payment Date during the Funding Period,
the Bond Administrator, on behalf of the Indenture Trustee, shall withdraw from
the Interest Coverage Account and transfer to the Indenture Trustee for deposit
into the Payment Account established by the Indenture Trustee the applicable
Interest Coverage Addition with respect to each Group.
(c) Upon the earlier of (i) termination of the Trust Fund in accordance with
Section 8.01 of the Trust Agreement and (ii) the Business Day prior to the
Payment Date following the end of the Funding Period, any amount remaining on
deposit in the Interest Coverage Account with respect to each Group shall be
withdrawn by the Bond Administrator and transferred to the Indenture Trustee for
deposit in the Payment Account established by the Indenture Trustee.
ARTICLE IX
Supplemental Indentures
Section 9.01. Supplemental Indentures Without Consent of Bondholders.
(a) Without the consent of the Holders of any Bonds but with the prior written
consent of the Bond Insurer and prior notice to the Rating Agencies, the Issuer,
the Bond Administrator and the Indenture Trustee, when authorized by an Issuer
Request, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the TIA
as in force at the date of the execution thereof), in form reasonably
satisfactory to the Bond Administrator, the Indenture Trustee and the Bond
Insurer, for any of the following purposes:
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(i) to correct or amplify the description of any property at any time subject
to the lien of this Indenture, or better to assure, convey and confirm
unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable provisions
hereof, of another person to the Issuer, and the assumption by any such
successor of the covenants of the Issuer herein and in the Bonds
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the Holders of
the Bonds, or to surrender any right or power herein conferred upon the
Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee;
(v) to cure any ambiguity or to correct or supplement any provision herein or
in any supplemental indenture that may be inconsistent with any other
provision herein or in any supplemental indenture;
(vi) to make any other provisions with respect to matters or questions arising
under this Indenture or in any supplemental indenture; provided, that such
action shall not materially and adversely affect the interests of the
Holders of the Bonds;
(vii) to evidence and provide for the acceptance of the appointment hereunder by
a successor Indenture Trustee or a successor Bond Administrator with
respect to the Bonds and to add to or change any of the provisions of this
Indenture as shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee, pursuant to the requirements of
Article VI hereof; or
(viii)to modify, eliminate or add to the provisions of this Indenture to such
extent as shall be necessary to effect the qualification of this Indenture
under the TIA or under any similar federal statute hereafter enacted and
to add to this Indenture such other provisions as may be expressly
required by the TIA;
provided, however, that no such supplemental indenture shall be entered into
unless the Indenture Trustee and the Bond Administrator shall have received an
Opinion of Counsel that entering into such supplemental indenture will not (A)
result in a "substantial modification" of the Bonds under Treasury Regulation
Section 1.1001.3 or adversely affect the status of the Bonds as indebtedness for
federal income tax purposes or (B) cause the Trust to be subject to an entity
level tax.
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The Indenture Trustee and the Bond Administrator are hereby
authorized to join in the execution of any such supplemental indenture and to
make any further appropriate agreements and stipulations that may be therein
contained.
(b) The Issuer, the Bond Administrator and the Indenture Trustee, when
authorized by an Issuer Request, may, also without the consent of any of the
Holders of the Bonds but with the prior written consent of the Bond Insurer and
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Bonds under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel (or, in the alternative, with respect to clause (i), as
evidenced by a rating letter confirming the existing ratings on the Bonds
(without taking into account the Bond Insurance Policy)) (i) adversely affect in
any material respect the interests of any Bondholder or (ii) if the Bond
Insurance Policy is outstanding, cause the Issuer to be subject to an entity
level tax for federal income tax purposes.
Section 9.02. Supplemental Indentures With Consent of Bondholders.
The Issuer, the Bond Administrator and the Indenture Trustee, when
authorized by an Issuer Request, also may, with prior notice to the Rating
Agencies and with the prior written consent of the Bond Insurer and the consent
of the Holders of not less than a majority of the Bond Principal Balances of the
Bonds affected thereby, by Act (as defined in Section 10.03 hereof) of such
Holders delivered to the Issuer, the Bond Administrator and the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Bonds under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Bond affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Bond, or reduce the principal amount thereof or the
interest rate thereon, change the provisions of this Indenture relating
to the application of collections on, or the proceeds of the sale of,
the Trust Estate to payment of principal of or interest on the Bonds,
or change any place of payment where, or the coin or currency in which,
any Bond or the interest thereon is payable, or impair the right to
institute suit for the enforcement of the provisions of this Indenture
requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Bonds on or
after the respective due dates thereof;
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(ii) reduce the percentage of the Bond Principal Balances of the Bonds, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition of the
term "Outstanding" or modify or alter the exception in the definition of
the term "Bondholder";
(iv) reduce the percentage of the Bond Principal Balances of the Bonds required
to direct the Indenture Trustee to direct the Issuer to sell or liquidate
the Trust Estate pursuant to Section 5.04 hereof;
(v) modify any provision of this Section 9.02 except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Bond affected thereby;
(vi) modify any of the provisions of this Indenture in such manner as to affect
the calculation of the amount of any payment of interest or principal due
on any Bond on any Payment Date (including the calculation of any of the
individual components of such calculation); or
(vii) permit the creation of any lien ranking prior to or on a parity with the
lien of this Indenture with respect to any part of the Trust Estate or,
except as otherwise permitted or contemplated herein, terminate the lien
of this Indenture on any property at any time subject hereto or deprive
the Holder of any Bond of the security provided by the lien of this
Indenture; and provided, further, that such action shall not, as evidenced
by an Opinion of Counsel, cause the Issuer to be subject to an entity
level tax.
The Indenture Trustee, may, with the consent of the Bond Insurer, so
long as no Bond Insurer Default exists, in its discretion determine whether or
not any Bonds would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Bonds, 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 Bondholders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
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Promptly after the execution by the Issuer, the Bond Administrator
and the Indenture Trustee of any supplemental indenture pursuant to this Section
9.02, the Bond Administrator, on behalf of the Indenture Trustee, shall mail to
the Holders of the Bonds to which such amendment or supplemental indenture
relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Bond Administrator, on behalf 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 permitting the additional trusts created by, any
supplemental indenture permitted by this Article IX or the modification thereby
of the trusts created by this Indenture, the Indenture Trustee and the Bond
Administrator shall be entitled to receive, and subject to Sections 6.01 and
6.02 hereof, shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. Each of the Indenture Trustee and the Bond
Administrator may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's or the Bond
Administrator's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture shall be, and shall be deemed to be, modified
and amended in accordance therewith with respect to the Bonds affected thereby,
and the respective rights, limitations of rights, obligations, duties,
liabilities and immunities under this Indenture of the Indenture Trustee, the
Bond Administrator, the Issuer and the Holders of the Bonds shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act.
Every amendment of this Indenture and every supplemental indenture
executed pursuant to this Article IX shall conform to the requirements of the
Trust Indenture Act as then in effect so long as this Indenture shall then be
qualified under the Trust Indenture Act.
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Section 9.06. Reference in Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and if required by the
Indenture Trustee shall, bear a notation in form approved by the Indenture
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer or the Bond Administrator, on behalf of the Indenture Trustee, shall so
determine, new Bonds so modified as to conform, in the opinion of the Bond
Administrator, on behalf 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 Bond Registrar in exchange for Outstanding
Bonds.
ARTICLE X
Miscellaneous
Section 10.01. Compliance Certificates and Opinions, etc.
Upon any application or request by the Issuer to the Indenture
Trustee or to the Bond Administrator to take any action under any provision of
this Indenture, the Issuer shall furnish to the Indenture Trustee, the Bond
Administrator and the Bond Insurer an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel 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, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each signatory of such certificate or opinion has read or
has caused to be read such covenant or condition and the definitions herein
relating thereto;
(b) brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such signatory, such signatory has
made such examination or investigation as is necessary to enable such signatory
to express an informed opinion as to whether or not such covenant or condition
has been complied with;
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(d) a statement as to whether, in the opinion of each such signatory, such
condition or covenant has been complied with; and
(e) if the signatory of such certificate or opinion is required to be
Independent, the statement required by the definition of the term "Independent".
(i) Except with respect to the substitution of Mortgage Loans
pursuant to Section 2.1 of the Purchase Agreement, prior to the deposit of any
Collateral or other property or securities with the Bond Administrator, on
behalf of the Indenture Trustee, that is to be made the basis for the release of
any property or securities subject to the lien of this Indenture, the Issuer
shall, in addition to any obligation imposed in Section 10.01(a) or elsewhere in
this Indenture, furnish to the Indenture Trustee, the Bond Administrator and the
Bond Insurer an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
deposit) to the Issuer of the Collateral or other property or securities to be
so deposited and a report from a nationally recognized accounting firm verifying
such value.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee, the Bond Administrator and the Bond Insurer an Officer's Certificate
certifying or stating the opinion of any signer thereof as to the matters
described in clause (i) above, the Issuer shall also deliver to the Indenture
Trustee and the Bond Administrator an Independent Certificate from a nationally
recognized accounting firm as to the same matters, if the fair value to the
Issuer of the securities to be so deposited and of all other such securities
made the basis of any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the certificates
delivered pursuant to clause (i) above and this clause (ii), is 10% or more of
the Bond Principal Balances of the Bonds, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair value thereof
to the Issuer as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the Bond Principal Balances of the Bonds.
(iii) Except with respect to the substitution of Mortgage Loans
pursuant to Section 2.1 of the Purchase Agreement, whenever any property or
securities are to be released from the lien of this Indenture, the Issuer shall
also furnish to the Indenture Trustee, the Bond Administrator and the Bond
Insurer an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
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(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee, the Bond Administrator and the Bond Insurer an Officer's Certificate
certifying or stating the opinion of any signer thereof as to the matters
described in clause (iii) above, the Issuer shall also furnish to the Indenture
Trustee and the Bond Administrator an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property, other than securities released from the lien of this Indenture since
the commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10% or
more of the Bond Principal Balances of the Bonds, but such certificate need not
be furnished in the case of any release of property or securities if the fair
value thereof as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the then Bond Principal Balances of the
Bonds.
Section 10.02. Form of Documents Delivered to Indenture Trustee or Bond
Administrator.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Seller or the Issuer, stating that the information with respect to such
factual matters is in the possession of the Seller or the Issuer, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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Section 10.03. Acts of Bondholders.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Bondholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Bondholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Bond Administrator, 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 Bondholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.01
hereof) conclusive in favor of the Bond Administrator, Indenture Trustee and the
Issuer, if made in the manner provided in this Section 10.03.
The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Bond Administrator or
the Indenture Trustee, as the case may be, deems sufficient.
The ownership of Bonds shall be proved by the Bond Registrar.
Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Bonds shall bind the Holder of every
Bond issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Bond.
Section 10.04. Notices, etc., to Indenture Trustee, Bond Administrator,
Issuer, Bond Insurer and Rating Agencies.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Bondholders or other documents provided or permitted by this
Indenture shall be in writing and if such request, demand, authorization,
direction, notice, consent, waiver or Act of Bondholders is to be made upon,
given or furnished to or filed with:
(a) the Indenture Trustee by any Bondholder or by the Issuer, the Bond
Administrator or the Bond Insurer shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the Indenture
Trustee at the Indenture Trustee's Corporate Trust Office. The Indenture Trustee
shall promptly transmit any notice received by it from the Bondholders to the
Issuer; or
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(b) the Bond Administrator by any Bondholder or by the Issuer, the Indenture
Trustee or the Bond Insurer shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the Bond Administrator at
the Bond Administrator's Corporate Trust Office. The Bond Administrator shall
promptly transmit any notice received by it from the Bondholders to the Issuer;
or
(c) the Issuer by the Indenture Trustee, the Bond Administrator or by any
Bondholder or the Bond Insurer shall be sufficient for every purpose hereunder
if in writing and mailed first-class, postage prepaid, to the Issuer addressed
to: NovaStar Mortgage Funding Trust, Series 1999-1, in care of Wilmington Trust
Company, as Owner Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration
(telecopy number (302) 651-8882), or at any other address previously furnished
in writing to the Bond Administrator, on behalf of the Indenture Trustee, by the
Issuer. The Issuer shall promptly transmit any notice received by it from the
Bondholders to the Indenture Trustee and to the Bond Administrator; or
(d) the Transferor by the Indenture Trustee, the Bond Administrator or by any
Bondholder or the Bond Insurer shall be sufficient for every purpose hereunder
if in writing and mailed first-class, postage prepaid, to the Company addressed
to: NovaStar Mortgage Funding Corporation II, 1901 West 47th Place, Suite 105,
Westwood, Kansas 66205, Attention: David Lee (telecopy number (913) 362-1011),
or at any other address previously furnished in writing to the Bond
Administrator, on behalf of the Indenture Trustee, by the Transferor. The
Transferor shall promptly transmit any notice received by it from the
Bondholders to the Indenture Trustee and to the Bond Administrator; or
(e) the Seller and Servicer by the Indenture Trustee, the Bond Administrator or
by any Bondholder or the Bond Insurer shall be sufficient for every purpose
hereunder if in writing and mailed first-class, postage prepaid, to the Issuer
addressed to: NovaStar Mortgage, Inc., 1901 West 47th Place, Suite 105,
Westwood, Kansas 66205, Attention: Scott F. Hartman (telecopy number (913)
362-1011), or at any other address previously furnished in writing to the Bond
Administrator, on behalf of the Indenture Trustee, by the Seller and Servicer.
The Seller and Servicer shall promptly transmit any notice received by it from
the Bondholders to the Indenture Trustee and to the Bond Administrator; or
(f) the Bond Insurer by the Issuer, the Indenture Trustee or by any Bondholders
shall be sufficient for every purpose hereunder if in writing and mailed, the
Bond Administrator first-class, postage pre-paid, or personally delivered or
telecopied to: Financial Security Assurance, 350 Park Avenue, New York, New York
10022, Attention: Transaction Oversight (NovaStar Mortgage Funding Trust, Series
1999-1) (telecopy number (212) 888-5278).
79
<PAGE>
Notices required to be given to the Rating Agencies by the Issuer,
the Indenture Trustee, the Bond Administrator or the Owner Trustee shall be in
writing, personally delivered or mailed first-class postage pre-paid, to (i) in
the case of Moody's, at the following address: Moody's Investors Service, Inc.,
Residential Mortgage Monitoring Department, 99 Church Street, New York, New York
10007 and (ii) in the case of Standard & Poor's, at the following address:
Standard & Poor's Ratings Group, 26 Broadway (15th Floor), New York, New York
10004, Attention of Asset Backed Surveillance Department; or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
Section 10.05. Notices to Bondholders; Waiver.
Where this Indenture provides for notice to Bondholders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed first-class, postage prepaid, to
each Bondholder affected by such event, at such Person's address as it appears
on the Bond Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Bondholders is given by mail, neither the failure to mail such notice
nor any defect in any notice so mailed to any particular Bondholder shall affect
the sufficiency of such notice with respect to other Bondholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given regardless of whether such notice is in fact actually
received.
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 Bondholders shall be filed with the Bond
Administrator and the Indenture Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such a
waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Bondholders 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 Bond Administrator and the Indenture
Trustee, shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
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Section 10.06. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
another provision hereof that is required to be included in this Indenture by
any of the provisions of the Trust Indenture Act, such required provision shall
control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 10.07. Effect of Headings.
The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
Section 10.08. Successors and Assigns.
All covenants and agreements in this Indenture and the Bonds by
the Issuer shall bind its successors and assigns, whether so expressed or not.
All agreements of the Indenture Trustee and the Bond Administrator in this
Indenture shall bind their respective successors, co-trustees and agents.
Section 10.09. Separability.
In case any provision in this Indenture or in the Bonds shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 10.10. Benefits of Indenture.
The Bond Insurer and its successors and assigns shall be a
third-party beneficiary to the provisions of this Indenture. To the extent that
this Indenture confers upon or gives or grants to the Bond Insurer any right,
remedy or claim under or by reason of this Indenture, the Bond Insurer may
enforce any such right, remedy or claim conferred, given or granted hereunder.
Nothing in this Indenture or in the Bonds, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, and the
Bondholders and the Bond Insurer, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
81
<PAGE>
Section 10.11. Legal Holidays.
In any case where the date on which any payment is due shall not
be a Business Day, then (notwithstanding any other provision of the Bonds or
this Indenture) payment need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date on which nominally due, and no interest shall accrue for the period from
and after any such nominal date.
Section 10.12. Governing Law.
THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (BUT
WITH REFERENCE TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH
BY ITS TERMS APPLIES TO THIS INDENTURE), AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 10.13. Counterparts.
This Indenture may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 10.14. Recording of Indenture.
If this Indenture is subject to recording in any appropriate
public recording offices, such recording is to be effected by the Issuer and at
its expense accompanied by an Opinion of Counsel (which may be counsel to the
Bond Administrator or to the Indenture Trustee or any other counsel reasonably
acceptable to the Bond Administrator or to the Indenture Trustee) to the effect
that such recording is necessary either for the protection of the Bondholders or
any other Person secured hereunder or for the enforcement of any right or remedy
granted to the Indenture Trustee under this Indenture.
Section 10.15. Issuer Obligation.
No recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee, the Bond Administrator or the
Indenture Trustee on the Bonds or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Bond Administrator, 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
Bond Administrator, Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee,
the Bond Administrator or the Indenture Trustee or of any successor or assign of
the Bond Administrator, 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 Bond Administrator, 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 as such, and in its
individual capacity, shall be subject to, and entitled to the benefits of, the
terms and provisions of the Trust Agreement.
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Section 10.16. No Petition.
The Indenture Trustee and the Bond Administrator, by entering into
this Indenture, and each Bondholder, by accepting a Bond, hereby covenant and
agree that they will not at any time institute against the Seller or the Issuer,
or join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Bonds, this Indenture or any
of the Basic Documents. This Section 10.16 will survive for one year and one day
following the termination of this Indenture.
Section 10.17. Inspection.
The Issuer agrees that, on reasonable prior notice, it shall
permit any representative of the Indenture Trustee, the Bond Administrator and
the Bond Insurer, during the Issuer's normal business hours, to examine all the
books of account, records, reports and other papers of the Issuer, to make
copies and extracts therefrom, to cause such books to be audited by Independent
certified public accountants, and to discuss the Issuer's affairs, finances and
accounts with the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee, the Bond Administrator and the Bond Insurer
shall cause their representatives to hold in confidence all such information
except to the extent disclosure may be required by law (and all reasonable
applications for confidential treatment are unavailing) and except to the extent
that the Indenture Trustee or the Bond Administrator may reasonably determine
that such disclosure is necessary to perform its obligations hereunder.
Section 10.18. Limitation of Liability.
Notwithstanding any other provision herein or elsewhere, this
Indenture has been executed and delivered by the Owner Trustee, not in its
individual capacity, but solely in its capacity as Owner Trustee of the Issuer.
In no event shall the Owner Trustee have any liability in respect to the
representations, warranties or obligations of the Issuer hereunder or under any
other Basic Document, as to all of which recourse shall be had solely to the
assets of the Trust, and for all purposes of this Indenture and each other Basic
Document, the Owner Trustee shall be entitled to the benefits of the Trust
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Issuer, the Bond Administrator and the
Indenture Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized, all as of the day and year first
above written.
NOVASTAR MORTGAGE FUNDING TRUST, SERIES
1999-1, as Issuer
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee
By: /s/ James D. Nesci
-------------------
Name: James D. Nesci
---------------
Title: Authorized Signer
------------------
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Administrator and as Bond Registrar
By: /s/ Robert Ashbaugh
--------------------
Name: Robert Ashbaugh
----------------
Title: Vice President
---------------
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as
Indenture Trustee
By: /s/ Jennifer Cupo
------------------
Name: Jennifer Cupo
--------------
Title: Authorized Signer
-------------------
84
<PAGE>
FIRST UNION NATIONAL BANK
hereby accepts the appointment as Certificate Paying Agent pursuant to Section
3.10 of the Trust Agreement and as Bond Registrar pursuant to Section 4.02
hereof.
By: /s/ Robert Ashbaugh
--------------------
Name: Robert Ashbaugh
----------------
Title: Vice President
---------------
[SIGNATURE PAGE TO INDENTURE]
85
<PAGE>
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE)
On this 29th day of January, 1999 before me personally appeared
James D. Nesci, to me known, who being by me duly sworn, did depose and say,
that his office is located at One Rodney Square, 1100 North Market Street,
Wilmington, Delaware 19890, he is an Authorized Officer of Wilmington Trust
Company, not in its individual capacity, but solely as Owner Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
WITNESS my hand and official seal.
/s/ Jill G. Chavooshian
-----------------------
Notary Public
[NOTARIAL SEAL]
86
<PAGE>
STATE OF NORTH CAROLINA )
) ss.:
COUNTY OF ____________ )
On this 29th day of January, 1999 before me personally appeared
Robert Ashbaugh, to me known, who being by me duly sworn, did depose and say,
that his office is located at 230 S. Tryon Street, Charlotte, NC 28031, he is
the Vice President of the Bond Administrator, one of the corporations described
in and which executed the above instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
WITNESS my hand and official seal.
/s/ Bryon M. Tinnin
-------------------
Notary Public
[NOTARIAL SEAL]
87
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of January, 1999 before me personally appeared
Jennifer Cupo, to me known, who being by me duly sworn, did depose and
say, that his office is located at 450 W. 33rd, New York, New York,
he is a ___________________________ of the Indenture Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
IN WITNESS WHEREOF, I have hereunto set my name and affixed my
official seal the day and year in this Certificate first above written.
/s/ Jill G. Chavooshian
-----------------------
Notary Public
[NOTARIAL SEAL]
88
<PAGE>
EXHIBIT A
FORM OF CLASS A-1 BONDS
UNLESS THIS CLASS A-1 BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE INDENTURE
TRUSTEE OR THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CLASS A-1 BOND 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 CLASS A-1 BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED
IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE BOND
INSURANCE POLICY AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS
NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS CLASS A-1 BOND.
PRINCIPAL OF THIS CLASS A-1 BOND IS PAYABLE OVER TIME AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS CLASS A-1 BOND AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
A-1
<PAGE>
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
HOME EQUITY LOAN ASSET-BACKED BONDS
CLASS A-1
AGGREGATE CLASS A-1 BOND PRINCIPAL
BALANCE: $75,000,000
INITIAL CLASS A-1 BOND PRINCIPAL
BALANCE OF THIS CLASS A-1 BOND: $75,000,000 CUSIP NO. ________________
BOND NUMBER: __
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of Seventy-Five Million Dollars
($75,000,000) in monthly installments on the twenty-fifth day of each month or,
if such day is not a Business Day, the next succeeding Business Day (each a
"Payment Date"), commencing in February 1999 and ending on or before the Payment
Date occurring in April, 2030 (the "Final Scheduled Payment Date") and to pay
interest on the Bond Principal Balance of this Class A-1 Bond outstanding from
time to time as provided below.
This Class A-1 Bond is one of a duly authorized issue of NovaStar
Mortgage Funding Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds (the
"Bonds"), issued under an Indenture, dated as of January 1, 1999 (the
"Indenture"), among the Issuer, First Union National Bank, as bond administrator
("Bond Administrator," which term includes any successor Bond Administrator
under the Indenture) and The Chase Manhattan Bank, as indenture trustee (the
"Indenture Trustee", which term includes any successor Indenture Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Issuer, the Bond Administrator, Indenture Trustee, and the Holders of the
Class A-1 Bonds and the terms upon which the Class A-1 Bonds are to be
authenticated and delivered. All terms used in this Class A-1 Bond which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
A-2
<PAGE>
On each Payment Date, Holders of Class A-1 Bonds will be entitled to
receive interest payments in an aggregate amount equal to the related Interest
Payment Amount for such Payment Date. Principal payments will be payable on the
Class A-1 Bonds, on each Payment Date in an aggregate amount equal to the
related Principal Payment Amount for such Payment Date. In addition, on each
Payment Date, Holders of Class A-1 Bonds in the aggregate will be entitled to
receive additional interest payments equal to the related Carry-Forward Amount
for such Payment Date, to the extent of available funds. The "Bond Principal
Balance" of a Class A-1 Bond as of any date of determination is equal to the
initial principal balance thereof as of the Closing Date, reduced by the
aggregate of all amounts previously paid with respect to such Class A-1 Bond on
account of principal.
The principal of, and interest on, this Class A-1 Bond are due and
payable as described in the Indenture, 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
Class A-1 Bond shall be equal to this Class A-1 Bond's pro rata share of the
aggregate payments on all Class A-1 Bonds as described above, and shall be
applied as between interest and principal as provided in the Indenture.
Financial Security Assurance, Inc. (the "Bond Insurer"), in
consideration of the payment of the premium and subject to the terms of the
financial guaranty insurance policy (the "Bond Insurance Policy") issued
thereby, has unconditionally and irrevocably guaranteed the payment of the
Insured Payment. The Bond Insurance Policy will not cover any Prepayment
Interest Shortfalls, Relief Act Shortfalls or related Carry-Forward Amount.
All principal and interest accrued on the Class A-1 Bonds, if not
previously paid, will become finally due and payable at the related Final
Scheduled Payment Date.
The Servicer may repurchase the Mortgage Loans, which will result in
the a redemption of the Bonds in whole, but not in part, on any Payment Date on
or after the Payment Date on which the aggregate Principal Balance of the
Mortgage Loans in all four Groups is reduced to less than 10% of the sum of the
Principal Balance of the Initial Mortgage Loans as of the Cut-Off Date and the
Original Pre-Funded Amount.
The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate and payments under the Bond Insurance Policy will be the sole
source of payments on the Bonds, and each Holder hereof, by its acceptance of
this Bond, agrees that (i) such Bond will be limited in right of payment to
amounts available from the Trust Estate and the Bond Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Bond Administrator, the Indenture Trustee, the
Transferor, the Seller, the Servicer or any of their respective affiliates, or
to the assets of any of the foregoing entities, except the assets of the Issuer
pledged to secure the Bonds pursuant to the Indenture.
A-3
<PAGE>
Any installment of interest or principal, if any, payable on this
Class A-1 Bond that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, so long as this Class A-1 Bond is a Book-Entry
Bond registered in the name of the Depository or its nominee, be paid by wire
transfer to the Depository or its nominee, except for the final installment of
principal and interest payable with respect to this Class A-1 Bond, which shall
be payable as provided below; otherwise, if the Holder of this Class A-1 Bond
shall have so requested at least five Business Days prior to the related Record
Date and holds an aggregate initial Class A-1 Bond Principal Balance of at least
$5,000,000, such installment, other than the final installment of principal or
interest, shall be paid on such Payment Date to the Holder of record on such
Record Date, by wire transfer to an account specified in writing by such Holder
reasonably satisfactory to the Bond Administrator, and in all other cases, other
than the payment of the final installment of principal or interest, or if no
such instructions have been delivered to the Bond Administrator, by check to
such Bondholder mailed to such Holder's address as it appears in the Bond
Register in the amount required to be distributed to such Holder on such Payment
Date; PROVIDED, HOWEVER, that the Bond Administrator shall not pay to such
Holder any amount required to be withheld from a payment to such Holder by the
Code. The Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. All reductions in the principal amount of a Class
A-1 Bond (or one or more predecessor Class A-1 Bonds) effected by payments of
principal made on any Payment Date shall be binding upon all Holders of this
Class A-1 Bond and of any bond issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof, whether or not such payment is noted
on such Class A-1 Bond. The final payment of this Class A-1 Bond shall be
payable upon presentation and surrender thereof on or after the Payment Date
thereof at the Corporate Trust Office of the Bond Registrar, or the office or
agency of the Issuer maintained by it for such purpose pursuant to Section 3.02
of the Indenture.
Subject to the foregoing provisions, each Bond delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Bond, shall carry the rights to unpaid principal and interest that were
carried by such other Bond.
If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared to
be due and payable in the manner and with the effect provided in the Indenture.
If any such acceleration of maturity occurs prior to the payment of the entire
unpaid Bond Principal Balance of the Class A-1 Bonds, the amount payable to the
Holder of this Class A-1 Bond will be equal to the unpaid Bond Principal Balance
of this Class A-1 Bond, together with accrued and unpaid interest thereon as
described in the Indenture. The Indenture provides that, notwithstanding the
acceleration of the maturity of the Bonds, under certain circumstances specified
therein, all amounts collected as proceeds of the Trust Estate securing the
Bonds or otherwise shall continue to be applied to payments of principal of and
interest on the Bonds as if they had not been declared due and payable.
A-4
<PAGE>
The failure to pay any related Subordination Increase Amount or
Carry-Forward Amount at any time when funds are not available to make such
payment as provided in the Indenture shall not constitute an Event of Default
under the Indenture.
Pursuant to the Indenture, unless a Bond Insurer Default exists (i)
the Bond Insurer shall be deemed to be the holder of the Class A Bonds for
certain purposes specified in the Indenture (other than with respect to payment
on the Bonds), and will be entitled to exercise all rights of the Bondholders
thereunder, including the rights of Bondholders relating to the occurrence of,
and the remedies with respect to, an Event of Default, without the consent of
such Bondholders, and (ii) the Indenture Trustee may take actions which would
otherwise be at its option or within its discretion, including actions relating
to the occurrence of, and the remedies with respect to, an Event of Default,
only at the direction of the Bond Insurer.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-1 Bond may be registered on the
Bond Register of the Issuer. Upon surrender for registration of transfer of, or
presentation of a written instrument of transfer for, this Class A-1 Bond at the
Corporate Trust Office of the Bond Administrator, as Bond Registrar, accompanied
by proper instruments of assignment in form satisfactory to the Bond Registrar,
one or more new Class A-1 Bonds of any authorized denominations and of a like
aggregate initial Class A-1 Bond Principal Balance will be issued to the
designated transferee or transferees.
Prior to the due presentment for registration of transfer of this
Class A-1 Bond, the Issuer, the Bond Insurer, the Indenture Trustee, the Bond
Administrator and any agent of the Issuer, the Bond Insurer, the Indenture
Trustee or the Bond Administrator may treat the Person in whose name this Class
A-1 Bond is registered as the owner of such Class A-1 Bond (i) on the applicable
Record Date for the purpose of making payments and interest of such Class A-1
Bond, and (ii) on any other date for all other purposes whatsoever, as the owner
hereof, whether or not this Class A-1 Bond be overdue, and none of the Issuer,
the Bond Insurer, the Indenture Trustee, the Bond Administrator or any such
agent of the Issuer or the Bond Administrator 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Class A-1
Bond (or any one or more predecessor Class A-1 Bonds) shall bind the Holder of
every Class A-1 Bond 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 such Class A-1 Bond. The Indenture also permits the Issuer,
the Indenture Trustee and the Bond Administrator to amend or waive certain terms
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds issued thereunder.
A-5
<PAGE>
Initially, the Class A-1 Bonds will be represented by one bond
registered in the name of CEDE & Co. as nominee of DTC, acting in its capacity
as the Depository for the Bonds. The Class A-1 Bonds will be delivered in
denominations as provided in the Indenture and subject to certain limitations
therein set forth. The Class A-1 Bonds are exchangeable for a like aggregate
initial Class A-1 Bond Principal Balance of Class A-1 Bonds of different
authorized denominations, as requested by the Holder surrendering the same.
Unless the Certificate of Authentication hereon has been executed by
the Bond Registrar by manual signature, this Class A-1 Bond shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
Each Bondholder, by accepting a Bond, hereby covenants and agrees
that such Bondholder will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture or any of the Basic Documents.
So long as no Bond Insurer Default exists, the Bond Insurer shall at
all times be treated as if it were the exclusive Bondholder for the purposes of
all approvals, consents, waivers and the institution of any action and the
direction of all remedies, and the Indenture Trustee and the Bond Administrator
shall act in accordance with the directions of the Bond Insurer so long as it is
indemnified therefor to its reasonable satisfaction.
AS PROVIDED IN THE INDENTURE, THIS CLASS A-1 BOND AND THE INDENTURE
CREATING THIS CLASS A-1 BOND 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.
A-6
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: January 29, 1999
NOVASTAR MORTGAGE FUNDING TRUST, SERIES
1999-1
BY: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
in its capacity as Owner Trustee
By: _______________________________
Authorized Signatory
A-7
<PAGE>
BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Bonds referred to in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Registrar
By: _______________________________
Authorized Signatory
A-8
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of the Class A-1 Bond, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ____________________________ Custodian
(Cust) (Minor)
under Uniform Gifts to Minor Act
(State)
Additional abbreviations may also be used though not in the above
list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:
(Please print or typewrite name and address, including zip code, of assignee)
the within bond and all rights thereunder, hereby irrevocably constitution and
appointing attorney to transfer said Class A-1 Bond on the books of the Issuer,
with full power of substitution in the premises.
Dated:
Signature Guaranteed by
NOTICE: The signature(s) to this assignment must correspond with the name as it
appears upon the face of the within Class A-1 Bond in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.
A-9
<PAGE>
EXHIBIT B
FORM OF CLASS A-2 BONDS
UNLESS THIS CLASS A-2 BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE INDENTURE
TRUSTEE OR THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CLASS A-2 BOND 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 CLASS A-2 BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED
IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE BOND
INSURANCE POLICY AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS
NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS CLASS A-2 BOND.
PRINCIPAL OF THIS CLASS A-2 BOND IS PAYABLE OVER TIME AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS CLASS A-2 BOND AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
B-1
<PAGE>
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
HOME EQUITY LOAN ASSET-BACKED BONDS
CLASS A-2
AGGREGATE CLASS A-2 BOND PRINCIPAL
BALANCE: $20,000,000
INITIAL CLASS A-2 BOND PRINCIPAL
BALANCE OF THIS CLASS A-2 BOND: $20,000,000 CUSIP NO.______________
BOND NUMBER: __
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of Twenty Million Dollars
($20,000,000) in monthly installments on the twenty-fifth day of each month or,
if such day is not a Business Day, the next succeeding Business Day (each a
"Payment Date"), commencing in February 1999 and ending on or before the Payment
Date occurring in April, 2030 (the "Final Scheduled Payment Date") and to pay
interest on the Bond Principal Balance of this Class A-2 Bond outstanding from
time to time as provided below.
This Class A-2 Bond is one of a duly authorized issue of NovaStar
Mortgage Funding Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds (the
"Bonds"), issued under an Indenture, dated as of January 1, 1999 (the
"Indenture"), among the Issuer, First Union National Bank, as bond administrator
("Bond Administrator," which term includes any successor Bond Administrator
under the Indenture) and The Chase Manhattan Bank as indenture trustee (the
"Indenture Trustee", which term includes any successor Indenture Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Issuer, the Bond Administrator, the Indenture Trustee, and the Holders of
the Class A-2 Bonds and the terms upon which the Class A-2 Bonds are to be
authenticated and delivered. All terms used in this Class A-2 Bond which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
B-2
<PAGE>
On each Payment Date, Holders of Class A-2 Bonds will be entitled to
receive interest payments in an aggregate amount equal to the related Interest
Payment Amount for such Payment Date. Principal payments will be payable on the
Class A-2 Bonds, on each Payment Date in an aggregate amount equal to the
related Principal Payment Amount for such Payment Date. In addition, on each
Payment Date, Holders of Class A-2 Bonds in the aggregate will be entitled to
receive additional interest payments equal to the related Carry-Forward Amount
for such Payment Date to the extent of available funds. The "Bond Principal
Balance" of a Class A-2 Bond as of any date of determination is equal to the
initial principal balance thereof as of the Closing Date, reduced by the
aggregate of all amounts previously paid with respect to such Class A-2 Bond on
account of principal.
The principal of, and interest on, this Class A-2 Bond are due and
payable as described in the Indenture, 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
Class A-2 Bond shall be equal to this Class A-2 Bond's pro rata share of the
aggregate payments on all Class A-2 Bonds as described above, and shall be
applied as between interest and principal as provided in the Indenture.
Financial Security Assurance, Inc. (the "Bond Insurer"), in
consideration of the payment of the premium and subject to the terms of the
financial guaranty insurance policy (the "Bond Insurance Policy") issued
thereby, has unconditionally and irrevocably guaranteed the payment of the
Insured Payment. The Bond Insurance Policy will not cover any Prepayment
Interest Shortfalls, Relief Act Shortfalls or related Carry-Forward Amount.
All principal and interest accrued on the Class A-2 Bonds, if not
previously paid, will become finally due and payable at the related Final
Scheduled Payment Date.
The Servicer may repurchase the Mortgage Loans, which will result in
the a redemption of the Bonds in whole, but not in part, on any Payment Date on
or after the Payment Date on which the aggregate Principal Balance of the
Mortgage Loans in all four Groups is reduced to less than 10% of the sum of the
Principal Balance of the Initial Mortgage Loans as of the Cut-Off Date and the
original Pre-Funded Amount.
B-3
<PAGE>
The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate and payments under the Bond Insurance Policy will be the sole
source of payments on the Bonds, and each Holder hereof, by its acceptance of
this Bond, agrees that (i) such Bond will be limited in right of payment to
amounts available from the Trust Estate and the Bond Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Bond Administrator, the Indenture Trustee, the
Transferor, the Seller, the Servicer or any of their respective affiliates, or
to the assets of any of the foregoing entities, except the assets of the Issuer
pledged to secure the Bonds pursuant to the Indenture.
Any installment of interest or principal, if any, payable on this
Class A-2 Bond that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, so long as this Class A-2 Bond is a Book-Entry
Bond registered in the name of the Depository or its nominee, be paid by wire
transfer to the Depository or its nominee, except for the final installment of
principal and interest payable with respect to this Class A-2 Bond, which shall
be payable as provided below; otherwise, if the Holder of this Class A-2 Bond
shall have so requested at least five Business Days prior to the related Record
Date and holds an aggregate initial Class A-2 Bond Principal Balance of at least
$5,000,000, such installment, other than the final installment of principal or
interest, shall be paid on such Payment Date to the Holder of record on such
Record Date, by wire transfer to an account specified in writing by such Holder
reasonably satisfactory to the Bond Administrator, and in all other cases, other
than the payment of the final installment of principal or interest, or if no
such instructions have been delivered to the Bond Administrator, by check to
such Bondholder mailed to such Holder's address as it appears in the Bond
Register in the amount required to be distributed to such Holder on such Payment
Date; PROVIDED, HOWEVER, that the Bond Administrator shall not pay to such
Holder any amount required to be withheld from a payment to such Holder by the
Code. The Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. All reductions in the principal amount of a Class
A-2 Bond (or one or more predecessor Class A-2 Bonds) effected by payments of
principal made on any Payment Date shall be binding upon all Holders of this
Class A-2 Bond and of any bond issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof, whether or not such payment is noted
on such Class A-2 Bond. The final payment of this Class A-2 Bond shall be
payable upon presentation and surrender thereof on or after the Payment Date
thereof at the Corporate Trust Office of the Bond Registrar or the office or
agency of the Issuer maintained by it for such purpose pursuant to Section 3.02
of the Indenture.
B-4
<PAGE>
Subject to the foregoing provisions, each Bond delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Bond, shall carry the rights to unpaid principal and interest that were
carried by such other Bond.
If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared to
be due and payable in the manner and with the effect provided in the Indenture.
If any such acceleration of maturity occurs prior to the payment of the entire
unpaid Bond Principal Balance of the Class A-2 Bonds, the amount payable to the
Holder of this Class A-2 Bond will be equal to the unpaid Bond Principal Balance
of this Class A-2 Bond, together with accrued and unpaid interest thereon as
described in the Indenture. The Indenture provides that, notwithstanding the
acceleration of the maturity of the Bonds, under certain circumstances specified
therein, all amounts collected as proceeds of the Trust Estate securing the
Bonds or otherwise shall continue to be applied to payments of principal of and
interest on the Bonds as if they had not been declared due and payable.
The failure to pay any related Subordination Increase Amount or
Carry-Forward Amount at any time when funds are not available to make such
payment as provided in the Indenture shall not constitute an Event of Default
under the Indenture.
Pursuant to the Indenture, unless a Bond Insurer Default exists (i)
the Bond Insurer shall be deemed to be the holder of the Class A Bonds for
certain purposes specified in the Indenture (other than with respect to payment
on the Bonds), and will be entitled to exercise all rights of the Bondholders
thereunder, including the rights of Bondholders relating to the occurrence of,
and the remedies with respect to, an Event of Default, without the consent of
such Bondholders, and (ii) the Indenture Trustee may take actions which would
otherwise be at its option or within its discretion, including actions relating
to the occurrence of, and the remedies with respect to, an Event of Default,
only at the direction of the Bond Insurer.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-2 Bond may be registered on the
Bond Register of the Issuer. Upon surrender for registration of transfer of, or
presentation of a written instrument of transfer for, this Class A-2 Bond at the
Corporate Trust Office of the Bond Administrator, as Bond Registrar, accompanied
by proper instruments of assignment in form satisfactory to the Bond Registrar,
one or more new Class A-2 Bonds of any authorized denominations and of a like
aggregate initial Class A-2 Bond Principal Balance will be issued to the
designated transferee or transferees.
B-5
<PAGE>
Prior to the due presentment for registration of transfer of this
Class A-2 Bond, the Issuer, the Bond Insurer, the Indenture Trustee, the Bond
Administrator and any agent of the Issuer, the Indenture Trustee, the Bond
Insurer or the Bond Administrator may treat the Person in whose name this Class
A-2 Bond is registered as the owner of such Class A-2 Bond (i) on the applicable
Record Date for the purpose of making payments and interest of such Class A-2
Bond, and (ii) on any other date for all other purposes whatsoever, as the owner
hereof, whether or not this Class A-2 Bond be overdue, and none of the Issuer,
the Bond Insurer, the Bond Administrator, the Indenture Trustee or any such
agent of the Issuer, the Indenture Trustee or the Bond Administrator 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Class A-2
Bond (or any one or more predecessor Class A-2 Bonds) shall bind the Holder of
every Class A-2 Bond 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 such Class A-2 Bond. The Indenture also permits the Issuer,
the Indenture Trustee and the Bond Administrator to amend or waive certain terms
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds issued thereunder.
Initially, the Class A-2 Bonds will be represented by one bond
registered in the name of CEDE & Co. as nominee of DTC, acting in its capacity
as the Depository for the Bonds. The Class A-2 Bonds will be delivered in
denominations as provided in the Indenture and subject to certain limitations
therein set forth. The Class A-2 Bonds are exchangeable for a like aggregate
initial Class A-2 Bond Principal Balance of Class A-2 Bonds of different
authorized denominations, as requested by the Holder surrendering the same.
Unless the Certificate of Authentication hereon has been executed by
the Bond Registrar by manual signature, this Class A-2 Bond shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
B-6
<PAGE>
Each Bondholder, by accepting a Bond, hereby covenants and agrees
that such Bondholder will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture or any of the Basic Documents.
So long as no Bond Insurer Default exists, the Bond Insurer shall at
all times be treated as if it were the exclusive Bondholder for the purposes of
all approvals, consents, waivers and the institution of any action and the
direction of all remedies, and the Indenture Trustee and the Bond Administrator
shall act in accordance with the directions of the Bond Insurer so long as it is
indemnified therefor to its reasonable satisfaction.
AS PROVIDED IN THE INDENTURE, THIS CLASS A-2 BOND AND THE INDENTURE
CREATING THIS CLASS A-2 BOND 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.
B-7
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: January 29, 1999
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
BY: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
s
By: _______________________________
Authorized Signatory
B-8
<PAGE>
BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Bonds referred to in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Registrar
By: _______________________________
Authorized Signatory
B-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of the Class A-2 Bond, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- Custodian
(Cust) (Minor)
under Uniform Gifts to Minor Act
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:
(Please print or typewrite name and address, including zip code, of assignee)
the within bond and all rights thereunder, hereby irrevocably constitution and
appointing attorney to transfer said Class A-2 Bond on the books of the Issuer,
with full power of substitution in the premises.
Dated:
Signature Guaranteed by:
NOTICE: The signature(s) to this assignment must correspond with the name as it
appears upon the face of the within Class A-2 Bond in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.
B-10
<PAGE>
EXHIBIT C
FORM OF CLASS A-3 BONDS
UNLESS THIS CLASS A-3 BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE INDENTURE
TRUSTEE OR THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CLASS A-3 BOND 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 CLASS A-3 BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED
IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE BOND
INSURANCE POLICY AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS
NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS CLASS A-3 BOND.
PRINCIPAL OF THIS CLASS A-3 BOND IS PAYABLE OVER TIME AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS CLASS A-3 BOND AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
C-1
<PAGE>
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
HOME EQUITY LOAN ASSET-BACKED BONDS
CLASS A-3
AGGREGATE CLASS A-3 BOND PRINCIPAL
BALANCE: $45,000,000
INITIAL CLASS A-3 BOND PRINCIPAL
BALANCE OF THIS CLASS A-3 BOND: $45,000,000 CUSIP NO.____________
C-2
<PAGE>
BOND NUMBER: __
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of Forty-Five Million Dollars
($45,000,000) in monthly installments on the twenty-fifth day of each month or,
if such day is not a Business Day, the next succeeding Business Day (each a
"Payment Date"), commencing in February 1999 and ending on or before the Payment
Date occurring in April, 2030 (the "Final Scheduled Payment Date") and to pay
interest on the Bond Principal Balance of this Class A-3 Bond outstanding from
time to time as provided below.
This Class A-3 Bond is one of a duly authorized issue of NovaStar
Mortgage Funding Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds (the
"Bonds"), issued under an Indenture, dated as of January 1, 1999 (the
"Indenture"), among the Issuer and First Union National Bank, as bond
administrator ("Bond Administrator," which term includes any successor Bond
Administrator under the Indenture) and The Chase Manhattan Bank, as indenture
trustee (the "Indenture Trustee", which term includes any successor Indenture
Trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights
thereunder of the Issuer, the Indenture Trustee, and the Holders of the Class
A-3 Bonds and the terms upon which the Class A-3 Bonds are to be authenticated
and delivered. All terms used in this Class A-3 Bond which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
On each Payment Date, Holders of Class A-3 Bonds will be entitled to
receive interest payments in an aggregate amount equal to the related Interest
Payment Amount for such Payment Date. Principal payments will be payable on the
Class A-3 Bonds on each Payment Date in an aggregate amount equal to the related
Principal Payment Amount for such Payment Date. The "Bond Principal Balance" of
a Class A-3 Bond as of any date of determination is equal to the initial
principal balance thereof as of the Closing Date, reduced by the aggregate of
all amounts previously paid with respect to such Class A-3 Bond on account of
principal.
The principal of, and interest on, this Class A-3 Bond are due and
payable as described in the Indenture, 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
Class A-3 Bond shall be equal to this Class A-3 Bond's pro rata share of the
aggregate payments on all Class A-3 Bonds as described above, and shall be
applied as between interest and principal as provided in the Indenture.
C-3
<PAGE>
Financial Security Assurance, Inc. (the "Bond Insurer"), in
consideration of the payment of the premium and subject to the terms of the
financial guaranty insurance policy (the "Bond Insurance Policy") issued
thereby, has unconditionally and irrevocably guaranteed the payment of the
Insured Payment. The Bond Insurance Policy will not cover any Prepayment
Interest Shortfalls, Relief Act Shortfalls or related Carry-Forward Amount.
All principal and interest accrued on the Class A-3 Bonds, if not
previously paid, will become finally due and payable at the related Final
Scheduled Payment Date.
The Servicer may repurchase the Mortgage Loans, which will result in
the a redemption of the Bonds in whole, but not in part, on any Payment Date on
or after the Payment Date on which the aggregate Principal Balance of the
Mortgage Loans in all four Groups is reduced to less than 10% of the sum of the
original aggregate Principal Balance of the Initial Mortgage Loans as of the
Cut-Off Date and the Original Pre-Funding Amount.
The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate and payments under the Bond Insurance Policy will be the sole
source of payments on the Bonds, and each Holder hereof, by its acceptance of
this Bond, agrees that (i) such Bond will be limited in right of payment to
amounts available from the Trust Estate and the Bond Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Bond Administrator, the Indenture Trustee, the
Transferor, the Seller, the Servicer or any of their respective affiliates, or
to the assets of any of the foregoing entities, except the assets of the Issuer
pledged to secure the Bonds pursuant to the Indenture.
Any installment of interest or principal, if any, payable on this
Class A-3 Bond that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, so long as this Class A-3 Bond is a Book-Entry
Bond registered in the name of the Depository or its nominee, be paid by wire
transfer to the Depository or its nominee, except for the final installment of
principal and interest payable with respect to this Class A-3 Bond, which shall
be payable as provided below; otherwise, if the Holder of this Class A-3 Bond
shall have so requested at least five Business Days prior to the related Record
Date and holds an aggregate initial Class A-3 Bond Principal Balance of at least
$5,000,000, such installment, other than the final installment of principal or
interest, shall be paid on such Payment Date to the Holder of record on such
Record Date, by wire transfer to an account specified in writing by such Holder
reasonably satisfactory to the Bond Administrator, and in all other cases, other
than the payment of the final installment of principal or interest, or if no
such instructions have been delivered to the Bond Administrator, by check to
such Bondholder mailed to such Holder's address as it appears in the Bond
Register in the amount required to be distributed to such Holder on such Payment
Date; PROVIDED, HOWEVER, that the Bond Administrator shall not pay to such
Holder any amount required to be withheld from a payment to such Holder by the
Code. The Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. All reductions in the principal amount of a Class
A-3 Bond (or one or more predecessor Class A-3 Bonds) effected by payments of
principal made on any Payment Date shall be binding upon all Holders of this
Class A-3 Bond and of any bond issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof, whether or not such payment is noted
on such Class A-2 Bond. The final payment of this Class A-3 Bond shall be
payable upon presentation and surrender thereof on or after the Payment Date
thereof at the Corporate Trust Office of the Bond Registrar or the office or
agency of the Issuer maintained by it for such purpose pursuant to Section 3.02
of the Indenture.
C-4
<PAGE>
Subject to the foregoing provisions, each Bond delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Bond, shall carry the rights to unpaid principal and interest that were
carried by such other Bond.
If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared to
be due and payable in the manner and with the effect provided in the Indenture.
If any such acceleration of maturity occurs prior to the payment of the entire
unpaid Bond Principal Balance of the Class A-3 Bonds, the amount payable to the
Holder of this Class A-3 Bond will be equal to the unpaid Bond Principal Balance
of this Class A-3 Bond, together with accrued and unpaid interest thereon as
described in the Indenture. The Indenture provides that, notwithstanding the
acceleration of the maturity of the Bonds, under certain circumstances specified
therein, all amounts collected as proceeds of the Trust Estate securing the
Bonds or otherwise shall continue to be applied to payments of principal of and
interest on the Bonds as if they had not been declared due and payable.
The failure to pay any related Subordination Increase Amount or
Carry-Forward Amount at any time when funds are not available to make such
payment as provided in the Indenture shall not constitute an Event of Default
under the Indenture.
Pursuant to the Indenture, unless a Bond Insurer Default exists (i)
the Bond Insurer shall be deemed to be the holder of the Class A Bonds for
certain purposes specified in the Indenture (other than with respect to payment
on the Bonds), and will be entitled to exercise all rights of the Bondholders
thereunder, including the rights of Bondholders relating to the occurrence of,
and the remedies with respect to, an Event of Default, without the consent of
such Bondholders, and (ii) the Indenture Trustee may take actions which would
otherwise be at its option or within its discretion, including actions relating
to the occurrence of, and the remedies with respect to, an Event of Default,
only at the direction of the Bond Insurer.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-3 Bond may be registered on the
Bond Register of the Issuer. Upon surrender for registration of transfer of, or
presentation of a written instrument of transfer for, this Class A-3 Bond at the
Corporate Trust Office of the Bond Administrator, as Bond Registrar, accompanied
by proper instruments of assignment in form satisfactory to the Bond Registrar,
one or more new Class A-3 Bonds of any authorized denominations and of a like
aggregate initial Class A-3 Bond Principal Balance will be issued to the
designated transferee or transferees.
C-5
<PAGE>
Prior to the due presentment for registration of transfer of this
Class A-3 Bond, the Issuer, the Bond Insurer, the Indenture Trustee, the Bond
Administrator and any agent of the Issuer, the Bond Insurer, the Indenture
Trustee or the Bond Administrator may treat the Person in whose name this Class
A-3 Bond is registered as the owner of such Class A-3 Bond (i) on the applicable
Record Date for the purpose of making payments and interest of such Class A-3
Bond, and (ii) on any other date for all other purposes whatsoever, as the owner
hereof, whether or not this Class A-3 Bond be overdue, and none of the Issuer,
the Bond Insurer, the Bond Administrator, the Indenture Trustee or any such
agent of the Issuer, the Indenture Trustee or the Bond Administrator 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Class A-3
Bond (or any one or more predecessor Class A-3 Bonds) shall bind the Holder of
every Class A-3 Bond 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 such Class A-3 Bond. The Indenture also permits the Issuer,
the Indenture Trustee and the Bond Administrator to amend or waive certain terms
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds issued thereunder.
Initially, the Class A-3 Bonds will be represented by one bond
registered in the name of CEDE & Co. as nominee of DTC, acting in its capacity
as the Depository for the Bonds. The Class A-3 Bonds will be delivered in
denominations as provided in the Indenture and subject to certain limitations
therein set forth. The Class A-3 Bonds are exchangeable for a like aggregate
initial Bond Principal Balance of Class A-3 Bonds of different authorized
denominations, as requested by the Holder surrendering the same.
Unless the Certificate of Authentication hereon has been executed by
the Bond Registrar by manual signature, this Class A-3 Bond shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
C-6
<PAGE>
Each Bondholder, by accepting a Bond, hereby covenants and agrees
that such Bondholder will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture or any of the Basic Documents.
So long as no Bond Insurer Default exists, the Bond Insurer shall at
all times be treated as if it were the exclusive Bondholder for the purposes of
all approvals, consents, waivers and the institution of any action and the
direction of all remedies, and the Indenture Trustee and the Bond Administrator
shall act in accordance with the directions of the Bond Insurer so long as it is
indemnified therefor to its reasonable satisfaction.
AS PROVIDED IN THE INDENTURE, THIS CLASS A-3 BOND AND THE INDENTURE
CREATING THIS CLASS A-3 BOND 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.
C-7
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: January 29, 1999
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
BY: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By: _______________________________
Authorized Signatory
C-8
<PAGE>
BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Bonds referred to in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Registrar
By: _______________________________
Authorized Signatory
C-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of the Class A-3 Bond, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- Custodian
(Cust) (Minor)
under Uniform Gifts to Minor Act
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:
(Please print or typewrite name and address, including zip code, of assignee)
the within bond and all rights thereunder, hereby irrevocably constitution and
appointing _______________ attorney to transfer said Class A-3 Bond on the books
of the Issuer, with full power of substitution in the premises.
Dated:
Signature Guaranteed by:
NOTICE: The signature(s) to this assignment must correspond with the name as it
appears upon the face of the within Class A-3 Bond in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.
C-10
<PAGE>
EXHIBIT D
FORM OF CLASS A-4 BONDS
UNLESS THIS CLASS A-4 BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE INDENTURE
TRUSTEE OR THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CLASS A-4 BOND 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 CLASS A-4 BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED
IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE BOND
INSURANCE POLICY AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS
NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS CLASS A-4 BOND.
PRINCIPAL OF THIS CLASS A-4 BOND IS PAYABLE OVER TIME AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS CLASS A-4 BOND AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
D-1
<PAGE>
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
HOME EQUITY LOAN ASSET-BACKED BONDS
CLASS A-4
AGGREGATE CLASS A-4 BOND PRINCIPAL
BALANCE: $20,000,000
INITIAL CLASS A-4 BOND PRINCIPAL
BALANCE OF THIS CLASS A-4 BOND: $20,000,000 CUSIP NO.___________
BOND NUMBER: __
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of Twenty Million Dollars
($20,000,000) in monthly installments on the twenty-fifth day of each month or,
if such day is not a Business Day, the next succeeding Business Day (each a
"Payment Date"), commencing in February 1999 and ending on or before the Payment
Date occurring in April, 2030 (the "Final Scheduled Payment Date") and to pay
interest on the Class A-4 Bond Principal Balance of this Class A-4 Bond
outstanding from time to time as provided below.
This Class A-4 Bond is one of a duly authorized issue of NovaStar
Mortgage Funding Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds (the
"Bonds"), issued under an Indenture, dated as of January 1, 1999 (the
"Indenture"), among the Issuer, First Union National Bank, as bond administrator
(the "Bond Administrator," which term includes any successor Bond Administrator
under the Indenture) and The Chase Manhattan Bank, as indenture trustee (the
"Indenture Trustee," which term includes any successor Indenture Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Issuer, the Indenture Trustee, and the Holders of the Class A-4 Bonds and
the terms upon which the Class A-4 Bonds are to be authenticated and delivered.
All terms used in this Class A-4 Bond which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
On each Payment Date, Holders of Class A-4 Bonds will be entitled to
receive interest payments in an aggregate amount equal to the related Interest
Payment Amount for such Payment Date. Principal payments will be payable on the
Class A-4 Bonds on each Payment Date in an aggregate amount equal to the related
Principal Payment Amount for such Payment Date. The "Bond Principal Balance" of
a Class A-4 Bond as of any date of determination is equal to the initial
principal balance thereof as of the Closing Date, reduced by the aggregate of
all amounts previously paid with respect to such Class A-4 Bond on account of
principal.
D-2
<PAGE>
The principal of, and interest on, this Class A-4 Bond are due and
payable as described in the Indenture, 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
Class A-4 Bond shall be equal to this Class A-4 Bond's pro rata share of the
aggregate payments on all Class A-4 Bonds as described above, and shall be
applied as between interest and principal as provided in the Indenture.
Financial Security Assurance, Inc. (the "Bond Insurer"), in
consideration of the payment of the premium and subject to the terms of the
financial guaranty insurance policy (the "Bond Insurance Policy") issued
thereby, has unconditionally and irrevocably guaranteed the payment of the
Insured Payment. The Bond Insurance Policy will not cover any Prepayment
Interest Shortfalls, Relief Act Shortfalls or related Carry-Forward Amount.
All principal and interest accrued on the Class A-4 Bonds, if not
previously paid, will become finally due and payable at the related Final
Scheduled Payment Date.
The Servicer may repurchase the Mortgage Loans, which will result in
the a redemption of the Bonds in whole, but not in part, on any Payment Date on
or after the Payment Date on which the aggregate Principal Balance of the
Mortgage Loans in all four Groups is reduced to less than 10% of the sum of the
Principal Balance of the Initial Mortgage Loans as of the Cut-Off Date and the
Original Pre-Funded Amount.
The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate and payments under the Bond Insurance Policy will be the sole
source of payments on the Bonds, and each Holder hereof, by its acceptance of
this Bond, agrees that (i) such Bond will be limited in right of payment to
amounts available from the Trust Estate and the Bond Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Bond Administrator, the Indenture Trustee, the
Transferor, the Seller, the Servicer or any of their respective affiliates, or
to the assets of any of the foregoing entities, except the assets of the Issuer
pledged to secure the Bonds pursuant to the Indenture.
D-3
<PAGE>
Any installment of interest or principal, if any, payable on this
Class A-4 Bond that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, so long as this Class A-4 Bond is a Book-Entry
Bond registered in the name of the Depository or its nominee, be paid by wire
transfer to the Depository or its nominee, except for the final installment of
principal and interest payable with respect to this Class A-4 Bond, which shall
be payable as provided below; otherwise, if the Holder of this Class A-4 Bond
shall have so requested at least five Business Days prior to the related Record
Date and holds an aggregate initial Class A-4 Bond Principal Balance of at least
$5,000,000, such installment, other than the final installment of principal or
interest, shall be paid on such Payment Date to the Holder of record on such
Record Date, by wire transfer to an account specified in writing by such Holder
reasonably satisfactory to the Bond Administrator, and in all other cases, other
than the payment of the final installment of principal or interest, or if no
such instructions have been delivered to the Bond Administrator, by check to
such Bondholder mailed to such Holder's address as it appears in the Bond
Register in the amount required to be distributed to such Holder on such Payment
Date; PROVIDED, HOWEVER, that the Bond Administrator shall not pay to such
Holder any amount required to be withheld from a payment to such Holder by the
Code. The Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. All reductions in the principal amount of a Class
A-4 Bond (or one or more predecessor Class A-4 Bonds) effected by payments of
principal made on any Payment Date shall be binding upon all Holders of this
Class A-4 Bond and of any bond issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof, whether or not such payment is noted
on such Class A-4 Bond. The final payment of this Class A-4 Bond shall be
payable upon presentation and surrender thereof on or after the Payment Date
thereof at the Corporate Trust Office of the Bond Registrar or the office or
agency of the Issuer maintained by it for such purpose pursuant to Section 3.02
of the Indenture.
Subject to the foregoing provisions, each Bond delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Bond, shall carry the rights to unpaid principal and interest that were
carried by such other Bond.
If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared to
be due and payable in the manner and with the effect provided in the Indenture.
If any such acceleration of maturity occurs prior to the payment of the entire
unpaid Bond Principal Balance of the Class A-4 Bonds, the amount payable to the
Holder of this Class A-4 Bond will be equal to the unpaid Bond Principal Balance
of this Class A-4 Bond, together with accrued and unpaid interest thereon as
described in the Indenture. The Indenture provides that, notwithstanding the
acceleration of the maturity of the Bonds, under certain circumstances specified
therein, all amounts collected as proceeds of the Trust Estate securing the
Bonds or otherwise shall continue to be applied to payments of principal of and
interest on the Bonds as if they had not been declared due and payable.
D-4
<PAGE>
The failure to pay any related Subordination Increase Amount or
Carry-Forward Amount at any time when funds are not available to make such
payment as provided in the Indenture shall not constitute an Event of Default
under the Indenture.
Pursuant to the Indenture, unless a Bond Insurer Default exists (i)
the Bond Insurer shall be deemed to be the holder of the Class A Bonds for
certain purposes specified in the Indenture (other than with respect to payment
on the Bonds), and will be entitled to exercise all rights of the Bondholders
thereunder, including the rights of Bondholders relating to the occurrence of,
and the remedies with respect to, an Event of Default, without the consent of
such Bondholders, and (ii) the Indenture Trustee may take actions which would
otherwise be at its option or within its discretion, including actions relating
to the occurrence of, and the remedies with respect to, an Event of Default,
only at the direction of the Bond Insurer.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-4 Bond may be registered on the
Bond Register of the Issuer. Upon surrender for registration of transfer of, or
presentation of a written instrument of transfer for, this Class A-4 Bond at the
Corporate Trust Office of the Bond Administrator as Bond Registrar, accompanied
by proper instruments of assignment in form satisfactory to the Bond Registrar,
one or more new Class A-4 Bonds of any authorized denominations and of a like
aggregate initial Class A-4 Bond Principal Balance will be issued to the
designated transferee or transferees.
Prior to the due presentment for registration of transfer of this
Class A-4 Bond, the Issuer, the Bond Insurer, the Indenture Trustee, the Bond
Administrator and any agent of the Issuer, the Bond Insurer, the Indenture
Trustee or the Bond Administrator may treat the Person in whose name this Class
A-4 Bond is registered as the owner of such Class A-4 Bond (i) on the applicable
Record Date for the purpose of making payments and interest of such Class A-4
Bond, and (ii) on any other date for all other purposes whatsoever, as the owner
hereof, whether or not this Class A-4 Bond be overdue, and none of the Issuer,
the Bond Insurer, the Bond Administrator, the Indenture Trustee or any such
agent of the Issuer, the Indenture Trustee or the Bond Administrator 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Class A-4
Bond (or any one or more predecessor Class A-4 Bonds) shall bind the Holder of
every Class A-4 Bond 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 such Class A-4 Bond. The Indenture also permits the Issuer,
the Indenture Trustee and the Bond Administrator to amend or waive certain terms
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds issued thereunder.
D-5
<PAGE>
Initially, the Class A-4 Bonds will be represented by one bond
registered in the name of CEDE & Co. as nominee of DTC, acting in its capacity
as the Depository for the Bonds. The Class A-4 Bonds will be delivered in
denominations as provided in the Indenture and subject to certain limitations
therein set forth. The Class A-4 Bonds are exchangeable for a like aggregate
initial Bond Principal Balance of Class A-4 Bonds of different authorized
denominations, as requested by the Holder surrendering the same.
Unless the Certificate of Authentication hereon has been executed by
the Bond Registrar by manual signature, this Class A-4 Bond shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
Each Bondholder, by accepting a Bond, hereby covenants and agrees
that such Bondholder will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture or any of the Basic Documents.
So long as no Bond Insurer Default exists, the Bond Insurer shall at
all times be treated as if it were the exclusive Bondholder for the purposes of
all approvals, consents, waivers and the institution of any action and the
direction of all remedies, and the Indenture Trustee and the Bond Administrator
shall act in accordance with the directions of the Bond Insurer so long as it is
indemnified therefor to its reasonable satisfaction.
AS PROVIDED IN THE INDENTURE, THIS CLASS A-4 BOND AND THE INDENTURE
CREATING THIS CLASS A-4 BOND 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.
D-6
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: January 29, 1999
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
BY: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By: _______________________________
Authorized Signatory
D-7
<PAGE>
BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Bonds referred to in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Registrar
By: _______________________________
Authorized Signatory
D-8
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of the Class A-4 Bond, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- Custodian
(Cust) (Minor)
under Uniform Gifts to Minor Act
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:
(Please print or typewrite name and address, including zip code, of assignee)
the within bond and all rights thereunder, hereby irrevocably constitution and
appointing _______________ attorney to transfer said Class A-4 Bond on the books
of the Issuer, with full power of substitution in the premises.
Dated:
Signature Guaranteed by:
NOTICE: The signature(s) to this assignment must correspond with the name as it
appears upon the face of the within Class A-4 Bond in every particular, without
alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.
D-9
<PAGE>
EXHIBIT E
FORM OF CLASS B BONDS
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS BOND NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH BOND ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (B) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT SUBJECT, IN THE CASE OF CLAUSES (B) OR (C)
ABOVE, TO COMPLIANCE BY THE HOLDER AND THE TRANSFEREE WITH THE PROVISIONS OF THE
INDENTURE APPLICABLE TO SUCH TRANSFER. NO RESALE OR OTHER TRANSFER OF THIS BOND
MAY BE MADE TO A NONRESIDENT ALIEN INDIVIDUAL, FOREIGN CORPORATION OR OTHER
NON-UNITED STATES PERSON.
THE PRINCIPAL OF THIS BOND IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING BOND PRINCIPAL BALANCE OF THIS
BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE BOND
ADMINISTRATOR, ON BEHALF OF THE INDENTURE TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
E-1
<PAGE>
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
HOME EQUITY LOAN ASSET-BACKED BONDS
CLASS B
AGGREGATE CLASS B BOND PRINCIPAL
BALANCE: $4,687,378.15
INITIAL CLASS B BOND PRINCIPAL
BALANCE OF THIS CLASS B BOND: $____________
BOND NUMBER: __
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to
_______________or registered assigns, the principal sum of Four Million Six
Hundred Eighty Seven Thousand Three Hundred and Seventy Eight Dollars and
Fifteen Cents ($4,687,378.15) in monthly installments on the twenty-fifth day of
each month or, if such day is not a Business Day, the next succeeding Business
Day (each a "Payment Date"), commencing in February 1999 and ending on or before
the Payment Date occurring in April, 2030 (the "Final Scheduled Payment Date")
and to pay interest on the Bond Principal Balance of this Class B Bond
outstanding from time to time as provided below.
This Class B Bond is one of a duly authorized issue of NovaStar
Mortgage Funding Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds (the
"Bonds"), issued under an Indenture, dated as of January 1, 1999 (the
"Indenture"), among the Issuer, First Union National Bank, as bond administrator
(the "Bond Administrator," which term includes any successor Bond Administrator
under the Indenture) and The Chase Manhattan Bank, as indenture trustee (the
"Indenture Trustee," which term includes any successor Indenture Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Issuer, the Bond Administrator, the Indenture Trustee, and the Holders of
the Class B Bonds and the terms upon which the Class B Bonds are to be
authenticated and delivered. All terms used in this Class B Bond which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
E-2
<PAGE>
On each Payment Date, Holders of Class B Bonds will be entitled to
receive interest payments in an aggregate amount equal to the related Interest
Payment Amount for such Payment Date. Principal payments will be payable on the
Class B Bonds on each Payment Date in an aggregate amount equal to the related
Principal Payment Amount for such Payment Date. The "Bond Principal Balance" of
a Class B Bond as of any date of determination is equal to the initial principal
balance thereof as of the Closing Date, reduced by the aggregate of all amounts
previously paid with respect to such Class B Bond on account of principal.
The principal of, and interest on, this Class B Bond are due and
payable as described in the Indenture, 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
Class B Bond shall be equal to this Class B Bond's pro rata share of the
aggregate payments on all Class B Bonds as described above, and shall be applied
as between interest and principal as provided in the Indenture.
There is no Bond Insurer with respect to the Class B Bonds.
All principal and interest accrued on the Class B Bonds, if not
previously paid, will become finally due and payable at the Final Scheduled
Payment Date.
The Servicer may repurchase the Mortgage Loans, which will result in
the a redemption of the Bonds in whole, but not in part, on any Payment Date on
or after the Payment Date on which the aggregate Principal Balance of the
Mortgage Loans in all four Groups is reduced to less than 10% of the original
aggregate Principal Balance thereof.
The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate will be the sole source of payments on the Bonds, and each Holder
hereof, by its acceptance of this Bond, agrees that (i) such Bond will be
limited in right of payment to amounts available from the Trust Estate as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Bond Administrator, the Indenture Trustee, the
Transferor, the Seller, the Servicer or any of their respective affiliates, or
to the assets of any of the foregoing entities, except the assets of the Issuer
pledged to secure the Bonds pursuant to the Indenture.
E-3
<PAGE>
Any installment of interest or principal, if any, payable on this
Class B Bond that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall be made by the Bond Administrator, on behalf of
the Indenture Trustee, except for the final installment of principal and
interest payable with respect to the Class B Bonds, by check mailed, or upon
request of the Holder hereof, by wire transfer of immediately available funds,
to the Holder entitled thereto, as specified by such Holder in accordance with
the terms of the Indenture or by such other means as the Person entitled thereto
and the Bond Administrator, on behalf of the Indenture Trustee, shall agree,
without the presentation or surrender of this Class B Note or the making of any
notation thereon. The Bond Administrator, on behalf of the Indenture Trustee,
may deduct a reasonable wire transfer fee from any payment made by wire
transfer. All reductions in the principal amount of a Class B Bond (or one or
more predecessor Class B Bonds) effected by payments of principal made on any
Payment Date shall be binding upon all Holders of this Class B Bond and of any
bond issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Class B Bond. The
final payment of this Class B Bond shall be payable upon presentation and
surrender thereof on or after the Payment Date thereof at the Corporate Trust
Office of the Bond Administrator or the office or agency of the Issuer
maintained by it for such purpose pursuant to Section 3.02 of the Indenture.
Subject to the foregoing provisions, each Bond delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Bond, shall carry the rights to unpaid principal and interest that were
carried by such other Bond.
If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared to
be due and payable in the manner and with the effect provided in the Indenture.
If any such acceleration of maturity occurs prior to the payment of the entire
unpaid Bond Principal Balance of the Class B Bonds, the amount payable to the
Holder of this Class B Bond will be equal to the unpaid Class B Bond Principal
Balance of this Class B Bond, together with accrued and unpaid interest thereon
as described in the Indenture. The Indenture provides that, notwithstanding the
acceleration of the maturity of the Bonds, under certain circumstances specified
therein, all amounts collected as proceeds of the Trust Estate securing the
Bonds or otherwise shall continue to be applied to payments of principal of and
interest on the Bonds as if they had not been declared due and payable.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class B Bond may be registered on the
Bond Register of the Issuer. Upon surrender for registration of transfer of, or
presentation of a written instrument of transfer for, this Class B Bond at the
Corporate Trust Office of the Bond Administrator, accompanied by proper
instruments of assignment in form satisfactory to the Bond Administrator, on
behalf of the Indenture Trustee, one or more new Class B Bonds of any authorized
denominations and of a like aggregate initial Class B Bond Principal Balance
will be issued to the designated transferee or transferees.
E-4
<PAGE>
The transfer of this Class B Bond shall not be registered unless the
transferee has executed and delivered to the Bond Administrator, on behalf of
the Indenture Trustee, a certification to the effect that 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.
Prior to the due presentment for registration of transfer of this
Class B Bond, the Issuer, the Bond Insurer, the Indenture Trustee, the Bond
Administrator and any agent of the Issuer, the Bond Insurer, the Indenture
Trustee or the Bond Administrator may treat the Person in whose name this Class
B Bond is registered as the owner of such Class B Bond (i) on the applicable
Record Date for the purpose of making payments and interest of such Class B
Bond, and (ii) on any other date for all other purposes whatsoever, as the owner
hereof, whether or not this Class B Bond be overdue, and none of the Issuer, the
Bond Insurer, the Bond Administrator, the Indenture Trustee or any such agent of
the Issuer, the Indenture Trustee or the Bond Administrator 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Class B
Bond (or any one or more predecessor Class B Bonds) shall bind the Holder of
every Class B Bond 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 such Class B Bond. The Indenture also permits the Issuer,
the Indenture Trustee and the Bond Administrator to amend or waive certain terms
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds issued thereunder.
The Class B Bonds will be delivered in denominations as provided in
the Indenture and subject to certain limitations therein set forth. The Class B
Bonds are exchangeable for a like aggregate initial Bond Principal Balance of
Class B Bonds of different authorized denominations, as requested by the Holder
surrendering the same.
E-5
<PAGE>
Unless the Certificate of Authentication hereon has been executed by
the Indenture Trustee by manual signature, this Class B Bond shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
Each Bondholder, by accepting a Bond, hereby covenants and agrees
that such Bondholder will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture or any of the Basic Documents.
AS PROVIDED IN THE INDENTURE, THIS CLASS B BOND AND THE INDENTURE
CREATING THIS CLASS B BOND 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.
E-6
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: January 29, 1999
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
BY: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By: _______________________________
Authorized Signatory
E-7
<PAGE>
BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Bonds referred to in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Registrar
By: _______________________________
Authorized Signatory
E-8
<PAGE>
EXHIBIT F
FORM OF CLASS IO BONDS
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS BOND NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH BOND ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (B) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT SUBJECT, IN THE CASE OF CLAUSES (B) OR (C)
ABOVE, TO COMPLIANCE BY THE HOLDER AND THE TRANSFEREE WITH THE PROVISIONS OF THE
INDENTURE APPLICABLE TO SUCH TRANSFER. NO RESALE OR OTHER TRANSFER OF THIS BOND
MAY BE MADE TO A NONRESIDENT ALIEN INDIVIDUAL, FOREIGN CORPORATION OR OTHER
NON-UNITED STATES PERSON.
F-1
<PAGE>
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
HOME EQUITY LOAN ASSET-BACKED BONDS
CLASS IO
AGGREGATE CLASS IO BOND NOTIONAL
BALANCE: $164,687,378.15
INITIAL CLASS IO BOND NOTIONAL
BALANCE OF THIS CLASS IO BOND: $__
BOND NUMBER: I__
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to
_______________ or registered assigns, the Class IO Payment Amount on the
twenty-fifth day of each month or, if such day is not a Business Day, the next
succeeding Business Day (each a "Payment Date"), commencing in February 1999 and
ending on or before the Payment Date occurring in April, 2030 (the "Final
Scheduled Payment Date").
This Class IO Bond is one of a duly authorized issue of NovaStar
Mortgage Funding Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds (the
"Bonds"), issued under an Indenture, dated as of January 1, 1999 (the
"Indenture"), among the Issuer, First Union National Bank, as bond administrator
(the "Bond Administrator," which term includes any successor Bond Administrator
under the Indenture) and The Chase Manhattan Bank, as indenture trustee (the
"Indenture Trustee," which term includes any successor Indenture Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Issuer, the Bond Administrator, the Indenture Trustee, and the Holders of
the Class IO Bonds and the terms upon which the Class IO Bonds are to be
authenticated and delivered. All terms used in this Class IO Bond which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
On each Payment Date, Holders of Class IO Bonds will be entitled to
receive payments in an aggregate amount equal to the Class IO Payment Amount for
such Payment Date. Payments will be payable on the Class IO Bonds, in accordance
with the outstanding Class IO Bond Notional Balance on each Payment Date.
F-2
<PAGE>
Distributions on this Class IO Bond are due and payable as described
in the Indenture, 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 Class IO Bond shall be equal to
this Class IO Bond's pro rata share of the aggregate payments on all Class IO
Bonds as described above, and shall be applied as between interest and principal
as provided in the Indenture.
There is no Bond Insurer with respect to the Class IO Bonds.
The Servicer may repurchase the Mortgage Loans, which will result in
the a redemption of the Bonds in whole, but not in part, on any Payment Date on
or after the Payment Date on which the aggregate Principal Balance of the
Mortgage Loans in all four Groups is reduced to less than 10% of the sum of the
Principal balance of the Initial Mortgage Loans as of the Cut-Off Date and the
Original Pre-Funded Amount.
The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate will be the sole source of payments on the Bonds, and each Holder
hereof, by its acceptance of this Bond, agrees that (i) such Bond will be
limited in right of payment to amounts available from the Trust Estate as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Bond Administrator, the Indenture Trustee, the
Transferor, the Seller, the Servicer or any of their respective affiliates, or
to the assets of any of the foregoing entities, except the assets of the Issuer
pledged to secure the Bonds pursuant to the Indenture.
Any distribution, payable on this Class IO Bond that is punctually
paid or duly provided for by the Issuer on the applicable Payment Date shall be
made by the Bond Administrator, on behalf of the Indenture Trustee, except for
the final distribution with respect to the Class IO Bonds, by check mailed, or
upon request of the Holder hereof, by wire transfer of immediately available
funds, to the Holder entitled thereto, as specified by such Holder in accordance
with the terms of the Indenture or by such other means as the Person entitled
thereto and the Bond Administrator, on behalf of the Indenture Trustee, shall
agree, without the presentation or surrender of this Class IO Note or the making
of any notation thereon. The Bond Administrator, on behalf of the Indenture
Trustee, may deduct a reasonable wire transfer fee from any payment made by wire
transfer. All reductions in the notional amount of a Class IO Bond (or one or
more predecessor Class IO Bonds) shall be binding upon all Holders of this Class
IO Bond and of any bond issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, whether or not such reduction is noted on
such Class IO Bond. The final payment of this Class IO Bond shall be payable
upon presentation and surrender thereof on or after the Payment Date thereof at
the Corporate Trust Office of the Bond Administrator or the office or agency of
the Issuer maintained by it for such purpose pursuant to Section 3.02 of the
Indenture.
F-3
<PAGE>
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class IO Bond may be registered on the
Bond Register of the Issuer. Upon surrender for registration of transfer of, or
presentation of a written instrument of transfer for, this Class IO Bond at the
Corporate Trust Office of the Bond Administrator, accompanied by proper
instruments of assignment in form satisfactory to the Bond Administrator, on
behalf of the Indenture Trustee, one or more new Class IO Bonds of any
authorized denominations and of a like aggregate initial Class IO Bond Principal
Balance will be issued to the designated transferee or transferees.
The transfer of this Class IO Bond shall not be registered unless
the transferee has executed and delivered to the Bond Administrator, on behalf
of the Indenture Trustee, a certification to the effect that 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.
Prior to the due presentment for registration of transfer of this
Class IO Bond, the Issuer, the Bond Insurer, the Indenture Trustee, the Bond
Administrator and any agent of the Issuer, the Bond Insurer, the Indenture
Trustee or the Bond Administrator may treat the Person in whose name this Class
IO Bond is registered as the owner of such Class IO Bond (i) on the applicable
Record Date for the purpose of making payments and interest of such Class IO
Bond, and (ii) on any other date for all other purposes whatsoever, as the owner
hereof, whether or not this Class IO Bond be overdue, and none of the Issuer,
the Bond Insurer, the Bond Administrator, the Indenture Trustee or any such
agent of the Issuer, the Indenture Trustee or the Bond Administrator 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Class IO
Bond (or any one or more predecessor Class IO Bonds) shall bind the Holder of
every Class IO Bond 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 such Class IO Bond. The Indenture also permits the Issuer,
the Indenture Trustee and the Bond Administrator to amend or waive certain terms
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds issued thereunder.
F-4
<PAGE>
The Class IO Bonds will be delivered in denominations as provided in
the Indenture and subject to certain limitations therein set forth. The Class IO
Bonds are exchangeable for a like aggregate initial Class IO Bond Notional
Balance of Class IO Bonds of different authorized denominations, as requested by
the Holder surrendering the same.
Unless the Certificate of Authentication hereon has been executed by
the Indenture Trustee by manual signature, this Class IO Bond shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
Each Bondholder, by accepting a Bond, hereby covenants and agrees
that such Bondholder will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture or any of the Basic Documents.
AS PROVIDED IN THE INDENTURE, THIS CLASS IO BOND AND THE INDENTURE
CREATING THIS CLASS IO BOND 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.
F-5
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: January 29, 1999
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
BY: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By: _______________________________
Authorized Signatory
F-6
<PAGE>
BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Class IO Bonds referred to in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Registrar
By: _______________________________
Authorized Signatory
F-7
<PAGE>
EXHIBIT G
FORM OF TRUSTEE INITIAL CERTIFICATION
[Closing Date]
[Seller]
[Servicer]
[Bond Insurer]
[Transferor
[Depositor]
- - -------------------------
Re: Indenture, dated as of January 1, 1999 (the "Indenture"), among
NovaStar Mortgage Funding Trust, Series 1999-1 (the "Issuer"), First
Union National Bank (the "Bond Administrator") and The Chase Bank of
Manhattan (the "Indenture Trustee") -- NovaStar Mortgage Funding
Trust, Series 1999-1 Home Equity Loan Asset-Backed Bonds.
Gentlemen:
In accordance with Section 2.03 of the above-captioned Indenture,
and Section 2.1(b) of the Mortgage Loan Purchase Agreement, dated as of January
1, 1999, among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
II, the Issuer, the Bond Administrator and the Indenture Trustee (the "Mortgage
Loan Purchase Agreement" and, together with the Indenture, the "Agreements"),
the undersigned, as Bond Administrator, on behalf of the Indenture Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or listed on the attachment
hereto) it has reviewed the Mortgage File and the Mortgage Loan Schedule and has
determined that: (i) all documents required to be included in the Mortgage File
are in its possession; (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan; and (iii) based on
examination by it, and only as to such documents, the information set forth in
items (i) - (vii) and (xiv) of the definition or description of "Mortgage Loan
Schedule" is correct.
G-1
<PAGE>
The Bond Administrator, on behalf of the Indenture Trustee, has made
no independent examination of any documents contained in each Mortgage File
beyond the review specifically required in the above-referenced Agreements. The
Bond Administrator, on behalf of the Indenture Trustee, makes no representation
that any documents specified in clause (vi) of Section 2.1(b) of the Mortgage
Loan Purchase Agreement should be included in any Mortgage File. The Bond
Administrator, on behalf of the Indenture Trustee, makes no representations as
to and shall not be responsible to verify: (i) the validity, legality,
sufficiency, enforceability, due authorization, recordability or genuineness of
any of the documents contained in each Mortgage File of any of the Mortgage
Loans identified on the Mortgage Loan Schedule, (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan, or (iii)
the existence of any assumption, modification, written assurance or substitution
agreement with respect to any Mortgage File if no such documents appear in the
Mortgage File delivered to the Bond Administrator, on behalf of the Indenture
Trustee.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Administrator
By: ___________________________________
Name: _________________________________
Title: ________________________________
G-2
<PAGE>
EXHIBIT H
FORM OF TRUSTEE FINAL CERTIFICATION
[date]
[Seller]
[Servicer]
[Bond Insurer]
[Transferor]
[Depositor]
- - --------------------------
Re: Indenture, dated as of January 1, 1999 (the
"Indenture"), among NovaStar Mortgage Funding Trust,
Series 1999-1 (the "Issuer"), First Union National
Bank, as bond administrator (the "Bond
Administrator") and The Chase Manhattan Bank, as
indenture trustee (the "Indenture Trustee") --
NovaStar Mortgage Funding Trust, Series 1999-1 Home
Equity Loan Asset-Backed Bonds.
Gentlemen:
In accordance with Section 2.03 of the above-captioned Indenture,
and Section 2.1(b) of the Mortgage Loan Purchase Agreement, dated as of January
1, 1999, among NovaStar Mortgage, Inc., the Issuer, the Bond Administrator, the
Indenture Trustee and NovaStar Mortgage Funding Corporation II (the "Mortgage
Loan Purchase Agreement" and, together with the Indenture, the "Agreements"),
the undersigned, as Bond Administrator, on behalf of the Indenture Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or listed on the attachment
hereto) it has received the documents set forth in Section 2.1(b) of the
Mortgage Loan Purchase Agreement.
H-1
<PAGE>
The Bond Administrator, on behalf of the Indenture Trustee, has made
no independent examination of any documents contained in each Mortgage File
beyond the review specifically required in the Agreements. The Bond
Administrator, on behalf of the Indenture Trustee, makes no representation that
any documents specified in clause (vi) of Section 2.1(b) should be included in
any Mortgage File. The Bond Administrator, on behalf of the Indenture Trustee,
makes no representations as to and shall not be responsible to verify: (i) the
validity, legality, sufficiency, enforceability, due authorization,
recordability or genuineness of any of the documents contained in each Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, (ii)
the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan or (iii) the existence of any assumption, modification, written
assurance or substitution agreement with respect to any Mortgage File if no such
documents appear in the Mortgage File delivered to the Bond Administrator, on
behalf of the Indenture Trustee.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Indenture.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Bond
Administrator
By: ___________________________________
Name: _________________________________
Title: ________________________________
H-2
<PAGE>
EXHIBIT I
FORM OF TRANSFEREE CERTIFICATION
(144A QIB)
First Union National Bank,
as Bond Administrator, on behalf
of the Indenture Trustee
Re: NovaStar Mortgage Funding Trust, Series 1999-1, Class B Home
Equity Loan Asset-Backed Bonds, No. ___, issued under that
certain Indenture, dated as of January 1, 1999, by and among
NovaStar Mortgage Funding Trust, Series 1999-1 ("Issuer"), First
Union National Bank ("Bond Administrator"), and The Chase
Manhattan Bank ("Indenture Trustee")
Dear Sirs:
______________________________ as registered holder ("Seller")
intends to transfer the captioned Bond to _______________________________
("Purchaser"), for registration in the name of_______________________________.
1. In connection with such transfer and in accordance with Article
[V] of the captioned Indenture, the Seller hereby certifies the following facts:
Neither the Seller nor anyone acting on its behalf has offered, transferred,
pledged, sold or otherwise disposed of the Bond, any interest in the Bond or any
other similar security, offer to buy or accept a transfer, pledge or other
disposition of the Bond, any interest in the Bond or any other similar security
with, any person in any manner, or made any general solicitation by means of
general advertising or in any other manner, or taken any other action which
would constitute a distribution of the Bond under the Securities Act of 1933, as
amended (the "1933 Act"), or which would render the disposition of the Bond a
violation of Section 5 of the 1933 Act or require registration pursuant thereto.
2. The Purchaser warrants and represents to, and covenants with, the
Issuer, the Bond Administrator and the Indenture Trustee pursuant to Article [V]
of the Indenture as follows:
a. The Purchaser understands that the Bond has not been
registered under the 1933 Act or the securities laws of any state.
I-1
<PAGE>
b. The Purchaser is acquiring the Bond for investment for its
own account only and not for any other person.
c. The Purchaser considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
investment in the Bond.
d. The Purchaser has been furnished with all information
regarding the Bond that it has requested from the Issuer, the Bond Administrator
or the Indenture Trustee.
e. The Purchaser is a "qualified institutional buyer" as that
term is defined in Rule 144A under the 1933 Act ("Rule 144") and has completed
either of the forms of certification to that effect attached hereto as Annex 1
or Annex 2. The Purchaser is aware that the sale to it is being made in reliance
on Rule 144A. The Purchaser is acquiring the Bond for its own account for the
account of a qualified institutional buyer, understands that the Bond may be
resold, pledged or transferred only (i) to a person reasonably believed to be a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
3. The Purchaser warrants and represents to, and covenants with, the
Issuer, the Bond Administrator and the Indenture Trustee that (i) the Purchaser
is not 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 a plan (as defined in Section 4975(e)(1)
of the Internal Revenue Code of 1986 (the "Code")) that is subject to Section
4975 of the Code (each of the foregoing, a "Benefit Plan"), and the Purchaser is
not directly or indirectly purchasing the Bond on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with assets of a Benefit
Plan.
4. This document may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
IN WITNESS WHEREOF, each of the parties have caused this document to
be executed by their duly authorized officers as of the date set forth below.
Seller Purchaser
By: By:
------------------------------- -------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No.________________________ No.________________________
Date:______________________________ Date:__________________________
I-2
<PAGE>
ANNEX 1 TO TRANSFEREE CERTIFICATION
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Purchasers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to the parties addressed
in the Transferee Certificate to which this certification relates with respect
to the Bond described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Purchaser.
2. In connection with purchases by the Purchaser, the Purchaser is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Purchaser owned and/or
invested on a discretionary basis more than $100,000,0001 in securities (except
for the excluded securities referred to below) as of the end of the Purchaser's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Purchaser satisfies the criteria in the category marked
below.
___ Corporation, etc. The Purchaser is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts
or similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
___ Bank. The Purchaser (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, a copy of which is
attached hereto.
___ Savings and Loan. The Purchaser (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision over
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
- - ------------------------------------
1 The Purchaser must own and/or invest on a discretionary basis at
least $100,000,000 in securities unless the Purchaser is a dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934, and, in that
case, the Purchaser must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
1
<PAGE>
___ Broker-dealer. The Purchaser is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Purchaser is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State, territory
or the District of Columbia.
___ State or Local Plan. The Purchaser is a plan established and
maintained by a State, its political subdivisions, or any agency
or instrumentality of the State or its political subdivisions,
for the benefit of its employees.
___ ERISA Plan. The Purchaser is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of
1974.
___ Investment Advisor. The Purchaser is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Purchaser, (ii) securities
that are part of an unsold allotment to or subscription by the Purchaser, if the
Purchaser is a dealer, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Purchaser, the Purchaser
used the cost of such securities to the Purchaser and did not include any of the
securities referred to in the preceding paragraph. Further, in determining such
aggregate amount, the Purchaser may have included securities owned by
subsidiaries of the Purchaser, but only if such subsidiaries are consolidated
with the Purchaser in its financial statements prepared in accordance with
generally accepted, accounting principles and if the investments of such
subsidiaries are managed under the Purchaser's direction. However, such
securities were not included if the Purchaser is a majority-owned, consolidated
subsidiary of another enterprise and the Purchaser is not itself a reporting
company under the Securities Exchange Act of 1934.
2
<PAGE>
5. The Purchaser acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Bonds are
relying and will continue to rely on the statements made herein because one or
more sales to the Purchaser may be in reliance on Rule 144A.
____ ___ Will the Purchaser be
purchasing the Bond only for
Yes No the Purchaser's own account?
6. If the answer to the foregoing question is "no", the Purchaser
agrees that, in connection with any purchase of securities sold to the Purchaser
for the account of a third party (including any separate account) in reliance on
Rule 144A, the Purchaser will only purchase for the account of a third party
that at the time is a "qualified institutional buyer" within the meaning of Rule
144A. In addition, the Purchaser agrees that the Purchaser will not purchase
securities for a third party unless the Purchaser has obtained a current
representation letter from such third party or taken other appropriate steps
contemplated by Rule 144A to conclude that such third party independently meets
the definition of "qualified institutional buyer" set forth in Rule 144A.
7. The Purchaser will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Purchaser's purchase of the Bond will constitute
a reaffirmation of this certification as of the date of such purchase.
______________________________________
Print Name of Purchaser
By:___________________________________
Name:
Title:
Date:
3
<PAGE>
ANNEX 2 TO TRANSFEREE CERTIFICATION
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Purchasers That Are Registered Investment Companies]
The undersigned hereby certifies as follows to the parties addressed
in the Transferee Certificate to which this certification relates with respect
to the Note described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Purchaser or, if the Purchaser
is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because Purchaser is part of a Family
of Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Purchaser, the Purchaser is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Purchaser is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Purchaser alone, or the Purchaser's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the Purchaser's
most recent fiscal year. For purposes of determining the amount of securities
owned by the Purchaser or the Purchaser's Family of Investment Companies, the
cost of such securities was used.
____ The Purchaser owned $______________________ in securities (other
than the excluded securities referred to below) as of the end of the
Purchaser's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
____ The Purchaser is part of a Family of Investment Companies which
owned in the aggregate $____________ in securities (other than the
excluded securities referred to below) as of the end of the
Purchaser's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same party or because one investment
adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Purchaser or are part of the
Purchaser's Family of Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv) repurchase agreements,
(v) securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
5. The Purchaser is familiar with Rule 144A and understands that the
seller to it and the other parties related to the Bonds are relying and will
continue to rely on the statements made herein because one or more sales to the
Purchaser will be in reliance on Rule 144A. In addition, the Purchaser will only
purchase for the Purchaser's own account.
6. The undersigned will notify the parties addressed in the
Transferee Certificate to which this certification relates of any changes in the
information and conclusion herein. Until such notice, the Purchaser's purchase
of the Bond will constitute a reaffirmation of this certification by the
undersigned as of the date of such purchase.
___________________________________
Print Name of Purchaser or Adviser
By:______________________________________
Name:
Title:
IF AN ADVISER:
___________________________________
Print Name of Purchaser
Date::___________________________________
<PAGE>
EXHIBIT J
FORM OF TRANSFEREE CERTIFICATION
(INVESTMENT COMPANY)
First Union National Bank,
as Bond Administrator on behalf
of the Indenture Trustee
Re: NovaStar Mortgage Funding Trust, Series 1999-1, Class B Home Equity
Loan Asset-Backed Bonds No. ____, issued under that certain
Indenture, dated as of January 1, 1999, among NovaStar Mortgage
Funding Trust, Series 1999-1, as issuer ("Issuer"), First Union
National Bank, as bond administrator ("Bond Administrator") and The
Chase Manhattan Bank, as indenture trustee ("Indenture Trustee")
Dear Sirs:
_________________________________________ as registered holder
("Seller") intends to transfer the captioned Bond to
_____________________________ ("Purchaser"), for registration in the name of
_____________________________.
1. Seller certifies to the Bond Administrator that it is an
investment company registered under the Investment Company Act of 1940, as
amended.
Attached hereto is a true and correct copy of the Qualified
Institutional Buyer's Certificate of the Purchaser. We have required no further
information with respect to the Purchaser's status as "qualified institutional
buyer" other than the following:
2. The Purchaser warrants and represents to, and covenants with, the
Bond Administrator, the Issuer and the Indenture Trustee that (i) the Purchaser
is not 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 a plan (as defined in Section 4975(e)(1)
of the Internal Revenue Code of 1986 (the "Code")) that is subject to Section
4975 of the Code (each of the foregoing, a "Benefit Plan"), and the Purchaser is
not directly or indirectly purchasing the Bond on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with assets of a Benefit
Plan.
<PAGE>
3. [Address for Payment / Wire Transfer Instructions].
IN WITNESS WHEREOF, each of the parties have caused this document to
be executed by their duly authorized officers as of the date set forth below.
_________________________________ _____________________________
Seller Purchaser
By: By:
------------------------ ---------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
Date:_________________________ Date:____________________
<PAGE>
ADDENDUM 1
RULE 144A
QUALIFIED INSTITUTIONAL BUYER CERTIFICATE
Dear Sirs:
In connection with our purchase(s) from or through you (or others)
of privately offered debt or equity securities ("Rule 144A Eligible Securities")
pursuant to Rule l44A under the Securities Act of 1933, we certify as follows:
1. We are a "qualified institutional buyer" as defined in Rule 144A.
2. As of the date set forth below, which date is subsequent to the
close of our most recent fiscal year on ____________________, we beneficially
owned and/or invested on a discretionary basis an amount of securities (as
determined in accordance with Rule 144A) in excess of $100,000,000.
We represent that we will only purchase Rule 144A Eligible
Securities for our own account or for the account of other qualified
institutional buyers.
You, any issuer of Rule 144A Eligible Securities, trustee, paying or
fiscal agent, and other participants in any transaction in Rule 144A Eligible
Securities purchased by us may rely upon this certificate, and we will advise
you promptly should we cease to be a qualified institutional buyer.
This certificate has been executed on our behalf by one of our
executive officers.
_____________________________________
Name of Company
By:__________________________________
Name:________________________________
Title:_______________________________
Date:________________________________
<PAGE>
EXHIBIT K
MORTGAGE LOAN SCHEDULE
<PAGE>
APPENDIX A
DEFINITIONS
Addition Notice: With respect to the transfer of Subsequent Mortgage Loans
to the Issuer pursuant to Section 2.02(b) of the Mortgage Loan Purchase
Agreement, a notice given to the Rating Agencies, the Bond Administrator, the
Indenture Trustee, the Bond Insurer and the Owner Trustee, which shall be given
not later than six Business Days prior to the related Subsequent Transfer Date,
of the Seller's and the Transferor's designation of Subsequent Mortgage Loans to
be sold to the Trust and the aggregate principal balance as of the Subsequent
Cut-off Date of such Subsequent Mortgage Loans.
Adjustable Rate Initial Mortgage Loan: Each of the Adjustable Rate
Mortgage Loans transferred to the Trust on the Closing Date.
Adjustable Rate Mortgage Loan: Each of the Mortgage Loans identified
in the Mortgage Loan Schedule as having a Mortgage Rate that is subject to
adjustment.
Adjustment Date: As to each Adjustable Rate Mortgage Loan, each date set
forth in the related Mortgage Note on which an adjustment to the interest rate
on such Mortgage Loan becomes effective.
Administrative Fee: With respect to each Group (and related Class or
Component), the Bond Insurance Premium, together with the MI Premium, the
Servicing Fee and the Bond Administrator Fee with respect to such Group (and
Class or Component).
Administrative Fee Rate: As to each Mortgage Loan, the sum of (i) the Bond
Administrator Fee Rate, (ii) the Servicing Fee Rate, (iii) the MI Insurance
Premium on the applicable Mortgage Loans and (iv) the Bond Insurance Premium.
Advance: As to any Mortgage Loan, any advance made by the Servicer
pursuant to Section 4.02 of the Servicing Agreement.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
1
<PAGE>
Annual Loss Percentage (Rolling Six Month): With respect to any Payment
Date, the product of (x) two and (y) a fraction, expressed as a percentage, the
numerator of which is the aggregate of the Realized Losses as of the last day of
each Due Period for the six immediately preceding Due Periods and the
denominator of which is the outstanding Principal Balance of the Mortgage Loans
as of the first day of the sixth preceding Due Period.
Annualized Periodic Spread: The percentage equivalent of a fraction, the
numerator of which is the product of (x) 12 and (y) aggregate the Net Monthly
Excess Cash Flow on the Class A-1 Bonds and the Class A-2 Bonds and the
denominator of which is the aggregate Principal Balance of the Mortgage Loans in
Group I and Group II.
Appraised Value: The appraised value of a Mortgaged Property based upon
the lesser of (i) the appraisal made at the time of the origination of the
related Mortgage Loan, or (ii) the sales price of such Mortgaged Property at
such time of origination. With respect to a Mortgage Loan the proceeds of which
were used to refinance an existing mortgage loan, the appraised value of the
Mortgaged Property based upon the appraisal (as reviewed and approved by the
Seller) obtained at the time of refinancing.
Assignment of Mortgage: 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, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
Authorized Newspaper: A newspaper of general circulation in the Borough of
Manhattan, The City of New York, printed in the English language and customarily
published on each Business Day, whether or not published on Saturdays, Sundays
or holidays.
Authorized Officer: With respect to the Issuer, any officer of the Owner
Trustee who is authorized to act for the Owner Trustee in matters relating to
the Issuer and who is identified on the list of Authorized Officers delivered by
the Owner Trustee to the Bond Administrator and the Indenture Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter).
2
<PAGE>
Available Funds: As to each Class of Class A Bonds and related Component
of the Subordinated Bonds, and any Payment Date, an amount equal to the amount
on deposit in the Payment Account with respect to such class, representing the
sum of (i) the aggregate amount of scheduled payments on the related Mortgage
Loans due on the related Due Date and received on or prior to the related
Determination Date, (ii) any amounts representing interest on amounts in the
Payment Account and miscellaneous fees and collections, including assumption
fees and prepayment penalties with respect to the Mortgage Loans in the related
Group (but excluding late fees), (iii) any unscheduled payments and receipts,
including Mortgagor prepayments on the related Mortgage Loans, received during
the related Prepayment Period and proceeds of repurchases, and adjustments in
the case of substitutions and terminations, Net Liquidation Proceeds, Insurance
Proceeds, MI Insurance Proceeds and proceeds from the sale of Converted Mortgage
Loans from the related Group, (iv) all Advances made for such Payment Date in
respect of the related Mortgage Loans, (v) on the Payment Date relating to the
Due Period in which the termination of the Funding Period occurred, the amount
on deposit in the Pre-Funding Account with respect to such Class at such time,
and (vi) on each Payment Date on or prior to the Payment Date in April 1999, the
amount, if any, withdrawn from the Interest Coverage Account for such Class
(minus (i) the Administrative Fee for the related Group, and (ii) if the Bonds
have been declared due and payable following an Event of Default on such Payment
Date, any amounts owed to the Bond Administrator and the Indenture Trustee by
the Issuer pursuant to Section 6.07 of the Indenture and any amounts owed to the
Bond Insurer by the Issuer pursuant to clause SECOND of Section 5.04 of the
Indenture).
Available Funds Cap Rate: With respect to each Class of Class A Bonds and
the related B Components for any Payment Date is a rate per annum equal to the
fraction, expressed as a percentage, the numerator and denominator of which are
as follows:
(i) the numerator of which is an amount equal to the product of (x) the
weighted average Mortgage Rate on the Mortgage Loans in the related Group and
(y) 1/12 of the aggregate Principal Balance of the Mortgage Loans in the related
Group less the Administrative Fee for such Group; and
(ii) the denominator of which is an amount equal to the product of the
related Bond Principal Balance and the number of days elapsed in the related
Interest Period divided by 360;
less, in the case of the Class A-1 and Class A-2 Bonds, 0.50%.
3
<PAGE>
B Components: Collectively, the B-1 Component, the B-2 Component, the B-3
Component and the B-4 Component.
B-1 Component: The component of the Class B Bonds relating to Group I.
B-2 Component: The component of the Class B Bonds relating to Group II.
B-3 Component: The component of the Class B Bonds relating to Group III.
B-4 Component: The component of the Class B Bonds relating to Group IV.
Back-up Servicer: Fairbanks Capital Corp., a Utah corporation, or any
successor thereto.
Back-up Servicing Fee: With respect to the Mortgage Loans and any Payment
Date, the product of (i) the Back-up Servicing Fee Rate divided by 12 and (ii)
the scheduled Principal Balance of such Mortgage Loans as of such Payment Date.
Back-up Servicing Fee Rate: 0.05%.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
Base Prospectus: The base Prospectus, dated November 10, 1998, with
respect to the Bonds.
Basic Documents: The Trust Agreement, the Certificate of Trust, the
Indenture, the Purchase Agreement, each Subsequent Transfer Instrument, the
Insurance Agreement, the Side Indemnity Letter, the Indemnification Agreement,
the Servicing Agreement, the REMIC Interests Sale Agreement, the Converted Loan
Purchase Agreement, the Underwriting Agreement, and the other documents and
certificates delivered in connection with any of the above.
Beneficial Owner: With respect to any Class A Bond, the Person who is the
beneficial owner of such Class A Bond as reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly as a Depository Participant or indirectly through a
Depository Participant, in accordance with the rules of such Depository).
Bond Administrator: First Union National Bank, a national banking
association, and any successor thereto.
Bond Administrator Fee: With respect to each Payment Date, the product of
(i) the Bond Administrator Fee Rate divided by 12 and (ii) the sum of the
Principal Balance of the Mortgage Loans and the Pre-Funded Amount as of such
date.
4
<PAGE>
Bond Administrator Fee Rate: 0.0125% per annum.
Bond Insurance Policy: The financial guaranty insurance policy
number 50772-N, issued by the Bond Insurer to the Indenture Trustee for the
benefit of the Bondholders.
Bond Insurance Premium: The premium and the premium supplement (if
any) payable to the Bond Insurer, as specified in the Insurance Agreement.
Bond Insurer: Financial Security Assurance, Inc., a New York insurance
company, or any successor thereto.
Bond Insurer Default: The existence and continuance of any of the
following: (a) a failure by the Bond Insurer to make a payment required under
the Bond Insurance Policy in accordance with its terms; or (b)(i) the Bond
Insurer (A) files any petition or commences any case or proceeding under any
provision or chapter of the Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (B) makes a general assignment for the benefit of its creditors,
or (C) has an order for relief entered against it under the Bankruptcy Code or
any other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and nonappealable;
or (ii) a court of competent jurisdiction, the New York Department of Insurance
or other competent regulatory authority enters a final and nonappealable order,
judgment or decree (A) appointing a custodian, trustee, agent or receiver for
the Bond Insurer or for all or any material portion of its property or (B)
authorizing the taking of possession by a custodian, trustee, agent or receiver
of the Bond Insurer (or the taking of possession of all or any material portion
of the property of the Bond Insurer).
Bond Interest Rate: With respect to each Class of Class A Bonds and each
Payment Date, an amount equal to the lesser of (i) the applicable Stated Rate
and (ii) the applicable Available Funds Cap Rate.
With respect to each B Component and each Payment Date, the same annual
rate of interest that is payable on such Payment Date on the related Class of
Class A Bonds.
With respect to each IO Component and each Payment Date, the remainder of
(a) the sum of (i) the Available Funds Cap Rate for the related Class of the
Class A Bonds on such Payment Date, plus (ii) in the case of the IO-1 Component
and the IO-2 Component, 0.50%, minus (b) the Bond Interest Rate for the related
Class of the Class A Bonds on such Payment Date.
5
<PAGE>
Bond Owner: The Beneficial Owner of a Class A Bond and the record
owner of the Class B Bonds and the Class IO Bonds.
Bond Percentage: With respect to any Payment Date and any Bond, the ratio
expressed as a percentage of the Bond Principal Balance (or IO Component
Notional Balance, in the case of the Class IO Bond) of such Bond to the
aggregate Bond Principal Balance (or IO Component Notional Balance) of all Bonds
immediately prior to such Payment Date.
Bond Principal Balance: With respect to each Class of Class A Bonds and
each B Component, as of any date of determination, the initial principal balance
of such Class of Bonds or Component as of the Closing Date reduced by all
payments of principal thereon prior to such determination date. With respect to
the Class B Bonds, the sum of the principal balances of the B Components.
Bond Register: The register maintained by the Bond Registrar in which
the Bond Registrar shall provide for the registration of Bonds and of
transfers and exchanges of Bonds.
Bond Registrar: The Bond Administrator, in its capacity as Bond
Registrar.
Bondholder or Holder: The Person in whose name a Bond is registered in the
Bond Register, except that, any Bond registered in the name of the Seller, the
Transferor, the Issuer, the Indenture Trustee or the Bond Administrator or any
Affiliate of any of them shall be deemed not to be a Bondholder or Holder, nor
shall any Bond so owned be considered outstanding, for purposes of giving any
request, demand, authorization, direction, notice, consent or waiver under the
Indenture or the Trust Agreement, provided that, in determining whether the
Indenture Trustee or the Bond Administrator shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Bonds that the Indenture Trustee or the Bond Administrator, as applicable,
knows to be so owned shall be so disregarded. Pledgees of Bonds that have been
pledged in good faith may be regarded as Holders if the pledgee establishes to
the satisfaction of the Indenture Trustee or the Bond Administrator the
pledgee's right so to act with respect to such Bonds and that the pledgee is not
the Issuer, any other obligor upon the Bonds or any Affiliate of any of the
foregoing Persons. Any Bonds on which payments are made under the Bond Insurance
Policy shall be deemed Outstanding until the Bond Insurer has been reimbursed
with respect thereto and the Bond Insurer shall be deemed the Bondholder thereof
to the extent of such unreimbursed payment.
6
<PAGE>
Bonds: NovaStar Mortgage Funding Trust, Series 1999-1, Home Equity Loan
Asset-Backed Bonds, Series 1999-1, designated as the "Bonds" in the Indenture,
issued in six classes, the Class A-1 Bonds in an aggregate principal amount of
$75,000,000, the Class A-2 Bonds in an aggregate principal amount of
$20,000,000, the Class A-3 Bonds in an aggregate principal amount of
$45,000,000, the Class A-4 Bonds in the aggregate principal amount of
$20,000,000, the Class B Bonds in the aggregate principal amount of $4,687,378
and the Class IO Bonds in the amount of the IO Component Notional Balance.
Book-Entry Bonds: Beneficial interests in the Class A Bonds, ownership and
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the City of New York, Delaware, California or
Kansas or in the city in which the corporate trust offices of the Indenture
Trustee and the Bond Administrator or the principal office of the Bond Insurer
are located, are required or authorized by law to be closed.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code 12
Del. Code ss.ss. 3801 et seq., as the same may be amended from time to time.
Carry-Forward Amount: With respect to the Class A-1 Bonds and the Class
A-2 Bonds and any Payment Date, an amount equal to any amount by which the
related Interest Payment Amount was reduced by application of the related
Available Funds Cap Rate, together with all unreimbursed Carry-Forward Amounts
from all prior Payment Dates and interest thereon at the related Bond Interest
Rate.
Carry-Forward Cross-Collateralization Amount: With respect to Class A-1
and Class A-2 and any Payment Date, an amount to be paid to the holders of the
other Class of Bonds (Class A-1 or Class A-2, respectively) with respect to any
shortfall in the Carry-Forward Amount for such other Class, as determined in
accordance with Section 3.05(b) of the Indenture.
Cash Liquidation: As to any defaulted Mortgage Loan other than a Mortgage
Loan as to which an REO Acquisition occurred, a determination by the Servicer
that it has received all Liquidation Proceeds and other payments or cash
recoveries which the Servicer reasonably and in good faith expects to be finally
recoverable with respect to such Mortgage Loan.
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Certificate Distribution Account: The account or accounts created and
maintained pursuant to Section 3.10 of the Trust Agreement. The Certificate
Distribution Account shall be an Eligible Account.
Certificate Paying Agent: The meaning specified in Section 3.10 of the
Trust Agreement.
Certificate Percentage Interest: With respect to each Certificate, the
Certificate Percentage Interest on the face thereof.
Certificate Register: The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Certificate Registrar: Initially, the Bond Administrator, in its
capacity as Certificate Registrar, or any successor to the Bond Administrator
in such capacity.
Certificates Sale Agreement: The Certificates Sale Agreement, dated as
of January 29, 1999, between NovaStar Mortgage Funding Corporation and NovaStar
REMIC Financing Corp.
Certificate of Trust: The Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute.
Certificates: The NovaStar Mortgage Funding Trust, Series 1999-1, Home
Equity Loan Asset-Backed Certificates, evidencing the beneficial ownership
interest in the Issuer, designated as the "residual interest" in the Trust for
purposes of the REMIC Provisions, and executed by the Owner Trustee in
substantially the form set forth in Exhibit A to the Trust Agreement.
Certificateholder: The Person in whose name a Certificate is registered in
the Certificate Register. Pledgees of Certificates that have been pledged in
good faith may be regarded as Certificateholders if the pledgee establishes to
the satisfaction of the Certificate Paying Agent or the Owner Trustee, as the
case may be, the pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Issuer, any other obligor upon the Certificates or
any Affiliate of any of the foregoing Persons.
Class: Each Class of Bonds: Class A-1, Class A-2, Class A-3, Class
A-4, Class B and Class IO.
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Class A Bonds: Collectively, the Class A-1 Bonds, the Class A-2 Bonds, the
Class A-3 Bonds and the Class A-4 Bonds.
Class A-1 Bonds: The Class of Bonds identified as the "Class A-1 Bonds" in
the Indenture, substantially in the form of Exhibit A to the Indenture.
Class A-2 Bonds: The Class of Bonds identified as the "Class A-2 Bonds" in
the Indenture, substantially in the form of Exhibit B to the Indenture.
Class A-3 Bonds: The Class of Bonds identified as the "Class A-3 Bonds" in
the Indenture, substantially in the form of Exhibit C thereto.
Class A-4 Bonds: The Class of Bonds identified as the "Class A-4 Bonds" in
the Indenture, substantially in the form of Exhibit D thereto.
Class B Bonds: The Class of Bonds identified as the "Class B Bonds" in the
Indenture, substantially in the form of Exhibit E thereto.
Class IO Bonds: The Class of Bonds identified as the "Class IO Bonds" in
the Indenture, substantially in the form of Exhibit F thereto.
Closing Date: January 29, 1999.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of the
Indenture.
Collection Account: The account or accounts created and maintained
pursuant to Section 3.06(d) of the Servicing Agreement. The Collection
Account shall be an Eligible Account.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan which is
secured by a second lien on the related Mortgaged Property at any given time
generally will be the ratio, expressed as a percentage, the numerator of which
is the sum of (i) the original principal balance of the Mortgage Loan plus (ii)
the unpaid principal balance of any first lien on the related Mortgaged Property
as of such date, and the denominator of which is the lesser of (i) the appraised
value of the related Mortgaged Property as of the date of the appraisal used by
or on behalf of the Seller to underwrite such Mortgage Loan or (ii) the sale
price of the related Mortgaged Property if such a sale occurred at origination
of the Mortgage Loan.
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Compensating Interest: With respect to any Determination Date, an amount
equal to the lesser of (i) the aggregate amount of Prepayment Interest Shortfall
for the related Prepayment Period and (ii) the Servicing Fee for the related
Payment Date.
Component: Any of the B Components or IO Components.
Conversion Date: The date on which a Convertible Mortgage Loan becomes
a Converted Mortgage Loan according to the terms of the related Mortgage Note.
Converted Loan Purchase Agreement: The Converted Loan Purchase
Agreement, dated as of January 1, 1999, among the Converted Loan Purchaser,
the Bond Administrator, the Indenture Trustee, the Servicer, the Issuer and
the Back-up Servicer.
Converted Loan Purchaser: NovaStar Capital, Inc., a Delaware
corporation, and any successor thereto.
Converted Mortgage Loan: Any Convertible Mortgage Loan as to which the
Mortgagor has exercised the option to convert to a fixed Mortgage Rate and
satisfied all of the conditions to conversion set forth in the Mortgage Note.
Convertible Mortgage Loans: Any Mortgage Loan evidenced by a Mortgage Note
that according to its terms is convertible at the option of the Mortgagor from a
variable Mortgage Rate to a fixed Mortgage Rate, subject to satisfaction of the
conditions set forth in such note.
Corporate Trust Office: With respect to the Indenture Trustee and the
Paying Agent, the principal corporate trust office at which at any particular
time its corporation trust business shall be administered, which office at the
date of execution of the Indenture is located at 450 West 33rd Street, 14th
Floor, New York, New York 10001, Attention: Capital Markets Fiduciary Services,
NovaStar 1999-1. With respect to the Owner Trustee, the principal corporate
trust office of the Owner Trustee at which at any particular time its corporate
trust business shall be administered, which office at the date of the execution
of the Trust Agreement is located at Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19801, Attention:
Corporate Trust Administration. With respect to the Bond Administrator, Bond
Registrar, Certificate Registrar and Certificate Paying Agent, the principal
corporate trust office at which at any particular time its corporate trust
business shall be administered, which office at the date of the execution of
this instrument is located at 230 S. Tryon Street, NC 1179, 9th Floor,
Charlotte, North Carolina 28288-1179, Attention: NovaStar Mortgage Funding
Trust, Series 1999-1.
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Cumulative Loss Percentage: As to any Payment Date and the Mortgage Loans,
the percentage equivalent of the fraction obtained by dividing (i) the aggregate
of Realized Losses on the Mortgage Loans (without giving any effect to coverage
provided by any MI Policy) from the Cut-off Date through such Payment Date by
(ii) the sum of the aggregate Principal Balance of the Initial Mortgage Loans as
of the Cut-off Date and the Pre-Funded Amount.
Cumulative Loss Test: The Cumulative Loss Test for each Payment Date in
the period indicated below is satisfied if the Cumulative Loss Percentage for
such Payment Date does not exceed the percentage set out for such Payment Date
below:
Monthly Remittance Dates Cumulative
from and including to and including Loss Percentage
August 2001 July 2002 1.25%
August 2002 July 2003 1.75%
August 2003 July 2004 2.15%
August 2004 and thereafter 2.50%
Cut-off Date: January 1, 1999.
Cut-off Date Principal Balance: With respect to any Initial Mortgage Loan,
the unpaid principal balance thereof as of the opening of business on the last
day of the related Due Period immediately prior to the Cut-off Date, and with
respect to the Initial Mortgage Loans in each Group, as set forth below:
Group Amount
I $67,101,778.67
II $16,279,956.12
III $39,442,140.31
IV $16,049,269.29
Debt Service Reduction: With respect to any Mortgage Loan, a reduction in
the scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction
constituting a Deficient Valuation or any reduction that results in a permanent
forgiveness of principal.
Default: Any occurrence which is or with notice or the lapse of time
or both would become an Event of Default.
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Deficient Valuation: With respect to any Mortgage Loan, a valuation by a
court of competent jurisdiction of the Mortgaged Property in an amount less than
the then outstanding indebtedness under the Mortgage Loan, or any reduction in
the amount of principal to be paid in connection with any scheduled Monthly
Payment that constitutes a permanent forgiveness of principal, which valuation
or reduction results from a proceeding under the Bankruptcy Code.
Definitive Bonds: The meaning specified in Section 4.08 of the
Indenture.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced with
an Eligible Substitute Mortgage Loan.
Delinquency Percentage: As of the last day of any Due Period and with
respect to the Mortgage Loans, the percentage equivalent of a fraction, the
numerator of which equals the aggregate Principal Balance of the Mortgage Loans
that are 90 or more days delinquent, in foreclosure or converted to REO
Properties as of such last day of such Due Period, and the denominator of which
is the aggregate Principal Balance of the Mortgage Loans as of the last day of
such Due Period.
Depositor: Residential Asset Funding Corporation, a North Carolina
corporation, and any successor thereto.
Depository or Depository Agency: The Depository Trust Company or a
successor appointed by the Indenture Trustee with the approval of the Issuer.
Any successor to the Depository shall be an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.
Depository Participant: A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
Determination Date: With respect to any Payment Date, the 15th day of
the related month, or if the 15th day of such month is not a Business Day,
the immediately preceding Business Day.
Determination Date Report: The meaning specified in Section 4.01 of the
Servicing Agreement.
Disqualified Organization: "Disqualified Organization" shall have the
meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to
the Trust.
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Due Date: The first day of the month of the related Payment Date.
Due Period: With respect to any Mortgage Loan and Due Date, the period
commencing on the second day of the month preceding the month of such Payment
Date (or, with respect to the first Due Period, the day following the Cut-off
Date) and ending on the related Due Date.
Eligible Account: An account that is either: (A) a segregated account or
accounts maintained with an institution whose deposits are insured by the FDIC,
the unsecured and uncollateralized long-term debt obligations of which
institution shall be rated AA or higher by Standard & Poor's and Aa2 or higher
by Moody's and in the highest short-term rating category by each of the Rating
Agencies, and which is (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 Bond Insurer and each Rating Agency or (B) a segregated trust
account or accounts maintained with the trust department of a federal or state
chartered depository institution acceptable to the Bond Insurer and each Rating
Agency, having capital and surplus of not less than $100,000,000, acting in its
fiduciary capacity.
Eligible Investments: One or more of the following:
(i) direct obligations of, and obligations fully guaranteed by, the United
States of America, any of the Federal Home Mortgage Corporation, the Federal
National Mortgage Association, 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;
(ii) (A) 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, the Bond Administrator or their
agents acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any State thereof and subject to
supervision and examination by federal and/or state authorities, so long as at
the time of such investment or contractual commitment providing for such
investment, such depository institution or trust company has a short-term
unsecured debt rating in the highest available rating category of each of the
Rating Agencies and provided that each such investment has an original maturity
of no more than 365 days, and (B) any other demand or time deposit or deposit
which is fully insured by the Federal Deposit Insurance Corporation;
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(iii) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (i) above and entered into with a
depository institution or trust company (acting as a principal) rated "A" or
higher by S&P and A2 or higher by Moody's; provided, however, that collateral
transferred pursuant to such repurchase obligation must (A) be valued daily at
current market price plus accrued interest, (B) pursuant to such valuation,
equal, at all times, 105% of the cash transferred in exchange for such
collateral and (C) be delivered in such a manner as to accomplish perfection of
a security interest in the collateral by possession of certificated securities.
(iv) 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;
(v) 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;
(vi) a guaranteed investment contract approved by each of the Rating
Agencies and the Bond 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;
(vii) money market funds having ratings in the highest available long-term
rating category of each of the Rating Agencies at the time of such investment;
any such money market funds which provide for demand withdrawals being
conclusively deemed to satisfy any maturity requirement for Eligible Investments
set forth in the Indenture; and
(viii) any investment approved in writing by each of the Rating
Agencies and the Bond Insurer;
provided, however, that each such instrument shall be acquired in an
arm's-length transaction and no such instrument shall be an Eligible Investment
if it represents, either (1) the right to receive only interest payments with
respect to the underlying debt instrument or (2) the right to receive both
principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity greater than 120% of the yield to
maturity at par of such underlying obligations; provided, further, however, that
each such instrument acquired shall not be acquired at a price in excess of par.
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The Bond Administrator may purchase from or sell to itself or an
affiliate, as principal or agent, the Eligible Investments listed above.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
Seller for a Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed in an Officer's Certificate delivered to the Bond Administrator and
the Bond Insurer, (i) have an outstanding principal balance, after deduction of
the principal portion of the monthly payment due in the month of substitution
(or in the case of a substitution of more than one Mortgage Loan for a Deleted
Mortgage Loan, an aggregate outstanding principal balance, after such
deduction), not in excess of the outstanding principal balance of the Deleted
Mortgage Loan (the amount of any shortfall to be deposited by the Seller in the
Collection Account in the month of substitution); (ii) comply in all material
respects with each representation and warranty set forth in clauses (ii) through
(lxviii) of Section 3.01(b) of the Purchase Agreement other than clauses (iii),
(v)-(xiv), (xlii), (xlv), (lvi), (lvii), (lx) and (lxiii); (iii) have a Mortgage
Rate and, with respect to an Adjustable Rate Mortgage Loan, a Gross Margin no
lower than and not more than 1% per annum higher than the Mortgage Rate and
Gross Margin, respectively, of the Deleted Mortgage Loan as of the date of
substitution; (iv) have a Loan-to-Value Ratio and Combined Loan-to-Value Ratio,
if applicable, at the time of substitution no higher than that of the Deleted
Mortgage Loan at the time of substitution; (v) have a remaining term to stated
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan; (vi) not be 30 days or more delinquent; (vii) not be a
negative amortization loan; (viii) have a lien priority equal to or superior to
the lien priority of the Deleted Mortgage Loan; and (ix) be a Qualified
Replacement Mortgage.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Event of Default: With respect to the Indenture, any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) a default by the Issuer in the payment of (a) any Interest Payment
Amount or Principal Payment Amount with respect to the Class A Bonds on such
Payment Date or (b) the Subordination Increase Amount or the Carry-Forward
Amount, but only, with respect to clause (b), to the extent funds are available
to make such payment as provided in the Indenture (provided that for purposes of
this clause, a remittance by the Indenture Trustee from proceeds of the Bond
Insurance Policy shall not be considered payment by the Issuer with respect to
the Class A Bonds); or
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(ii) the failure by the Issuer on the Final Scheduled Payment Date to
reduce the Bond Principal Balance of the Class A Bonds to zero (provided that
for purposes of this clause, a remittance by the Indenture Trustee from proceeds
of the Bond Insurance Policy shall not be considered payment by the Issuer with
respect to the Bonds); or
(iii) there occurs a default in the observance or performance of any
covenant or agreement of the Issuer made in the Indenture, or any representation
or warranty of the Issuer made in the Indenture or in any certificate or other
writing delivered pursuant thereto or in connection therewith proving to have
been incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the circumstance
or condition in respect of which such representation or warranty was incorrect
shall not have been eliminated or otherwise cured, for a period of 30 days after
there shall have been given, by registered or certified mail, to the Issuer by
the Indenture Trustee or the Bond Administrator or to the Issuer, the Indenture
Trustee and the Bond Administrator by the Bond Insurer, or if a Bond Insurer
Default exists, the Holders of at least 25% of the aggregate Bond Principal
Balance of the Bonds, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that such
notice is a notice of default hereunder; or
(iv) there occurs the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust Estate,
or ordering the winding-up or liquidation of the Issuer's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) there occurs the commencement by the Issuer of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an order
for relief in an involuntary case under any such law, or the consent by the
Issuer to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Issuer or
for any substantial part of the assets of the Trust Estate, or the making by the
Issuer of any general assignment for the benefit of creditors, or the failure by
the Issuer generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing.
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Event of Servicer Termination: With respect to the Servicing
Agreement, a Servicing Default as defined in Section 6.01 of the Servicing
Agreement.
Excess Subordination Amount: With respect to a Class of Class A Bonds and
any Payment Date, the excess, if any, of (a) the related Subordination Amount
that would apply on such Payment Date after taking into account all
distributions to be made on such Payment Date (exclusive of any reductions
thereto attributable to Subordination Reduction Amounts on such Payment Date)
over (b) the related Required Subordination Amount for such Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
Expense Adjusted Coupon Rate: With respect to each Group and a Payment
Date, the weighted average Mortgage Rate of the Mortgage Loans in such Group
less the related Administrative Fee Rate.
Expenses: The meaning specified in Section 7.02 of the Trust Agreement.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
thereto.
Final Scheduled Payment Date: With respect to each Class of Bonds, the
Payment Date occurring in April 2030.
Fixed Rate Initial Mortgage Loan: Each of the Fixed Rate Mortgage Loans
transferred to the Trust on the Closing Date.
Fixed Rate Mortgage Loan: Each of the Mortgage Loans identified in the
Mortgage Loan Schedule as having a Mortgage Rate that is fixed.
FNMA: The Federal National Mortgage Association, or any successor
thereto.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Mortgage Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
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Funding Period: The period beginning on the Closing Date and ending on the
earlier of the date on which (a) the amount on deposit in the Pre-Funding
Account is less than $10,000 or (b) the close of business on April 28, 1999.
Grant: Pledge, bargain, sell, warrant, alienate, remise, release, convey,
assign, transfer, create, and grant a lien upon and a security interest in and
right of set-off against, deposit, set over and confirm pursuant to the
Indenture. A Grant of the Collateral or of any other agreement or instrument
shall include all rights, powers and options (but none of the obligations) of
the granting party thereunder, including the immediate and continuing right to
claim for, collect, receive and give receipt for principal and interest payments
in respect of such collateral or other agreement or instrument and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
Gross Margin: With respect to any Mortgage Loan, the percentage set forth
as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan Schedule, as
adjusted from time to time in accordance with the terms of the Servicing
Agreement.
Group: Each of Mortgage Loan Groups I, II, III and IV.
Group I: A group of Mortgage Loans consisting of adjustable rate mortgage
loans and identified as such on the Mortgage Loan Schedule, which loans "relate"
to the Class A-1 Bonds, B-1 Component and IO-1 Component for purposes of the
Basic Documents.
Group II: A group of Mortgage Loans consisting of adjustable rate mortgage
loans and identified as such on the Mortgage Loan Schedule, which loans "relate"
to the Class A-2 Bonds, B-2 Component and IO-2 Component for purposes of the
Basic Documents.
Group III: A group of Mortgage Loans consisting of fixed rate mortgage
loans and identified as such on the Mortgage Loan Schedule, which loans "relate"
to the Class A-3 Bonds, B-3 Component and IO-3 Component for purposes of the
Basic Documents.
Group IV: A group of Mortgage Loans consisting of fixed rate mortgage
loans and identified as such on the Mortgage Loan Schedule, which loans "relate"
to the Class A-4 Bonds, B-4 Component and IO-4 Component for purposes of the
Basic Documents.
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Indemnification Agreement: The Indemnification Agreement, dated as of
January 22, 1999, among the Bond Insurer, the Seller, the Transferor, the
Depositor, the Issuer and the Underwriter, including any amendments and
supplements thereto.
Indemnified Party: The meaning specified in Section 7.02 of the Trust
Agreement.
Indenture: The indenture, dated as of January 1, 1999, among the
Issuer, as debtor, the Indenture Trustee, and the Bond Administrator.
Indenture Trustee: The Chase Manhattan Bank, a New York banking
corporation, and its successors and assigns or any successor indenture trustee
appointed pursuant to the terms of the Indenture.
Indenture Trustee Fee: With respect to each Payment Date, the product of
(i) the Indenture Trustee Fee Rate divided by 12 and (ii) the sum of the
Principal Balance of the Mortgage Loans and the Pre-Funded Amount as of such
date, which fee shall be payable from the Bond Administration Fee.
Indenture Trustee Fee Rate: 0.004% per annum.
Independent: When used with respect to any specified Person, the Person
(i) is in fact independent of the Issuer, any other obligor on the Bonds, the
Seller, the Depositor, the Transferor, the Servicer and any Affiliate of any of
the foregoing Persons, (ii) does not have any direct financial interest or any
material indirect financial interest in the Issuer, any such other obligor, the
Seller, the Depositor, the Transferor, the Servicer, the Issuer or any Affiliate
of any of the foregoing Persons and (iii) is not connected with the Issuer, any
such other obligor, the Seller, the Depositor, the Transferor, the Servicer, the
Issuer, or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
Independent Certificate: A certificate or opinion to be delivered to the
Bond Administrator and the Indenture Trustee under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 10.01
of the Indenture, made by an Independent appraiser or other expert appointed by
the Issuer and approved by Bond Administrator on behalf of the Indenture Trustee
in the exercise of reasonable care, and such opinion or certificate shall state
that the signer has read the definition of "Independent" in this Indenture and
that the signer is Independent within the meaning thereof.
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Index: With respect to any Adjustable Rate Mortgage Loan, the index
for the adjustment of the Mortgage Rate set forth as such on the related
Mortgage Note.
Initial Mortgage Loan: A Mortgage Loan transferred and conveyed by the
Depositor to the Issuer on the Closing Date, as listed on the Mortgage Loan
Schedule.
Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
January 1, 1999, among the Servicer, the Seller, the Transferor, the Depositor,
the Issuer and the Bond Insurer, including any amendments and supplements
thereto.
Insurance Proceeds: Proceeds paid by any insurer (excluding the Bond
Insurer) pursuant to any insurance policy covering a Mortgage Loan which are
required to be remitted to the Servicer, including MI Insurance Proceeds in the
case of Mortgage Loans covered under a MI Policy, or amounts required to be paid
by the Servicer pursuant to the Servicing Agreement, net of any component
thereof (i) covering any expenses incurred by or on behalf of the Servicer in
connection with obtaining such proceeds, (ii) that is applied to the restoration
or repair of the related Mortgaged Property or (iii) released to the Mortgagor
in accordance with the Servicer's normal servicing procedures.
Interest Coverage Account: The account established and maintained in
the name and on behalf of the Indenture Trustee by the Bond Administrator
pursuant to Section 8.09 of the Indenture.
Interest Coverage Addition: As to each Class of Class A Bonds and any
Payment Date during the Funding Period, an amount, not less than $0.00, equal to
the remainder of (x) the product of (A) the Original Pre-Funded Amount with
respect to such Class and (B) a rate equal to the sum of (i) the related Bond
Interest Rate for the related Interest Period, (ii) the rate used to calculate
the Bond Insurance Premium and (iii) the rate used to calculate the Bond
Administrator Fee (all rates calculated as one-twelfth of the annual rate) minus
(y) interest collected on all Subsequent Mortgage Loans during the related
Interest Period (and after the related Subsequent Cut-off Date with respect to
any Subsequent Mortgage Loans transferred during such Interest Period).
Interest Coverage Amount: With respect to each Class of Class A Bonds, the
amount to be paid from proceeds received from the sale of the Bonds for deposit
into the Interest Coverage Account pursuant to Section 8.09 of the Indenture,
which amount on the Closing Date shall be as set forth below:
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Class Amount
A-1 $111,197.08
A-2 $ 53,210.58
A-3 $ 90,975.22
A-4 $ 65,666.08
Interest Cross-Collateralization Amount: With respect to a Class of Class
A Bonds and any Payment Date, an amount to be paid to the holders of each other
Class of Class A Bonds with respect to any shortfall in the Interest Payment
Amount for such other Class, as determined in accordance with Section 3.05(b) of
the Indenture.
Interest Determination Date: With respect to any Interest Period, the
second London Business Day preceding the commencement of such Interest Period.
Interest Payment Amount: With respect to each Class of Bonds (or B
Component or IO Component) and any Payment Date, an amount equal to interest
accrued on the related Bond Principal Balance or the IO Component Notional
Amount immediately prior to such Payment Date at the related Bond Interest Rate
for the related Interest Period.
Interest Period: With respect to a Payment Date, the Interest Period for
the Class A-1 and Class A-2 Bonds and the B-1, B-2, IO-1 and IO-2 Components is
the prior Payment Date through and including the day preceding the related
Payment Date; provided that the Interest Period with respect to the first
Payment Date is the Closing Date through and including the day preceding such
Payment Date. Interest will accrue on the Class A-1 and Class A-2 Bonds and the
B-1, B-2, IO-1 and IO-2 Components on the basis of the actual number of days in
the Interest Period and a 360 day year. With respect to a Payment Date, the
Interest Period for the Class A-3 and Class A-4 Bonds and the B-3, B-4, IO-3 and
IO-4 Components is the calendar month preceding the related Payment Date.
Interest will accrue on the Class A-3 and Class A-4 Bonds and the B-3, B-4, IO-3
and IO-4 Components on the basis of twelve 30-day months and a 360 day year.
Interest Rate Adjustment Date: With respect to each Adjustable Rate
Mortgage Loan, the date or dates on which the Mortgage Rate is adjusted in
accordance with the related Mortgage Note.
Initial Required Subordination Amount: $2,519,380, with respect to Group
I, $671,835 with respect to Group II, $1,035,806 with respect to Group III and
$460,358 with respect to Group IV.
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Investment Company Act: The Investment Company Act of 1940, as
amended, and any amendments thereto.
IO-1 Component: The component of the Class IO Bonds relating to Group I.
IO-2 Component: The component of the Class IO Bonds relating to Group II.
IO-3 Component: The component of the Class IO Bonds relating to Group III.
IO-4 Component: The component of the Class IO Bonds relating to Group IV.
IO Component Payment Amount: For any IO Component and any Payment Date,
the product of (a) the related IO Component Notional Balance and (b) the Bond
Interest Rate for such IO Component (but only to the extent that funds are
available to pay such amounts on such Payment Date in accordance with the terms
of this Indenture).
IO Components: Collectively, the IO-1 Component, the IO-2 Component, the
IO-3 Component, and the IO-4 Component.
IO Component Notional Balance: With respect to each IO Component and each
Payment Date, the sum of (i) the aggregate Principal Balance of the Mortgage
Loans in the related Group and (ii) the remaining Pre-Funded Amount (if any), in
each case as of the first day of the Due Period.
IO Notional Balance: With respect to the IO Bond and any Payment Date, the
aggregate of the IO Component Notional Balances for each IO Component.
Issuer: NovaStar Mortgage Funding Trust, Series 1999-1, a Delaware
business trust, or its successor in interest.
Issuer Request: A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and approved in writing by the Bond
Insurer, so long as no Bond Insurer Default exists, and delivered to the Bond
Administrator on behalf of the Indenture Trustee.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or in the city of
London, England are required or authorized by law to be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.
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Lifetime Rate Cap: With respect to each Adjustable Rate Mortgage Loan with
respect to which the related Mortgage Note provides for a lifetime rate cap, the
maximum Mortgage Rate permitted over the life of such Mortgage Loan under the
terms of such Mortgage Note, as set forth on the Mortgage Loan Schedule and
initially as set forth on Exhibit A to the Servicing Agreement.
Limited Net Monthly Cashflow: With respect to any Payment Date on which
the Stepup Rolling Delinquency Test is not satisfied (and the Stepup Rolling
Loss Test and Stepup Cumulative Loss Test are satisfied and no MI Insurer
Insolvency Event is then continuing), the amount of Net Monthly Excess Cashflow
which would otherwise be remaining after reduction of the Subordination
Deficiency to zero, if the Required Subordination Amount did not increase due to
the failure of the Stepup Rolling Delinquency Test.
Liquidated Mortgage Loan: With respect to any Payment Date, (i) any
Mortgage Loan in respect of which the Servicer has determined, in accordance
with the servicing procedures specified in the Servicing Agreement, as of the
end of the related Prepayment Period that substantially all Liquidation Proceeds
which it reasonably expects to recover with respect to the disposition of the
related Mortgaged Property or REO Property have been recovered and, (ii) any
Mortgage Loan secured by a second lien of which any portion of a scheduled
monthly payment of principal and interest is in excess of 180 days past due.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) which
are incurred by or on behalf of the Servicer in connection with the liquidation
of any Mortgage Loan and not recovered under any insurance policy, such
expenses, including, without limitation, legal fees and expenses, any
unreimbursed amount expended respecting the related Mortgage Loan and any
related and unreimbursed expenditures for real estate property taxes or for
property restoration, preservation or insurance against casualty loss or damage.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts received under the Bond Insurance Policy) received in
connection with the liquidation of any Mortgage Loan or related REO Property,
including any proceeds received on second lien Mortgage Loans in excess of 180
days past due, whether through trustee's sale, foreclosure sale or otherwise.
Loan-to-Value Ratio: With respect to any Mortgage Loan, as of any date of
determination, a fraction expressed as a percentage, the numerator of which is
the then current principal amount of the Mortgage Loan, and the denominator of
which is the lesser of the Purchase Price or the Appraised Value of the related
Mortgaged Property.
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Loan Year: With respect to any Mortgage Loan, the one year period
commencing on the day succeeding the origination of such Mortgage Loan and
ending on the anniversary date of such Mortgage Loan, and each annual period
thereafter.
London Business Day: Any day on which banks in the City of London,
England are open and conducting transactions in United States dollars.
Majority Bondholders: Holders of Class A and Class B Bonds representing
not less than a majority of the Bond Principal Balance of all Outstanding Class
A and Class B Bonds.
Maximum Collateral Amount: The sum of the Principal Balance as of the
Cut-off Date of the Initial Mortgage Loans in such Group and the Original
Pre-Funded Amount.
Maximum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, the maximum Mortgage Rate specified in the related Mortgage Note.
MI Insurance Agreement: Collectively, (i) the Master Policy, dated as of
August 1, 1998, between NFI and the MI Insurer, (ii) the Letter Agreement, dated
August 14, 1998, between NFI and the MI Insurer, (iii) all exhibits and
schedules attached to any of the foregoing and (iv) all amendments or
supplements to any of the foregoing.
MI Insurance Proceeds: Proceeds paid by the MI Insurer pursuant to a
MI Policy.
MI Insurer: Commonwealth Mortgage Assurance Company, a Pennsylvania
mortgage insurance company, and its successors and assigns.
MI Insurer Insolvency Event: (A) The determination by the applicable
regulatory or supervisory agency having jurisdiction over the MI Insurer that
the MI Insurer is insolvent or unable to pay its obligations as they mature, (B)
following the failure of the MI Insurer to pay any claim under the MI Policy,
the joint determination by the Bond Insurer and the Servicer that the MI Insurer
is insolvent or unable to pay its obligations as they become due, (C) the
failure of the MI Insurer to pay claims during any 12 calendar months under any
number of MI Policies, (i) prior to the time the aggregate Principal Balance of
the Mortgage Loans is less than 50% of the Maximum Collateral Amount, in an
aggregate amount that exceeds the product of 0.25% and the Maximum Collateral
Amount, or (ii) after the time the aggregate Principal Balance of the Mortgage
Loans is less than 50% of the Maximum Collateral Amount, in an aggregate amount
that exceeds the product of the aggregate Principal Balance of the Mortgage
Loans (at the end of such 12 month period) and 0.50% and (D) the long-term
rating on the claims paying ability of the MI Insurer shall be lowered by
Moody's below A-2, if the MI Insurer is then rated by Moody's, or shall be
lowered by S&P below A, if the MI Insurer is then rated by S&P; provided,
however, that with respect to (C) above, any claim that is denied by the MI
Insurer on the grounds of fraud and with respect to which the Servicer, after
further review, concurs with the MI Insurer's denial on the grounds of fraud
shall not be counted under such tests as a failure of the MI Insurer to pay such
claim.
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MI Policy: The private mortgage insurance policy underwritten by the MI
Insurer with respect to an individual Mortgage Loan, issued pursuant to the MI
Insurance Agreement.
MI Premium: The primary mortgage insurance premium for each MI Policy,
payable annually to the MI Insurer, as specified in the MI Insurance Agreement,
and with respect to each monthly premium payment, 1/12 of the annual premium.
Minimum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, the minimum Mortgage Rate.
Monthly Payment: With respect to any Mortgage Loan (including any REO
Property) and any Due Date, the payment of principal and interest due thereon in
accordance with the amortization schedule at the time applicable thereto (after
adjustment, if any, for partial Principal Prepayments and for Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than a Deficient
Valuation, or similar proceeding or any moratorium or similar waiver or grace
period).
Moody's: Moody's Investors Service, Inc. or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a first
lien on an estate in fee simple interest in real property securing a Mortgage
Loan.
Mortgage File: The file containing the Related Documents pertaining to a
particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to the Mortgage Loan Purchase Agreement or the
Servicing Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage
Loans pledged under the Indenture on such date. The schedule of Initial Mortgage
Loans as of the Cut-off Date is the schedule set forth in Exhibit E of the
Indenture and the schedule or schedules of Subsequent Mortgage Loans, if any, as
of the Subsequent Cut-off Date, which schedules set forth as to each Mortgage
Loan
(i) the loan number and name of the Mortgagor;
(ii) the street address, city, state and zip code of the Mortgaged
Property;
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(iii) the Mortgage Rate at origination;
(iv) with respect to an Adjustable Rate Mortgage Loan, the Maximum Rate
and the Minimum Rate;
(v) the maturity date;
(vi) the original principal balance;
(vii) the first payment date;
(viii) the type of Mortgaged Property;
(ix) the Monthly Payment in effect as of the Cut-off Date (with respect to
an Initial Mortgage Loan) or Subsequent Cut-off Date (with respect to a
Subsequent Mortgage Loan);
(x) the Principal Balance as of the Cut-off Date (with respect to an
Initial Mortgage Loan) or Subsequent Cut-off Date (with respect to a Subsequent
Mortgage Loan);
(xi) with respect to an Adjustable Rate Mortgage Loan, the Index, the
Gross Margin; the Lifetime Rate Cap and the Periodic Rate Cap;
(xii) with respect to an Adjustable Rate Mortgage Loan, the first
Adjustment Date and next Adjustment Date, if any;
(xiii) with respect to an Adjustable Rate Mortgage Loan, the Adjustment
Date frequency and Payment Date frequency;
(xiv) the occupancy status;
(xv) the purpose of the Mortgage Loan;
(xvi) the Appraised Value of the Mortgaged Property;
(xvii) the original term to maturity;
(xviii) the paid-through date of the Mortgage Loan;
(xix) the Loan-to-Value Ratio;
(xx) whether the Mortgage Loan is an Adjustable Rate Mortgage Loan or
a Fixed Rate Mortgage Loan;
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(xxi) whether or not the Mortgage Loan was underwritten pursuant to a
limited documentation program;
(xxii) whether or not the Mortgage Loan is a Convertible Mortgage Loan;
and
(xxiii) whether the Mortgage Loan is covered by a MI Policy.
The Mortgage Loan Schedule shall set forth the total of the amounts
described under (ix) above for all of the Mortgage Loans. The Mortgage Loan
Schedule shall set forth separately the above information as to each Group of
Mortgage Loans.
Mortgage Loans: At any time, collectively, all Mortgage Loans that have
been transferred and conveyed to the Issuer, in each case together with the
Related Documents, and that remain subject to the terms of the Indenture. As
applicable, Mortgage Loan shall be deemed to refer to the related REO Property
and both Initial Mortgage Loans and Subsequent Mortgage Loans.
Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor under a Mortgage Loan.
Mortgage Rate: With respect to any Mortgage Loan, the annual rate at
which interest accrues on such Mortgage Loan.
Mortgaged Property: The underlying property, including real property
and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses.
Net Monthly Excess Cashflow: With respect to each Class of Class A Bonds
any Payment Date, the amount of Available Funds remaining after distributions
pursuant to clauses (i) through (viii) of Section 3.05(a) of the Indenture.
Net Mortgage Rate: With respect to any Mortgage Loan and any day, the
related Mortgage Rate less the sum of the related Servicing Fee Rate and the
Bond Administrator Fee Rate.
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NFI: NovaStar Financial, Inc., a Maryland corporation, and its
successors and assigns.
NRFC: NovaStar REMIC Financing Corporation, a Delaware corporation,
and its successors and assigns.
Net Weighted Average Mortgage Rate: With respect to any Group and Due
Period, the weighted average Net Mortgage Rate (weighted by Principal Balances)
of the related Mortgage Loans, calculated at the opening of business on the
first day of such Due Period.
Nonrecoverable Advance: With respect to any Mortgage Loan, any Advance (i)
which was previously made or is proposed to be made by the Servicer; and (ii)
which, in the good faith judgment of the Servicer, will not or, in the case of a
proposed Advance, would not, be ultimately recoverable by the Servicer from
Liquidation Proceeds, Insurance Proceeds, Repurchase Price or
future payments on such Mortgage Loan.
One-Month LIBOR: With respect to any Interest Period, the rate determined
by the Bond Administrator on the related Interest Determination Date on the
basis of the offered rates of the Reference Banks for one-month United States
dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00
a.m. (London time) on such Interest Determination Date. If such rate does not
appear on Telerate Page 3750, the rate for that day will be determined on the
basis of the rates at which deposits in United States dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on that day to prime
banks in the London interbank market for a period equal to the relevant Interest
Period (commencing on the first day of such Interest Period). The Bond
Administrator will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that day will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that day
will be the arithmetic mean of the rates quoted by major banks in New York City,
selected by the Bond Administrator, at approximately 11:00 a.m., New York City
time, on that day for loans in United States dollars to leading European banks
for a period equal to the relevant Interest Period (commencing on the first day
of such Interest Period).
The establishment of One-Month LIBOR on each Interest Determination Date
by the Bond Administrator and the Bond Administrator's calculation of the rate
of interest applicable to the Bonds for the related Interest Period shall (in
the absence of manifest error) be final and binding.
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Opinion of Counsel: A written opinion of counsel acceptable to the Bond
Insurer, who may be in-house counsel for the Servicer if acceptable to the Bond
Administrator on behalf of the Indenture Trustee, the Bond Insurer and the
Rating Agencies or counsel for the Transferor, as the case may be.
Original Pre-Funded Amount: With respect to each Group, the amount
deposited (from the Bond proceeds) in the Pre-Funding Account for such Group on
the Closing Date, which amount is set forth below:
Group Amount
I $10,417,601.18
II $4,391,878.50
III $6,593,665.31
IV $4,411,088.77
Original Value: Except in the case of a refinanced Mortgage Loan, the
lesser of the Appraised Value or sales price of Mortgaged Property at the time a
Mortgage Loan is closed, and for a refinanced Mortgage Loan, the Original Value
is the value of such property set forth in an appraisal acceptable to the
Servicer.
Outstanding: With respect to the Bonds, as of the date of
determination, all Bonds theretofore executed, authenticated and delivered
under the Indenture except:
Bonds theretofore canceled by the Bond Registrar or delivered to the
Bond Administrator for cancellation; and
Bonds in exchange for or in lieu of which other Bonds have been executed,
authenticated and delivered pursuant to the Indenture unless proof satisfactory
to the Bond Registrar or the Bond Administrator is presented that any such Bonds
are held by a holder in due course.
All Bonds that have been paid with funds provided under the Bond Insurance
Policy shall be deemed to be Outstanding until the Bond Insurer has been
reimbursed with respect thereto.
Owner Trust Estate: The corpus of the Issuer created by the Trust
Agreement which consists of items referred to in Section 2.05 of the Trust
Agreement.
Owner Trustee: Wilmington Trust Company, and its successors and assigns,
not in its individual capacity, but solely as owner trustee, or any successor
owner trustee, appointed pursuant to the terms of the Trust Agreement.
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Owner Trustee Fee: The initial and annual fees payable to Wilmington Trust
Company for its services as Owner Trustee under the Trust Agreement, as provided
in a separate fee agreement among Wilmington Trust Company, the Transferor and
the Servicer.
Paying Agent: Any paying agent or co-paying agent appointed pursuant
to Section 3.03 of the Indenture, which initially shall be the Indenture
Trustee
Payment Account: The account or accounts established by the Indenture
Trustee or the Bond Administrator in the name of and on behalf of the
Indenture Trustee pursuant to Section 3.01 of the Indenture. The Payment
Account shall be an Eligible Account.
Payment Adjustment Date: With respect to each negative amortization loan,
the date set forth in the related Mortgage Note on which the Monthly Payment may
change each month. The first Payment Adjustment Date as to each negative
amortization loan is set forth in the Mortgage Loan Schedule.
Payment Cap: With respect to each negative amortization loan and each
Payment Adjustment Date, the amount (expressed as a percentage) by which the
Monthly Payment on such negative amortization loan due in the month preceding
such Payment Adjustment Date is multiplied for purposes of calculating the
maximum amount to which the Monthly Payment may be adjusted, as identified as
such on the Mortgage Loan Schedule.
Payment Date: The 25th day of each month, or if such day is not a
Business Day, then the next Business Day, commencing on February 25, 1999.
Percentage Interest: With respect to any Bond, the percentage obtained by
dividing the Bond Principal Balance of such Bond by the aggregate of the Bond
Principal Balances of all Bonds. With respect to any Certificate, the percentage
on the face thereof.
Periodic Rate Cap: With respect to any Adjustable Rate Mortgage Loan, the
maximum rate, if any, by which the Mortgage Rate on such Mortgage Loan can
adjust on any Adjustment Date, as stated in the related Mortgage Note or
Mortgage.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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Pool Balance: With respect to any date, the sum of the aggregate of
the Principal Balances of all Mortgage Loans and the Pre-Funded Amount as of
such date.
Pre-Funded Amount: With respect to each Group any date of determination,
the related Original Pre-Funded Amount as reduced by the amount thereof used to
purchase Subsequent Mortgage Loans for such Group.
Pre-Funding Account: The account established and maintained by the
Bond Administrator in the name of and on behalf of the Indenture Trustee
pursuant to Section 8.08 of the Indenture.
Preference Amount: Any amount previously distributed to a Holder on the
Bonds that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the United States Bankruptcy Code (11
U.S.C.), as amended from time to time, in accordance with a final nonappealable
order of a court having competent jurisdiction.
Prepayment Interest Shortfall: As to any Payment Date and any Mortgage
Loan (other than a Mortgage Loan relating to an REO Property) that was the
subject of (a) a Principal Prepayment in full during the related Prepayment
Period, an amount equal to the excess of interest accrued during the related
Prepayment Period at the Mortgage Rate (net of the Servicing Fee) on the
Principal Balance of such Mortgage Loan over the amount of interest (adjusted to
the Mortgage Rate (net of the Servicing Fee)) paid by the Mortgagor for such
Prepayment Period to the date of such Principal Prepayment in full or (b) a
partial Principal Prepayment during the prior calendar month, an amount equal to
interest accrued during the related Prepayment Period at the Mortgage Rate (net
of the Servicing Fee) on the amount of such partial Prepayment.
Prepayment Period: As to any Payment Date, the calendar month
preceding the month of such Payment Date.
Principal Balance: With respect to any Mortgage Loan or related REO
Property, at any given time, (i) the Principal Balance of the Mortgage Loan as
of the Cut-off Date or Subsequent Cut-off Date, as applicable, minus (ii) the
sum of (a) the principal portion of the Monthly Payments due with respect to
such Mortgage Loan or REO Property during each Due Period ending prior to the
most recent Payment Date which were received or with respect to which an Advance
was made, and (b) all Principal Prepayments with respect to such Mortgage Loan
or REO Property, and all Insurance Proceeds, Liquidation Proceeds and REO
Proceeds, to the extent applied by the Servicer as recoveries of principal in
accordance with the Servicing Agreement with respect to such Mortgage Loan or
REO Property, and (c) the principal portion of any Realized Loss with respect
thereto for any previous Payment Date.
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Principal Cross-Collateralization Amount: With respect to a Class of Class
A Bonds and any Payment Date, an amount to be paid to each other Class of Class
A Bonds with respect to any shortfall in the Principal Payment Amount for such
other Class, as determined in accordance with Section 3.05(b) of the Indenture.
Principal Payment Amount: (I)(a) With respect to each Class of Class A
Bonds and any Payment Date, other than the Final Scheduled Payment Date, the
lesser of (a) the sum of (x) the Available Funds with respect to the related
Group remaining after distributions pursuant to clauses (i) through (iii) of
Section 3.05 of the Indenture and (y) any portion of any Scheduled Payment for
such Payment Date representing a Subordination Deficit and (b) the sum of:
(1) the principal portion of all Monthly Payments received and Advances
made with respect to the Mortgage Loans in the related Group during the related
Due Period (and with respect to the first Payment Date, received since the
Cut-off Date) on each related Mortgage Loan;
(2) the Principal Balance of any Mortgage Loan in the related Group
repurchased during the related Prepayment Period pursuant to the Mortgage Loan
Purchase Agreement or Sections 3.12 or 3.18 of the Servicing Agreement and the
amount of any Substitution Adjustment Amounts received during the related
Prepayment Period (and with respect to the first Payment Date, since the Cut-off
Date);
(3) the principal portion of all other unscheduled collections received
during the related Prepayment Period (or deemed to be received during the
related Prepayment Period) (including, without limitation and without
duplication, Principal Prepayments in full, partial Principal Prepayments,
Insurance Proceeds, Liquidation Proceeds and REO Proceeds) to the extent applied
by the Servicer as payments or recoveries of principal of a Mortgage Loan in the
related Group;
(4) any Scheduled Payment paid with respect to any Subordination Deficit
with respect to such Class; and
(5) with respect to the Payment Date immediately following the end of the
Funding Period, any amounts in the related Pre-Funding Account and the Interest
Coverage Account relating to the Group securing such Class after giving effect
to any purchase of related Subsequent Mortgage Loans;
minus
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(6) the amount of any Subordination Reduction Amount with respect to such
Class for such Payment Date;
and (b) with respect to the Final Scheduled Payment Date, the amount
necessary to reduce the related Bond Principal Balance to zero.
(II) In regard to each B Component, the Principal Payment Amount shall be
an amount equal to the Subordination Reduction Amount on the related class of
Class A Bonds; and in regard to the Class B Bonds, the Principal Payment Amount
shall be the aggregate of the Principal Payment Amount on each B Component.
Principal Prepayment: Any payment of principal made by the Mortgagor on a
Mortgage Loan which is received in advance of its scheduled Due Date and which
is not accompanied by an amount of interest representing scheduled interest due
on any date or dates in any month or months subsequent to the month of
prepayment.
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Prohibited Transaction: The meaning set forth from time to time in the
definition thereof at Section 860F(a)(2) of the Code (or any successor
statute thereto) and applicable to the Trust.
Prospectus: The Prospectus Supplement together with the Base
Prospectus attached thereto with respect to the Class A Bonds.
Prospectus Supplement: The Prospectus Supplement dated January 22,
1999, with respect to the Class A Bonds.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of
January 1, 1999, among the Seller, the Transferor, the Depositor, the
Indenture Trustee, the Bond Administrator and the Issuer.
Purchase Price: The meaning specified in Section 2.01(a) of the
Purchase Agreement.
Qualified Liquidation: The meaning set forth from time to time in the
definition thereof at Section 860F(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust.
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Qualified Mortgage: The meaning set forth from time to time in the
definition thereof at Section 860G(a)(3) of the Code (or any successor statute
thereto) and applicable to the Trust and the Mortgage Loan Groups.
Qualified Replacement Mortgage: A Mortgage Loan substituted for another
pursuant to Section 3.01 of the Purchase Agreement and that satisfies all of the
criteria set forth from time to time in the definition thereof at Section
860G(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust, all as evidenced by an Officer's Certificate of the Seller delivered to
the Bond Administrator on behalf of the Indenture Trustee prior to any such
substitution.
Rate Stepup Date: The Payment Date on which the aggregate Principal
Balance of the Mortgage Loans is reduced to equal to or less than 10% of the
Maximum Collateral Amount.
Rating Agency: Any nationally recognized statistical rating organization,
or its successor, that rated the Class A Bonds at the request of the Depositor
at the time of the initial issuance of the Class A Bonds. Initially such rating
agencies shall consist of Moody's and Standard & Poor's. If such organization or
a successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization, or other comparable Person,
designated by the Bond Insurer so long as no Bond Insurer Default exists, notice
of which designation shall be given to the Bond Administrator and the Indenture
Trustee. References herein to the highest short-term unsecured rating category
of a Rating Agency shall mean A-1 or better in the case of Standard & Poor's and
P-1 or better in the case of Moody's and in the case of any other Rating Agency
shall mean such equivalent rating. References herein to the highest long-term
rating category of a Rating Agency shall mean "AAA" in the case of Standard &
Poor's and "Aaa" in the case of Moody's and in the case of any other Rating
Agency, such equivalent rating.
Realized Loss: With respect to each Mortgage Loan (or REO Property) as to
which a Cash Liquidation or REO Disposition has occurred, an amount (not less
than zero) equal to (i) the Principal Balance of the Mortgage Loan (or REO
Property) as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Bondholders up to the
last day of the month in which the Cash Liquidation (or REO Disposition)
occurred on the Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced,
minus (iii) Net Liquidation Proceeds, if any, received with respect to such Cash
Liquidation (or REO Disposition), minus the portion thereof reimbursable to the
Servicer or any Subservicer with respect to related Advances or expenses as to
which the Servicer or Subservicer is entitled to reimbursement thereunder but
which have not been previously reimbursed. With respect to each Mortgage Loan
which has become the subject of a Deficient Valuation, the difference between
the principal balance of the Mortgage Loan outstanding immediately prior to such
Deficient Valuation and the principal balance of the Mortgage Loan as reduced by
the Deficient Valuation. With respect to each Mortgage Loan which has become the
object of a Debt Service Reduction, the amount of such Debt Service Reduction.
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Record Date: For the Class A-1 and Class A-2 Bonds, the Business Day prior
to the related Payment Date, and for the Class A-3, Class A-4 Bonds, Class B and
Class IO Bonds and any Class A-1 and A-2 Bonds that become Definitive Bonds, the
last day of the calendar month prior to the related Payment Date.
Reference Banks: Bankers Trust Company, Barclay's Bank PLC, The Bank of
Tokyo-Mitsubishi, LTD. and National Westminster Bank PLC and their successors in
interest; provided that if any of the foregoing banks are not suitable to serve
as a Reference Bank, then any leading banks selected by the Bond Administrator
which are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Seller or
any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBO
Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Bond Administrator.
Registered Holder: The Person in whose name a Bond is registered in
the Bond Register on the applicable Record Date.
Reimbursement Amount: With respect to a Group, the sum of all (a) payments
previously paid by the Bond Insurer under the Bond Insurance Policy with respect
to the related Class of Bonds which have not previously been reimbursed, (b) any
other amounts due to the Bond Insurer with respect to such Group pursuant to the
Insurance Agreement plus the pro rata portion of any other amounts due to the
Bond Insurer that are not allocable to a particular Group, to the extent not
previously reimbursed and (c) interest on the foregoing as set forth in the
Insurance Agreement from the date such amounts become due until paid in full.
Reimbursement Cross-Collateralization Amount: With respect to a Class of
Class A Bonds and any Payment Date an amount to be paid to the Bond Insurer for
each other Class of Class A Bonds with respect to any shortfall in the
Reimbursement Amount for such other Class, as determined in accordance with
Section 3.05(b) of the Indenture.
Related Documents: With respect to each Mortgage Loan, the documents
specified in Section 2.01(c) of the Purchase Agreement and any documents
required to be added to such documents pursuant to the Purchase Agreement, any
Subsequent Transfer Instrument, the Trust Agreement, the Indenture or the
Servicing Agreement.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
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Relief Act Shortfall: As to any Payment Date and any Mortgage Loan (other
than a Mortgage Loan relating to an REO Property), any shortfalls relating to
the Relief Act or similar legislation or regulations.
REMIC: A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Sections 860A through
860G of the Code, and related provisions, and regulations and rulings
promulgated thereunder, as the foregoing may be in effect from time to time.
REMIC Interests Sale Agreement: The REMIC Interests Sale Agreement, dated
as of January 29, 1999, between the Transferor and NRFC.
REMIC Residual Interest: A "residual interest" within the meaning set
forth from time to time in the definition thereof at Section 860G(a)(2) of the
Code or any successor statute thereto.
REMIC Trust: The segregated pool of assets consisting of the Trust Estate.
REO Acquisition: The acquisition by the Servicer on behalf of the
Indenture Trustee for the benefit of the Bondholders and the Bond Insurer of any
REO Property pursuant to Section 3.13 of the Servicing Agreement.
REO Disposition: As to any REO Property, a determination by the Servicer
that it has received substantially all Insurance Proceeds, Liquidation Proceeds,
REO Proceeds and other payments and recoveries (including proceeds of a final
sale) which the Servicer expects to be finally recoverable from the sale or
other disposition of the REO Property.
REO Imputed Interest: As to any REO Property, for any period, an amount
equivalent to interest (at the Net Mortgage Rate that would have been applicable
to the related Mortgage Loan had it been outstanding net, with respect to a
negative amortization loan, of amounts that would have been Deferred Interest,
if any) on the unpaid principal balance of the Mortgage Loan as of the date of
acquisition thereof for such period as such balance is reduced pursuant to
Section 3.13 of the Servicing Agreement by any income from the REO Property
treated as a recovery of principal and with respect to a negative amortization
loan, as such balance is increased by the addition of Deferred Interest.
REO Proceeds: Proceeds, net of expenses, received in respect of any REO
Property (including, without limitation, proceeds from the rental of the related
Mortgaged Property), which proceeds are required to be deposited into the
Collection Account within two days of receipt by the Servicer.
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REO Property: A Mortgaged Property that is acquired by the Issuer by
foreclosure or by deed in lieu of foreclosure.
Repurchase Event: With respect to any Mortgage Loan, either (i) a
discovery that, as of the Closing Date the related Mortgage was not a valid lien
on the related Mortgaged Property subject only to (A) the lien of real property
taxes and assessments not yet due and payable, (B) covenants, conditions, and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage and such other permissible title
exceptions as are permitted and (C) other matters to which like properties are
commonly subject which do not materially adversely affect the value, use,
enjoyment or marketability of the related Mortgaged Property or (ii) with
respect to any Mortgage Loan as to which the Seller delivers an affidavit
certifying that the original Mortgage Note has been lost or destroyed, a
subsequent default on such Mortgage Loan if the enforcement thereof or of the
related Mortgage is materially and adversely affected by the absence of such
original Mortgage Note.
Repurchase Price: With respect to any Mortgage Loan (i) required to be
repurchased on any date by the Seller pursuant to the Purchase Agreement, (ii)
permitted to be purchased by the Servicer pursuant to the Servicing Agreement or
(iii) required to be purchased by the Converted Loan Purchaser or the Back-up
Servicer pursuant to the Converted Loan Purchase Agreement, an amount equal to
the sum, without duplication, of (i) 100% of the Principal Balance thereof
(without reduction for any amounts charged off) and (ii) unpaid accrued interest
at the Mortgage Rate on the outstanding principal balance thereof from the Due
Date to which interest was last paid by the Mortgagor (or with respect to which
an Advance was last made by the Servicer) to the first day of the month
following the month of purchase plus (iii) the amount of any unreimbursed
Servicing Advances or unreimbursed Advances made with respect to such Mortgage
Loan plus (iv) any other amounts owed to the Servicer or the Subservicer
pursuant to Section 3.07 of the Servicing Agreement and not included in clause
(iii) of this definition.
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Required Subordination Amount: With respect to a Class of Class A Bonds
and as of any Payment Date (x) prior to the Stepdown Date, the amount which is
equal to the Initial Required Subordination Amount for the related Group and (y)
on and after the Stepdown Date (i) if the Stepdown Requirement is satisfied, the
lesser of (A) the greatest of (i) an amount equal to the Stepped Down Required
Subordination Amount for such Group and Payment Date and (ii) 0.50% of the
Maximum Collateral Amount and (iii) the aggregate Principal Balance of the three
largest Mortgage Loans then included in such Group or (B) the Initial Required
Subordination Amount or (ii) if the Stepdown Requirement is not satisfied, the
amount which is equal to the Initial Required Subordination Amount; provided,
however, that if on any Payment Date either of the Stepup Rolling Loss Test or
the Stepup Cumulative Loss Test is not satisfied or if a MI Insurer Insolvency
Event is then continuing, then the Required Subordination Amount for each Class
of Class A Bonds will be unlimited during the period that such Stepup Rolling
Loss Test or Stepup Cumulative Loss Test is not satisfied or such MI Insurer
Insolvency Event is continuing; provided, further, however, that, if on any
Payment Date, the Stepup Rolling Delinquency Test is not satisfied (and both the
Stepup Rolling Loss Test and Stepup Cumulative Loss Test are satisfied and no MI
Insurer Insolvency Event is then continuing), then the Required Subordination
Amount for each Class of Class A Bonds shall equal the sum of (A) the Initial
Required Subordination Amount for the related Group plus (B) the product of (x)
a fraction (not greater than one or less than zero), expressed as a percentage,
the numerator of which is the excess of (i) the Rolling Delinquency Percentage
for such Payment Date over (ii) 12.00% and the denominator of which is 5.00% and
(y) the Limited Net Monthly Excess Cash Flow; provided, further, however, that,
if on any Payment Date in or after February 2000, the Stepup Spread Squeeze Test
is not satisfied, then the Required Subordination Amount for the Class A-1 Bonds
and the Class A-2 Bonds shall each increase by their respective share of the
Stepup Spread Increase Amount, allocated between the Class A-1 Bonds and the
Class A-2 Bonds on a pro rata basis in preparation to the aggregate Principal
Balance of the Mortgage Loans in Group I and Group II, respectively; provided,
further, that the Required Overcollateralization Amount may be amended by the
Bond Insurer and the Servicer without the consent of the Indenture Trustee or
any Bondholder.
Responsible Officer: With respect to the Indenture Trustee or the Bond
Administrator, any officer thereof with direct responsibility for the
administration of the Indenture and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
Rolling Delinquency Percentage: For any Payment Date, the average of the
Delinquency Percentages for the Mortgage Loans as of the last day of each of the
three (or 1 and 2 in the case of the first two Payment Dates, as applicable)
most recently ended Due Periods.
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Sale: The meaning assigned in Section 5.15 of the Indenture.
Scheduled Payment: Shall have the meaning set forth in the Bond
Insurance Policy.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Security: Any of the Certificates or Bonds.
Securityholder or Holder: Any Bondholder or a Certificateholder.
Security Instrument: A written instrument creating a valid first lien on a
Mortgaged Property securing a Mortgage Note, which may be any applicable form of
mortgage, deed of trust, deed to secure debt or security deed, including any
riders or addenda thereto.
Seller: NovaStar Mortgage, Inc., a Virginia corporation, and its
successors and assigns.
Servicer: NovaStar Mortgage, Inc., a Virginia corporation, and its
successors and assigns.
Servicing Account: The separate trust account created and maintained by
the Servicer or each Subservicer with respect to the Mortgage Loans or REO
Property, which shall be an Eligible Account, for collection of taxes,
assessments, insurance premiums and comparable items as described in Section
3.08 of the Servicing Agreement.
Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in connection with a default, delinquency or
other unanticipated event in the performance by the Servicer of its servicing
obligations, including, without duplication, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.13 of the Servicing Agreement.
Servicing Agreement: The Servicing Agreement, dated as of January 1, 1999,
among the Servicer, the Back-up Servicer, the Bond Administrator, the Indenture
Trustee and the Issuer.
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Servicing Default: The meaning assigned in Section 6.01 of the
Servicing Agreement.
Servicing Fee: With respect to the Mortgage Loans and any Payment Date,
the product of (i) the Servicing Fee Rate divided by 12 and (ii) the Principal
Balance of such Mortgage Loans as of such Payment Date.
Servicing Fee Rate: With respect to any Mortgage Loan, (a) if the Servicer
is the servicer of the Mortgage Loans pursuant to the Servicing Agreement, 0.55%
per annum, which includes the Back-up Servicing Fee Rate, (b) if the Back-up
Servicer or the Bond Administrator is the servicer of the Mortgage Loans
pursuant to the Servicing Agreement, either (x) 0.50% per annum, if the Servicer
had been terminated as servicer of the Mortgage Loans for a Servicing Default
under Section 6.01(x)(D) of the Servicing Agreement, or (y) 0.75% per annum, if
the Servicer had been terminated as servicer of the Mortgage Loans for any other
reason under the Servicing Agreement and (c) if some other party is the
successor servicer, an amount (not to exceed 0.75%) to be agreed upon among the
Bond Insurer, the Indenture Trustee and such successor servicer; provided that
additional servicing compensation may be paid to a successor servicer pursuant
to Section 3.05 (b)(xiv) of the Indenture, if agreed to by the Bond Insurer and
the Indenture Trustee.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the Bond
Administrator (with a copy to the Bond Insurer) by the Servicer or a
Subservicer, as such list may be amended from time to time.
Side Indemnity Letter: The Side Indemnity Letter dated January 22,
1999 among the Depositor, the Seller and NFI.
Standard & Poor's: Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc., or its successor in interest.
Stated Rate: With respect to the Class A-1 Bonds, an annual rate of
interest equal to, for each Payment Date prior to the Rate Stepup Date,
One-Month LIBOR plus 0.43% and thereafter, One-Month LIBOR plus 0.86%. With
respect to the Class A-2 Bonds, an annual rate of interest equal to, for each
Payment Date prior to the Rate Stepup Date, One-Month LIBOR plus 0.52% and
thereafter, One-Month LIBOR plus 1.04%. With respect to the Class A-3 Bonds, an
annual rate of interest equal to, for each Payment Date prior to the Rate Stepup
Date, 6.285% and thereafter, 6.785%. With respect to the Class A-4 Bonds, an
annual rate of interest equal to, for each Payment Date prior to the Rate Stepup
Date, 6.386% and thereafter, 6.886%. For each Class of Class A Bonds, the
related Bond Interest Rate may be no greater than the related Available Funds
Cap Rate.
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With respect to each of the B Components and each Payment Date, the same
annual rate of interest that is payable on such Payment Date on the related
Class of Class A Bonds.
With respect to each IO Component and each Payment Date, the remainder, if
any, of (a) the sum of (i) the Available Funds Cap Rate for the related Class of
Class A Bonds on such Payment Date, plus, in the case of the IO-1 and IO-2
Components, (ii) 0.50%, minus (b) the Bond Interest Rate for the related Class
of the Class A Bonds on such Payment Date.
Stepdown Date: The Payment Date occurring in August 2001.
Stepped Down Required Subordination Amount: With respect to any Payment
Date after the Stepdown Date, the Stepped Down Required Subordination Percentage
multiplied by the aggregate Principal Balance of the Mortgage Loans in the
applicable Group as of the end of the immediately preceding Due Period.
Stepped Down Required Subordination Percentage: With respect to any
Payment Date and the related Class of Class A Bonds after the Stepdown Date, a
percentage equal to (i) the percentage equivalent of a fraction, the numerator
of which is, 3.25%, with respect to the Class A-1 Bonds and the Class A-2 Bonds,
and, 2.25%, with respect to the Class A-3 Bonds and the Class A-4 Bonds, of the
applicable Maximum Collateral Amount and the denominator of which is the
aggregate Principal Balance of the Mortgage Loans in the applicable Group as of
the end of the immediately preceding Due Period, minus (ii) the percentage
equivalent of a fraction, the numerator of which is the product of (A) the
percentage calculated under clause (i) above minus 6.5%, with respect to the
Class A-1 Bonds and Class A-2 Bonds, and 4.5% with respect to the Class A-3
Bonds and the Class A-4 Bonds multiplied by (B) the number of consecutive
Payment Dates through and including the Payment Date for which the Stepped Down
Required Subordination Amount is being calculated, up to a maximum of six, from
and including the Payment Date immediately following the Stepdown Date, and the
denominator of which is six.
Stepdown Requirement: The Stepdown Requirement is satisfied on any Payment
Date on or after the Payment Date in August 2001 if, as of such Payment Date,
(x) the Rolling Delinquency Percentage is less than 11.0%, (y) the Cumulative
Loss Test is satisfied and (z) the Annual Loss Percentage (Rolling Six Month) is
not greater than or equal to 0.7%.
Stepup Cumulative Loss Test: The Stepup Cumulative Loss Test for each
period indicated below is satisfied if the Cumulative Loss Percentage for such
Payment Date does not exceed the percentage set out for such Payment Date below:
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Monthly Payment Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
February 1999 January 2000 0.70%
February 2000 January 2001 0.80%
February 2001 January 2002 1.55%
February 2002 January 2003 2.05%
February 2003 January 2004 2.55%
February 2004 and thereafter 3.05%
Stepup Rolling Delinquency Test: The Stepup Rolling Delinquency Test will
be satisfied with respect to a Payment Date, if the Rolling Delinquency
Percentage for such Payment Date is 12.00% or less.
Stepup Rolling Loss Test: The Stepup Rolling Loss Test shall be satisfied
with respect to a Payment Date, if the Annual Loss Percentage (Rolling Six
Month) for such Payment Date is 0.95% or less.
Stepup Spread Increase Amount: For any Payment Date occurring in and after
February 2000 through the Payment Date in January 2001, on which the Stepup
Spread Squeeze Test has not been met, an amount equal to the product obtained by
multiplying (i) three times (ii) the excess, if any, of (x) 2.0% over (y) the
Annualized Periodic Spread as of such Payment Date times (iii) the aggregate
Principal Balance of the Adjustable Rate Mortgage Loans as of the Closing Date
plus the aggregate Principal Balance of all Subsequent Mortgage Loans that are
Adjustable Rate Mortgage Loans as of their respective Subsequent Transfer Dates.
For any Payment Date occurring in and after February 2001, on which the Stepup
Spread Squeeze Test has not been met, an amount equal to the product obtained by
multiplying (i) three times (ii) the excess, if any, of (x) 2.5% over the (y)
the Annualized Periodic Spread as of such Payment Date times (iii) the aggregate
Principal Balance of the Adjustable Rate Mortgage Loans as of the Closing Date
plus the aggregate Principal Balance of all Subsequent Mortgage Loans that are
Adjustable Rate Mortgage Loans as of their respective Subsequent Transfer Dates.
Stepup Spread Squeeze Test: With respect to any Payment Date occurring in
and after February 2000 through the Payment Date in January 2001, the Setup
Spread Squeeze Test will not be met if the Annualized Periodic Spread as of such
Payment Date, is less than 2.00%. With respect to any Payment Date occurring in
and after February 2001, the Stepup Spread Squeeze Test will not be met if the
Annualized Periodic Spread as of such Payment Date, is less than 2.50%.
Subordinated Bonds: Collectively, the Class B Bonds and the Class IO
Bonds.
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Subordination Amount: With respect to a Class of Class A Bonds and as of
any Payment Date, the excess, if any, of (x) the aggregate Principal Balance of
the Mortgage Loans in the related Group as of the close of business on the last
day of the related Due Period, over (y) the Bond Principal Balance of the Bonds
of such Class as of such Payment Date (and following the making of all
distributions on such Payment Date).
Subordination Deficiency: With respect to any Class A Bond on any Payment
Date, the amount by which the Requirement Subordination Amount for such Class A
Bond on such Payment Date exceeds the Subordination Amount for such Class A Bond
prior to the application of payments to be made on such Payment Date.
Subordination Deficit: With respect to all Class A Bonds and any Payment
Date, the amount, if any, by which (x) the aggregate Bond Principal Balance of
all Classes of Class A Bonds as of such Payment Date, and following the making
of all distributions to be made on such Payment Date (except for any payment to
be made as to principal from proceeds of the Bond Insurance Policy), exceeds (y)
the aggregate Principal Balance of all the Mortgage Loans as of the close of
business on the related Due Date for such Payment Date.
Subordination Increase Amount: With respect to a Class of Class A Bonds
and any Payment Date, the amount of any related Net Monthly Excess Cashflow
available in the Payment Account to increase the related Subordination Amount up
to the related Required Subordination Amount.
Subordination Increase Cross-Collateralization Amount: With respect to a
Class of Class A Bonds and any Payment Date, an amount to be paid to such other
Class of Class A Bonds with respect to any shortfall in the Subordination
Increase Amount for such other Class, as determined in accordance with Section
3.05(b) of the Indenture.
Subordination Reduction Amount: With respect to a Class of Class A Bonds
and any Payment Date, an amount equal to the lesser of (a) the related Excess
Subordination Amount and (b) the principal collections for such Group received
by the Servicer with respect to the prior Due Period.
Subsequent Cut-off Date: With respect to those Subsequent Mortgage Loans
which are sold to the Trust pursuant to a Subsequent Transfer Instrument, one
Business Day prior to the Subsequent Transfer Date.
Subsequent Mortgage Loan: A Mortgage Loan sold by the Seller to the
Transferor, who in turn sold such Mortgage Loan to the Trust, pursuant to
Section 2.02 of the Purchase Agreement, such Mortgage Loan being identified on
the Mortgage Loan Schedule attached to a Subsequent Transfer Instrument.
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Subsequent Transfer Date: With respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Mortgage Loans are sold
to the Trust.
Subsequent Transfer Instrument: Each Subsequent Transfer Instrument dated
as of a Subsequent Transfer Date executed by the Seller and the Transferor
substantially in the form of Exhibit 2(A) to the Purchase Agreement, by which
Subsequent Mortgage Loans are sold to the Transferor and each Subsequent
Transfer Instrument dated as of a Subsequent Transfer Date executed by the
Transferor and the Issuer substantially in the form of Exhibit 2(B) to the
Purchase Agreement, by which Subsequent Mortgage Loans are sold to the Issuer.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement as a Subservicer.
Subservicing Account: An Eligible Account established or maintained by
a Subservicer as provided for in Section 3.06(e) of the Servicing Agreement.
Subservicing Agreement: The written contract between the Servicer and any
Subservicer relating to servicing and administration of certain Mortgage Loans
as provided in Section 3.02 of the Servicing Agreement.
Subservicing Fee: With respect to each Mortgage Loan and any Payment
Date, the portion of the Servicing Fee paid to a Subservicer.
Substitution Adjustment Amount: With respect to any Eligible
Substitute Mortgage Loan, the amount as defined in Section 2.03 of the
Servicing Agreement.
Superior Lien: With respect to any Mortgage Loan which is secured by a
second lien, the mortgage loan(s) having a superior priority on the related
Mortgaged Property.
Tax Matters Person: The Bond Administrator, appointed pursuant to
Section 5.03 of the Trust Agreement.
Telerate Page 3750: The display page currently so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices) and "Reference
Banks" means leading banks selected by the Bond Administrator and engaged in
transactions in European deposits in the international Eurocurrency market.
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Transferor: NovaStar Mortgage Funding Corporation II, a Delaware
corporation, and its successors and assigns.
Treasury Regulations: Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust: The NovaStar Mortgage Funding Trust, Series 1999-1, a Delaware
business trust, to be created pursuant to the Trust Agreement.
Trust Agreement: The Trust Agreement, dated as of January 1, 1999 between
the Owner Trustee and the Depositor, as amended and restated by the Amended and
Restated Trust Agreement, dated as of January 1, 1999, among the Owner Trustee,
Transferor and the Depositor.
Trust Estate: The meaning specified in the Granting Clause of the
Indenture.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended
from time to time, as in effect on any relevant date.
UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
Underwriter: Wheat First Securities, Inc., acting through First Union
Capital Markets, a division of Wheat First Securities, Inc., and its
successors and assigns.
Underwriting Agreement: The Underwriting Agreement dated as of January 22,
1999 between the Underwriter and the Depositor with respect to the offer and
sale of the Class A Bonds, as the same may be amended from time to time.
Underwriting Guidelines: The underwriting guidelines set forth in the
Prospectus Supplement under the heading "Description of the Mortgage
Pool--Underwriting Standards for Mortgage Loans".
NOVASTAR MORTGAGE, INC.,
as Servicer,
FAIRBANKS CAPITAL CORP.,
as Back-up Servicer
FIRST UNION NATIONAL BANK,
as Bond Administrator,
THE CHASE MANHATTAN BANK,
as Indenture Trustee
and
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1,
as Issuer
SERVICING AGREEMENT
Dated as of January 1, 1999
----------------------
Fixed and Adjustable-Rate Mortgage Loans
NovaStar Mortgage Funding Trust, Series 1999-1
NovaStar Home Equity Loan Asset-Backed Bonds, Series 1999-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
ARTICLE I Definitions........................................................ 2
Section 1.01.Definitions................................................. 2
Section 1.02.Other Definitional Provisions............................... 2
Section 1.03.Interest Calculations....................................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES.................................... 3
Section 2.01.Representations and Warranties Regarding the Servicer....... 3
Section 2.02.Existence................................................... 4
Section 2.03.Enforcement of Representations and Warranties............... 4
ARTICLE III Administration and Servicing of Mortgage Loans................... 5
Section 3.01.Servicer to Assure Servicing................................ 5
Section 3.02.Subservicing Agreements Between Servicer and Subservicers... 6
Section 3.03.Successor Subservicers...................................... 7
Section 3.04.Liability of the Servicer................................... 7
Section 3.05.Assumption or Termination of Subservicing Agreements by
Back-up Servicer............................................ 8
Section 3.06.Collection of Mortgage Loan Payments........................ 9
Section 3.07.Withdrawals from the Collection Account..................... 11
Section 3.08.Collection of Taxes, Assessments and Similar Items;
Servicing Account.......................................... 12
Section 3.09.Access to Certain Documentation and Information
Regarding the Mortgage Loans................................ 13
Section 3.10.[Reserved] ................................................. 14
Section 3.11.Maintenance of Hazard Insurance and Fidelity Coverage....... 14
Section 3.12.Due-on-Sale Clauses; Assumption Agreements.................. 15
Section 3.13.Realization Upon Defaulted Mortgage Loans................... 16
Section 3.14.Bond Administrator to Cooperate; Release of Mortgage Files.. 18
Section 3.15.Servicing Compensation...................................... 19
Section 3.16.Annual Statements of Compliance............................. 19
Section 3.17.Annual Independent Public Accountants' Servicing Report..... 20
Section 3.18.Optional Purchase of Defaulted Mortgage Loans............... 20
Section 3.19.Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of
Mortgaged Property.......................................... 21
Section 3.20.Purchase of Converted Mortgage Loans........................ 21
Section 3.21.[Reserved].................................................. 22
Section 3.22.Servicing and Administrating of the MI Policies............. 22
Section 3.23.Optional Termination of the Bonds........................... 24
i
<PAGE>
ARTICLE IV Remittance Reports................................................ 24
Section 4.01.Remittance Reports.......................................... 24
Section 4.02.Advances.................................................... 25
Section 4.03.Compensating Interest Payments.............................. 26
ARTICLE V The Servicer....................................................... 26
Section 5.01.Liability of the Servicer................................... 26
Section 5.02.Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer................................ 26
Section 5.03.Limitation on Liability of the Servicer and Others.......... 26
Section 5.04.Servicer Not to Resign...................................... 27
Section 5.05.Delegation of Duties........................................ 28
Section 5.06.Servicer to Pay Indenture Trustee's, Bond Administrator's
and Owner Trustee's Fees and Expenses; Indemnification...... 28
ARTICLE VI Default........................................................... 30
Section 6.01.Servicing Default........................................... 30
Section 6.02.Back-up Servicer to Act; Appointment of Successor........... 33
Section 6.03.Notification to Bondholders................................. 34
Section 6.04.Waiver of Defaults.......................................... 35
ARTICLE VII Miscellaneous Provisions......................................... 35
Section 7.01.Amendment................................................... 35
Section 7.02.Governing Law............................................... 35
Section 7.03.Notices..................................................... 35
Section 7.04.Severability of Provisions.................................. 37
Section 7.05.Third-Party Beneficiaries................................... 38
Section 7.06.Counterparts................................................ 38
Section 7.07.Effect of Headings and Table of Contents.................... 38
Section 7.08.Termination................................................. 38
Section 7.09.No Petition................................................. 38
Section 7.10.No Recourse................................................. 38
Section 7.11.Limitation of Liability of the Owner Trustee................ 38
Section 7.12.Renewable 90 Day Term of Servicer........................... 39
ARTICLE VIII Administrative Duties of the Servicer........................... 39
Section 8.01.Administrative Duties....................................... 39
Section 8.02.Records..................................................... 41
Section 8.03.Additional Information to be Furnished...................... 41
ARTICLE IX THE BACK-UP SERVICER.............................................. 41
Section 9.01.Representations and Warranties Regarding the Back-up
Servicer.................................................... 41
Section 9.02.Back-up Servicing Fee....................................... 42
ii
<PAGE>
Section 9.03.Fee to Back-up Servicer for Assumption of Servicing......... 42
Section 9.04.Maintenance of Servicing Information by Back-Up Servicer.... 42
Section 9.05.Additional Agreements....................................... 43
EXHIBIT A - MORTGAGE LOAN SCHEDULE A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE B-1
EXHIBIT C - FORM OF LIQUIDATION REPORT C-1
</TABLE>
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THIS SERVICING AGREEMENT, dated as of January 1, 1999, among
NovaStar Mortgage, Inc., as Servicer (the "Servicer"), Fairbanks Capital Corp.,
as Back-up Servicer (the "Back-up Servicer"), First Union National Bank, as Bond
Administrator (the "Bond Administrator"), The Chase Manhattan Bank, as Indenture
Trustee (the "Indenture Trustee"), and NovaStar Mortgage Funding Trust, Series
1999-1, as Issuer (the "Issuer").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms of the Purchase Agreement, the Seller
will sell the Initial Mortgage Loans and the related MI Policies to the
Transferor on the Closing Date, who will then sell the Initial Mortgage Loans
and the related MI Policies, and assign all of its rights under the Purchase
Agreement, to the Depositor on the Closing Date;
WHEREAS, pursuant to the terms of the Trust Agreement, the Depositor
will sell the Initial Mortgage Loans and the related MI Policies, and assign all
of its rights under the Purchase Agreement, to the Issuer, without recourse, on
the Closing Date;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will
pledge the Initial Mortgage Loans and the related MI Policies, and assign all of
its rights under the Purchase Agreement, to the Indenture Trustee on the Closing
Date;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will
issue, and transfer to or at the direction of the Issuer, the Bonds and the
Subordinated Bonds;
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer
will transfer to the Depositor the Bonds, the Subordinated Bonds and the
Certificates;
WHEREAS, pursuant to the terms of the Underwriting Agreement, the
Depositor will sell the Bonds to the Underwriter;
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Depositor will transfer the Subordinated Bonds and the Certificates to the
Transferor;
WHEREAS, pursuant to the terms of the REMIC Interests Sale
Agreement, the Transferor will sell the Subordinated Bonds to NRFC;
WHEREAS, pursuant to the terms of this Servicing Agreement, the
Servicer will service the Mortgage Loans; and
WHEREAS, pursuant to the terms of the Converted Loan Purchase
Agreement, the Converted Loan Purchaser will purchase the Converted Mortgage
Loans from the Issuer.
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
For all purposes of this Servicing Agreement, except as otherwise
expressly provided herein or unless the context otherwise requires, capitalized
terms not otherwise defined herein shall have the meanings assigned to such
terms in the Definitions contained in Appendix A to the Indenture dated as of
January 1, 1999 (the "Indenture") among the Issuer, the Bond Administrator and
the Indenture Trustee, which Definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings specified
herein.
Section 1.02 Other Definitional Provisions.
(a) All terms defined in this Servicing Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import when
used in this Servicing Agreement shall refer to this Servicing Agreement as a
whole and not to any particular provision of this Servicing Agreement; Section
and Exhibit references contained in this Servicing Agreement are references to
Sections and Exhibits in or to this Servicing Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Servicing Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or in
any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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Section 1.03 Interest Calculations.
All calculations of interest hereunder that are made in respect of
the Principal Balance of a Mortgage Loan shall be made in accordance with the
terms of the related Mortgage Note and Mortgage. The calculation of the
Servicing Fee shall be made on the basis of a 360-day year consisting of twelve
30-day months. All dollar amounts calculated hereunder shall be rounded to the
nearest penny with one-half of one penny being rounded up.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties Regarding the Servicer.
The Servicer represents and warrants to the Issuer and for the
benefit of the Indenture Trustee, as pledgee of the Mortgage Loans, the Bond
Insurer and the Bondholders, as of the Closing Date, that:
(i) The Servicer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Virginia and has the corporate power to
own its assets and to transact the business in which it is currently engaged.
The Servicer is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such qualification
and in which the failure to so qualify would have a material adverse effect on
the business, properties, assets, or condition (financial or other) of the
Servicer or the validity or enforceability of the Mortgage Loans;
(ii) The Servicer has the corporate power and authority to make, execute,
deliver and perform this Servicing Agreement and all of the transactions
contemplated under this Servicing Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Servicing Agreement. When executed and delivered, this Servicing Agreement will
constitute the legal, valid and binding obligation of the Servicer enforceable
in accordance with its terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies;
(iii) The Servicer is not required to obtain the consent of any other Person
or any consent, license, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Servicing Agreement, except for such consent, license, approval or
authorization, or registration or declaration, as shall have been obtained or
filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement and the
performance of the transactions contemplated hereby by the Servicer will not
violate any provision of any existing law or regulation or any order or decree
of any court applicable to the Servicer or any provision
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of the certificate of incorporation or bylaws of the Servicer, or constitute a
material breach of any mortgage, indenture, contract or other agreement to which
the Servicer is a party or by which the Servicer may be bound; and
(v) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of the
Servicer threatened, against the Servicer or any of its properties or with
respect to this Servicing Agreement or the Bonds or the Certificates which, to
the knowledge of the Servicer, has a reasonable likelihood of resulting in a
material adverse effect on the transactions contemplated by this Servicing
Agreement.
The foregoing representations and warranties shall survive any
termination of the Servicer hereunder.
Section 2.02 Existence.
The Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Servicing Agreement.
Section 2.03 Enforcement of Representations and Warranties.
The Servicer, on behalf of and subject to the direction of the Bond
Administrator on behalf of the Indenture Trustee, as pledgee of the Mortgage
Loans, or the Bond Insurer, shall enforce the representations and warranties and
related obligations for breaches thereof of the Seller pursuant to the Purchase
Agreement. Upon the discovery by the Seller, the Servicer, the Bond
Administrator, the Indenture Trustee, the Issuer, the Owner Trustee or the Bond
Insurer of a breach of any of the representations and warranties made in the
Purchase Agreement, in respect of any Mortgage Loan which materially and
adversely affects the value of the related Mortgage Loan or the interests of the
Bondholders or the Certificateholders or the Bond Insurer, the party discovering
such breach shall give prompt written notice to the other parties. The Servicer
shall promptly notify the Seller of such breach and request that, pursuant to
the terms of the Purchase Agreement, the Seller either (i) cure such breach in
all material respects or (ii) purchase such Mortgage Loan, in each instance in
accordance with the Purchase Agreement; provided that the Seller shall, subject
to the conditions set forth in the Purchase Agreement, have the option to
substitute an Eligible Substitute Mortgage Loan or Eligible Substitute Mortgage
Loans for such Mortgage Loan. Monthly Payments due with respect to Eligible
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Estate and will be retained by the Servicer and remitted by the Servicer
to the Seller on the next succeeding Payment Date. For the month of
substitution, distributions to the Payment Account pursuant to the Servicing
Agreement will include the Monthly Payment due on a Deleted Mortgage Loan for
such month and thereafter the Seller shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loan. The Servicer shall amend or
cause to be amended the Mortgage Loan Schedule to reflect the removal of such
Mortgage Loan and the substitution of the Eligible Substitute Mortgage Loans and
the Servicer shall promptly deliver the amended Mortgage Loan Schedule to the
related
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Subservicer, if any, the Bond Insurer, the Owner Trustee, the Indenture Trustee
and the Bond Administrator.
In connection with the substitution of one or more Eligible
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (such amount, a "Substitution Adjustment Amount"), if
any, by which the aggregate principal balance of all such Eligible Substitute
Mortgage Loans as of the date of substitution is less than the aggregate
principal balance of all such Deleted Mortgage Loans (after application of the
principal portion of the Monthly Payments due in the month of substitution that
are to be distributed to the Payment Account in the month of substitution). The
Seller shall pay the Substitution Adjustment Amount to the Servicer and the
Servicer shall deposit such Substitution Adjustment Amount into the Collection
Account upon receipt.
It is understood and agreed that the obligation of the Seller to
cure such breach or purchase or substitute for such Mortgage Loan as to which
such a breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Issuer and the Indenture Trustee, as
pledgee of the Mortgage Loans, against the Seller, except as set forth in
Section 6.01 of the Purchase Agreement. In connection with the purchase of or
substitution for any such Mortgage Loan by the Seller, the Issuer shall assign
to the Seller all of its right, title and interest in respect of the Purchase
Agreement applicable to such Mortgage Loan. Upon receipt of the Repurchase
Price, or upon completion of such substitution, the Servicer shall notify the
Bond Administrator by certification signed by a Servicing Officer (which
certification shall include a statement to the effect that the Repurchase Price
has been deposited in the Collection Account) and then the Bond Administrator on
behalf of the Indenture Trustee shall deliver the Mortgage Files relating to
such Mortgage Loan to the Servicer, together with all relevant endorsements and
assignments prepared by the Servicer which the Bond Administrator, on behalf of
the Indenture Trustee, shall execute or cause to be executed.
ARTICLE III.
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 Servicer to Assure Servicing
(a) The Servicer shall supervise, or take such actions as are necessary to
ensure, the servicing and administration of the Mortgage Loans and any REO
Property in accordance with this Servicing Agreement and its normal servicing
practices, which generally shall conform to the standards of an institution
prudently servicing mortgage loans for its own account and shall have full
authority to do anything it reasonably deems appropriate or desirable in
connection with such servicing and administration. With the consent of the Bond
Insurer, the Servicer may perform its responsibilities relating to servicing
through other agents or independent contractors, but shall not thereby be
released from any of its responsibilities as hereinafter set forth. Subject to
Section 3.06(b), the authority of the Servicer, in its capacity as Servicer, and
any Subservicer acting on its behalf, shall include, without limitation, the
power to (i) consult with and advise any Subservicer regarding administration of
a related Mortgage Loan, (ii) approve any
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recommendation by a Subservicer to foreclose on a related Mortgage Loan, (iii)
supervise the filing and collection of insurance claims and take or cause to be
taken such actions on behalf of the insured Person thereunder as shall be
reasonably necessary to prevent the denial of coverage thereunder, and (iv)
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing a related Mortgage Loan, including the employment of
attorneys, the institution of legal proceedings, the collection of deficiency
judgments, the acceptance of compromise proposals and any other matter
pertaining to a delinquent Mortgage Loan. The authority of the Servicer shall
include, in addition, the power on behalf of the Bondholders, the Indenture
Trustee, the Bond Insurer or any of them to (i) execute and deliver customary
consents or waivers and other instruments and documents, (ii) upon receiving the
consent of the Bond Insurer, consent to transfer of any related Mortgaged
Property and assumptions of the related Mortgage Notes and Security Instruments
(in the manner provided in this Servicing Agreement) and (iii) collect any
Insurance Proceeds and Liquidation Proceeds. Without limiting the generality of
the foregoing, the Servicer and any Subservicer acting on its behalf may, and is
hereby authorized, and empowered by the Indenture Trustee when the Servicer
believes it is reasonably necessary in its best judgment in order to comply with
its servicing duties hereunder, to execute and deliver, on behalf of itself, the
Bondholders, the Indenture Trustee, the Bond Insurer or any of them, any
instruments of satisfaction, cancellation, partial or full release, discharge
and all other comparable instruments, with respect to the related Mortgage
Loans, the insurance policies and the accounts related thereto, and the
Mortgaged Properties. The Servicer may exercise this power in its own name or in
the name of a Subservicer. The Servicer will not waive any prepayment penalties
without the consent of the Bond Insurer.
The Servicer, in such capacity, may not consent to the placing of a
lien senior to that of the Mortgage on the related Mortgaged Property.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Servicing Agreement) to the Issuer and the
Indenture Trustee under this Servicing Agreement is intended by the parties to
be that of an independent contractor and not that of a joint venturer, partner
or agent.
(b) Notwithstanding the provisions of Subsection 3.01(a), the Servicer
shall not take any action inconsistent with the interests of the Indenture
Trustee, the Bond Insurer or the Bondholders or with the rights and interests of
the Indenture Trustee, the Bond Insurer or the Bondholders under this Servicing
Agreement.
(c) The Bond Administrator shall furnish or shall cause the Indenture
Trustee to furnish the Servicer with any powers of attorney and other documents
in form as provided to it necessary or appropriate to enable the Servicer to
service and administer the related Mortgage Loans and REO Property and the Bond
Administrator and the Indenture Trustee shall not be liable for the actions of
the Servicer or any Subservicers under such powers of attorney.
Section 3.02 Subservicing Agreements Between Servicer and Subservicers
(a) With the consent of the Bond Insurer, the Servicer may enter into
Subservicing Agreements with Subservicers for the servicing and administration
of the Mortgage Loans and
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for the performance of any and all other activities of the Servicer hereunder.
Each Subservicer shall be either (i) an institution the accounts of which are
insured by the FDIC or (ii) another entity that engages in the business of
originating or servicing mortgage loans comparable to the Mortgage Loans, and
in either case shall be authorized to transact business in the state or states
in which the related Mortgaged Properties it is to service are situated, if and
to the extent required by applicable law to enable the Subservicer to perform
its obligations hereunder and under the Subservicing Agreement. Any Subservicing
Agreement entered into by the Servicer shall include the provision that such
Agreement may be immediately terminated (i) (x) with cause and without any
termination fee by the Servicer hereunder and/or (y) without cause, in which
case the Servicer shall be solely responsible for any termination fee or penalty
resulting therefrom and (ii) at the option of the Bond Insurer upon the
termination or resignation of the Servicer hereunder, in which case the Servicer
shall be solely responsible for any termination fee or penalty resulting
therefrom. In addition, each Subservicing Agreement shall provide for servicing
of the Mortgage Loans consistent with the terms of this Servicing Agreement.
With the consent of the Bond Insurer, the Servicer and the Subservicers may
enter into Subservicing Agreements and make amendments to the Subservicing
Agreements or enter into different forms of Subservicing Agreements providing
for, among other things, the delegation by the Servicer to a Subservicer of
additional duties regarding the administration of the Mortgage Loans; provided,
however, that any such amendments or different forms shall be consistent with
and not violate the provisions of this Servicing Agreement, and that no such
amendment or different form shall be made or entered into which could be
reasonably expected to be materially adverse to the interests of the Bond
Insurer or the Bondholders, without the consent of the Bond Insurer or, if a
Bond Insurer Default exists, the holders of at least 51% of the aggregate Bond
Principal Balance of the Outstanding Bonds.
(b) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Indenture Trustee, the Bond Insurer and the Bondholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing Agreements and the pursuit of
other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense, but shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement only to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loan or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed.
Section 3.03 Successor Subservicers.
With the consent of the Bond Insurer, the Servicer shall be entitled
to terminate any Subservicing Agreement that may exist in accordance with the
terms and conditions of such Subservicing Agreement and without any limitation
by virtue of this Servicing Agreement; provided, however, that upon termination,
the Servicer shall either act as servicer of the related Mortgage Loans or enter
into an appropriate contract with a successor Subservicer reasonably acceptable
to the Bond Administrator on behalf of the Indenture Trustee, and the Bond
Insurer
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pursuant to which such successor Subservicer will be bound by all relevant terms
of the related Subservicing Agreement pertaining to the servicing of such
Mortgage Loans.
Section 3.04 Liability of the Servicer
(a) Notwithstanding any Subservicing Agreement, any of the provisions of this
Servicing Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall under all circumstances remain obligated and
primarily liable to the Bond Administrator, the Indenture Trustee, the
Bondholders and the Bond Insurer for the servicing and administering of the
Mortgage Loans and any REO Property in accordance with this Servicing Agreement.
The obligations and liability of the Servicer shall not be diminished by virtue
of Subservicing Agreements or by virtue of indemnification of the Servicer by
any Subservicer, or any other Person. The obligations and liability of the
Servicer shall remain of the same nature and under the same terms and conditions
as if the Servicer alone were servicing and administering the related Mortgage
Loans. The Servicer shall, however, be entitled to enter into indemnification
agreements with any Subservicer or other Person and nothing in this Servicing
Agreement shall be deemed to limit or modify such indemnification. For the
purposes of this Servicing Agreement, the Servicer shall be deemed to have
received any payment on a Mortgage Loan on the date the Subservicer received
such payment.
(b) Any Subservicing Agreement that may be entered into and any transactions
or services relating to the Mortgage Loans involving a Subservicer in its
capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone, and the Bond Administrator, the Indenture
Trustee, the Bond Insurer and the Bondholders shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Subservicer except as set forth in Section 3.15.
Section 3.05 Assumption or Termination of Subservicing Agreements
by Back-up Servicer
(a) If the Back-up Servicer or its designee as the successor Servicer, shall
assume the servicing obligations of the Servicer in accordance with Section 6.02
below, the Back-up Servicer, to the extent necessary to permit the Back-up
Servicer to carry out the provisions of Section 6.02 with respect to the
Mortgage Loans, shall succeed to all of the rights and obligations of the
Servicer under each of the Subservicing Agreements. In such event, the Back-up
Servicer or its designee as the successor Servicer shall be deemed to have
assumed all of the Servicer's rights and obligations therein and to have
replaced the Servicer as a party to such Subservicing Agreements to the same
extent as if such Subservicing Agreements had been assigned to the Back-up
Servicer or its designee as a successor Servicer, except that the Back-up
Servicer or its designee as a successor Servicer shall not be deemed to have
assumed any obligations or liabilities of the Servicer arising prior to such
assumption or as a result of the Back-up Servicer's terminating any Subservicer
upon the Back-up Servicer becoming successor Servicer and the Servicer shall not
thereby be relieved of any liability or obligations under such Subservicing
Agreements arising prior to such assumption or as a result of the Back-up
Servicer's terminating any Subservicer upon the Back-up Servicer becoming
successor Servicer.
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(b) The Back-up Servicer may, with the consent of the Bond Insurer, terminate
any Subservicer upon becoming successor Servicer.
(c) In the event that the Back-up Servicer or its designee as successor
Servicer for the Back-up Servicer assumes the servicing obligations of the
Servicer under Section 6.02, upon the request of the Back-up Servicer or such
designee as successor Servicer, the Servicer shall at its own expense deliver to
the Back-up Servicer, or at its written request to such designee, originals or,
if originals are not available, photocopies of all documents, files and records,
electronic or otherwise, relating to the Subservicing Agreements and the related
Mortgage Loans or REO Property then being serviced and an accounting of amounts
collected and held by it, if any, and will otherwise cooperate and use its
reasonable efforts to effect the orderly and efficient transfer of the
Subservicing Agreements, or responsibilities hereunder to the Back-up Servicer,
or at its written request to such designee as successor Servicer.
Section 3.06 Collection of Mortgage Loan Payments
(a) The Servicer will coordinate and monitor remittances by Subservicers to it
with respect to the Mortgage Loans in accordance with this Servicing Agreement.
(b) The Servicer shall make its best reasonable efforts to collect or cause to
be collected all payments required under the terms and provisions of the
Mortgage Loans and shall follow, and use its best reasonable efforts to cause
Subservicers to follow, collection procedures comparable to the collection
procedures of prudent mortgage lenders servicing mortgage loans for their own
account to the extent such procedures shall be consistent with this Servicing
Agreement. Consistent with the foregoing, the Servicer or the related
Subservicer may in its discretion (i) waive or permit to be waived any late
payment charge, prepayment charge (with the consent of the Bond Insurer),
assumption fee, or any penalty interest in connection with the prepayment of a
Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced
regular monthly payments for a period of up to six months, or arrange or permit
an arrangement with a Mortgagor for a scheduled liquidation of delinquencies;
provided, however, that the Servicer or the related Subservicer may permit the
foregoing only if it believes, in good faith, that recoveries of Monthly
Payments will be maximized; provided further, however, that the Servicer may not
without the prior written consent of the MI Insurer and the Bond Insurer permit
any waiver, modification or variance which would (a) change the loan rate, (b)
forgive any payment of principal or interest, (c) lessen the lien priority or
(d) extend the final maturity date of a Mortgage Loan past 12 months after the
original maturity date on such Mortgage Loan. In the event the Servicer or
related Subservicer shall consent to the deferment of the due dates for payments
due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall
cause the related Subservicer to make an advance to the same extent as if such
installment were due, owing and delinquent and had not been deferred through
liquidation of the Mortgaged Property; provided, however, that the obligation of
the Servicer or the related Subservicer to make an Advance shall apply only to
the extent that the Servicer believes, in good faith, that such advances are not
Nonrecoverable Advances.
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(c) Within five Business Days after the Servicer has determined that all
amounts which it expects to recover from or on account of a Liquidated Mortgage
Loan have been recovered and that no further Liquidation Proceeds will be
received in connection therewith, the Servicer shall provide to (i) the Bond
Administrator a certificate of a Servicing Officer that such Mortgage Loan
became a Liquidated Mortgage Loan as of the date of such determination and (ii)
the Bond Insurer and the Bond Administrator a Liquidation Report in the form
attached hereto as Exhibit C.
(d) The Servicer shall establish a segregated account in the name of the
Indenture Trustee (the "Collection Account"), which shall be an Eligible
Account, in which the Servicer shall deposit or cause to be deposited any
amounts representing payments on and any collections in respect of the Mortgage
Loans received by it after the Cut-Off Date or, with respect to the Subsequent
Mortgage Loans, the Subsequent Cut-off Date (other than in respect of the
payments referred to in the following paragraph) within two Business Days
following receipt thereof, including the following payments and collections
received or made by it (without duplication):
(i) all payments of principal or interest on the Mortgage Loans received by
the Servicer directly from Mortgagors or from the respective Subservicer;
(ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the
Servicer pursuant to Section 3.18 or by the Converted Loan Purchaser, pursuant
to Section 3.20;
(iii) Net Liquidation Proceeds;
(iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to
the Purchase Agreement, and all Substitution Adjustment Amounts required to be
deposited in connection with the substitution of an Eligible Substitute Mortgage
Loan pursuant to the Purchase Agreement;
(v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance
Proceeds resulting from any insurance policy maintained on a Mortgaged Property;
(vi) any Advance and any Compensating Interest payments;
(vii) any other amounts received by the Servicer, including all Foreclosure
Profits, assumption fees, prepayment penalties and any other fees that are
required to be deposited in the Collection Account pursuant to this Servicing
Agreement.
provided, however, that with respect to each Due Period, the Servicer shall be
permitted to retain from payments in respect of interest on the Mortgage Loans,
the Servicing Fee for such Due Period. The foregoing requirements respecting
deposits to the Collection Account are exclusive, it being understood that,
without limiting the generality of the foregoing, the Servicer need not deposit
in the Collection Account late payment charges payable by Mortgagors, as further
described in Section 3.15, or amounts received by the Subservicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items. In the event any amount not required to
be deposited in the Collection Account is so
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deposited, the Servicer may at any time (prior to being terminated under this
Servicing Agreement) withdraw such amount from the Collection Account, any
provision herein to the contrary notwithstanding. The Servicer shall keep
records that accurately reflect the funds on deposit in the Collection Account
that have been identified by it as being attributable to the Mortgage Loans and
shall hold all collections in the Collection Account for the benefit of the
Owner Trustee, the Indenture Trustee, the Bondholders and the Bond Insurer, as
their interests may appear.
Funds in the Collection Account may be invested in Eligible
Investments, but shall not be commingled with the Servicer's own funds or
general assets or with funds respecting payments on mortgage loans or with any
other funds not related to the Bonds. Income earned on such Eligible Investments
shall be for the account of the Servicer.
(e) The Servicer will require each Subservicer to hold all funds constituting
collections on the Mortgage Loans, pending remittance thereof to the Servicer,
in one or more accounts in the name of the Indenture Trustee meeting the
requirements of an Eligible Account, and such funds shall not be invested. The
Subservicer shall segregate and hold all funds collected and received pursuant
to each Mortgage Loan separate and apart from any of its own funds and general
assets and any other funds. Each Subservicer shall make remittances to the
Servicer no later than one Business Day following receipt thereof and the
Servicer shall deposit any such remittances received from any Subservicer within
one Business Day following receipt by the Servicer.
Section 3.07 Withdrawals from the Collection Account
(a) The Servicer shall, from time to time as provided herein, make withdrawals
from the Collection Account of amounts on deposit therein pursuant to Section
3.06 that are attributable to the Mortgage Loans for the following purposes
(without duplication):
(i) to deposit in the Payment Account, by the fourth Business Day prior to
each Payment Date, all collections on the Mortgage Loans required to be
distributed from the Payment Account on a Payment Date;
(ii) to the extent deposited to the Collection Account, to reimburse itself or
the related Subservicer for previously unreimbursed expenses incurred in
maintaining individual insurance policies pursuant to Section 3.11, or
Liquidation Expenses, paid pursuant to Section 3.13, such withdrawal right being
limited to amounts received on particular Mortgage Loans (other than any
Repurchase Price in respect thereof) which represent late recoveries of the
payments for which such advances were made, or from related Liquidation
Proceeds;
(iii) to pay to itself out of each payment received on account of interest on
a Mortgage Loan as contemplated by Section 3.15, an amount equal to the related
Servicing Fee (to the extent not retained pursuant to Section 3.06) and to pay
the Back-up Servicer an amount equal to the Back-up Servicing Fee;
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(iv) to pay to itself or the Seller, with respect to any Mortgage Loan or
property acquired in respect thereof that has been purchased by the Seller, the
Servicer or other entity, all amounts received thereon and not required to be
distributed to Bondholders as of the date on which the related Repurchase Price
is determined;
(v) to reimburse the Servicer or any Subservicer for any unreimbursed Advance
of its own funds or any unreimbursed advance of such Subservicer's own funds,
the right of the Servicer or a Subservicer to reimbursement pursuant to this
subclause (v) being limited to amounts received on a particular Mortgage Loan
(including, for this purpose, the Repurchase Price therefor, Insurance Proceeds
and Liquidation Proceeds) which represent late payments or recoveries of the
principal of or interest on such Mortgage Loan respecting which such Advance or
advance was made;
(vi) to reimburse the Servicer or any Subservicer from Insurance Proceeds or
Liquidation Proceeds relating to a particular Mortgage Loan for amounts expended
by the Servicer or such Subservicer pursuant to Section 3.13 in good faith in
connection with the restoration of the related Mortgage Property which was
damaged by the uninsured cause or in connection with the liquidation of such
Mortgage Loan;
(vii) to reimburse the Servicer or any Subservicer for any unreimbursed
Nonrecoverable Advance previously made, and otherwise not reimbursed pursuant to
this Subsection 3.07(a);
(viii) to pay the Owner Trustee the Owner Trustee Fee;
(ix) to withdraw any other amount deposited in the Collection Account that was
not required to be deposited therein pursuant to Section 3.06;
(x) to reimburse the Servicer for costs associated with the environmental
report specified in Section 3.13(c);
(xi) to clear and terminate the Collection Account upon a termination pursuant
to Section 7.08;
(xii) to pay to the Servicer income earned on Eligible Investments in the
Collection Account;
(xiii) to pay to the MI Insurer the monthly MI Premium due under each MI
Policy from payments received (or Advances made) on account of interest due on
the related Mortgage Loan; and
(xiv) to make an Advance with respect to a delinquent Mortgage Loan from funds
held in the Collection Account as contemplated by Section 4.02, provided that
the amount withdrawn for such an Advance is immediately deposited into the
Payment Account.
Withdrawals made pursuant to clause (xiii) shall be made on a first priority
basis. In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v)
and (vi), the Servicer's entitlement thereto
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is limited to collections or other recoveries on the related Mortgage Loan, and
the Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Collection Account pursuant to such clauses.
(b) Notwithstanding the provisions of this Section 3.07, the Servicer may, but
is not required to, allow the Subservicers to deduct from amounts received by
them or from the related account maintained by a Subservicer, prior to deposit
in the Collection Account, any portion to which such Subservicers are entitled
as reimbursement of any reimbursable Advances made by such Subservicers.
Section 3.08 Collection of Taxes, Assessments and Similar Items;
Servicing Accounts
(a) The Servicer shall establish and maintain or cause the related Subservicer
to establish and maintain, one or more Servicing Accounts. The Servicer or a
Subservicer will deposit and retain therein all collections from the Mortgagors
for the payment of taxes, assessments, insurance premiums, or comparable items
as agent of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in trust by the
Servicer or a Subservicer (and its successors and assigns) in the name of the
Indenture Trustee. Such Servicing Accounts shall be Eligible Accounts and, if
permitted by applicable law, invested in Eligible Investments held in trust by
the Servicer or a Subservicer as described above and maturing, or be subject to
redemption or withdrawal, no later than the date on which such funds are
required to be withdrawn, and in no event later than 45 days after the date of
investment; withdrawals of amounts from the Servicing Accounts may be made only
to effect timely payment of taxes, assessments, insurance premiums, or
comparable items, to reimburse the Servicer or a Subservicer for any advances
made with respect to such items, to refund to any Mortgagors any sums as may be
determined to be overages, to pay interest, if required, to Mortgagors on
balances in the Servicing Accounts or to clear and terminate the Servicing
Accounts at or any time after the termination of this Servicing Agreement.
Amounts received from Mortgagors for deposit into the Servicing Accounts shall
be deposited in the Servicing Accounts by the Servicer within two days of
receipt. The Servicer shall advance from its own funds amounts needed to pay
items payable from the Servicing Accounts if the Servicer reasonably believes
that such amounts are recoverable from the related Mortgagor. The Servicer shall
comply with all laws relating to the Servicing Accounts, including laws relating
to payment of interest on the Servicing Accounts. If interest earned by the
Servicer on the Servicing Accounts is not sufficient to pay required interest on
the Servicing Accounts, the Servicer shall pay the difference from its own
funds. The Servicing Accounts shall not be the property of the Issuer.
Section 3.09 Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Servicer shall provide, and shall cause any Subservicer to
provide, to the Bond Administrator, the Indenture Trustee, the Owner Trustee and
the Bond Insurer access to the documentation regarding the related Mortgage
Loans and REO Property and to the Bondholders, the FDIC, and the supervisory
agents and examiners of the FDIC (to which the Bond Administrator and the
Indenture Trustee shall also provide) access to the documentation regarding the
related Mortgage Loans required by applicable regulations, such access being
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afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer or the Subservicers that are
designated by these entities; provided, however, that, unless otherwise required
by law, the Bond Administrator, the Indenture Trustee, the Servicer or the
Subservicer shall not be required to provide access to such documentation if the
provision thereof would violate the legal right to privacy of any Mortgagor;
provided, further, however, that the Bond Administrator, the Indenture Trustee,
the Bond Insurer and the Owner Trustee shall coordinate their requests for such
access so as not to impose an unreasonable burden on, or cause an unreasonable
interruption of, the business of the Servicer or any Subservicer. The Servicer,
the Subservicers, the Indenture Trustee and the Bond Administrator shall allow
representatives of the above entities to photocopy any of the documentation and
shall provide equipment for that purpose at a charge that covers their own
actual out-of-pocket costs.
Section 3.10 [Reserved]
Section 3.11 Maintenance of Hazard Insurance and Fidelity Coverage
(a) The Servicer shall maintain and keep, or cause each Subservicer to
maintain and keep, with respect to each Mortgage Loan and each REO Property, in
full force and effect hazard insurance (fire insurance with extended coverage)
equal to at least the lesser of the Principal Balance of the Mortgage Loan (or
the combined Principal Balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan) or the current replacement cost of the Mortgaged
Property, and containing a standard mortgagee clause, provided, however, that
the amount of hazard insurance may not be less than the amount necessary to
prevent loss due to the application of any co-insurance provision of the related
policy. Unless applicable state law requires a higher deductible, the deductible
on such hazard insurance policy may be no more than $1,500 or 1% of the
applicable amount of coverage, whichever is less. In the case of a condominium
unit or a unit in a planned unit development, the required hazard insurance
shall take the form of a multi-peril policy covering the entire condominium
project or planned unit development, in an amount equal to at least 100% of the
insurable value based on replacement cost. If the Servicer shall obtain and
maintain a blanket policy consistent with its general mortgage servicing
activities from an insurer acceptable to the Bond Insurer insuring against
hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to
have satisfied its obligations as set forth in this Section 3.11(a), it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property a policy complying with this Section 3.11(a)
and there shall have been a loss which would have been covered by such policy,
deposit in the Collection Account the amount not otherwise payable under the
blanket policy because of such deductible clause without any right of
reimbursement. Any such deposit by the Servicer shall be made on the last
Business Day of the Due Period in the month in which payments under any such
policy would have been deposited in the Collection Account. In connection with
its activities as servicer of the Mortgage Loans, the Servicer agrees to
present, on behalf of itself, the Issuer, and the Indenture Trustee, claims
under any such blanket policy.
(b) Any amounts collected by the Servicer or a Subservicer under any such
hazard insurance policy (other than amounts to be applied to the restoration or
repair of the Mortgaged
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Property or amounts released to the Mortgagor in accordance with the Servicer's
or a Subservicer's normal servicing procedures, the Mortgage Note, the Security
Instrument or applicable law) shall be deposited in the Collection Account.
(c) Any cost incurred by a Servicer or a Subservicer in maintaining any such
individual hazard insurance policies shall not be added to the amount owing
under the Mortgage Loan for the purpose of calculating monthly distributions to
Bondholders, notwithstanding that the terms of the Mortgage Loan so permit. Such
costs of maintaining individual hazard insurance policies shall be recoverable
by the Servicer or a Subservicer out of related late payments by the Mortgagor
or out of Insurance Proceeds or Liquidation Proceeds or by the Servicer from the
Repurchase Price, to the extent permitted by Section 3.07.
(d) No earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. When, at
the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard
area, the Servicer shall use its best reasonable efforts to cause with respect
to the Mortgage Loans and each REO Property flood insurance (to the extent
available and in accordance with mortgage servicing industry practice) to be
maintained. Such flood insurance shall cover the Mortgaged Property, including
all items taken into account in arriving at the Appraised Value on which the
Mortgage Loan was based, and shall be in an amount equal to the lesser of (i)
the Principal Balance of the related Mortgage Loan and (ii) the minimum amount
required under the terms of coverage to compensate for any damage or loss on a
replacement cost basis, but not more than the maximum amount of such insurance
available for the related Mortgaged Property under either the regular or
emergency programs of the National Flood Insurance Program (assuming that the
area in which such Mortgaged Property is located is participating in such
program). Unless applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,500 or 1% of the applicable
amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections 3.11 (a)
and (d) and there shall have been a loss which would have been covered by such
insurance had it been maintained, the Servicer shall pay, or cause the related
Subservicer to pay, for any necessary repairs without any right of
reimbursement.
(f) The Servicer shall present, or cause the related Subservicer to present,
claims under any related hazard insurance or flood insurance policy.
(g) The Servicer shall obtain and maintain at its own expense, and shall cause
each Subservicer to obtain and maintain at its own expense, and for the duration
of this Servicing Agreement, a blanket fidelity bond and an errors and omissions
insurance policy covering the Servicer's and such Subservicer's officers,
employees and other persons acting on its behalf in connection with its
activities under this Servicing Agreement. The amount of coverage shall be
consistent with industry standards but in an amount not less than presently
maintained by the Servicer. The Servicer shall promptly notify the Bond
Administrator, the Indenture Trustee and
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the Bond Insurer of any material change in the terms of such bond or policy. The
Servicer shall provide annually to the Bond Administrator, the Indenture Trustee
and the Bond Insurer a certificate of insurance that such bond and policy are in
effect. If any such bond or policy ceases to be in effect, the Servicer shall,
to the extent possible, give the Bond Administrator, the Indenture Trustee and
the Bond Insurer ten days' notice prior to any such cessation and shall use its
reasonable best efforts to obtain a comparable replacement bond or policy, as
the case may be. Any amounts relating to the Mortgage Loans collected under such
bond or policy shall be deposited in the Collection Account.
Section 3.12 Due-on-Sale Clauses; Assumption Agreements
(a) In any case in which the Servicer is notified by any Mortgagor or
Subservicer that a Mortgaged Property relating to a Mortgage Loan has been or is
about to be conveyed by the Mortgagor, the Servicer shall enforce, or shall
instruct such Subservicer to enforce, any due-on-sale clause contained in the
related Security Instrument to the extent permitted under the terms of the
related Mortgage Note and by applicable law. The Servicer or the related
Subservicer may repurchase a Mortgage Loan at the Repurchase Price when the
Servicer requires acceleration of the Mortgage Loan, but only if the Servicer is
satisfied, as evidenced by an Officer's Certificate delivered to the Bond
Administrator, the Indenture Trustee and the Bond Insurer, that such Mortgage
Loan is in default or default is reasonably foreseeable. If the Servicer
reasonably believes that such due-on-sale clause cannot be enforced under
applicable law or if the Mortgage Loan does not contain a due-on-sale clause,
the Servicer is authorized, and may authorize any Subservicer, to consent to a
conveyance subject to the lien of the Mortgage, and, with the consent of the MI
Insurer, if applicable, to take or enter into an assumption agreement from or
with the Person to whom such property has been or is about to be conveyed,
pursuant to which such Person becomes liable under the related Mortgage Note and
unless prohibited by applicable state law, such Mortgagor remains liable
thereon, on condition, however, that the related Mortgage Loan shall continue to
be covered by a hazard policy. In connection with any such assumption, no
material term of the related Mortgage Note may be changed. The Servicer shall
notify the Bond Administrator, the Indenture Trustee and the Bond Insurer,
whenever possible, before the completion of such assumption agreement, and shall
forward to the Bond Administrator the original copy of such assumption
agreement, which copy shall be added by the Bond Administrator to the related
Mortgage File and which shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
(b) Notwithstanding the foregoing paragraph or any other provision of this
Servicing Agreement, the Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or any conveyance by the Mortgagor of the
related Mortgaged Property or assumption of a Mortgage Loan which the Servicer
reasonably believes it may be restricted by law from preventing, for any reason
whatsoever or if the exercise of such right would impair or threaten to impair
any recovery under any applicable insurance policy.
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Section 3.13 Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, or shall direct the related Subservicer to, foreclose
upon or otherwise comparably convert the ownership of properties securing any
Mortgage Loans that come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.06, except that the Servicer shall not, and shall not
direct the related Subservicer to, foreclose upon or otherwise comparably
convert a Mortgaged Property if there is evidence of toxic waste or other
environmental hazards thereon unless the Servicer follows the procedures in
Subsection (c) below. In connection with such foreclosure or other conversion,
the Servicer in conjunction with the related Subservicer, if any, shall use its
best reasonable efforts to preserve REO Property and to realize upon defaulted
Mortgage Loans in such manner as to maximize the receipt of principal and
interest by the Bondholders, taking into account, among other things, the timing
of foreclosure and the considerations set forth in Subsection 3.13(b). The
foregoing is subject to the proviso that the Servicer shall not be required to
expend its own funds in connection with any foreclosure or towards the
restoration of any property unless it determines in good faith (i) that such
restoration or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to Bondholders after reimbursement to itself for such expenses and
(ii) that such expenses will be recoverable to it either through Liquidation
Proceeds (respecting which it shall have priority for purposes of reimbursements
from the Collection Account pursuant to Section 3.07) or through Insurance
Proceeds (respecting which it shall have similar priority). The Servicer shall
be responsible for all costs and expenses constituting Liquidation Expenses
incurred by it in any such proceedings; provided, however, that it shall be
entitled to reimbursement thereof (as well as its normal servicing compensation)
as set forth in Section 3.07. Any income from or other funds (net of any income
taxes) generated by REO Property shall be deemed for purposes of this Servicing
Agreement to be Liquidation Proceeds.
Any subsequent collections with respect to any Liquidated Mortgage
Loan shall be deposited to the Collection Account. For purposes of determining
the amount of any Liquidation Proceeds or Insurance Proceeds, or other
unscheduled collections, the Servicer may take into account any estimated
additional Liquidation Expenses expected to be incurred in connection with the
related defaulted Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee and held by the Bond Administrator, who
shall hold the same on behalf of Indenture Trustee and the Issuer in accordance
with the Indenture. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgaged Property shall (except
as otherwise expressly provided herein) be considered to be an outstanding
Mortgage Loan held as an asset of the Issuer until such time as such property
shall be sold.
(b) The Servicer shall not acquire any real property (or any personal property
incident to such real property) on behalf of the Trust Estate except in
connection with a default or reasonably foreseeable default of a Mortgage Loan.
In the event that the Servicer acquires any real property (or personal property
incident to such real property) on behalf of the Trust Estate in
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connection with a default or imminent default of a Mortgage Loan, such property
shall be disposed of by the Servicer on behalf of the Trust Estate within two
years after its acquisition on behalf of the Trust Estate.
(c) With respect to any Mortgage Loan as to which the Servicer or a
Subservicer has received notice of, or has actual knowledge of, the presence of
any toxic or hazardous substance on the Mortgaged Property, the Servicer shall
promptly notify the Bond Administrator, the Indenture Trustee, the Owner Trustee
and the Bond Insurer and shall act in accordance with any such directions and
instructions provided by the Bond Insurer, or if a Bond Insurer Default exists,
by the Bond Administrator on behalf of, and after consulting with, the Indenture
Trustee, as pledgee of the Issuer. Notwithstanding the preceding sentence of
this Section 3.13(c), with respect to any Mortgage Loan described by such
sentence, the Servicer shall, if requested by the Bond Insurer, obtain and
deliver to the Issuer, the Bond Administrator, the Indenture Trustee, and the
Bond Insurer an environmental audit report prepared by a Person who regularly
conducts environmental audits using customary industry standards. The Servicer
shall be entitled to reimbursement for such report pursuant to Section 3.07. If
the Bond Insurer or Bond Administrator on behalf of the Indenture Trustee, as
applicable, has not provided directions and instructions to the Servicer in
connection with any such Mortgage Loan within 30 days of a request by the
Servicer for such directions and instructions, then the Servicer shall take such
action as it deems to be in the best economic interest of the Trust Estate
(other than proceeding against the Mortgaged Property) and is hereby authorized
at such time as it deems appropriate to release such Mortgaged Property from the
lien of the related Mortgage. The parties hereto acknowledge that the Servicer
shall not obtain on behalf of the Issuer a deed as a result or in lieu of
foreclosure, and shall not otherwise acquire possession of or title to, or
commence any proceedings to acquire possession of or title to, or take any other
action with respect to, any Mortgaged Property, if the Owner Trustee as such and
in its individual capacity could reasonably be considered to be a responsible
party for any liability arising from the presence of any toxic or hazardous
substance on the Mortgaged Property, unless the Owner Trustee as such and in its
individual capacity has been indemnified to its reasonable satisfaction against
such liability.
Section 3.14 Bond Administrator to Cooperate; Release of Mortgage Files.
(a) Upon payment in full of any Mortgage Loan, the Servicer will immediately
notify the Bond Administrator and the Indenture Trustee by a certification
signed by a Servicing Officer (which certification shall include a statement to
the effect that all amounts received in connection with such payment which are
required to be deposited in the Collection Account have been so deposited) and
shall request delivery to the Servicer or Subservicer, as the case may be, of
the Mortgage File. Upon receipt of such certification and request, the Bond
Administrator on behalf of the Indenture Trustee shall promptly cause to be
released the related Mortgage File to the Servicer or Subservicer and execute
and deliver to the Servicer, without recourse, the request for reconveyance,
deed of reconveyance or release or satisfaction of mortgage or such instrument
releasing the lien of the Security Instrument (furnished by the Servicer),
together with the Mortgage Note with written evidence of cancellation thereon.
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(b) From time to time as is appropriate, for the servicing or foreclosure of
any Mortgage Loan or collection under an insurance policy, the Servicer may
deliver to the Bond Administrator a Request for Release signed by a Servicing
Officer on behalf of the Servicer in substantially the form attached as Exhibit
B hereto. Upon receipt of the Request for Release, the Bond Administrator on
behalf of the Indenture Trustee shall deliver the Mortgage File or any document
therein to the Servicer or Subservicer, as the case may be, as bailee for the
Indenture Trustee.
(c) The Servicer shall cause each Mortgage File or any document therein
released pursuant to Subsection 3.14(b) to be returned to the Bond Administrator
when the need therefor no longer exists, and in any event within 21 days of the
Servicer's receipt thereof, unless the Mortgage Loan has become a Liquidated
Mortgage Loan and the Liquidation Proceeds relating to the Mortgage Loan have
been deposited in the Collection Account or such Mortgage File is being used to
pursue foreclosure or other legal proceedings. Prior to return of a Mortgage
File or any document to the Bond Administrator, the Servicer, the related
insurer or Subservicer to whom such file or document was delivered shall retain
such file or document in its respective control as bailee for the Bond
Administrator on behalf of the Indenture Trustee unless the Mortgage File or
such document has been delivered to an attorney, or to a public trustee or other
public official as required by law, to initiate or pursue legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Servicer has delivered to the Bond Administrator and the
Indenture Trustee, a certificate of a Servicing Officer certifying as to the
name and address of the Person to which such Mortgage File or such document was
delivered and the purpose or purposes of such delivery. If a Mortgage Loan
becomes a Liquidated Mortgage Loan, the Bond Administrator on behalf of the
Indenture Trustee shall deliver the Request for Release with respect thereto to
the Servicer upon deposit of the related Liquidation Proceeds in the Collection
Account.
(d) The Bond Administrator on behalf of the Indenture Trustee shall execute
and deliver or cause to be executed and delivered to the Servicer any court
pleadings, requests for trustee's sale or other documents necessary to (i) the
foreclosure or trustee's sale with respect to a Mortgaged Property; (ii) any
legal action brought to obtain judgment against any Mortgagor on the Mortgage
Note or Security Instrument; (iii) obtain a deficiency judgment against the
Mortgagor; or (iv) enforce any other rights or remedies provided by the Mortgage
Note or Security Instrument or otherwise available at law or equity. Together
with such documents or pleadings the Servicer shall deliver to the Bond
Administrator and the Indenture Trustee a certificate of a Servicing Officer in
which it requests the Bond Administrator on behalf of the Indenture Trustee to
execute or cause to be executed the pleadings or documents. The certificate
shall certify and explain the reasons for which the pleadings or documents are
required. It shall further certify that the Indenture Trustee's or the Bond
Administrator's execution and delivery of the pleadings or documents will not
invalidate any insurance coverage under the insurance policies or invalidate or
otherwise affect the lien of the Security Instrument, except for the termination
of such a lien upon completion of the foreclosure or trustee's sale.
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Section 3.15 Servicing Compensation.
(a) As compensation for its activities hereunder, the Servicer shall be
entitled to receive the Servicing Fee (out of which it will pay the Back-up
Servicer) from full payments of accrued interest on each Mortgage Loan. The
Servicer shall be solely responsible for paying any and all fees with respect to
a Subservicer, and the Back-up Servicer and the Trust Estate shall not bear any
fees, expenses or other costs directly associated with any Subservicer.
(b) The Servicer may retain additional servicing compensation in the form of
late payment charges, to the extent such charges are collected from the related
Mortgagors and investment earnings on the Collection Account. The Servicer shall
be required to pay all expenses it incurs in connection with servicing
activities under this Servicing Agreement and shall not be entitled in
connection with servicing activities under this Servicing Agreement to
reimbursement except as provided in this Servicing Agreement. Expenses to be
paid by the Servicer without reimbursement under this Subsection 3.15(b) shall
include payment of the expenses of the accountants retained pursuant to Section
3.17.
Section 3.16 Annual Statements of Compliance.
Within 90 days after December 31 of each year, the Servicer at its
own expense shall deliver to the Bond Administrator, with a copy to the Bond
Insurer and the Indenture Trustee and the Rating Agencies, an Officer's
Certificate stating, as to the signer thereof, that (i) a review of the
activities of the Servicer during the preceding calendar year and of performance
under this Servicing Agreement has been made under such officer's supervision,
(ii) to the best of such officer's knowledge, based on such review, the Servicer
has fulfilled its obligations under this Servicing Agreement in all material
respects for such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof including the steps being taken by the Servicer to
remedy such default; (iii) a review of the activities of each Subservicer during
the Subservicer's most recently ended calendar year and its performance under
its Subservicing Agreement has been made under such officer's supervision; and
(iv) to the best of the Servicing Officer's knowledge, based on his review and
the certification of an officer of the Subservicer (unless the Servicing Officer
has reason to believe that reliance on such certification is not justified),
either each Subservicer has performed and fulfilled its duties, responsibilities
and obligations under this Servicing Agreement and its Subservicing Agreement in
all material respects throughout the year, or, if there has been a default in
performance or fulfillment of any such duties, responsibilities or obligations,
specifying the nature and status of each such default known to the Servicing
Officer. Copies of such statements shall be provided by the Servicer to the
Bondholders upon request or by the Bond Administrator at the expense of the
Servicer should the Servicer fail to provide such copies.
Section 3.17 Annual Independent Public Accountants' Servicing Report.
(a) Within 90 days after December 31 of each year, the Servicer, at its
expense, shall cause a firm of independent public accountants who are members of
the American Institute of Certified Public Accountants and are otherwise
acceptable to the Bond Insurer to furnish a
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statement to the Servicer, which will be provided to the Bond Administrator,
the Indenture Trustee, the Bond Insurer and the Rating Agencies, to the effect
that, in connection with the firm's examination of the Servicer's financial
statements as of the end of such calendar year, nothing came to their attention
that indicated that the Servicer was not in compliance with Sections 3.06, 3.07
and 3.08 except for (i) such exceptions as such firm believes to be immaterial
and (ii) such other exceptions as are set forth in such statement.
(b) Within 90 days after December 31 of each year, the Servicer, at its
expense, shall, and shall cause each Subservicer to cause, a nationally
recognized firm of independent certified public accountants to furnish to the
Servicer or such Subservicer, as the case may be, a report stating that (i) it
has obtained a letter of representation regarding certain matters from the
management of the Servicer or such Subservicer, as the case may be, which
includes an assertion that the Servicer or such Subservicer, as the case may be,
has complied with certain minimum mortgage loan servicing standards identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America with respect to the servicing of
first lien conventional single family mortgage loans during the most recently
completed calendar year and (ii) on the basis of an examination conducted by
such firm in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. Immediately upon receipt of such report, the Servicer shall or
shall cause each Subservicer to furnish a copy of such report to the Bond
Administrator, the Indenture Trustee, the Rating Agencies and the Bond Insurer.
Section 3.18 Optional Purchase of Defaulted Mortgage Loans.
The Servicer may repurchase any Mortgage Loan delinquent in payment
for a period of 90 days or longer for a price equal to the Repurchase Price;
provided, that the aggregate Principal Balance of Mortgage Loans repurchased by
the Servicer may not exceed, without the consent of the Bond Insurer, 3% of the
sum of the aggregate Principal Balance of the Initial Mortgage Loans as of the
Cut-off Date and the Original Pre-Funded Amount; and provided, further, that,
unless the Bond Insurer consents otherwise, the Servicer must repurchase such
mortgage loans in the reverse order of the respective number of days delinquent,
including foreclosures. The procedure for such repurchase shall be the same as
for repurchase by the Seller under the Purchase Agreement. Notwithstanding any
contrary provision of this Agreement, with respect to any Mortgage Loan which is
not in default or as to which no default is imminent, no purchase or
substitution pursuant to Section 2.03 or this Section 3.18 shall be made unless
the Servicer provides to the Bond Administrator, the Indenture Trustee, the
Owner Trustee and the Bond Insurer an Opinion of Counsel to the effect that such
purchase or substitution would not (i) result in the imposition of taxes on
"prohibited transactions" of the Trust Estate, as defined in Section 860F of the
Code or a tax or contributions to the Trust Estate under the REMIC Provisions,
or (ii) cause the Trust Estate to fail to qualify as a REMIC at any time that
any Bonds are outstanding. Any Mortgage Loan to be purchased or substituted
pursuant to this Section 3.18 shall be purchased or substituted (subject to
compliance with this Section 3.18) upon the earlier of (x) the occurrence of a
default or reasonably foreseeable default with respect to such Mortgage Loan or
(y) receipt by the Bond Administrator, the Indenture Trustee, the Owner Trustee
and the
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Bond Insurer of an Opinion of Counsel to the effect that such purchase
or substitution will not result in the events described in clauses (i) and (ii)
of the preceding sentence.
Section 3.19 Information Required by the Internal Revenue Service Generally and
Reports of Foreclosures and Abandonments of Mortgaged Property.
The Servicer shall prepare and deliver all federal and state
information reports when and as required by all applicable state and federal
income tax laws. In particular, with respect to the requirement under Section
6050J of the Code to the effect that the Servicer or Subservicer shall make
reports of foreclosures and abandonments of any mortgaged property for each year
beginning in 1999, the Servicer or Subservicer shall file reports relating to
each instance occurring during the previous calendar year in which the Servicer
(i) acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that any Mortgaged Property has been abandoned.
The reports from the Servicer or Subservicer shall be in form and substance
sufficient to meet the reporting requirements imposed by Section 6050J, Section
6050H (reports relating to mortgage interest received) and Section 6050P of the
Code (reports relating to cancellation of indebtedness).
Section 3.20 Purchase of Converted Mortgage Loans.
Pursuant to the Converted Loan Purchase Agreement, the Converted
Loan Purchaser shall be obligated to purchase from the Issuer any Converted
Mortgage Loans at the Repurchase Price. The Servicer shall promptly notify the
Bond Insurer, the Bond Administrator, the Indenture Trustee and the Converted
Loan Purchaser of each Mortgage Loan which becomes a Converted Mortgage Loan. If
the Converted Loan Purchaser fails to purchase any Converted Loan, the Servicer
shall be terminated and the Back-up Servicer shall be the Servicer and is
obligated to make such purchase under the Converted Loan Purchase Agreement.
Section 3.21 [Reserved]
Section 3.22 Servicing and Administrating of the MI Policies.
(a) The Servicer shall take all such actions on behalf of the Issuer as are
necessary to service, maintain and administer the MI Policies and to perform the
Issuer's obligations and enforce the Issuer's rights under the MI Policies,
which actions shall conform to the standards of an institution prudently
administering MI Policies for its own account. Except as expressly set forth
herein, the Servicer shall have full authority on behalf of the Issuer to do
anything it reasonably deems appropriate or desirable in connection with the
servicing, maintenance and administration of the MI Policies. The Servicer shall
make its best reasonable efforts to file all insured claims under the MI
Policies and collect from the MI Insurer all Insurance Proceeds due to the
Issuer under the MI Policies. The Servicer shall not take, or permit any
subservicer to take, any action which would result in non-coverage under any
applicable MI Policy of any loss which, but for the actions of the Servicer or
Subservicer, would have been covered thereunder. To the extent coverage is
available, the Servicer shall keep or cause to be kept in full force and effect
each such MI Policy for the life of the Mortgage Loan; provided, however, that
if a MI
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Insurer Insolvency Event has occurred and is continuing, the Servicer shall, at
the direction of the Bond Insurer, or, if a Bond Insurer Default has occurred
and is continuing, may, terminate the MI Policy on any Mortgage Loan that is not
then past due. Unless a Bond Insurer Default has occurred and is continuing,
neither the Servicer, the Bond Administrator nor the Indenture Trustee shall
terminate the MI Policy with respect to any Mortgage Loan without the prior
written consent of the Bond Insurer. The Servicer shall cooperate with the MI
Insurer and shall use its best efforts to furnish all reasonable aid, evidence
and information in the possession of the Servicer or to which the Servicer has
access with respect to any Mortgage Loan.
(b) The Servicer shall deposit into the Collection Account pursuant to Section
3.06(d)(v) hereof all MI Insurance Proceeds received from the MI Insurer under
the terms of the MI Policies. The Servicer shall withdraw from the Collection
Account and pay to the MI Insurer pursuant to Section 3.07(a)(xiii) hereof, the
monthly MI Premiums due to the MI Insurer in accordance with the terms of the MI
Insurance Agreement.
(c) Notwithstanding the provisions of Subsection 3.22(a) and (b), the Servicer
shall not take any action in regard to the MI Policies inconsistent with the
interests of the Indenture Trustee, the Bond Insurer or the Bondholders or with
the rights and interests of the Indenture Trustee, the Bond Insurer or the
Bondholders under this Servicing Agreement; provided, however, that payments of
the monthly MI Premiums to the MI Insurer pursuant to Subsection 3.22(b) above
and Section 3.07(a)(xiii) hereof shall be deemed not to be inconsistent with
such interests.
(d) The Issuer and the Bond Administrator on behalf of the Indenture Trustee
shall furnish the Servicer with any powers of attorney and other documents in
form as provided to it necessary or appropriate to enable the Servicer to
service and administer the MI Policies; provided, however, that neither the Bond
Administrator nor the Indenture Trustee shall be liable for the actions of the
Servicer under such powers of attorney.
(e) If at any time during the term of this Agreement, a MI Insurer Insolvency
Event has occurred and is continuing, the Servicer agrees to review, not less
often than monthly, the financial condition of the MI Insurer with a view
towards determining whether recoveries under the MI Policy are jeopardized for
reasons related to the financial condition of the MI Insurer. In such event, the
Servicer may obtain an additional MI Policy or a replacement MI Policy, the MI
Premiums on which would be paid by the Servicer from the Collection Account
pursuant to Section 3.07(a)(xiii) hereof. In the event that the Servicer is
unable to obtain such additional MI Policy or replacement MI Policy, the Bond
Insurer may, after consulting with the Servicer, obtain for the benefit of the
Indenture Trustee, the Bondholders and the Bond Insurer an additional MI Policy
or a replacement MI Policy, the MI Premiums on which would be paid by the
Servicer from the Collection Account pursuant to Section 3.07(a)(xiii) hereof.
The Servicer shall cooperate with and assist the Bond Insurer in obtaining any
replacement or additional policy.
(f) The Servicer shall give written notice to the MI Insurer of all "Defaults"
and "Early Defaults" (as such terms are defined in the MI Policy) with respect
to the Mortgage Loans or any
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other notice required to be given pursuant to the MI policy within the time
frames and in the manner provided in the MI Policy.
(g) The Servicer shall not authorize any assumption agreement with respect to
any Mortgage Loan covered by a MI Policy without the prior written approval of
the MI Insurer.
(h) With respect to each Mortgage Loan covered by a MI Policy, the Servicer
shall initiate foreclosure proceedings or other appropriate proceedings not
later than 6 months after it is permitted to do so hereunder and under the
Mortgage Loan and by applicable law, and shall provide copies of all notices and
pleadings with respect thereto.
(i) With respect to any Mortgage Loan covered by a MI Policy, the Servicer
shall use its best efforts to obtain the MI Insurer's Consent with respect to
any "Approved Sale" (as such term is defined in the MI Policy) of the related
Mortgaged Property.
(j) [reserved]
(k) The Servicer shall furnish to the Bond Insurer copies of all claims under
any MI Policy made by the Servicer to the MI Insurer and all correspondence
between the MI Insurer and the Servicer with respect to claims under any MI
Policy made by the Servicer to the MI Insurer.
(l) The Servicer shall comply with all other terms, conditions or obligations
set forth in any MI Policy.
(m) Following any MI Insurer Insolvency Event (excluding any such event that
results solely under subparagraph (C) of the definition thereof), the Bond
Insurer shall consult with the Servicer regarding whether or not to terminate
the MI Policy with respect to any Mortgage Loan that is not then past due. The
Bond Insurer shall give the Servicer thirty (30) days prior written notice of
its intention to terminate the MI Policy with respect to any Mortgage Loan.
Section 3.23 Optional Termination of the Bonds
(a) Pursuant to Section 8.07 of the Indenture, the Servicer shall have the
option of purchasing 100% of the Mortgage Loans, causing the redemption of the
Bonds in whole, but not in part, on any Payment Date on or after the Payment
Date on which the aggregate Principal Balance of the Mortgage Loans in all four
Groups is reduced to less than 10% of the Maximum Collateral Amount. The
purchase price for Mortgage Loans in each Group will be an amount sufficient to
pay 100% of the outstanding Bond Principal Balance of each Class of Class A
Bonds and of each of the B Components as of the Payment Date on which the
proposed purchase will take place in accordance with the foregoing, together
with accrued and unpaid interest thereon (and on the Class IO Bonds) at the
related Bond Interest Rate through such Payment Date (including any related
Carry-Forward Amount), plus an amount sufficient to pay in full all amounts
owing to the Bond Insurer, the Bond Administrator and the Indenture Trustee
under the Indenture and the Insurance Agreement and the Servicer under the
Servicing Agreement (which amounts shall be specified in writing upon request of
the Issuer by the Indenture Trustee, the
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Bond Administrator and the Bond Insurer). Such termination must constitute a
"qualified liquidation" of the REMIC established by the Issuer under Section
860F of the Code, including without limitation, the requirement that the
qualified liquidation takes place over a period not to exceed 90 days.
(b) In order to exercise the foregoing option, the Servicer shall, not less
than 30 days prior to the proposed Payment Date on which such termination is to
be made, provide written notice of its exercise of such option to the Bond
Administrator, the Indenture Trustee, the Bond Insurer, the Owner Trustee and
the Issuer. Following receipt of the notice, pursuant to the foregoing, the Bond
Administrator, on behalf of the Indenture Trustee, shall provide notice to the
Bondholders of the final payment on the Bonds, conduct a qualified liquidation
of the Trust Estate and will remit funds from such liquidation to the Indenture
Trustee to be applied to make final payments of principal and interest on the
Bonds.
ARTICLE IV
REMITTANCE REPORTS
Section 4.01 Remittance Reports.
On the second Business Day following each Determination Date, the
Servicer shall deliver to the Bond Administrator and the Bond Insurer a report,
prepared as of the close of business on the Determination Date (the
"Determination Date Report"), and shall forward to the Bond Administrator and
the Bond Insurer in the form of computer readable electromagnetic tape or disk a
copy of such report. The Determination Date Report and any written information
supplemental thereto shall include such information with respect to the Mortgage
Loans that is reasonably available to the Servicer and that is required by the
Bond Administrator for purposes of making the calculations and providing the
reports referred to in the Indenture, as set forth in written specifications or
guidelines issued by the Bond Administrator from time to time. Such information
shall include the aggregate amounts required to be withdrawn from the Collection
Account and deposited into the Payment Account pursuant to Section 3.07. Such
information shall also include (a) the number of Mortgage Loans that prepaid in
the previous month; (b) the loan balance of each such Mortgage Loan; (c) whether
a prepayment penalty was applied to such Mortgage Loan; and (d) the amount of
prepayment penalty with respect to each such Mortgage Loan (in each case broken
out by Group). The Servicer agrees to cooperate with the Bond Administrator and
the Bond Insurer in providing all information as is reasonably requested by the
Bond Administrator and the Bond Insurer to prepare the reports required under
the Indenture. The Servicer shall deliver the Determination Date Report to the
Bond Insurer in the CPI S50Y magnetic tape format.
The determination by the Servicer of such amounts shall, in the
absence of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Owner Trustee, as such and in its individual capacity, and the
Indenture Trustee and the Bond Administrator shall be fully protected in relying
upon the same without any independent check or verification.
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Section 4.02 Advances.
If any Monthly Payment (together with any advances from the
Subservicers) on a Mortgage Loan that was due on the immediately preceding Due
Date and delinquent on the Determination Date is delinquent other than as a
result of application of the Relief Act, the Servicer will deposit in the
Collection Account not later than the fourth Business Day immediately preceding
the related Payment Date an amount equal to such deficiency net of the related
Servicing Fee for such Mortgage Loan, except to the extent the Servicer
determines any such advance to be nonrecoverable from Liquidation Proceeds,
Insurance Proceeds or future payments on such Mortgage Loan. Subject to the
foregoing and in the absence of such a determination, the Servicer shall
continue to make such advances through the date that the related Mortgaged
Property has, in the judgment of the Servicer, been completely liquidated.
The Servicer may fund an Advance from its own corporate funds,
advances made by any subservicer or funds held in the Collection Account for
future payment or withdrawal.
Advances made from funds held in the Collection Account may be made
by the Servicer from subsequent collections of principal and interest received
on other Mortgage Loans and deposited into the Collection Account. Advances made
from the Collection Account are not limited to subsequent collections of
principal and interest received on the delinquent Mortgage Loan with respect to
which an Advance is made. If on the fourth Business Day prior to any Payment
Date funds in the Collection Account are less than the amount required to be
paid to the Bondholders on such Payment Date, then the Servicer shall deposit
its own funds into the Payment Account in the amount of the lesser of (i) any
unreimbursed Advances previously made by the Servicer with funds held in the
Collection Account or (ii) the shortfall in the Collection Account, provided,
however, that in no event shall the Servicer deposit into the Collection Account
an amount that is less than any shortfall in the Collection Account attributable
to delinquent payments on Mortgage Loans which the Servicer deems to be
recoverable and which has not been covered by an Advance from the Servicer's own
corporate funds or any subservicer's funds. If applicable, on the fourth
Business Day preceding each Payment Date, the Servicer shall present an
Officer's Certificate to the Bond Administrator, the Indenture Trustee and the
Bond Insurer (i) stating that the Servicer elects not to make an Advance in a
stated amount and (ii) detailing the reason it deems the advance to be
nonrecoverable. The Bond Administrator shall forward a copy of such Officer's
Certificate to the Bond Insurer.
Section 4.03 Compensating Interest Payments.
The Servicer shall deposit in the Collection Account not later than
the fourth Business Day preceding the Payment Date an amount equal to the
Compensating Interest related to the related Determination Date. The Servicer
shall not be entitled to any reimbursement of any Compensating Interest payment.
Such Compensating Interest payment shall not relieve the Servicer of its
obligation to pay the Back-up Servicing Fee.
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ARTICLE V
THE SERVICER
Section 5.01 Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by the
Servicer herein.
Section 5.02 Merger or Consolidation of, or Assumption of the Obligations of,
the Servicer.
Any corporation into which the Servicer 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 Servicer shall be a party, or
any corporation succeeding to the business of the Servicer, shall be, with the
consent of the Bond Insurer, the successor of the Servicer, hereunder, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
The Servicer may fully assign all of its rights and delegate its
duties and obligations under this Servicing Agreement; provided, that the Person
accepting such assignment or delegation shall be a Person which is reasonably
satisfactory to the Bond Administrator, the Indenture Trustee (as pledgee of the
Mortgage Loans) and the Bond Insurer (in its sole discretion), is willing to
service the Mortgage Loans and executes and delivers to the Bond Insurer, the
Bond Administrator, the Indenture Trustee and the Issuer an agreement, in form
and substance reasonably satisfactory to the Bond Insurer, the Bond
Administrator, the Indenture Trustee and the Issuer, which contains an
assumption by such Person of the due and punctual performance and observance of
each covenant and condition to be performed or observed by the Servicer under
this Servicing Agreement; provided, further, that each Rating Agency's rating of
the Bonds in effect immediately prior to such assignment and delegation will not
be qualified, reduced, or withdrawn as a result of such assignment and
delegation (as evidenced by a letter to such effect from each Rating Agency)
without taking into account the Bond Insurance Policy.
Section 5.03 Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or
employees or agents of the Servicer shall be under any liability to the Issuer,
the Owner Trustee, the Bond Administrator, the Indenture Trustee, the Bond
Insurer or the Bondholders for any action taken or for refraining from the
taking of any action in good faith pursuant to this Servicing Agreement,
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability which would otherwise be imposed by reason of
its willful misfeasance, bad faith or negligence in the performance of its
duties hereunder or by reason of its reckless disregard of its obligations and
duties hereunder. The Servicer and any director or officer or employee or agent
of the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Servicer and any director or officer or employee or agent of the
Servicer shall be indemnified by the Issuer and held harmless against any loss,
liability or expense incurred in connection with any legal action
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relating to this Servicing Agreement or the Bonds, including any amount paid to
the Owner Trustee or the Bond Administrator on behalf of the Indenture Trustee
pursuant to Section 5.06(b), other than any loss, liability or expense related
to any specific Mortgage Loan or Mortgage Loans (except as any such loss,
liability or expense shall be otherwise reimbursable pursuant to this Servicing
Agreement) and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or negligence in the performance of its duties hereunder
or by reason of its reckless disregard of its obligations and duties hereunder.
The Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the Mortgage
Loans in accordance with this Servicing Agreement, and which in its opinion may
involve it in any expense or liability; provided, however, that the Servicer may
in its sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Servicing Agreement, and the rights and duties of
the parties hereto and the interests of the Bondholders hereunder. In such
event, the reasonable legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Issuer, and
the Servicer shall be entitled to be reimbursed therefor. The Servicer's right
to indemnity or reimbursement pursuant to this Section 5.03 shall survive any
resignation or termination of the Servicer pursuant to Section 5.04 or 6.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination). Any reimbursements or indemnification to the
Servicer from the Issuer pursuant to this Section 5.03 shall be payable in the
priority set forth in Section 3.05(a)(xi) of the Indenture.
Section 5.04 Servicer Not to Resign.
Subject to the provisions of Section 5.02, the Servicer shall not
resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are no
longer permissible under applicable law or (ii) upon satisfaction of the
following conditions: (a) the Servicer has proposed a successor servicer to the
Issuer, the Bond Insurer, the Indenture Trustee and the Bond Administrator in
writing and such proposed successor servicer is reasonably acceptable to the
Issuer, the Indenture Trustee and the Bond Administrator; (b) each Rating Agency
shall have delivered a letter to the Issuer, the Indenture Trustee, the Bond
Insurer and the Bond Administrator prior to the appointment of the successor
servicer stating that the proposed appointment of such successor servicer as
Servicer hereunder will not result in the reduction or withdrawal of the then
current rating of the Bonds or the then current rating of the Bonds without
taking into account the Bond Insurance Policy; and (c) such proposed successor
servicer is acceptable to the Bond Insurer, as evidenced by a letter to the
Issuer, the Servicer, the Indenture Trustee and the Bond Administrator;
provided, however, that no such resignation by the Servicer shall become
effective until such successor servicer or, in the case of (i) above, the
Back-up Servicer or its designee as successor Servicer shall have assumed the
Servicer's responsibilities and obligations hereunder or the Back-up Servicer or
its designee as successor Servicer shall have designated a successor servicer in
accordance with Section 6.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 6.01
and 6.02 as obligations that survive the resignation or termination of the
Servicer. The Servicer shall have no claim (whether by subrogation or otherwise)
or other action against any Bondholder or the Bond Insurer for any amounts paid
by
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the Servicer pursuant to any provision of this Servicing Agreement. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Bond Administrator, the
Indenture Trustee and the Bond Insurer.
Section 5.05 Delegation of Duties.
In the ordinary course of business, and with the consent of the Bond
Insurer, the Servicer at any time may delegate any of its duties hereunder to
any Person, including any of its Affiliates, who agrees to conduct such duties
in accordance with the same standards with which the Servicer complies pursuant
to Section 3.01. Such delegation shall not relieve the Servicer of its
liabilities and responsibilities with respect to such duties and shall not
constitute a resignation within the meaning of Section 5.04.
Section 5.06 Servicer to Pay Indenture Trustee's, Bond Administrator's and Owner
Trustee's Fees and Expenses; Indemnification.
(a) The Servicer covenants and agrees to pay to the Owner Trustee, the Bond
Administrator and any co-trustee of the Indenture Trustee from time to time, and
the Owner Trustee, the Bond Administrator and any such co-trustee shall be
entitled to, reasonable compensation, including all indemnification payments
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by each
of them in the execution of the trusts created under the Trust Agreement and the
Indenture and in the exercise and performance of any of the powers and duties
under the Trust Agreement or the Indenture, as the case may be, of the Owner
Trustee, the Bond Administrator, the Indenture Trustee and any co-trustee of the
Indenture Trustee, and the Servicer will pay or reimburse the Owner Trustee, the
Bond Administrator, the Indenture Trustee and any co-trustee upon request for
all reasonable expenses, disbursements and advances incurred or made by the
Owner Trustee, the Bond Administrator, the Indenture Trustee or any co-trustee
of the Indenture Trustee in accordance with any of the provisions of this
Servicing Agreement except any such expense, disbursement or advance as may
arise from its negligence or bad faith.
(b) The Servicer agrees to indemnify the Indenture Trustee, the Bond
Administrator and the Owner Trustee (as such and/or in its individual capacity)
for, and to defend and hold, the Indenture Trustee, the Bond Administrator and
the Owner Trustee (as such and/or in its individual capacity), as the case may
be, harmless against, any claim, tax, penalty, loss, liability or expense of any
kind whatsoever, incurred without gross negligence or willful misconduct on the
part of the Indenture Trustee, the Bond Administrator or the Owner Trustee, as
such and/or in its individual capacity, arising out of, or in connection with,
the failure by the Servicer to perform its duties in compliance with this
Servicing Agreement, including the reasonable costs and expenses (including
reasonable legal fees and expenses) of defending itself against any claim in
connection with the exercise or performance of any of its powers or duties under
any Basic Document, provided that:
(i) with respect to any such claim, the Indenture Trustee, the Bond
Administrator or the Owner Trustee (as such and/or in its individual capacity),
as the case may be, shall have given
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the Servicer written notice thereof promptly after the Bond Administrator, the
Indenture Trustee or Owner Trustee (as such and/or in its individual capacity),
as the case may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the Indenture Trustee,
the Bond Administrator or Owner Trustee (as such and/or in its individual
capacity), as the case may be, shall cooperate and consult fully with the
Servicer in preparing such defense; and
(iii) notwithstanding anything in this Servicing Agreement to the contrary,
the Servicer shall not be liable for settlement of any claim by the Indenture
Trustee, the Bond Administrator or the Owner Trustee (as such and/or in its
individual capacity), as the case may be, entered into without the prior consent
of the Servicer, which consent shall not be unreasonably withheld.
No termination of this Servicing Agreement shall affect the
obligations created by this Section 5.06 of the Servicer to indemnify the Bond
Administrator, the Indenture Trustee and the Owner Trustee (as such and/or in
its individual capacity) under the conditions and to the extent set forth
herein. This section shall survive the termination of this Servicing Agreement.
Any amounts to be paid by the Servicer pursuant to this Subsection may not be
paid from the Trust Estate.
Notwithstanding the foregoing, the indemnification provided by the
Servicer in this Section 5.06 shall not pertain to any loss, liability or
expense of the Indenture Trustee, the Bond Administrator or the Owner Trustee
(as such and/or in its individual capacity), including the costs and expenses of
defending itself against any claim, incurred in connection with any actions
taken by the Indenture Trustee, the Bond Administrator or the Owner Trustee (as
such and/or in its individual capacity) at the direction of the Securityholders,
as the case may be, pursuant to the terms of this Servicing Agreement.
(c) The Servicer agrees to indemnify the Issuer in an amount equal to the
amount of any claim made under a MI Policy for which coverage is denied by the
MI Insurer because (and if the MI Insurer's denial of coverage is contested by
the Servicer, a court or arbitrator finally determines that coverage is not
available under the MI Policy because) of the Servicer's failure to abide by the
terms of the MI Policy or the MI Insurance Agreement or the Servicer's failure
to abide by the NFI Underwriting Guidelines or the NFI Servicing Guidelines, as
attached to the MI Insurance Agreement.
(d) In the event the Back-up Servicer becomes the Servicer pursuant to Section
6.02 hereof, the Back-up Servicer shall not be obligated, in its individual
capacity, to pay any obligation of the Servicer under clause (a), (b) or (c)
above.
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ARTICLE VI
DEFAULT
Section 6.01 Servicing Default.
If any one of the following events (a "Servicing Default") shall
occur and be continuing:
(i) Any failure by the Servicer to deposit in the Collection Account or
Payment Account any deposit required to be made under the terms of this
Servicing Agreement, including any Advances and Compensating Interest, which
continues unremedied for a period of three Business Days after the date upon
which written notice of such failure shall have been given to the Servicer by
the Issuer, the Indenture Trustee or the Bond Administrator or to the Servicer,
the Issuer, the Indenture Trustee and the Bond Administrator by the Bond
Insurer; or
(ii) Failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Servicing Agreement, which failure, in each case, materially and adversely
affects the interests of Bondholders or the Bond Insurer or the breach of any
representation or warranty of the Servicer in this Servicing Agreement or in the
Insurance Agreement which materially and adversely affects the interests of the
Bondholders or the Bond Insurer, and which in either case continues unremedied
for a period of 30 days after the date on which written notice of such failure
or breach, requiring the same to be remedied, and stating that such notice is a
"Notice of Default" hereunder, shall have been given to the Servicer by the
Issuer, the Bond Administrator or the Indenture Trustee or to the Servicer, the
Issuer, the Bond Administrator and the Indenture Trustee by the Bond Insurer; or
(iii) The entry against the Servicer of a decree or order by a court or agency
or supervisory authority having jurisdiction in the premises for the appointment
of a trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(iv) The Servicer shall voluntarily go into liquidation, consent to the
appointment of a conservator, receiver, liquidator or similar person in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating to all or
substantially all of its property, or a decree or order of a court, agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Servicer and such decree or order shall have remained
in force undischarged, unbonded or unstayed for a period of 60 days; or the
Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
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(v) Any failure by the Servicer to pay when due any amount payable by it under
the terms of the Insurance Agreement which continues unremedied for a period of
three (3) Business Days after the date upon which written notice of such failure
shall have been given to the Servicer by the Bond Insurer; or
(vi) Failure on the part of the Seller or the Servicer to duly perform in any
material respect any covenant or agreement set forth in the Insurance Agreement,
which failure continues unremedied for a period of 30 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Bond Administrator, the Indenture Trustee, the Seller or
the Servicer, as the case may be, by the Bond Insurer; or
(vii) Any other Event of Default under the Insurance Agreement; or
(viii) So long as the Seller is an affiliate, the parent of, under common
control with, or the same company as the Servicer, any failure of the Seller to
repurchase any Mortgage Loan required to be repurchased, or pay any amount due,
pursuant to the Purchase Agreement which continues unremedied for a period of 30
days after the date upon which written notice of such failure shall have been
given to the Servicer; or
(ix) Failure on the part of the Converted Loan Purchaser to purchase any
Converted Mortgage Loan pursuant to Section 3.20 hereof; or
(x) (A) the Cumulative Loss Percentage (without giving any effect to coverage
provided by any MI Policy) for any period set forth below exceeds the percentage
set forth below:
- - -------------------------------------------------------------------------------
PERIOD CUMULATIVE LOSS %
- - -------------------------------------------------------------------------------
January 2, 1999-- January 1, 2000 1.00%
- - -------------------------------------------------------------------------------
January 2, 2000-- January 1, 2001 1.80%
- - -------------------------------------------------------------------------------
January 2, 2001-- January 1, 2002 2.05%
- - -------------------------------------------------------------------------------
January 2, 2002-- January 1, 2003 2.40%
- - -------------------------------------------------------------------------------
January 2, 2003-- January 1, 2004 3.00%
- - -------------------------------------------------------------------------------
For any period thereafter 4.05%
- - -------------------------------------------------------------------------------
(B) Realized Losses on the Mortgage Loans (without giving any effect
to coverage provided by any MI Policy) over any one twelve-month period exceed
1.30% of the sum of the aggregate Principal Balances of the Mortgage Loans as of
the first day of such twelve month period; or
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(C) the Rolling Delinquency Percentage exceeds 15%; or
(D) (i) NovaStar Financial, Inc. fails to secure long term (1 year
or greater) committed financing facilities of at least $175,000,000 by May 1,
1999;
(ii) NovaStar Financial, Inc. shall fail to maintain a
minimum net worth of $70,000,000; or
(iii) the Converted Loan Purchaser shall fail to purchase any
Converted Mortgage Loan pursuant to the Converted Loan Purchase Agreement;
then, (a) and in every such case, other than that set forth in (v), (vi) or
(vii) hereof, so long as a Servicing Default shall not have been remedied by the
Servicer, either the Issuer, subject to the direction of the Indenture Trustee
as pledgee of the Mortgage Loans, with the consent of the Bond Insurer, or the
Bond Insurer, or if a Bond Insurer Default exists, the holders of at least 51%
of the aggregate Bond Principal Balance of the Bonds, by notice then given in
writing to the Servicer (and to the Bond Administrator, the Indenture Trustee
and the Issuer if given by the Bond Insurer) or (b) in the case of the events
set forth in (v), (vi) or (vii) hereof, the Bond Insurer or, if a Bond Insurer
Default exists, the holders of at least 51% of the aggregate Bond Principal
Balance of the Bonds, may, by notice to the Servicer, terminate all of the
rights and obligations of the Servicer as servicer under this Servicing
Agreement other than its right to receive servicing compensation and expenses
for servicing the Mortgage Loans hereunder during any period prior to the date
of such termination and the Issuer, subject to the direction of the Indenture
Trustee as pledgee of the Mortgage Loans, with the consent of the Bond Insurer,
or the Bond Insurer may exercise any and all other remedies available at law or
equity. Any such notice to the Servicer shall also be given to each Rating
Agency, the Bond Insurer and the Issuer. On or after the receipt by the Servicer
of such written notice or upon the failure of the Servicer to receive any
Servicer Extension Notice contemplated in Section 7.12, all authority and power
of the Servicer under this Servicing Agreement, whether with respect to the
Bonds or the Mortgage Loans or otherwise, shall pass to and be vested in the
Back-up Servicer, pursuant to and under this Section 6.01; and, without
limitation, the Back-up Servicer is hereby authorized and empowered to execute
and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Mortgage
Loan and related documents, or otherwise. The Servicer agrees to cooperate with
the Back-up Servicer in effecting the termination of the responsibilities and
rights of the Servicer hereunder, including, without limitation, the transfer
within one Business Day to the Back-up Servicer the administration by it of all
cash amounts relating to the Mortgage Loans that shall at the time be held by
the Servicer and to be deposited by it in the Collection Account, or that have
been deposited by the Servicer in the Collection Account or thereafter received
by the Servicer with respect to the Mortgage Loans. In addition, the Servicer
agrees promptly (and in any event no later than five Business Days subsequent to
such notice or upon the failure of the Servicer to receive any Servicer
Extension Notice contemplated in Section 7.12) to provide the Back-up Servicer
with all documents and records requested by it to enable it to assume the
Servicer's functions under this Servicing Agreement. All reasonable costs and
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expenses (including, but not limited to, attorneys' fees) incurred in connection
with amending this Servicing Agreement to reflect such succession as Servicer
pursuant to this Section 6.01 shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. For
purposes of this Section 6.01, neither the Indenture Trustee nor the Bond
Administrator, respectively, shall be deemed to have knowledge of a Servicer
Default unless a Responsible Officer of the Indenture Trustee or the Bond
Administrator, respectively, assigned to and working in the Indenture Trustee's
Corporate Trust Office or the Bond Administrator's Corporate Trust Office,
respectively, has actual knowledge thereof or unless written notice of any event
which is in fact such a Servicer Default is received by a responsible officer of
the Indenture Trustee or the Bond Administrator, respectively, and such notice
references the Bonds or this Servicing Agreement.
Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a payment on a Mortgage Loan which was due prior to the notice terminating
the Servicer's rights and obligations hereunder and received after such notice,
that portion to which the Servicer would have been entitled pursuant to Sections
3.07 and 3.15 as well as its Servicing Fee in respect thereof, and any other
amounts payable to the Servicer hereunder the entitlement to which arose prior
to the termination of its activities hereunder.
The Servicer shall immediately notify the Indenture Trustee, the
Bond Administrator, the Bond Insurer and the Owner Trustee in writing of any
Servicing Default.
Section 6.02 Back-up Servicer to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 6.01 or sends a notice pursuant to Section 5.04 or fails to
receive any Servicing Extension Notice contemplated by Section 7.12, the Back-up
Servicer (or another successor servicer selected by the Bond Insurer) on behalf
of the Indenture Trustee on behalf of the Bondholders and the Bond Insurer shall
be the successor in all respects to the Servicer in its capacity as servicer
under this Servicing Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof,
including but not limited to the provisions of Article VIII. Nothing in this
Servicing Agreement shall be construed to permit or require the Back-up Servicer
or any other successor Servicer to (i) be responsible or accountable for any act
or omission of the Servicer prior to the issuance of a notice of termination
hereunder, (ii) require or obligate the Back-up Servicer, in its capacity as
successor Servicer, to purchase, repurchase or substitute any Mortgage Loan,
(iii) fund any losses on any Eligible Investment directed by any other Servicer,
or (iv) be responsible for the representations and warranties of the Servicer;
provided, however, that the Back-up Servicer, as successor Servicer, or any
other successor Servicer shall be required to make any required Advances to the
extent that the Servicer failed to make such Advances. As compensation therefor,
the Back-up Servicer or any other successor Servicer shall be entitled to the
Servicing Fee.
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(b) Notwithstanding the above, if the Back-up Servicer (or another successor
servicer selected by the Bond Insurer) is legally unable to so act, or if the
Bond Insurer so elects, the Bond Administrator shall become the successor
Servicer, subject to the same rights accorded to the Back-up Servicer under
Section 6.01 and this Section 6.02. If the Bond Administrator is legally unable
to so act, the Bond Administrator may appoint or petition a court of competent
jurisdiction to appoint any established housing and home finance institution,
bank or other mortgage loan servicer having a net worth of not less than
$10,000,000 as the successor to the Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Servicer
hereunder; provided, that any such successor Servicer shall be acceptable to the
Bond Insurer, as evidenced by the Bond Insurer's prior written consent and
provided further that the appointment of any such successor Servicer will not
result in the qualification, reduction or withdrawal of the ratings assigned to
the Bonds by the Rating Agencies or the ratings assigned to the Bonds without
taking into account the Bond Insurance Policy. Pending appointment of a
successor to the Servicer hereunder, unless the Bond Administrator is prohibited
by law from so acting, the Bond Administrator shall act in such capacity
(including the obligations of the Servicer to make Advances) as hereinabove
provided. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Mortgage Loans in
an amount equal to the greater of the compensation which the Servicer or the
Back-up Servicer would otherwise have received pursuant to Section 3.15 (or such
lesser or greater compensation as the Bond Administrator and such successor
shall agree; provided, however, that any greater compensation shall only be
payable from amounts that otherwise would be distributed to the holders of the
Subordinated Bonds). The appointment of a successor Servicer shall not affect
any liability of the predecessor Servicer which may have arisen under this
Servicing Agreement prior to its termination as Servicer (including, without
limitation, the obligation to purchase Mortgage Loans pursuant to Section 3.01,
to pay any deductible under an insurance policy pursuant to Section 3.11 or to
indemnify the Bond Administrator and the Indenture Trustee pursuant to Section
5.06), nor shall any successor Servicer be liable for any acts or omissions of
the predecessor Servicer or for any breach by such Servicer of any of its
representations or warranties contained herein or in any related document or
agreement. The Back-up Servicer and such successor shall take such action,
consistent with this Servicing Agreement, as shall be necessary to effectuate
any such succession.
(c) Any successor, including the Back-up Servicer, to the Servicer as servicer
shall during the term of its service as servicer (i) continue to service and
administer the Mortgage Loans on behalf of the Indenture Trustee for the benefit
of the Bondholders and the Bond Insurer and (ii) maintain in force a policy or
policies of insurance covering errors and omissions in the performance of its
obligations as Servicer hereunder and a fidelity bond in respect of its
officers, employees and agents to the same extent as the Servicer is so required
pursuant to Section 3.11.
(d) Any successor Servicer, including the Back-up Servicer, shall not be
deemed to be in default or to have breached its duties hereunder if the
predecessor Servicer shall fail to deliver any required deposit to the
Collection Account or otherwise cooperate with any required servicing transfer
or succession hereunder.
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Section 6.03 Notification to Bondholders.
Upon any termination or appointment of a successor to the Servicer
pursuant to this Article VI or Section 5.04, the Bond Administrator shall give
prompt written notice thereof to the Bondholders, the Bond Insurer, the
Indenture Trustee, the Owner Trustee, the Issuer and each Rating Agency.
Section 6.04 Waiver of Defaults.
The Bond Administrator, on behalf of the Indenture Trustee, shall
transmit by mail to all Bondholders and the Bond Insurer, within 5 days after
the occurrence of any Servicing Default known to the Bond Administrator, unless
such Servicing Default shall have been cured, notice of each such Servicing
Default hereunder known to the Bond Administrator. The Bond Insurer or, if a
Bond Insurer Default exists, the holders of at least 51% of the aggregate Bond
Principal Balance of the Bonds may waive any default by the Servicer in the
performance of its obligations hereunder and the consequences thereof, except a
default in the making of or the causing to be made any required distribution on
the Bonds. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
The Servicer shall give notice of any such waiver to the Rating Agencies.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
Section 7.01 Amendment.
This Servicing Agreement may be amended from time to time by the
parties hereto with the prior written consent of the Bond Insurer, provided that
any amendment be accompanied by a letter from the Rating Agencies to the effect
that the amendment will not result in the downgrading or withdrawal of the
rating then assigned to the Bonds or the rating then assigned to the Bonds
without taking into account the Bond Insurance Policy.
Section 7.02 Governing Law.
THIS SERVICING AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.03 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by certified mail, return receipt requested, or sent by reputable
overnight courier service to:
(a) in the case of the Servicer:
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NovaStar Mortgage, Inc.
1900 W. 47th Place
Suite 205
Westwood, Kansas 66205
Attention: Chris Miller, Senior Vice President
(b) in the case of the Bond Insurer:
Financial Security Assurance Inc.
530 Park Avenue
New York, New York 10022
Attention: Transaction Oversight
NovaStar Home Equity
Loan Asset-Backed
Bonds, Series 1999-1, Class A
(c) in the case of Rating Agencies:
Moody's Investors Service Inc.
99 Church Street
New York, New York 10007
Attention: Rod Dubitsky
Standard & Poor's
26 Broadway
New York, New York 10004-1064
Attention: Leslie Albergo
(d) in the case of the Owner Trustee:
Wilmington Trust Company
1100 N. Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administrator
(e) in the case of the Issuer:
c/o NovaStar Financial, Inc.
to NovaStar Mortgage Funding Trust, Series 1999-1
1901 W. 47th Place
Suite 105
Westwood, Kansas 66502
Attention: David J. Lee, Vice President
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(f) in the case of the Bond Administrator:
First Union National Bank
230 South Tryon Street, NC1179
9th Floor
Charlotte, NC 28288-1179
Attention: Robert Ashbaugh (NovaStar Mortgage Funding
Trust, Series 1999-1
(g) in the case of the Indenture Trustee:
The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, NY 10001
Attention: Capital Markets Fiduciary Services,
NovaStar 1999-1
(h) in the case of the Back-up Servicer:
If by U.S. Mail:
Fairbanks Capital Corp.
P.O. Box 65250
Salt Lake City, Utah 84165-0250
Attention: Terrell W. Smith
Fax No. (801) 293-1297
Phone No. (801) 293-1883
If by overnight delivery:
Fairbanks Capital Corp.
3815 South West Temple
Salt Lake City, Utah 84165-4412
Attention: Terrell W. Smith
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party. Any notice required or permitted to be
mailed to a Bondholder shall be given by first class mail, postage prepaid, at
the address of such Bondholder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Bondholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to deliver such notice
or document to any Rating Agency.
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Section 7.04 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Servicing Agreement shall be for any reason whatsoever held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Servicing
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Servicing Agreement or of the Bonds or the rights of the
Bondholders thereof.
Section 7.05 Third-Party Beneficiaries.
This Servicing Agreement will inure to the benefit of and be binding
upon the parties hereto, the Bondholders, the Bond Insurer, the Owner Trustee
and their respective successors and permitted assigns. Except as otherwise
provided in this Servicing Agreement, no other Person will have any right or
obligation hereunder. The Bond Administrator on behalf of the Indenture Trustee
shall have the right to exercise all rights of the Issuer under this Agreement.
Section 7.06 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 7.07 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 7.08 Termination.
Except with respect to obligations of the Servicer relating to any
representations and warranties or indemnities made by it in this Agreement, the
respective obligations and responsibilities of the Servicer and the Issuer
created hereby shall terminate upon the satisfaction and discharge of the
Indenture pursuant to Section 4.10 thereof.
Section 7.09 No Petition.
The Servicer, by entering into this Servicing Agreement,
hereby covenants and agrees that it will not at any time institute against the
Issuer or the Transferor, or join any institution against the Issuer or the
Transferor, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations of the Issuer or
the Transferor. This section shall survive the termination of this Servicing
Agreement by one year.
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Section 7.10 No Recourse.
The Servicer acknowledges that no recourse may be had against the
Issuer, except as may be expressly set forth in this Servicing Agreement.
Section 7.11 Limitation of Liability of the Owner Trustee.
Notwithstanding any other provision herein or elsewhere, this
Servicing Agreement has been executed and delivered by Wilmington Trust Company,
not in its individual capacity, but solely in its capacity as Owner Trustee of
the Issuer and in no event shall Wilmington Trust Company or the Owner Trustee
have any liability in respect of the representations, warranties, or obligations
of the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Trust, and for all purposes of this Servicing Agreement, the Owner
Trustee and Wilmington Trust Company shall be entitled to the benefits of the
Trust Agreement.
Section 7.12 Renewable 90 Day Term of Servicer.
(a) The Servicer hereby covenants and agrees to act as servicer under this
Agreement for an initial term commencing on the Closing Date and expiring on
April 30, 1999 (the "Initial Term"). Thereafter, the Initial Term may be
extended for additional 90 calendar day terms, in the sole discretion of the
Bond Insurer, by written notice (each, a "Servicer Extension Notice") of the
Bond Insurer to the Servicer. Each such Servicer Extension Notice, if any, shall
be delivered by the Bond Insurer to the other parties to this Agreement. The
Servicer hereby agrees that, as of the date hereof and upon its receipt of any
Servicer Extension Notice, the Servicer shall be bound for the duration of the
Initial Term and the term covered by any such Servicer Extension Notice to act
as the Servicer, subject to and in accordance with the other provisions of this
Agreement. The Servicer agrees that if, as of the tenth day prior to the last
day of any such servicing term, the Servicer shall not have received a Servicer
Extension Notice from the Bond Insurer, the Servicer shall, within five days
thereafter, give written notice of such non-receipt to the Bond Insurer and the
Indenture Trustee. The failure of the Bond Insurer to deliver a Servicer
Extension Notice by the end of any such 90 calendar day term shall result in the
automatic termination of the Servicer.
ARTICLE VIII
ADMINISTRATIVE DUTIES OF THE SERVICER
Section 8.01 Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall perform all its
duties and the duties of the Issuer under the Indenture. In addition, the
Servicer shall consult with the Owner Trustee as the Servicer deems appropriate
regarding the duties of the Issuer under the Indenture. The Servicer
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shall monitor the performance of the Issuer and shall advise the Owner Trustee
when action is necessary to comply with the Issuer's duties under the Indenture.
The Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this Servicing
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to this Servicing Agreement or any of the Basic Documents or under
state and federal tax and securities laws, and at the request of the Owner
Trustee or the Bond Insurer shall take all appropriate action that it is the
duty of the Issuer to take pursuant to this Servicing Agreement or any of the
Basic Documents. In accordance with the directions of the Issuer, the Bond
Insurer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with the Bonds
(including the Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Issuer, the Bond Insurer or the
Owner Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Servicing Agreement or any of the Basic
Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Bond Insurer in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of income)
to a Certificateholder as contemplated in Section 5.03 of the Trust Agreement.
Any such notice shall be in writing and specify the amount of any withholding
tax required to be withheld by the Owner Trustee pursuant to such provision.
(iii) In carrying out the foregoing duties or any of its other obligations
under this Servicing Agreement, the Servicer may enter into transactions with or
otherwise deal with any of its Affiliates; provided, however, that the terms of
any such transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the Servicer's opinion, no less
favorable to the Issuer in any material respect than with terms made available
to unrelated third-parties.
(c) Tax Matters. The Servicer shall provide such services as are reasonably
necessary to assist the Issuer or the Bond Administrator, as applicable, in the
preparation of tax returns and information reports as provided in Section 5.03
of the Trust Agreement.
(d) Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer shall not take any
action pursuant to this Article VIII unless within a reasonable time before the
taking of such action, the Servicer shall have notified the Owner Trustee, the
Bond Insurer and the Bond Administrator, of the proposed action and the Owner
Trustee, the Indenture Trustee, the Bond Insurer and, with respect to items (A),
(B), (C) and (D) below, the Bond Administrator shall not have withheld consent
or provided an
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alternative direction. For the purpose of the preceding sentence, "non-
ministerial matters" shall include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Mortgage Loans);
(C) the amendment, change or modification of this Servicing
Agreement or any of the Basic Documents;
(D) the appointment of successor Certificate Paying Agents and
successor Indenture Trustees pursuant to the Indenture or the appointment of
successor Servicers or the consent to the assignment by the Certificate
Registrar, Paying Agent, Bond Administrator or Indenture Trustee of its
obligations under the Indenture; and
(E) the removal of the Indenture Trustee or the Bond Administrator.
Section 8.02 Records.
The Servicer shall maintain appropriate books of account and records
relating to services performed under this Servicing Agreement, which books of
account and records shall be accessible for inspection by the Issuer, Indenture
Trustee and the Bond Insurer upon reasonable request and at any time during
normal business hours.
Section 8.03 Additional Information to be Furnished.
The Servicer shall furnish to the Issuer, the Bond Administrator,
the Indenture Trustee and the Bond Insurer from time to time such additional
information regarding the Bonds as the Issuer, the Bond Administrator, the
Indenture Trustee or the Bond Insurer shall reasonably request.
ARTICLE IX
THE BACK-UP SERVICER
Section 9.01 Representations and Warranties Regarding the Back-up Servicer.
The Back-up Servicer represents and warrants to the Issuer and for
the benefit of the Bond Administrator and the Indenture Trustee, as pledgee of
the Mortgage Loans, the Bond Insurer and the Bondholders, as of the Closing
Date, that:
(i) The Back-up Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Utah and has the corporate power
to own its assets and to transact the business in which it is currently engaged.
The Back-up Servicer is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such
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qualification and in which the failure to so qualify would have a material
adverse effect on the business, properties, assets, or condition (financial or
other) of the Back-up Servicer or the validity or enforceability of the Mortgage
Loans;
(ii) The Back-up Servicer has the corporate power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Servicing Agreement. When executed and delivered, this Servicing
Agreement will constitute the legal, valid and binding obligation of the Back-up
Servicer enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies;
(iii) The Back-up Servicer is not required to obtain the consent of any other
Person or any consent, license, approval or authorization from, or registration
or declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Servicing Agreement, except for such consent, license, approval or
authorization, or registration or declaration, as shall have been obtained or
filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement and the
performance of the transactions contemplated hereby by the Back-up Servicer will
not violate any provision of any existing law or regulation or any order or
decree of any court applicable to the Back-up Servicer or any provision of the
certificate of incorporation or bylaws of the Back-up Servicer, or constitute a
material breach of any mortgage, indenture, contract and other agreement to
which the Back-up Servicer is a party or by which the Back-up Servicer may be
bound; and
(v) No litigation or administrative proceeding of or before any courts,
tribunal or governmental body is currently pending, or to the knowledge of the
Back-up Servicer threatened, against the Back-up Servicer or any of its
properties or with respect to this Servicing Agreement or the Bonds or the
Certificates which, to the knowledge of the Back-up Servicer, has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Servicing Agreement.
The foregoing representations and warranties shall survive any
termination of the Back-up Servicer hereunder.
Section 9.02 Back-up Servicing Fee.
So long as the Servicer serves as servicer of the Mortgage Loans
under this Servicing Agreement, the Servicer shall pay the Back-up Servicing Fee
to the Back-up Servicer, on each payment date which shall be paid by the
Servicer regardless of the existence of a Prepayment Interest Shortfall. If the
Servicer or any other entity fails to pay such Back-up Servicing Fee within ten
days after such amount is due, the Back-up Servicer may resign and terminate its
obligations under this Agreement if such fee is not paid after an additional ten
days notice to the Bond Insurer of such failure.
43
<PAGE>
Section 9.03 Fee to Back-up Servicer for Assumption of Servicing.
Upon the Back-up Servicer becoming the servicer of the Mortgage
Loans under this Servicing Agreement, the Back-up Servicer shall be entitled to
receive the Servicing Fee pursuant to Section 3.15.
Section 9.04 Maintenance of Servicing Information by Back-Up Servicer.
(a) No later than the fifth Business Day of each calendar month, the Servicer
shall deliver to the Back-up Servicer a complete set of servicing records in
computer-readable form with respect to the payment, collection and other
servicing activity of the Mortgage Loans during the preceding calendar month,
which records shall contain sufficient data to permit the Back-up Servicer to
assume the duties of the Servicer hereunder without delay on account of the
absence of relevant servicing information. On at least a quarterly basis, the
Back-up Servicer shall convert and "map" the data contained in such servicing
records to its own servicing system, and shall provide the Bond Insurer and Bond
Administrator no later than each March 15, September 15 and December 15,
commencing on March 15, 1999, with an Officer's Certificate, to the effect that
it has received from the Servicer each monthly submission of servicing data, has
completed such conversion and mapping of the data delivered with respect to the
three immediately preceding calendar months, and is capable of assuming the
duties of the Servicer if required to so hereunder.
(b) The Servicer shall cooperate with the Back-up Servicer, and shall provide
to the Back-up Servicer information, regarding the Mortgage Loans and the
servicing thereof as reasonably requested by the Back-up Servicer.
Section 9.05 Additional Agreements.
Notwithstanding anything else contained in this Servicing Agreement,
the Back-up Servicer does not assume (i) any responsibility to indemnify nor
make any of the Seller's representations and warranties under the Purchase
Agreement or the Depositor's or the Seller's or the Servicer's representations
and warranties under (a) any document relating to the sale of the Mortgage
Loans; (b) the Insurance Agreement and (c) the Indemnification Agreement; (ii)
any obligation to pay a termination fee to any other subservicer pursuant to
this Servicing Agreement; (iii) any obligations to purchase Mortgage Loans
pursuant to any agreement other than pursuant to the Converted Loan Purchase
Agreement, including, without limitation, the Purchase Agreement; (iv) any
obligation to record the Mortgage Loans; provided, however, that if the Back-up
Servicer cannot enforce any Mortgage Loan due to a lack of such recording, the
Back-up Servicer shall record such mortgage at the Servicer's expense; or (v)
any obligations of the Indenture Trustee or the Bond Administrator under the
Basic Documents.
44
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Bond Administrator, the
Indenture Trustee and the Issuer have caused this Servicing Agreement to be duly
executed by their respective officers or representatives all as of the day and
year first above written.
NOVASTAR MORTGAGE, INC.,
as Servicer
By: /s/ Michael L. Bamburg
-----------------------
Name: Michael L. Bamburg
-------------------
Title: Senior Vice President
----------------------
NOVASTAR MORTGAGE FUNDING TRUST, SERIES
1999-1, as Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By: /s/ James D. Nesci
-------------------
Name: James D. Nesci
----------------
Title: Authorized Signer
-------------------
FIRST UNION NATIONAL BANK,
as Bond Administrator
By: /s/ Robert Ashbaugh
--------------------
Name: Robert Ashbaugh
-----------------
Title: Vice President
----------------
THE CHASE MANHATTAN BANK,
not in its individual capacity but solely
as Indenture Trustee
By: /s/ Jennifer Cupo
------------------
Name: Jennifer Cupo
---------------
45
<PAGE>
Title: Authorized Signer
------------------
FAIRBANKS CAPITAL CORP.
as Back-up Servicer
By: /s/ Kim A. Stevenson
---------------------
Name: Kim A. Stevenson
-----------------
Title: Executive Vice President
--------------------------
46
<PAGE>
EXHIBIT A
MORTGAGE LOAN SCHEDULE
A-1
<PAGE>
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(S):
Reason for Document Request: (circle one) Mortgage Loan Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
- - -------------------------------------
[Name of Servicer]
Authorized Signature
******************************************************************************
B-1
<PAGE>
To Indenture Trustee: Please acknowledge this request, and check off documents
being enclosed with a copy of this form. You should retain this form for your
files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or Deed of Trust
[ ] Title Insurance Policy
[ ] Other: ___________________________
Name
Title
Date
B-2
<PAGE>
EXHIBIT C
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition
2. Liquidation Proceeds
Principal Prepayment $____________
Property Sale Proceeds ____________
Insurance Proceeds ____________
Other (itemize) ____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances ____________
Delinquency Advances ____________
Monthly Advances ____________
Servicing Fees ____________
Other Servicing Compensation ____________
Total Advances $____________
4. Net Liquidation Proceeds $____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
C-1
Exhibit 8.1
January 29, 1999
The Addressees Listed
on Annex A
Re: NovaStar Mortgage Funding Trust, Series 1999-1
Ladies and Gentlemen:
We have acted as special tax counsel to NovaStar Mortgage, Inc. as
to certain matters in connection with the issuance and delivery of certain
asset-backed bonds denominated NovaStar Home Equity Loan Asset-Backed Bonds,
Series 1999-1 Class A Bonds, Class B Bonds and Class IO Bonds (collectively, the
"Bonds") pursuant to an indenture dated as of January 1, 1999 among NovaStar
Mortgage Funding Trust, Series 1999-1, a Delaware business trust, as issuer (the
"Issuer"), First Union National Bank, a national banking association, as bond
administrator (the "Bond Administrator") and The Chase Manhattan Bank, as
indenture trustee (the "Indenture Trustee"), and the Certificates pursuant to an
amended and restated trust agreement (which amends the trust agreement dated [ ]
between Residential Asset Funding Corporation, as depositor (the "Depositor")
and Wilmington Trust Company, a Delaware banking corporation, as owner trustee
(the "Owner Trustee")) dated as of January 1, 1999 (as amended from time to
time, the "Trust Agreement"), among NovaStar Mortgage Funding Corporation II as
the transferor (the "Transferor"), the Depositor and the Owner Trustee.
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) a Prospectus dated November 10, 1998 and a
Prospectus Supplement dated January 27, 1999 (together the "Prospectus") with
respect to the Class A Bonds, (b) an executed copy of the Indenture and the
exhibits attached thereto, (c) an executed copy of the Trust Agreement and the
exhibits attached thereto, and (d) other documents and matters of fact and law
as we deem necessary for the purposes of the opinions expressed below. Terms
capitalized herein and not otherwise defined herein shall have their respective
meanings as set forth in the Indenture.
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.
<PAGE>
To the Parties Listed on
the Attached Annex A;
January 29, 1999;
Page 2
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 the
special tax counsel is not binding on the courts or the Internal Revenue Service
(the "IRS").
Based on the foregoing, and such investigations as we have deemed
appropriate, we are of the opinion that for federal income tax purposes:
1. Assuming that (a) the Issuer created under the Trust Agreement elects,
as it has covenanted to do in the Trust Agreement, to be treated as a
"real estate mortgage investment conduit" ("REMIC"), as such term is
defined in the Internal Revenue Code of 1986, as amended (the "Code")
and (b) the parties to the Trust Agreement and the Indenture comply
with the terms thereof, the Issuer will be treated as a REMIC. Subject
to the above, the Bonds issued pursuant to the Indenture will be
treated as "regular interests" in the REMIC and the Certificates issued
pursuant to the Trust Agreement will be treated as the sole "residual
interest" in the REMIC.
2. The statements under the caption "FEDERAL INCOME TAX CONSEQUENCES" in the
Prospectus Supplement are accurate and complete in all material respects.
3. As a consequence of the qualification of the Issuer as a REMIC, the
Bonds will be treated as "regular . . . interest(s) in a REMIC" under
Section 7701(a)(19)(C) of the Code and "real estate assets" under
Section 856(c) of the Code in the same proportion that the assets of
the Issuer consist of qualifying assets under such sections. In
addition, as a consequence of the qualification of the Issuer as a
REMIC, interest on the Bonds will be treated as "interest on
obligations secured by mortgages on real property" under Section 856(c)
of the Code to the extent that the Bonds are treated as "real estate
assets" under Section 856(c) of the Code.
Our opinions contained herein are rendered only as of the date
hereof, and we undertake no obligation to update this letter or the opinions
contained herein after the date hereof.
2
<PAGE>
To the Parties Listed on
the Attached Annex A;
January 29, 1999;
Page 3
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 each
addressee, and no other person or entity is entitled to rely hereon without our
prior written consent. Copies of this opinion letter may not be furnished to any
other person or entity, nor may any portion of this opinion letter be quoted,
circulated or referred to in any other document, without our prior written
consent.
Very truly yours,
/s/ Dewey Ballantine LLP
3
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
<S> <C>
Wheat First Securities, Inc. Financial Security Assurance, Inc.
acting through 350 Park Avenue
First Union Capital Markets, a division of New York, New York 10022
Wheat First Securities, Inc.
301 South College Street, TW-06
Charlotte, North Carolina 28288-0610
Standard & Poor's Ratings Services The Chase Manhattan Bank
25 Broadway 450 West 33rd St.
New York, New York 10004 15th Floor
New York, New York 10001
NovaStar Financial Inc. Moody's Investors Service, Inc.
1901 West 47th Place, Suite 105 99 Church Street
Westwood, Kansas 66205 New York, New York 10007
NovaStar Capital, Inc. NovaStar Mortgage Funding Corporation II
1901 West 47th Place, Suite 105 1901 West 47th Place, Suite 105
Westwood, Kansas 66205 Westwood, Kansas 66205
NovaStar Mortgage Inc. NovaStar Mortgage Funding Trust 1999-1
1901 West 47th Place, Suite 105 c/o Wilmington Trust Company
Westwood, Kansas 66205 Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
</TABLE>
Exhibit 10.1
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
NOVASTAR MORTGAGE, INC.,
NOVASTAR MORTGAGE FUNDING CORPORATION II,
RESIDENTIAL ASSET FUNDING CORPORATION,
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1,
and
WHEAT FIRST SECURITIES, INC.,
acting through
FIRST UNION CAPITAL MARKETS,
a division of
WHEAT FIRST SECURITIES, INC.
Dated as of January 22, 1999
$160,000,000 of
NovaStar Home Equity Loan Asset-Backed Bonds
Series 1999-1, Class A-1, A-2, A-3 and A-4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Section 1. Definitions ........................................................ 3
Section 2. Representations, Warranties and Agreements of Financial Security.... 4
Section 3. Representations, Warranties and Agreements of the Underwriter....... 7
Section 4. Indemnification .................................................... 8
Section 5. Indemnification Procedures ....................................... 8
Section 6. Contribution ....................................................... 9
Section 7. Miscellaneous....................................................... 10
Section 8. Limitation of Liability of Owner Trustee............................ 12
EXHIBIT
Exhibit A Opinion of General Counsel
</TABLE>
2
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of January 22, 1999 among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), NOVASTAR MORTGAGE, INC. (the
"Company"), NOVASTAR MORTGAGE FUNDING CORPORATION II (the "Transferor"),
RESIDENTIAL ASSET FUNDING CORPORATION (the "Depositor"), NOVASTAR MORTGAGE
FUNDING TRUST, SERIES 1999-1 (the "Issuer"), and WHEAT FIRST SECURITIES, INC.,
acting through FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST
SECURITIES, INC. (the "Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended from time
to time.
"Company Party" means any of the Company, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Depositor Party" means any of the Depositor, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Financial Security Agreements" means this Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated
as of January 1, 1999, by and among Financial Security, the Company, the
Depositor, the Transferor, and the Issuer.
3
<PAGE>
"Losses" means the sum of (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitles such party to be indemnified hereunder (subject to the
limitations set forth in Section 5 hereof), to the extent not paid, satisfied or
reimbursed from funds provided by any other Person other than an affiliate of
such party (provided that the foregoing shall not create or imply any obligation
to pursue recourse against any such other Person), and (c) interest on the
amount paid by the party entitled to indemnification or contribution from the
date of such payment to the date of payment by the party who is obligated to
indemnify or contribute hereunder at the statutory rate applicable to judgments
for breach of contract.
"Offering Document" means the Prospectus and any amendments or
supplements thereto and any other material or documents delivered by the
Underwriter to any Person in connection with the offer or sale of the
Securities.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Prospectus" means the Prospectus dated November 10, 1998 and the
Prospectus Supplement dated January 22, 1999 of the Depositor relating to the
Securities.
"Securities" means the Class A Bonds issued pursuant to an Indenture,
dated as of January 1, 1999 (the "Indenture"), by and among the Issuer, First
Union National Bank (the "Trust Administrator"), and The Chase Manhattan Bank
(the "Indenture Trustee").
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means the Underwriter, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the underwriting agreement, dated January
22, 1999, between the Depositor and the Underwriter in respect of the
Securities.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
4
<PAGE>
(a) Organization, Etc. Financial Security is a stock insurance company
duly organized, validly existing and authorized to transact financial guaranty
insurance business under the laws of the State of New York.
(b) Authorization, Etc. The Policy and the Financial Security Agreements
have been duly authorized, executed and delivered by Financial Security.
(c) Validity, Etc. The Policy and the Financial Security Agreements
constitute valid and binding obligations of Financial Security, enforceable
against Financial Security in accordance with their terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of this Agreement, to principles of public
policy limiting the right to enforce the indemnification provisions contained
herein.
(d) Exemption From Registration. The Policy is exempt from registration
under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial
Security of the Policy or the Financial Security Agreements, nor the performance
by Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of Financial
Security or result in a breach of, or constitute a default under, any material
agreement or other instrument to which Financial Security is a party or by which
any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets of Financial
Security as of December 31, 1997 and the related consolidated statements of
income, changes in shareholder's equity and cash flows for the fiscal year then
ended and the interim consolidated balance sheet of Financial Security, as of
September 30, 1998, and the related statements of income, changes in
shareholder's equity and cash flows for the fiscal quarter then ended, furnished
by Financial Security for use in the Prospectus, fairly present in all material
respects the financial condition of Financial Security as of such dates and for
such periods in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal year-end
adjustments) and since the date of the most current interim consolidated balance
sheet referred to above there has been no change in the financial condition of
Financial Security which would materially and adversely affect its ability to
perform its obligations under the Policy.
5
<PAGE>
(g) Financial Security Information. The information in the Prospectus
Supplement set forth under the caption "The Bond Insurer" and the information
incorporated therein by reference (as revised from time to time in accordance
with the provisions hereof, the "Financial Security Information") is limited and
does not purport to provide the scope of disclosure required to be included in a
prospectus with respect to a registrant in connection with the offer and sale of
securities of such registrant registered under the Securities Act. Within such
limited scope of disclosure, however, as of the date of the Prospectus
Supplement and as of the date hereof, the Financial Security Information does
not contain any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(h) Additional Information. Financial Security will furnish to the
Underwriters, the Company or the Depositor, upon request of the Underwriters,
the Company or the Depositor, as the case may be, copies of Financial Security's
most recent financial statements (annual or interim, as the case may be) which
fairly present in all material respects the financial condition of Financial
Security as of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied except as noted
therein (subject, as to interim statements, to normal year-end adjustments);
provided, however, that, if the Underwriters, the Company or the Depositor shall
require a manually signed report or consent of Financial Security's auditors in
connection with such financial statements, such report or consent shall be at
the expense of the Underwriters, the Company or the Depositor, as the case may
be. In addition, if the delivery of a Prospectus relating to the Securities is
required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the
Securities, the Depositor or the Underwriters will notify Financial Security of
such requirement to deliver a Prospectus and Financial Security will promptly
provide the Underwriters and the Depositor with any revisions to the Financial
Security Information that are in the judgment of Financial Security necessary to
prepare an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the
Depositor, the Underwriters and the Company on the closing date for the sale of
the Securities an opinion of its General Counsel, to the effect set forth in
Exhibit A attached hereto, dated such closing date and addressed to the
Depositor, the Underwriters and the Company.
(j) Consents and Reports of Independent Accountants. Financial Security
will furnish to the Underwriters, the Company and the Depositor, upon request,
as comfort from its independent accountants in respect of its financial
condition, (i) at the expense of the Person specified in the Insurance
Agreement, a copy of the Prospectus, including either a manually signed consent
or a manually signed report of Financial Security's independent accountants and
(ii) the quarterly review letter by Financial Security's independent accountants
in respect of the most recent interim financial statements of Financial
Security.
Nothing in this Agreement shall be construed as a representation or
warranty by Financial Security concerning the rating of its claims-paying
ability by Standard & Poor's, a division of The McGraw Hill Companies, Inc.,
Moody's Investors Service, Inc., Fitch, IBCA or
6
<PAGE>
any other rating agency (collectively, the "Rating Agencies"). The Rating
Agencies, in assigning such ratings, take into account facts and assumptions not
described in the Prospectus and the facts and assumptions which are considered
by the Rating Agencies, and the ratings issued thereby, are subject to change
over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees, as of the date
hereof and 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
Securities and make such offers and sales in the manner provided in the
Prospectus.
(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 Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Prospectus. Each
Offering Document will include the following statement: "The Policy is not
covered by the property/casualty insurance security fund specified in Article 76
of the New York Insurance Law". Each Offering Document including financial
information with respect to Financial Security prepared in accordance with
generally accepted accounting principles will include the following statement
immediately preceding such financial information: "The New York State Insurance
Department recognizes only statutory accounting practices for determining and
reporting the financial condition and results of operations of an insurance
company, for determining its solvency under New York Insurance Law, and for
determining whether its financial condition warrants the payment of a dividend
to its stockholders. No consideration is given by the New York State Insurance
Department to financial statements prepared in accordance with generally
accepted accounting principals in making such determinations."
(c) Underwriter Information. The following information constitutes the
only information furnished by the Underwriter (the "Underwriter Information"):
(i) the statements set forth in the first two sentences of the last paragraph of
the front cover of the Prospectus Supplement; (ii) the statements set forth
under the heading "Method of Distribution"; and (iii) the statements set forth
in materials delivered by the Underwriter to the Depositor within the meaning of
the no-action letter dated May 20, 1994 issued by the Division of Corporation
Finance of the Securities Exchange Commission (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 and filed by the Depositor with the Commission in the
Current Report or Reports on Form 8-K (the "Form 8-K"), to the extent not
directly attributable to or arising out of untrue statements, errors or
omissions in the information with respect to the Mortgage Loans (as defined in
the Indenture) as provided by the Company. Within such limited scope of
disclosure, however, as of the date of the Prospectus
7
<PAGE>
and as of the date hereof, the Underwriter Information does not contain any
untrue statement of a material fact, or omit to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
Section 4. Indemnification.
(a) Financial Security agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Depositor Party, each Company Party, and each Underwriter Party against (i) any
and all Losses incurred by them with respect to the offer and sale of the
Securities and resulting from Financial Security's breach of any of its
representations, warranties or agreements set forth in Section 2 hereof and (ii)
any and all Losses to which any Depositor Party, Company Party, or Underwriter
Party may become subject, under the Securities Act or otherwise, insofar as such
Losses arise out of or result from an untrue statement of a material fact
contained in any Offering Document or the 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 statement or omission was made in the Financial Security Information
included therein in accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Financial Security
Party and each Company Party against (i) any and all Losses incurred by them
with respect to the offer and sale of the Securities and resulting from the
Underwriter's breach of any of its representations, warranties or agreements set
forth in Section 3 hereof and (ii) any and all Losses to which any Financial
Security Party or any Company Party may become subject, under the Securities Act
or otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the 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 statement or omission was made in the
Underwriter Information included therein.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution or in Section 7(e), the indemnification
provided herein by an Indemnifying Party shall be the exclusive remedy of any
and all Indemnified Parties for the breach of a representation, warranty or
agreement hereunder by an Indemnifying Party; provided, however, that each
Indemnified Party shall be entitled to pursue any other remedy at law or in
equity for any such breach so long as the damages sought to be recovered shall
not exceed the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim asserted
which may entitle an Indemnified Party to be indemnified under this Agreement,
such party shall give the Indemnifying Party written or
8
<PAGE>
telegraphic notice of such action or claim reasonably promptly after
receipt of written notice thereof. The Indemnifying Party shall be entitled to
participate in and, upon notice to the Indemnified Party, assume the defense of
any such action or claim in reasonable cooperation with, and with the
reasonable cooperation of, the Indemnified Party. The Indemnified Party will
have the right to employ its own counsel in any such action in addition to the
counsel of the Indemnifying Party, but the fees and expenses of such counsel
will be at the expense of such Indemnified Party, unless (a) the employment of
counsel by the Indemnified Party at its expense has been authorized in writing
by the Indemnifying Party, (b) the Indemnifying Party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, or (c) the named parties to
any such action or proceeding (including any impleaded parties) include both
the Indemnifying Party and one or more Indemnified Parties, and the Indemnified
Parties shall have been advised by counsel that there may be one or more legal
defenses available to them which are different from or additional to those
available to the Indemnifying 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 all Depositor Parties,
one such firm for all Company Parties, one such firm for all Underwriter
Parties and one such firm for all Financial Security Parties, as the case may
be, which firm shall be designated in writing by the Depositor in respect of
the Depositor Parties, by the Company in respect of the Company Parties, by the
Underwriter in respect of the Underwriter Parties and by Financial Security in
respect of the Financial Security Parties), in each of which cases the fees and
expenses of counsel will be at the expense of the Indemnifying Party and all
such fees and expenses will be reimbursed promptly as they are incurred. The
Indemnifying Party shall not be liable for any settlement of any such claim or
action unless the Indemnifying Party shall have consented thereto or be in
default in its obligations hereunder. Any failure by an Indemnified Party to
comply with the provisions of this Section shall relieve the Indemnifying Party
of liability only if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such prejudice.
Section 6. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of this
Section), each Indemnifying Party shall contribute to the Losses arising from
any breach of any of its representations, warranties or agreements contained in
this Agreement on the basis of the relative fault of each of the parties as set
forth in Section 6(b) below; provided, however, that an Indemnifying Party shall
in no event be required to contribute to all Indemnified Parties an aggregate
amount in excess of the Losses incurred by such Indemnified Parties resulting
from the breach of representations, warranties or agreements contained in this
Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other, shall be determined by reference to,
among other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement relates to
information supplied by, or action within the control of, the
9
<PAGE>
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, the Underwriter shall be
solely responsible for the Underwriter Information and that, as and to the
extent provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company and the Depositor.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the total
discount received by it from the Depositor in respect of the Securities
underwritten by the Underwriter.
(e) 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.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
(g) The provisions relating to contribution set forth in this Section 6
do not limit the rights of any party to indemnification under Section 4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under
this Agreement shall be delivered to the address set forth below or to such
other address as shall be designated by the recipient in a written notice to the
other party or parties hereto.
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: NovaStar Home Equity Loan Asset-Backed Bonds, Series 1999-1,
Class A-1, A-2, A-3 and A-4
10
<PAGE>
If to the Company:
NovaStar Mortgage, Inc.
1900 West 47th Place
Suite 205
Westwood, KS 66205
Attn: David J. Lee
Telecopy No.: (913) 362-1090
Confirmation: (913) 362-1011
If to the Transferor:
NovaStar Mortgage Funding Corporation II
1900 West 47th Place
Suite 205
Westwood, KS 66205
Attn: David J. Lee
Telecopy No.: (913) 362-1090
Confirmation: (913) 362-1011
If to the Depositor:
Residential Asset Funding Corporation
c/o Wheat First Securities, Inc.
acting through First Union Capital Markets,
a division of Wheat First Securities, Inc.
One First Union Center
301 South College Street
Charlotte, NC 38288
Attn: Evan Peverley
If to the Issuer:
NovaStar Mortgage Funding Trust, Series 1999-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration
Telecopy No.: (302) 651-8882
11
<PAGE>
If to the Underwriter:
Wheat First Securities, Inc.,
acting through
First Union Capital Markets,
a division of
Wheat First Securities, Inc.
-------------------------
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
law principles thereof.
(c) Assignments. This Agreement may not be assigned by any party without
the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
(d) Amendments. Amendments to this Agreement shall be in writing signed
by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements contained
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Securities or (iii) any termination of this
Agreement or the Policy. The indemnification provided in this Agreement will be
in addition to any liability which the parties may otherwise have and shall in
no way limit any obligations of the Company, the Depositor or the Underwriter
under the Underwriting Agreement or the Insurance Agreement, as applicable.
(f) Counterparts. This Agreement may be executed in counterparts by the
parties hereto, and all such counterparts shall constitute one and the same
instrument.
Section 8. Limitation of Liability of Owner Trustee. Notwithstanding any
other provision herein or elsewhere, this Agreement has been executed and
delivered by Wilmington Trust Company, not in its individual capacity, but
solely in its capacity as Owner Trustee of the Trust. In no event shall
Wilmington Trust Company or the Owner Trustee have any liability with respect to
the representations, warranties, or obligations of the Trust hereunder, as to
all of which recourse shall be had solely to the assets of the Trust, and for
all purposes of this Agreement, the Owner Trustee and Wilmington Trust Company
shall be entitled to the benefits of the Trust Agreement
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ David Williams
---------------------
Name: David Williams
-----------------
Title: Managing Director
--------------------
NOVASTAR MORTGAGE, INC. NOVASTAR MORTGAGE FUNDING TRUST
SERIES 1999-1
By: /s/ David J. Lee By: /s/ Patricia A. Evans
----------------- ---------------------
Title: Authorized Signer Title: Financial Services Officer
------------------- --------------------------
NOVASTAR MORTGAGE FUNDING WHEAT FIRST SECURITIES, INC.,
CORPORATION II acting through
FIRST UNION CAPITAL MARKETS, a division
By: /s/ Rodney E. Schwatken of WHEAT FIRST SECURITIES, INC.
-----------------------
Title: Vice President
----------------
By: /s/ Carolyn Eskridge
----------------------
Title: Senior Vice President
-----------------------
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ Shanker Merchant
----------------------
Title: Authorized Signer
-------------------
13
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized,
validly existing and authorized to transact financial guaranty insurance
business under the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized, executed and
delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding
obligations of Financial Security, enforceable against Financial Security in
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the case
of the Indemnification Agreement, to principles of public policy limiting the
right to enforce the indemnification provisions contained therein insofar as
they relate to indemnification for liabilities arising under applicable
securities laws.
4. The Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the Policy
or the Agreements, nor the performance by Financial Security of its obligations
thereunder, will conflict with any provision of the certificate of incorporation
or the by-laws of Financial Security or, to the best of my knowledge, result in
a breach of, or constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its property is
bound or, to the best of my knowledge, violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that in the published opinion of the Securities and Exchange
Commission the indemnification provisions of the Indemnification Agreement,
insofar as they relate to indemnification for liabilities arising under the Act,
are against public policy as expressed in the Act and are therefore
unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Bond Insurer" in the Prospectus
Supplement dated January 22, 1999 (the "Prospectus Supplement") of the Depositor
with respect to the Securities. The information provided in the Prospectus
Supplement with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a prospectus
1
<PAGE>
with respect to a registrant under the Act in connection with a public
offering and sale of securities of such registrant. Within such limited scope
of disclosure, however, there has not come to my attention any information
which would cause me to believe that the description of Financial Security
referred to above, as of the date of the Prospectus Supplement or as of the
date of this opinion, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except that I express no opinion with respect to any
financial statements or other financial information contained or referred to
therein).
2
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
NovaStar Mortgage, Inc. relating to NovaStar Home Equity Loan Asset-Backed
Bonds, Series 1999-1 of our report dated January 26, 1998 on our audits of the
consolidated financial statements of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997. We also consent to the reference to our
Firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
January 25, 1999
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ______
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE 10017
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive
offices)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1
(Exact name of obligor as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
C/O WILMINGTON TRUST COMPANY
RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DE 19890-0001
(Address of principal executive (Zip Code)
offices)
HOME EQUITY LOAN ASSET-BACKED BONDS
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
1. Name and address of each examining or supervising authority to which
it is subject. New York State Banking Department, State House, Albany,
New York 12110. Board of Governors of the Federal Reserve System,
Washington, D.C., 20551 Federal Reserve Bank of New York, District No.
2, 33 Liberty Street, New York, Federal Deposit Insurance Corporation,
Washington, D.C., 20429.
2. Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank (
National Association), Chemical Bank, the surviving corporation, was renamed The
Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all
the City of New York and State of New York, on the 26TH day of JANUARY 1999.
THE CHASE MANHATTAN BANK
BY /S/ JENNIFER CUPO
----------------------------
/S/ JENNIFER CUPO
ASSISTANT VICE PRESIDENT
