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: May 20, 1998
(Date of earliest event reported)
Commission File No. 333-40467
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV (as depositor under the Sale and
Servicing Agreement, dated as of May 1, 1998, relating to the Master Financial
Asset Securitization Trust 1998-2, Home Loan Asset Backed Notes, Series 1998-2)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
Delaware 06-1204982
(State of Incorporation) (I.R.S. Employer Identification No.)
1285 Avenue of the Americas
New York, New York 10019
Address of principal executive offices (Zip Code)
(212) 713-2000
Registrant's Telephone Number, including area code
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
ITEM 5. Other Events
On May 28, 1998, Master Financial Asset Securitization Trust 1998-2 (the
"Owner Trust") issued Home Loan Asset Backed Notes, Series 1998-2, Class A-1,
Class A-2, Class A-3, Class A-4, Class A-4 IO, Class M-1, Class M-2, and Class
B-1 (the "Offered Notes"), having an aggregate original principal balance of
$210,635,500. The Offered Notes were issued pursuant to an Indenture, dated as
of May 1, 1998 (the "Indenture") between Master Financial Asset Securitization
Trust 1998-2 (the "Owner Trust") and The Bank of New York ("BNY," in such
capacity, the "Indenture Trustee"), a copy of which is filed as an exhibit
hereto. Home Loan Asset Backed Notes, Series 1998-2, Class B-2 having an
aggregate initial principal balance of $6,514,500 (the "Private Notes" and,
together with the Offered Notes, the "Notes"), were also issued pursuant to the
Indenture. The Owner Trust was formed by PaineWebber Mortgage Acceptance
Corporation IV, a Delaware corporation (the "Registrant"), pursuant to an Owner
Trust Agreement, dated as of May 1, 1998 (the "Owner Trust Agreement") among the
Registrant, Master Financial, Inc. (the "Transferor") and Wilmington Trust
Company (the "Owner Trustee"), a copy of which is filed as an exhibit hereto.
The Notes are secured by the assets of the Owner Trust, consisting of a grantor
trust certificate (the "Grantor Trust Certificate") evidencing 100% of the
beneficial ownership interests in Master Financial Grantor Trust 1998-2 (the
"Grantor Trust"). The Grantor Trust was established pursuant to a Grantor Trust
Agreement dated as of May 1, 1998 (the "Grantor Trust Agreement") among the
Registrant, BNY, as grantor trustee (in such capacity, the "Grantor Trustee")
and the Transferor, a copy of which is filed as an exhibit hereto. The assets of
the Grantor Trust consist primarily of a pool (the "Pool") of closed-end,
fixed-rate home loans (the "Loans"), substantially all of which are secured
primarily by junior-lien mortgages, deeds of trust or other similar security
instruments. The Grantor Trust Certificate was sold by the Registrant to the
Owner Trust pursuant to a Sale and Servicing Agreement dated as of May 1, 1998
(the "Sale and Servicing Agreement") among the Owner Trust, as issuer, the
Registrant, BNY, as indenture trustee (in such capacity, the "Indenture
Trustee"), Master Financial, Inc., as servicer and transferor and the Grantor
Trustee, a copy of which is filed as an exhibit hereto.
In addition, the Owner Trust and BNY, as administrator of the Owner Trust
have entered into an Administration Agreement, dated as of May 1, 1998 (the
"Administration Agreement"), a copy of which is filed as an exhibit hereto.
Interest on the Offered Notes will be distributed on each Payment Date (as
defined in the Sale and Servicing Agreement). Monthly payments in reduction of
the principal balance of the Offered Notes will be allocated to the Offered
Notes in accordance with the priorities set forth in the Sale and Servicing
Agreement.
<PAGE>
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
(EX-4.1) Indenture, dated as of May 1, 1998, between
Master Financial Asset Securitization Trust
1998-2 and The Bank of New York.
(EX-4.2) Sale and Servicing Agreement, dated as of
May 1, 1998, among PaineWebber Mortgage
Acceptance Corporation IV, Master Financial
Asset Securitization Trust 1998-2, Master
Financial, Inc. and The Bank of New York.
(EX-99.1) Administration Agreement, dated as of
May 1, 1998, among Master Financial Asset
Securitization Trust 1998-2, Master
Financial, Inc. and The Bank of New York.
(EX-99.2) Owner Trust Agreement, dated as of May 1,
1998, among PaineWebber Mortgage Acceptance
Corporation IV, Master Financial, Inc.,
Wilmington Trust Company and The Bank of
New York.
(EX-99.3) Grantor Trust Agreement, dated as of May 1,
1998 among PaineWebber Mortgage Acceptance
Corporation IV, Master Financial, Inc. and
The Bank of New York.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV
June 5, 1998
By: /s/ Barbara Dawson
Barbara Dawson
Senior Vice President
<PAGE>
INDEX TO EXHIBITS
Paper (P) or
Exhibit No. Description Electronic(E)
(EX-4.1) Indenture, dated as of May 1, 1998, between E
Master Financial Asset Securitization Trust
1998-2 and The Bank of New York.
(EX-4.2) Sale and Servicing Agreement, dated as of E
May 1, 1998, among PaineWebber Mortgage
Acceptance Corporation IV, Master Financial
Asset Securitization Trust 1998-2, Master
Financial, Inc. and The Bank of New York.
(EX-99.1) Administration Agreement, dated as of May 1, E
1998, among Master Financial Asset
Securitization Trust 1998-2, Master Financial,
Inc. and The Bank of New York.
(EX-99.2) Owner Trust Agreement, dated as of May 1, E
1998, among PaineWebber Mortgage Acceptance
Corporation IV, Master Financial, Inc.,
Wilmington Trust Company and The Bank of New
York.
(EX-99.3) Grantor Trust Agreement, dated as of May 1, E
1998 among PaineWebber Mortgage Acceptance
Corporation IV, Master Financial, Inc. and The
Bank of New York.
================================================================================
INDENTURE
between
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2,
as Issuer
and
THE BANK OF NEW YORK,
as Indenture Trustee
Dated as of May 1, 1998
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
Home Loan Asset Backed Notes,
Series 1998-2
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions
Section 1.02. Incorporation by Reference of Trust Indenture Act
Section 1.03. Rules of Construction
ARTICLE II
THE NOTES
Section 2.01. Form
Section 2.02. Execution, Authentication, Delivery and Dating
Section 2.03. Registration; Registration of Transfer and Exchange
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes
Section 2.05. Persons Deemed Note Owners
Section 2.06. Payment of Principal and/or Interest; Defaulted Interest
Section 2.07. Cancellation
Section 2.08. Conditions Precedent to the Authentication of the Notes
Section 2.09. Release of Collateral
Section 2.10. Book-Entry Notes
Section 2.11. Notices to Clearing Agency
Section 2.12. Definitive Notes
Section 2.13. Tax Treatment
Section 2.14. Limitations on Transfer of the Class B-2 Notes
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and/or Interest
Section 3.02. Maintenance of Office or Agency
Section 3.03. Money for Payments to Be Held in Trust
Section 3.04. Existence
Section 3.05. Protection of Collateral
Section 3.06. Annual Opinions as to Collateral
Section 3.07. Performance of Obligations
Section 3.08. Negative Covenants
Section 3.09. Annual Statement as to Compliance
Section 3.10. Covenants of the Issuer
Section 3.11. Restricted Payments
Section 3.12. Treatment of Notes as Debt for Tax Purposes
Section 3.13. Notice of Events of Default
Section 3.14. Further Instruments and Acts
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture
Section 4.02. Application of Trust Money
Section 4.03. Repayment of Moneys Held by Paying Agent
ARTICLE V
REMEDIES
Section 5.01. Events of Default
Section 5.02. Acceleration of Maturity; Rescission and Annulment
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee
Section 5.04. Remedies; Priorities
Section 5.05. Optional Preservation of the Collateral
Section 5.06. Limitation of Suits
Section 5.07. Unconditional Rights of Noteholders to Receive Principal
and/or Interest
Section 5.08. Restoration of Rights and Remedies
Section 5.09. Rights and Remedies Cumulative
Section 5.10. Delay or Omission Not a Waiver
Section 5.11. Control by Noteholders
Section 5.12. Waiver of Past Defaults
Section 5.13. Undertaking for Costs
Section 5.14. Waiver of Stay or Extension Laws
Section 5.15. Action on Notes
Section 5.16. Performance and Enforcement of Certain Obligations
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee
Section 6.02. Rights of Indenture Trustee
Section 6.03. Individual Rights of Indenture Trustee
Section 6.04. Indenture Trustee's Disclaimer
Section 6.05. Notices of Default
Section 6.06. Reports by Indenture Trustee to Holders
Section 6.07. Compensation and Indemnity
Section 6.08. Replacement of Indenture Trustee
Section 6.09. Successor Indenture Trustee by Merger
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee
Section 6.11. Eligibility; Disqualification
Section 6.12. Preferential Collection of Claims Against Issuer
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders
Section 7.02. Preservation of Information; Communications to Noteholders
Section 7.03. Reports by Issuer
Section 7.04. Reports by Indenture Trustee
Section 7.05. 144A Information
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money
Section 8.02. Trust Accounts; Payments
Section 8.03. General Provisions Regarding Accounts
Section 8.04. Servicer's Monthly Statements
Section 8.05. Release of Collateral
Section 8.06. Opinion of Counsel
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders
Section 9.02. Supplemental Indentures with Consent of Noteholders
Section 9.03. Execution of Supplemental Indentures
Section 9.04. Effect of Supplemental Indentures
Section 9.05. Conformity with Trust Indenture Act
Section 9.06. Reference in Notes to Supplemental Indentures
Section 9.07. Amendments to Trust Agreement
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption
Section 10.02. Form of Redemption Notice
Section 10.03. Notes Payable on Redemption Date; Provision for Payment
of Indenture Trustee
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.
Section 11.02. Form of Documents Delivered to Indenture Trustee
Section 11.03. Acts of Noteholders
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies
Section 11.05. Notices to Noteholders; Waiver
Section 11.06. Conflict with Trust Indenture Act
Section 11.07. Effect of Headings and Table of Contents
Section 11.08. Successors and Assigns
Section 11.09. Separability
Section 11.10. Benefits of Indenture
Section 11.11. Legal Holidays
Section 11.12. Governing Law
Section 11.13. Counterparts
Section 11.14. Recording of Indenture
Section 11.15. Trust Obligation
Section 11.16. No Petition
Section 11.17. Inspection
EXHIBITS
EXHIBIT A - Forms of Notes
EXHIBIT B-1 - Form of Transferor Affidavit (144A)
EXHIBIT B-2 - Form of Transferee Affidavit (Accredited Investor)
EXHIBIT B-3 - Form of Transfer Affidavit
EXHIBIT C - Form of Securities Legend
<PAGE>
This Indenture entered into effective May 1, 1998, between MASTER FINANCIAL
ASSET SECURITIZATION TRUST 1998-2, a Delaware business trust, as Issuer (the
"Issuer"), and THE BANK OF NEW YORK, as Indenture Trustee (the "Indenture
Trustee"),
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
In consideration of the mutual covenants herein contained, the Issuer and
the Indenture Trustee hereby agree as follows for the benefit of each of them
and for the equal and ratable benefit of the Holders of the Issuer's Class A-1
Floating Rate Home Loan Asset Backed Notes (the "Class A-1 Notes"), Class A-2
6.34% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3 6.60% Home
Loan Asset Backed Notes (the "Class A-3 Notes"), Class A-4 7.07% Home Loan Asset
Backed Notes (the "Class A-4 Notes"), Class A-4 IO 6.32% Home Loan Asset Backed
Notes (the "Class A-4 IO Notes"), Class M-1 7.29% Home Loan Asset Backed Notes
(the "Class M-1 Notes"), Class M-2 7.60% Home Loan Asset Backed Notes (the
"Class M-2 Notes"), Class B-1 8.73% Home Loan Asset Backed Notes (the "Class B-1
Notes") and Class B-2 10.02% Home Loan Asset Backed Notes (the "Class B-2 Notes"
and, together with the Class A Notes, Class A-4 IO Notes, Class M-1 Notes, Class
M-2 Notes and Class B-1 Notes, the "Notes"):
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants on the
Closing Date, to the Indenture Trustee, as Indenture Trustee for the benefit of
the Holders of the Notes, all of the Issuer's right, title and interest in and
to: (i) the Owner Trust Estate (as defined in the Sale and Servicing Agreement);
(ii) all right, title and interest of the Issuer in and to the Sale and
Servicing Agreement and the Grantor Trust Agreement (including the Grantor
Trustee's right to cause the Company to repurchase Home Loans from the Grantor
Trust under certain circumstances described therein); (iii) all present and
future claims, demands, causes of action and choses in action in respect of any
or all of the foregoing and all payments on or under and all proceeds of every
kind and nature whatsoever in respect of any or all of the foregoing, including
all proceeds of the conversion thereof, voluntary or involuntary, into cash or
other liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations and receivables, instruments and other property which at
any time constitute all or part of or are included in the proceeds of any of the
foregoing; (iv) all funds on deposit from time to time in the Trust Accounts
(including the Certificate Distribution Account); and (v) all other property of
the Owner Trust from time to time (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trusts hereunder and agrees to
perform its duties required in this Indenture to the best of its ability to the
end that the interests of the Holders of the Notes may adequately and
effectively be protected. The Indenture Trustee agrees and acknowledges that
possession of the Grantor Trust Certificate will be maintained by the Indenture
Trustee in New York, New York. The Indenture Trustee further agrees and
acknowledges that each other item of Collateral that is physically delivered to
the Indenture Trustee will be held by the Custodian on behalf of the Indenture
Trustee in Los Angeles, California or such other location mutually agreeable to
the Indenture Fee and the Issuer.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a) hereof.
"Administration Agreement" means the Administration Agreement dated as of
May 1, 1998, among the Administrator, the Issuer and the Company.
"Administrator" means The Bank of New York, a New York banking corporation,
or any successor Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Vice President or more senior
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the list of
Authorized Officers delivered by the Administrator to the Indenture Trustee on
the Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"Basic Documents" means the Certificate of Owner Trust, Certificate of
Grantor Trust, the Grantor Trust Agreement, the Owner Trust Agreement, this
Indenture, the Sale and Servicing Agreement, the Administration Agreement, the
Custodial Agreement, the Note Depository Agreement and other documents and
certificates delivered in connection herewith or therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1, Class A-2,
Class A-3, Class A-4, Class A-4 IO, Class M-1, Class M-2, Class B-1 or Class B-2
Notes, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 hereof.
"Business Day" means any day other than (i) a Saturday or a Sunday, or (ii)
a day on which banking institutions in The City of New York or the city in which
the corporate trust office of the Indenture Trustee is located are authorized or
obligated by law or executive order to be closed.
"Certificate of Grantor Trust" means the certificate of trust of the
Grantor Trust substantially in the form of Exhibit A to the Grantor Trust
Agreement.
"Certificate of Owner Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit C to the Owner Trust Agreement.
"Class A Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes and the Class A-4 IO Notes.
"Class A-1 Notes", "Class A-2 Notes", "Class A-3 Notes", "Class A-4 Notes",
"Class A-4 IO Notes", "Class B-1 Notes", "Class B-2 Notes", "Class M-1 Notes"
and "Class M-2 Notes" shall each have the meaning assigned thereto in the
"WITNESSETH THAT" clause of this Indenture.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for which from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means May 28, 1998.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Commission" means the Securities and Exchange Commission.
"Company" means Master Financial, Inc., a California corporation, or any
successor in interest thereto.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
101 Barclay Street, New York, New York 10286; Attention: Corporate Trust MBS
Administration, or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders and the Issuer, or the principal
corporate trust office of any successor Indenture Trustee at the address
designated by such successor Indenture Trustee by notice to the Noteholders and
the Issuer.
"DCR" means Duff & Phelps Credit Rating Co. or any successor thereto.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" means any Class of Notes as set forth in Section 2.12
hereof.
"Depositor" shall mean PaineWebber Mortgage Acceptance Corporation IV, a
Delaware corporation, in its capacity as depositor under the Sale and Servicing
Agreement, or any successor in interest thereto.
"Depository Institution" means any depository institution or trust company,
including the Indenture Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations that
are rated A-1 by Fitch, D-1 by DCR and P-1 by Moody's (or comparable ratings if
Moody's, Fitch and DCR are not the Rating Agencies).
"Due Period" means, with respect to any Payment Date and any Class of
Notes, the calendar month immediately preceding the month of such Payment Date.
"Event of Default" has the meaning specified in Section 5.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Fitch" means Fitch IBCA, Inc. or any successor thereto.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Grantor Trust" means Master Financial Grantor Trust 1998-2, formed
pursuant to the Grantor Trust Agreement.
"Grantor Trust Agreement" means the Trust Agreement dated as of May 1,
1998, among PaineWebber Mortgage Acceptance Corporation IV, as Depositor, the
Company and the Grantor Trustee.
"Grantor Trust Certificate" means the trust certificate issued by the
Grantor Trust evidencing 100% of the beneficial ownership of the Grantor Trust.
"Grantor Trustee" means The Bank of New York, a New York banking
corporation, as Grantor Trustee under the Grantor Trust Agreement, or any
successor Grantor Trustee hereunder.
"Highest Priority Classes Notes" means, until the Class Principal Balances
of all Classes of Senior Notes (or Class Notional Balance, in the case of the
Class A-4 IO Notes) are reduced to zero and all sums payable to the Holders of
the Senior Notes have been paid in full, the Senior Notes; when the Class
Principal Balances (or Class Notional Balance, in the case of the Class A-4 IO
Notes) of all classes of Senior Notes have been reduced to zero and all amounts
payable to the Holders of the Senior Notes have been paid in full, the Class M-1
Notes; when the Class Principal Balances (or Class Notional Balance, in the case
of the Class A-4 IO Notes) of all Classes of Senior Notes and Class M-1 Notes
have been reduced to zero and all sums payable to the Holders of the Senior
Notes and Class M-1 Notes have been paid in full, the Class M-2 Notes; when the
Class Principal Balances (or Class Notional Balance, in the case of the Class
A-4 IO Notes) of all Classes of Senior Notes, Class M-1 Notes and Class M-2
Notes have been reduced to zero and all sums payable to the Holders of the
Senior Notes, Class M-1 Notes and Class M-2 Notes have been paid in full, the
Class B-1 Notes; when the Class Principal Balances (or Class Notional Balance,
in the case of the Class A-4 IO Notes) of all Classes of Senior Notes, Class M-1
Notes, Class M-2 Notes and Class B-1 Notes have been reduced to zero and all
sums payable to the Holders of the Notes, Class M-1 Notes, Class M-2 Notes and
Class B-1 Notes have been paid in full, the Class B-2 Notes.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means The Bank of New York, a New York banking
corporation, as Indenture Trustee under this Indenture, or any successor
Indenture Trustee hereunder.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Transferor and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Transferor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Transferor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 hereof, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Issuer" or "Owner Trust" means Master Financial Asset Securitization Trust
1998-2 until a successor replaces it and, thereafter, means the successor and,
for purposes of any provision contained herein and required by the TIA, each
other obligor on the Notes.
"Issuer Order" and "Issuer Request" mean a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Majority Highest Priority Classes Noteholders" means on any date, Holders
of Highest Priority Classes Notes representing more than 50% of the Voting
Interests of the Highest Priority Classes Notes then Outstanding.
"Maturity Date" means, with respect to each Class of Notes, the applicable
maturity date set forth below:
Class Maturity Date
----- -------------
A-1 September 20, 2009
A-2 October 20, 2012
A-3 November 20, 2018
A-4 September 20, 2024
A-4 IO July 20, 2000
M-1 September 20, 2024
M-2 September 20, 2024
B-1 September 20, 2024
B-2 September 20, 2024
"Moody's" means Moody's Investors Services, Inc. or any successor thereto.
"Non-Priority Class Notes" means Notes which are not Highest Priority
Classes Notes.
"Note" means a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4
Note, Class A-4 IO Note, Class M-1 Note, Class M-2 Note, Class B-1 Note or Class
B-2 Note, as applicable.
"Note Depository Agreement" means the agreement to be entered into among
the Issuer, the Administrator, the Indenture Trustee and The Depository Trust
Company, as the initial Clearing Agency, relating to the Book-Entry Notes.
"Note Interest Rate" means, with respect to any Class of Notes, the
applicable rate per annum specified below (computed on the basis of a 360-day
year assumed to consist of twelve 30-day months except that with respect to the
Class A-1 Notes, calculations of accrued interest shall be made on the basis of
a 360-day year and actual number of days elapsed in each Accrual Period):
Class A-1: Floating Rate (1) (2)
Class A-2: 6.34%(2)
Class A-3: 6.60%(2)
Class A-4: 7.07%(2)
Class A-4 IO: 6.32%(2)
Class M-1: 7.29%(2)
Class M-2: 7.60%(2)
Class B-1: 8.73%(2)
Class B-2: 10.02%(2)
- ------------------------------
(1) Interest will accrue on the Class A-1 Notes during each Accrual Period at
a per annum interest rate equal to LIBOR for the related LIBOR
Determination Date plus 0.08%, subject to a maximum rate equal to the Net
Weighted Average Rate. The Note Interest Rate applicable to the Class A-1
Notes for the initial Accrual Period will be 5.72844% per annum.
(2) Commencing on the first day of the month in which the Clean-up Call Date
occurs, the Note Interest Rate shall be increased by 0.50% per annum.
"Note Owner" means, with respect to a Book-Entry Note, the Person that is
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.03 hereof.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer or the Administrator, under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.01
hereof, and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer or the Administrator.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be an employee of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee, as
Indenture Trustee, and shall comply with any applicable requirements of Section
11.01 hereof and shall be in form and substance satisfactory to the Indenture
Trustee.
"Outstanding" means, with respect to any Note and as of the date of
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has theretofore been deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision for such notice
has been made satisfactory to the Indenture Trustee);
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser; provided, however, that in determining
whether the Holders of the requisite Voting Interests of the Outstanding
Notes have given any request, demand, authorization, direction, notice,
consent or waiver hereunder or under any Basic Document, Notes owned by the
Issuer, any other obligor upon the Notes, the Transferor or any Affiliate
of any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that the Indenture Trustee
actually knows to be owned in such manner shall be disregarded. Notes owned
in such manner that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee that the pledgee has the right so to act with respect to such Notes
and that the pledgee is not the Issuer, any other obligor upon the Notes,
the Transferor or any Affiliate of any of the foregoing Persons; and
(iv) Notes for which the related Maturity Date has occurred.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
Class of Notes, as applicable, Outstanding at the date of determination. The
Class A-4 IO Notes shall not have an Outstanding Amount.
"Owner Trust Agreement" means the Trust Agreement dated as of May 1, 1998,
among PaineWebber Mortgage Acceptance Corporation IV, as Depositor, the Company
and Wilmington Trust Company, as Owner Trustee.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
hereof and is authorized by the Issuer to make payments to and payments from the
Note Payment Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Payment Date" means the 20th day of any month or if such 20th day is not a
Business Day, the first Business Day immediately following such day, commencing
in June 1998.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, limited liability company, limited
liability partnership or government or any agency or political subdivision
thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.04 hereof in lieu of a mutilated,
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency" means either or all of (i) Moody's, (ii) Fitch or (iii)
DCR. If no such organization or successor thereto is any longer in existence,
"Rating Agency" shall be a nationally recognized statistical rating organization
or other comparable Person rating the Notes.
"Rating Agency Condition" means, with respect to any applicable action,
that each Rating Agency shall have been given 10 days' prior notice thereof (or
such shorter period as is acceptable to each Rating Agency) and that each of the
Rating Agencies shall have notified the Depositor, the Servicer and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes.
"Record Date" means, as to each Payment Date, the last Business Day of the
month immediately preceding the month in which such Payment Date occurs.
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01 hereof, the Payment Date specified by the Servicer or the
Issuer pursuant to such Section 10.01.
"Registered Holder" means the Person in the name of which a Note is
registered on the Note Register on the applicable Record Date.
"Residual Interest Certificate" has the meaning assigned to such term in
Section 1.1 of the Owner Trust Agreement.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject, and who shall have direct responsibility for the
administration of this Indenture.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement dated
as of May 1, 1998, among the Issuer, PaineWebber Mortgage Acceptance Corporation
IV, as Depositor, and Master Financial, Inc., as Transferor, Servicer and Claims
Administrator, and The Bank of New York, as Indenture Trustee, Grantor Trustee
and Contract of Insurance Holder.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" shall mean Master Financial, Inc., in its capacity as servicer
under the Sale and Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the States of the United States of America or the
District of Columbia.
"Transferor" means Master Financial, Inc., a California corporation.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code as in effect in the relevant jurisdiction, as amended from time to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
"Voting Interests" means (A) with respect to any Class of Notes, other than
the Class A-4 IO Notes, the percentage equal to the product of (i) 99% and (ii)
a fraction, the numerator of which is equal to the Class Principal Balance of
such Class of Notes and the denominator of which is equal to the aggregate Class
Principal Balances of all Classes of Notes Outstanding and (B) with respect to
the Class A-4 IO Notes, 1%.
Section 1.02. Incorporation by Reference of Trust Indenture Act. (a)
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
(b) All other TIA terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by rule of the Securities
and Exchange Commission have the respective meanings assigned to them by such
definitions.
Section 1.03. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect in the United States from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented (as provided in such agreements) and includes (in
the case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; references to a Person are
also to its permitted successors and assigns.
ARTICLE II
THE NOTES
Section 2.01. Form. The Notes shall be designated as the "Master Financial
Asset Securitization Trust 1998-2, Master Financial Home Loan Asset Backed
Notes, Series 1998-2". Each Class of Notes shall be in substantially the form
set forth in Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution thereof. Any portion of the text of any Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes are set forth in Exhibit A hereto. The terms of each Class of Notes are
part of the terms of this Indenture.
Section 2.02. Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or the Administrator. The signature of any such Authorized Officer on
the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Owner Trustee or the Administrator shall
bind the Issuer, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Notes or did not hold such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in Section 2.08
hereof, the Indenture Trustee shall, on the Closing Date, upon Issuer Order
authenticate and deliver the Classes of Notes for original issue in the
following principal amounts, or Class Notional Balances in the case of the Class
A-4 IO Notes: Class A-1, $74,260,000; Class A-2, $32,072,000; Class A-3,
$28,084,000; Class A-4, $17,589,000; Class A-4 IO, $17,589,000; Class M-1,
$21,715,000; Class M-2, $19,543,000; Class B-1, $17,372,000; Class B-2,
$6,514,500. The aggregate principal amounts of such Classes of Notes outstanding
at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture Trustee to
or upon the order of the Issuer on the Closing Date shall be dated May 28, 1998.
All other Notes that are authenticated after the Closing Date for any other
purpose under the Indenture shall be dated the date of their authentication.
Each Class of Notes shall be issuable as registered Notes in the minimum
denomination of $25,000 initial principal amount (or, in the case of the Class
A-4 IO Notes, $1,000,000 initial notional amount) and integral multiples of
$1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
Section 2.03. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee initially shall be the "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts or notional balances and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02 hereof, the
Issuer shall execute, and the Indenture Trustee shall authenticate and the
Noteholder shall obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes of the same Class in
any authorized denominations, of a like aggregate principal amount, or notional
amount in the case of the Class A-4 IO Notes.
At the option of the Holder, Notes may be exchanged for other Notes of the
same Class in any authorized denominations, of a like aggregate principal amount
or notional amount, as the case may be upon surrender of the Notes to be
exchanged at such office or agency. Whenever any Notes are so surrendered for
exchange, the Issuer shall execute, and the Indenture Trustee shall authenticate
and the Noteholder shall obtain from the Indenture Trustee, the Notes which the
Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agents' Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 9.06 hereof not
involving any transfer.
The preceding provisions of this Section 2.03 notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may reasonably be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, an Authorized Officer of the Owner Trustee or the
Administrator on behalf of the Issuer shall execute, and upon receiving an
Issuer Order the Indenture Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note of the same Class; provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become or
within seven days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Issuer and the Indenture Trustee shall be entitled to recover such replacement
Note (or such payment) from the Person to which it was delivered or any Person
taking such replacement Note from such Person to which such replacement Note was
delivered or any assignee of such Person, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor to
the extent of any loss, damage, cost or expense incurred by the Issuer or the
Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 2.04, the
Issuer or the Indenture Trustee may require the payment by the Holder of such
Note of a sum sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other reasonable expenses (including the
fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 2.04 in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 2.04 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.05. Persons Deemed Note Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in the name of
which any Note is registered (as of the day of determination) as the Note Owner
for the purpose of receiving payments of principal of and interest, if any, on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 2.06. Payment of Principal and/or Interest; Defaulted Interest. (a)
Each Class of Notes shall accrue interest at the related Note Interest Rate, and
such interest shall be payable on each Payment Date as specified in Exhibit A
hereto, subject to Section 3.01 hereof. With respect to the Class A-1 Notes, the
Indenture Trustee shall determine LIBOR for each applicable Accrual Period on
the second London Business Day prior thereto. Any installment of interest or
principal, if any, payable on any Note that is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
the name of which such Note (or one or more Predecessor Notes) is registered on
the Record Date by check mailed first-class postage prepaid to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.12 hereof, with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Payment Date or on the applicable Maturity Date for
such Class of Notes (and except for the Termination Price for any Note called
for redemption pursuant to Section 10.01) hereof, which shall be payable as
provided in Section 2.06(b) below. The funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.03 hereof.
(b) The principal of each Note other than the Class A-4 IO Notes shall be
payable in installments on each Payment Date as provided in the forms of the
Notes set forth in Exhibit A hereto. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes together with the amount of any Loss
Reimbursement Deficiency in respect thereof of a Class of Notes other than the
Class A-4 IO Notes shall be due and payable, if not previously paid, on the
earlier of (i) the applicable Maturity Date of such Class, (ii) the Redemption
Date or (iii) the date on which an Event of Default shall have occurred and be
continuing, if the Indenture Trustee or the Majority Highest Priority Classes
Noteholders shall have declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 hereof. The Class A-4 IO Notes are "interest
only" and shall receive no payments in respect of principal.
All principal payments on each Class of Notes other than the Class A-4 IO
Notes shall be made pro rata to the Noteholders of such Class entitled thereto.
The Indenture Trustee shall notify the Person in the name of which a Note is
registered at the close of business on the Record Date preceding the Payment
Date on which the Issuer expects that the final installment of principal of and
interest on such Note will be paid. Such notice shall be mailed or transmitted
by facsimile prior to such final Payment Date and shall specify that such final
installment will be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and surrendered for
payment of such installment. Notices in connection with redemptions of Notes
shall be mailed to Noteholders as provided in Section 10.02 hereof.
Section 2.07. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall
promptly be cancelled by the Indenture Trustee. The Issuer may at any time
deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall promptly be cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section 2.07, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided, however, that such
Issuer Order is timely and the Notes have not been previously disposed of by the
Indenture Trustee.
Section 2.08. Conditions Precedent to the Authentication of the Notes on
the Closing Date. The Notes may be authenticated by the Indenture Trustee on the
Closing Date, upon Issuer Request and upon receipt by the Indenture Trustee of
the following:
(a) An Issuer Order authorizing the execution and authentication of such
Notes by the Issuer.
(b) All of the items of Collateral which shall be delivered to the
Indenture Trustee or its designee.
(c) An executed counterpart of the Owner Trust Agreement.
(d) An Opinion of Counsel addressed to the Indenture Trustee to the effect
that:
(i) all conditions precedent provided for in this Indenture relating
to the authentication of the Notes have been complied with;
(ii) the Owner Trustee has power and authority to execute, deliver
and perform its obligations under the Owner Trust Agreement;
(iii) the Issuer has been duly formed, is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C. Section
3801 et seq., and has power, authority and legal right to execute and
deliver this Indenture, the Administration Agreement and the Sale and
Servicing Agreement;
(iv) assuming due authorization, execution and delivery hereof by
the Indenture Trustee, the Indenture is the valid, legal and binding
obligation of the Issuer, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent or preferential conveyance and other similar laws of general
application affecting the rights of creditors generally and to general
principles of equity (regardless of whether such enforcement is considered
in a Proceeding in equity or at law);
(v) the Notes, when executed and authenticated as provided herein
and delivered against payment therefor, will be the valid, legal and
binding obligations of the Issuer pursuant to the terms of this Indenture,
entitled to the benefits of this Indenture, and will be enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent or preferential
conveyance and other similar laws of general application affecting the
rights of creditors generally and to general principles of equity
(regardless of whether such enforcement is considered in a Proceeding in
equity or at law);
(vi) the Owner Trust Agreement authorizes the Issuer to Grant the
Collateral to the Indenture Trustee as security for the Notes;
(vii) this Indenture has been duly qualified under the Trust
Indenture Act;
(viii) no authorization, approval or consent of any governmental
body having jurisdiction in the premises which has not been obtained by the
Issuer is required to be obtained by the Issuer for the valid issuance and
delivery of the Notes, except that no opinion need be expressed with
respect to any such authorizations, approvals or consents as may be
required under any state securities or "blue sky" laws; and
(ix) any other matters as the Indenture Trustee may reasonably
request.
(e) An Officer's Certificate complying with the requirements of Section
11.01 hereof and stating that:
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes applied for will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, the Owner
Trust Agreement, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is bound, or any
order of any court or administrative agency entered in any Proceeding to
which the Issuer is a party or by which it may be bound or to which it may be
subject, and that all conditions precedent provided in this Indenture
relating to the authentication and delivery of the Notes applied for have
been complied with;
(ii) the Issuer is the owner of the Grantor Trust Certificate, has
not assigned any interest or participation in the Grantor Trust Certificate
(or, if any such interest or participation has been assigned, it has been
released) and has the right to Grant the Grantor Trust Certificate to the
Indenture Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in and to the Collateral, and has delivered or
caused the same to be delivered to the Indenture Trustee;
(iv) attached thereto are true and correct copies of letters signed
by the Rating Agencies confirming that the Class A-1, Class A-2, Class A-3,
Class A-4 and Class A-4 IO Notes have been rated "AAA" by Fitch and DCR, and
"Aaa" by Moody's, and letters signed by the Rating Agencies confirming that
the Class M-1 Notes, the Class M-2 Notes, the Class B-1 Notes and the Class
B-2 Notes have been rated "AA", "A", "BBB" and "BB", respectively by Fitch
and DCR, and rated "Aa2", "A2", "Baa3" and "Ba2", respectively by Moody's;
(v) all conditions precedent provided for in this Indenture relating
to the authentication of the Notes have been complied with; and
(f) A fair value certificate from the Servicer, as agent of the Trust,
pursuant to Section 2(a)(xii) of the Administration Agreement.
Section 2.09. Release of Collateral. Except as otherwise provided in
Section 11.01 hereof and the terms of the Basic Documents, the Indenture Trustee
shall release property from the lien of this Indenture only upon receipt of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(l) or an Opinion of Counsel in lieu of such Independent Certificates to
the effect that the TIA does not require any such Independent Certificates.
Section 2.10. Book-Entry Notes. The Notes, when authorized by an Issuer
Order, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by or on behalf of the Issuer. The Book-Entry Notes shall be
registered initially on the Note Register in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Note Owner will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12 hereof. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12 hereof:
(i) the provisions of this Section 2.10 shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole Holder of the
Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section 2.10
conflict with any other provisions of this Indenture, the provisions of
this Section 2.10 shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12
hereof, the initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Voting Interests of the Outstanding Notes, the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Note Owners
and/or Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12 hereof, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency and shall have no obligation to such Note Owners.
Section 2.12. Definitive Notes. (a) If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, Owners of the Book-Entry Notes
representing beneficial interests aggregating at least a majority of the Voting
Interests of the Outstanding Notes advise the Clearing Agency in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and each of them
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall
recognize the Holders of the Definitive Notes as Noteholders.
(b) Notwithstanding the foregoing, (i) Holders of the Class B-2 Notes held
as Book-Entry Notes, may transfer such Class B-2 Notes to transferees who will
hold such Class B-2 Notes as Definitive Notes and (ii) Holders of the Class B-2
Notes held as Definitive Notes, may transfer the Class B-2 Notes to transferees
who will hold such Class B-2 Notes as Book-Entry Notes, if the conditions set
forth in this Section 2.12 are satisfied.
Any and all transfers from a Holder of a Class B-2 Book-Entry Note to a
transferee wishing to take delivery in the form of a Definitive Note will
require the transferee to take delivery subject to the restrictions on the
transfer of such Definitive Note described in the legend set forth on the face
of the Class B-2 Note substantially in the form of Exhibit C as attached hereto
(the "Legend"), and such transferee agrees that it will transfer such a Class
B-2 Note only as provided therein and herein. No such transfer shall be made and
the Indenture Trustee shall not register any such transfer unless such transfer
is made in accordance with Section 2.12(b) and Section 2.14.
Upon acceptance for exchange or transfer of a beneficial interest in a
Class B-2 Book-Entry Note for a Definitive Note as provided herein, the
Indenture Trustee shall endorse on (or cause the endorsement of) the schedule
affixed to the related Book-Entry Note (or on a continuation of such schedule
affixed to the such Book-Entry Note and made a part thereof) an appropriate
notation evidencing the date of such exchange or transfer and a decrease in the
Class Principal Balance, in the case of the Class B-2 Notes, of such Book-Entry
Note equal to the Class Principal Balance of such Definitive Note issued in
exchange therefor or upon transfer thereof. Unless determined otherwise by the
Indenture Trustee in accordance with applicable law, a Definitive Note issued
upon transfer of or exchange for a beneficial interest in a Class B-2 Book-Entry
Note shall bear the Legend.
If a Holder of a Class B-2 Definitive Note wishes at any time to transfer
such Definitive Note to a Person who wishes to take delivery thereof in the form
of a beneficial interest in the Book-Entry Note, such transfer may be effected
only in accordance with the applicable procedures of the Depository Institution,
and Section 2.12(b) and Section 2.14. Upon receipt by the Indenture Trustee at
the Corporate Trust Office of (1) the Class B-2 Definitive Note to be
transferred with an assignment and transfer, (2) written instructions given in
accordance with the applicable procedures from a participant directing the
Indenture Trustee to credit or cause to be credited to another specified
participant's account a beneficial interest in the Book-Entry Note, in an amount
equal to the Class Principal Balance of the Class B-2 Notes of such Definitive
Note to be so transferred, (3) a written order given in accordance with the
applicable procedures containing information regarding the account of the
participant to be credited with such beneficial interest, and (4) transfer
documentation received for a "Qualified Institutional Buyer" pursuant to Section
2.14, the Indenture Trustee shall cancel such Definitive Note, execute and
deliver a new Definitive Note for the Class Principal Balance of the Class B-2
Notes of the Definitive Note not so transferred, registered in the name of the
Holder or the Holder's transferee (as instructed by the Holder), and the
Indenture Trustee shall instruct the Depository Institution to increase the
Class Principal Balance of the Book-Entry Note, by the Class Principal Balance
of the Definitive Note to be so transferred, and to credit or cause to be
credited to the account of the Person specified in such instructions a
corresponding Class Principal Balance of the Book-Entry Note.
Under no circumstances may an institutional "accredited investor" within
Regulation D of the Securities Act take delivery in the form of a beneficial
interest in a Class B-2 Book-Entry Note if such purchaser is not a "qualified
institutional buyer" as defined under Rule 144A under the Securities Act.
An exchange of a beneficial interest in a Class B-2 Book-Entry Note for a
Definitive Note or Notes, an exchange of a Class B-2 Definitive Note or Notes
for a beneficial interest in the Book-Entry Note and exchange of a Class B-2
Definitive Note or Notes for another Definitive Note or Notes (in each case,
whether or not such exchange is made in anticipation of subsequent transfer, and
in the case of the Book-Entry Note, so long as the Book-Entry Note remains
outstanding and is held by or on behalf of the Depository Institution), may be
made only in accordance with Section 2.12(b) and Section 2.14 and in accordance
with the rules of the Depository Institution.
Section 2.13. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that for all purposes,
including federal, state and local income, single business and franchise tax
purposes, the Notes will qualify as indebtedness of the Issuer secured by the
Collateral. The Issuer, by entering into this Indenture, and each Noteholder, by
its acceptance of a Note (and each Note Owner by its acceptance of an interest
in the applicable Book-Entry Note), agree to treat the Notes for all purposes,
including federal, state and local income, single business and franchise tax
purposes, as indebtedness of the Issuer.
SECTION 2.14. Limitations on Transfer of the Class B-2 Notes. The Class B-2
Notes have not been and will not be registered under the Securities Act and will
not be listed on any exchange. No transfer of a Class B-2 Definitive Note or
exchange of a Class B-2 Definitive Note for a Class B-2 Book-Entry Note (or vice
versa) shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under the
Securities Act and such state securities laws. In the event that a transfer of a
Class B-2 Note in Definitive Note form is to be made in reliance upon an
exemption from the Securities Act and state securities laws, in order to assure
compliance with the Securities Act and such laws, the prospective transferee
shall (A) in the event that the transfer is made in reliance upon Rule 144A
under the Securities Act, the Indenture Trustee shall require that the
transferor deliver a certification substantially in the form of Exhibit B-1
hereto, or (B) in the event that the transfer is made to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act that is not a "qualified institutional
buyer," the Indenture Trustee shall require that the transferee deliver a
certification substantially in the form of Exhibit B-2 hereto. In the event of a
transfer of a Class B-2 Note pursuant to clause (A) or (B) in the immediately
preceding sentence, the Indenture Trustee shall require that the transferee
deliver a certification substantially in the form of Exhibit B-3 hereto.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and/or Interest. The Issuer will duly
and punctually pay (or will cause to be paid duly and punctually) the principal
of and interest on the Notes in accordance with the terms of the Notes and this
Indenture. Without limiting the foregoing, subject to and in accordance with
Section 8.02(c) hereof, the Issuer will cause to be distributed all amounts on
deposit in the Note Payment Account on each Payment Date deposited therein
pursuant to the Sale and Servicing Agreement (i) for the benefit of the Class
A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class A-2
Notes, to the Class A-2 Noteholders, (iii) for the benefit of the Class A-3
Notes, to the Class A-3 Noteholders, (iv) for the benefit of the Class A-4
Notes, to the Class A-4 Noteholders, (v) for the benefit of the Class A-4 IO
Notes, to the Class A-4 IO Noteholders, (vi) for the benefit of the Class M-1
Notes, to the Class M-1 Noteholders, (vii) for the benefit of the Class M-2
Notes, to the Class M-2 Noteholders, (viii) for the benefit of the Class B-1
Notes, to the Class B-1 Noteholders and (ix) for the benefit of the Class B-2
Notes, to the Class B-2 Noteholders. Amounts properly withheld under the Code by
any Person from a payment to any Noteholder of interest and/or principal shall
be considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture. The Notes shall be non-recourse obligations of the
Issuer and shall be limited in right of payment to amounts available from the
Collateral, as provided in this Indenture. The Issuer shall not otherwise be
liable for payments on the Notes. If any other provision of this Indenture shall
be deemed to conflict with the provisions of this Section 3.01, the provisions
of this Section 3.01 shall control.
Section 3.02. Maintenance of Office or Agency. The Issuer will or will
cause the Administrator to maintain in the Borough of Manhattan in The City of
New York an office or agency where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served. The Issuer hereby
initially appoints the Administrator to serve as its agent for the foregoing
purposes and to serve as Paying Agent with respect to the Notes and the
Certificates. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments to Be Held in Trust. As provided in
Section 8.02(a) and (b) hereof, all payments of amounts due and payable with
respect to any Notes that are to be made from amounts withdrawn from the Note
Payment Account pursuant to Section 8.02(c) hereof shall be made on behalf of
the Issuer by the Indenture Trustee or by the Paying Agent, and no amounts so
withdrawn from the Note Payment Account for payments of Notes shall be paid over
to the Issuer except as provided in this Section 3.03.
On or before the Business Day preceding each Payment Date and the
Redemption Date, the Paying Agent shall deposit or cause to be deposited in the
Note Payment Account an aggregate sum sufficient to pay the amounts due on such
Payment Date or the Redemption Date under the Notes, such sum to be held in
trust for the benefit of the Persons entitled thereto, and (unless the Paying
Agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of
its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written notice
thereof to the Indenture Trustee. Any Paying Agent appointed by the Issuer shall
be a Person which would be eligible to be Indenture Trustee hereunder as
provided in Section 6.11 hereof. The Issuer shall not appoint any Paying Agent
(other than the Indenture Trustee) which is not, at the time of such
appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer
(or any other obligor upon the Notes) of which it has actual knowledge in
the making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith; provided, however, that
with respect to withholding and reporting requirements applicable to
original issue discount (if any) on the Notes, the Issuer shall have first
provided the calculations pertaining thereto to the Indenture Trustee.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds or abandoned
property, any money held by the Indenture Trustee or any Paying Agent in trust
for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request; and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Indenture Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided, however,
that the Indenture Trustee or such Paying Agent, before being required to make
any such repayment, shall at the expense and direction of the Issuer cause to be
published, once in a newspaper of general circulation in The City of New York
customarily published in the English language on each Business Day, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).
Section 3.04. Existence. (a) Subject to subparagraph (b) of this Section
3.04, the Issuer will keep in full effect its existence, rights and franchises
as a business trust under the laws of the State of Delaware (unless it becomes,
or any successor Issuer hereunder is or becomes, organized under the laws of any
other State or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes and the Collateral.
(b) Any successor to the Owner Trustee appointed pursuant to Section 10.2
of the Trust Agreement shall be the successor Owner Trustee under this Indenture
without the execution or filing of any paper, instrument or further act to be
done on the part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to the Owner
Trustee, the Person succeeding to the Owner Trustee under the Trust Agreement
may exercise every right and power of the Owner Trustee under this Indenture
with the same effect as if such Person had been named as the Owner Trustee
herein.
Section 3.05. Protection of Collateral. The Issuer will from time to time
execute and deliver all such reasonable supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) provide further assurance with respect to the Grant of all or
any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any rights with respect to the Collateral; or
(v) preserve and defend title to the Collateral and the rights of
the Indenture Trustee and the Noteholders in such Collateral against the
claims of all persons and parties.
The Issuer hereby designates the Administrator, its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
Section 3.06. Annual Opinions as to Collateral. On or before [June 15th] in
each calendar year, beginning in 1999, the Issuer shall furnish to the Indenture
Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until June 15th of
the following calendar year.
Section 3.07. Performance of Obligations. (a) The Issuer will not take any
action and will use its best efforts not to permit any action to be taken by
others that would release any Person from any of such Person's material
covenants or obligations under any instrument or agreement included in the
Collateral or that would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or effectiveness of, any
such instrument or agreement, except as expressly provided in this Indenture,
the Sale and Servicing Agreement or such other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer and the Administrator to assist the Issuer in performing its duties
under this Indenture. The Administrator must at all times be the same Person as
the Indenture Trustee.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, in the Basic Documents and in the
instruments and agreements included in the Collateral, including but not limited
to filing or causing to be filed all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture and the Sale and
Servicing Agreement. Except as otherwise expressly provided therein, the Issuer
shall not waive, amend, modify, supplement or terminate any Basic Document or
any provision thereof without the consent of the Indenture Trustee and the
Holders of at least a majority of the Voting Interests of the Outstanding Notes.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Default under the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect to such default. If
such an Event of Default shall arise from the failure of the Servicer to perform
any of its duties or obligations under the Sale and Servicing Agreement with
respect to the Home Loans, the Issuer shall take all reasonable steps available
to it to remedy such failure.
(e) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees (i) that it will not, without the prior
written consent of the Indenture Trustee, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral (except to the
extent otherwise provided in the Sale and Servicing Agreement) or the Basic
Documents, or waive timely performance or observance by the Servicer or the
Depositor under the Sale and Servicing Agreement; and (ii) that any such
amendment shall not (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, payments that are required to be made for the
benefit of the Noteholders or (B) reduce the aforesaid percentage of the Notes
that is required to consent to any such amendment, without the consent of the
Holders the Voting Interests of all Outstanding Notes. If any such amendment,
modification, supplement or waiver shall so be consented to by the Indenture
Trustee, the Issuer agrees, promptly following a request by the Indenture
Trustee to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale and
Servicing Agreement, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in the
Collateral, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Noteholder by reason of the payment of the taxes levied
or assessed upon any part of the Collateral;
(iii) engage in any business or activity other than as permitted by
the Owner Trust Agreement or other than in connection with, or relating to,
the issuance of Notes pursuant to this Indenture, or amend the Owner Trust
Agreement as in effect on the Closing Date other than in accordance with
Section 11.1 thereof;
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any indebtedness of
any Person, except for such indebtedness as may be incurred by the Issuer
in connection with the issuance of the Notes pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenants or obligations with respect to the Notes
under this Indenture except as may expressly be permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Collateral or any part
thereof or any interest therein or the proceeds thereof (other than tax
liens, mechanics' liens and other liens that arise by operation of law, in
each case on any of the Mortgaged Properties and arising solely as a result
of an action or omission of the related Obligors) or (C) permit the lien of
this Indenture not to constitute a valid first priority (other than with
respect to any such tax, mechanics' or other lien) security interest in the
Collateral;
(viii) remove the Administrator without cause unless the Rating
Agency Condition shall have been satisfied in connection with such removal;
or
(ix) take any other action or fail to take any action which may
cause the Issuer to be taxable as (a) an association pursuant to Section
7701 of the Code and the corresponding regulations or (b) as a taxable
mortgage pool pursuant to Section 7701(i) of the Code and the corresponding
regulations.
Section 3.09. Annual Statement as to Compliance. The Issuer will deliver to
the Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing in the fiscal year 1999), an Officer's Certificate stating,
as to the Authorized Officer signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in its compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
Section 3.10. Covenants of the Issuer. All covenants of the Issuer in this
Indenture are covenants of the Issuer and are not covenants of the Owner
Trustee. The Owner Trustee is, and any successor Owner Trustee under the Trust
Agreement will be, entering into this Indenture solely as Owner Trustee under
the Trust Agreement and not in its respective individual capacity, and in no
case whatsoever shall the Owner Trustee or any such successor Owner Trustee be
personally liable on, or for any loss in respect of, any of the statements,
representations, warranties or obligations of the Issuer hereunder, as to all of
which the parties hereto agree to look solely to the property of the Issuer.
Section 3.11. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any payment (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii) set
aside or otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made, (x) payments to the
Servicer, the Indenture Trustee, the Grantor Trustee, the Owner Trustee, the
Noteholders and the holders of the Residual Interest Certificate as contemplated
by, and to the extent funds are available for such purpose under, the Sale and
Servicing Agreement, the Grantor Trust Agreement or the Owner Trust Agreement
and (y) payments to the Indenture Trustee pursuant to Section 1(a)(ii) of the
Administration Agreement. The Issuer will not, directly or indirectly, make or
cause to be made payments to or distributions from the Collection Account in
respect of the Grantor Trust Certificate except in accordance with this
Indenture and the Basic Documents.
Section 3.12. Treatment of Notes as Debt for Tax Purposes. The Issuer
shall, and shall cause the Administrator to, treat the Notes as indebtedness for
all purposes.
Section 3.13. Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder, each default on the part of the Servicer or the Transferor of
its obligations under the Sale and Servicing Agreement and each default on the
part of the Transferor of its obligations under the Home Loan Purchase
Agreement.
Section 3.14. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes (except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08
and 3.10 hereof, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder which survive the termination of this Indenture (including the
rights of the Indenture Trustee under Section 6.07 hereof and the obligations of
the Indenture Trustee under Section 4.02 hereof) and (vi) the rights of
Noteholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee payable to all or any of them), and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when all of the following have occurred:
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i) Notes
that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.04 hereof and (ii) Notes for the payment
of which money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03 hereof) shall
have been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. shall have become due and payable, or
b. will become due and payable within one year following the Maturity
Date applicable to the Class B-2 Notes, or
c. are to be called for redemption within one year under arrangements
satisfactory to the Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and at the
expense, of the Issuer,
d. and the Issuer, in the case of clause a., b. or c. above, has
irrevocably deposited or caused irrevocably to be deposited with
the Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the
Indenture Trustee for cancellation when due to the applicable
Maturity Date of such Class of Notes or the Redemption Date (if
Notes shall have been called for redemption pursuant to Section
10.01 hereof), as the case may be; and
(B) the latest of (a) 18 months after payment in full of all outstanding
obligations under the Notes, (b) the payment in full of all unpaid Trust Fees
and Expenses and (c) the date on which the Issuer has paid or caused to be paid
all other sums payable hereunder by the Issuer; and
(C) the Issuer shall have delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.01(a) hereof and, subject
to Section 11.02 hereof, each stating that all conditions precedent herein
provided for, relating to the satisfaction and discharge of this Indenture with
respect to the Notes, have been complied with.
Section 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal
and/or interest; but such moneys need not be segregated from other funds except
to the extent required herein or in the Sale and Servicing Agreement or required
by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.03 hereof and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.01. Events of Default. (a) "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) subject to Section 5.01(b) and notwithstanding that there may be
insufficient sums in the Note Payment Account for payment thereof on the
related Payment Date, default in the payment of any interest on any Note
when the same becomes due and payable, and continuance of such default for
a period of five (5) days; or
(ii) subject to Section 5.01(b) and notwithstanding that there may
be insufficient sums in the Note Payment Account for payment thereof on the
related Payment Date, default in the payment of the principal of or any
installment of the principal of any Note (i) when the same becomes due and
payable or (ii) on the Maturity Date; or
(iii) the existence of an unpaid Loss Reimbursement Deficiency in
respect of any Highest Priority Classes Notes; or
(iv) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture, the Sale and Servicing Agreement or
in any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material respect
as of the time when the same shall have been made, and such default shall
continue or not be cured, or the circumstance or condition in respect of
which such misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Issuer by the
Indenture Trustee, or to the Issuer and the Indenture Trustee by the
Holders of at least 25% of the Voting Interests of the Outstanding Notes, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
notice of Default hereunder; or
(v) default in the observance or performance of any covenant or
agreement of the Company made in the Owner Trust Agreement or Grantor Trust
Agreement or any representation or warranty of the Company made in the
Owner Trust Agreement or Grantor Trust Agreement, proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee, or to the Issuer
and the Indenture Trustee by the Holders of at least 25% of the Voting
Interests of the Outstanding Notes, a written notice specifying such
Default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a notice of Default hereunder; or
(vi) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Collateral in an involuntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part
of the Collateral, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(vii) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Collateral, or the making
by the Issuer of any general assignment for the benefit of creditors, or
the failure by the Issuer generally to pay its debts as such debts become
due, or the taking of any action by the Issuer in furtherance of any of the
foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after
the occurrence thereof, written notice in the form of an Officer's Certificate
of any event which with the giving of notice and the lapse of time would become
an Event of Default under clauses (iv) and (v) above, the status of such event
and what action the Issuer is taking or proposes to take with respect thereto.
(b) Neither (i) the failure to pay the full amount of interest payable
pursuant to Section 5.01(d) of the Sale and Servicing Agreement to Holders of
any Non-Priority Class Notes, nor (ii) an application of Allocable Loss Amounts
pursuant to Section 5.04 of the Sale and Servicing Agreement to any Non-Priority
Class Notes, shall constitute an Event of Default under Section 5.01(a)(i).
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee, at the direction or upon the prior written consent of the
Majority Highest Priority Classes Noteholders, may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon, and all accrued and unpaid interest on the Class A-4 IO Notes, through
the date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the moneys due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Majority Highest Priority Classes Noteholders, by written notice to the Issuer
and the Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
1. all payments of principal of and/or interest on all Notes and
all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
2. all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the principal of
the Notes that has become due solely by such acceleration, have been cured or
waived as provided in Section 5.12 hereof. No such rescission shall affect any
subsequent default or impair any right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the Indenture
Trustee, pay to the Indenture Trustee, for the benefit of the Holders of the
Notes, the whole amount then due and payable on such Notes for principal and/or
interest, with interest upon the overdue principal and, to the extent payment at
such rate of interest shall be legally enforceable, upon overdue installments of
interest at the rate borne by the Notes and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee may, and shall at the direction of the majority of
the Holders of the Notes, institute a Proceeding for the collection of the sums
so due and unpaid, and may prosecute such Proceeding to judgment or final
decree, and may enforce the same against the Issuer or other obligor upon such
Notes and collect in the manner provided by law out of the property of the
Issuer or other obligor upon such Notes, wherever situated, the moneys adjudged
or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, in its discretion, and shall at the direction of the majority of the
Holders of the Notes, as more particularly provided in Section 5.04 hereof,
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Collateral, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and/or interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee, and its agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and the Indenture Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property; and any trustee,
receiver, liquidator, custodian or other similar official in any such
Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such
Noteholders, to pay to the Indenture Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred and all advances
made by the Indenture Trustee and each predecessor Indenture Trustee except
as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel, shall be
for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities.
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee may, and at the direction of a majority of the Holders of the
Notes shall, do one or more of the following (subject to Section 5.05 hereof):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Indenture with respect thereto, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee or the Noteholders; and
(iv) sell the Collateral or any portion thereof or rights or
interest therein in a commercially reasonable manner, at one or more public
or private sales called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral following an Event of Default, unless (A) the
Holders of 100% of the Voting Interests of the Outstanding Notes consent
thereto, (B) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts then due and
unpaid upon such Notes for principal and/or interest or (C) the Indenture
Trustee determines that the Collateral will not continue to provide
sufficient funds for the payment of principal of and interest on the Notes
as they would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of Holders of
66-2/3% of the Voting Interests of the Outstanding Notes. In determining
such sufficiency or insufficiency with respect to clause (B) and (C) of
this subsection (a)(iv), the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action
and as to the sufficiency of the Collateral for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee then
due and any costs or expenses incurred by it in connection with the
enforcement of the remedies provided for in this Article V and to the Owner
Trustee for the Owner Trustee Fee then due and to the Grantor Trustee for
the Grantor Trustee Fee then due;
SECOND: to the Servicer for the Servicing Fee then due and unpaid;
THIRD: to the Custodian for the Custodian Fee then due and unpaid;
FOURTH: to the Servicer for any amounts then due and payable as the
Servicing Advance Reimbursement Amount under the Sale and Servicing
Agreement;
FIFTH: to the Noteholders for amounts due and unpaid on the Notes
for interest, pro rata according to the amounts due and payable on the
Notes for interest, according to the amounts due and payable and in the
order and priorities set forth in Sections 5.01(d) the Sale and Servicing
Agreement, until the Class Principal Balance of each such Class is reduced
to zero;
SIXTH: to the applicable Noteholders for amounts due and unpaid on
the Notes (other than the Class A-4 IO Notes) for principal, pro rata among
the Holders of each such Class of Notes, according to the amounts due and
payable and in the order and priorities set forth in Sections 5.01(d) and
(e) of the Sale and Servicing Agreement, until the Class Principal Balance
of each such Class is reduced to zero; and
SEVENTH: to the Owner Trustee, for any amounts to be distributed pro
rata to the holders of the Residual Interest Certificate pursuant to the
Owner Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15 days
before such record date, the Indenture Trustee shall mail to each Noteholder and
the Issuer a notice that states the record date, the payment date and the amount
to be paid.
Section 5.05. Optional Preservation of the Collateral. If the Notes have
been declared to be due and payable under Section 5.02 hereof following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Collateral. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the
Collateral. In determining whether to maintain possession of the Collateral, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Voting Interests of the
Outstanding Highest Priority Classes Notes have made written request to the
Indenture Trustee to institute such Proceeding in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for 30 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceeding; and
(e) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 30-day period by the Majority
Priority Highest Classes Noteholders.
It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a Majority Priority Highest Classes Noteholders, the
Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive Principal
and/or Interest. Notwithstanding any other provisions in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the applicable Maturity Date thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Majority Priority Highest Classes
Notes shall have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee with respect to
the Notes or exercising any trust or power conferred on the Indenture Trustee;
provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) subject to the express terms of Section 5.04 hereof, any
direction to the Indenture Trustee to sell or liquidate the Collateral
shall be by Holders of Notes representing not less than 100% of the Voting
Interests of all Classes of Notes Outstanding;
(c) if the conditions set forth in Section 5.05 hereof have been
satisfied and the Indenture Trustee elects to retain the Collateral
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Voting Interests of all
Classes of Notes Outstanding to sell or liquidate the Collateral shall be
of no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in this Section
5.11, subject to Section 6.01 hereof, the Indenture Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. The Majority Priority Highest
Classes Notes may waive any past Default or Event of Default and its
consequences, except a Default (a) in the payment of principal of or interest on
any of the Notes or (b) in respect of a covenant or provision hereof that cannot
be modified or amended without the consent of the Holder of each Note. In the
case of any such waiver, the Issuer, the Indenture Trustee and the Holders of
the Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Voting
Interests of the Outstanding Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
Section 5.15. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Collateral or upon any of
the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b) hereof.
Section 5.16. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to do so, the
Issuer shall take all such lawful action as the Indenture Trustee may request to
compel or secure the performance and observance by the Transferor and the
Servicer, as applicable, of each of their obligations to the Issuer and the
Grantor Trustee under or in connection with the Sale and Servicing Agreement,
and to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer, as Grantor Trust Holder, under or in connection with
the Sale and Servicing Agreement and the Grantor Trust Agreement to the extent
and in the manner directed by the Indenture Trustee, including the transmission
of notices of default on the part of the Transferor or the Servicer thereunder
and the institution of legal or administrative actions or proceedings to compel
or secure performance by the Transferor or the Servicer of each of their
obligations under the Sale and Servicing Agreement and the Grantor Trust
Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone, confirmed in writing promptly thereafter) of the Holders of 66-2/3%
of the Highest Priority Classes Notes Outstanding shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer, as Grantor Trust Holder,
against the Transferor or the Servicer under or in connection with the Sale and
Servicing Agreement and the Grantor Trust Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Transferor or the Servicer, as the case may be, of each of their obligations to
the Grantor Trustee thereunder and to give any consent, request, notice,
direction, approval, extension, or waiver under the Sale and Servicing Agreement
and the Grantor Trust Agreement, and any right of the Issuer to take such action
shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default has
occurred and is continuing, the Indenture Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; provided, however, that the Indenture
Trustee shall examine the certificates and opinions which by any provision
hereof are specifically required to be furnished to the Indenture Trustee
to determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of mathematical
accuracy thereof).
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11 hereof.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section
6.01.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee shall be segregated from
other funds except to the extent permitted by law or the terms of this Indenture
or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it; provided, however, that the Indenture Trustee shall
not refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of its normal fees and expenses and provided, further, that nothing
in this Section 6.01(g) shall be construed to limit the exercise by the
Indenture Trustee of any right or remedy permitted under this Indenture or
otherwise in the event of the Issuer's failure to pay the Indenture Trustee's
fees and expenses pursuant to Section 6.07 hereof. In determining that such
repayment or indemnity is not reasonably assured to it, the Indenture Trustee
must consider not only the likelihood of repayment or indemnity by or on behalf
of the Issuer but also the likelihood of repayment or indemnity from amounts
payable to it from the Collateral pursuant to Section 6.07 hereof.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) The Indenture Trustee shall not be required to take notice or be deemed
to have notice or knowledge of any Event of Default (other than an Event of
Default pursuant to Section 5.01(a)(i) or (ii) hereof) unless a Responsible
Officer of the Indenture Trustee shall have received written notice thereof at
the Corporate Trust Office of the Indenture Trustee and such notice references
the Notes and this Indenture or otherwise shall have actual knowledge thereof.
In the absence of receipt of notice or such knowledge, the Indenture Trustee may
conclusively assume that there is no Event of Default.
Section 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that such action or omission by the
Indenture Trustee does not constitute willful misconduct, negligence or bad
faith.
(e) The Indenture Trustee may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Sections 6.11 and 6.12 hereof.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement of
the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
Section 6.05. Notices of Default. If a Default occurs and is continuing and
if it is known to a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall mail to each Noteholder notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such Holder to prepare its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. As compensation for its services
hereunder, the Indenture Trustee shall be entitled to receive, on each Payment
Date, the Indenture Trustee's Fee pursuant to Section 8.02(c) hereof (which
compensation shall not be limited by any law on compensation of a trustee of an
express trust) and shall be entitled to reimbursement by the Servicer for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer agrees to cause the Transferor to indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees and
expenses) incurred by it in connection with the administration of this trust and
the performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer and the Servicer promptly of any claim for which it may seek indemnity.
Failure by the Indenture Trustee so to notify the Issuer and the Servicer shall
not relieve the Issuer of its obligations hereunder. The Issuer shall or shall
cause the Servicer to defend any such claim, and the Indenture Trustee may have
separate counsel reasonably acceptable to the Servicer and the Issuer shall or
shall cause the Servicer to pay the reasonable fees and expenses of such
counsel. Neither the Issuer nor the Servicer need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section 6.07 shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(a)(vi) or (vii) hereof with respect to the Issuer, the expenses are
intended to constitute expenses of administration under Title 11 of the United
States Code or any other applicable federal or state bankruptcy, insolvency or
similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority of the
Voting Interests of the Outstanding Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee.
The Issuer shall remove the Indenture Trustee if:
(a) the Indenture Trustee fails to comply with Section 6.11 hereof;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority of the Voting Interests of
Outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section 6.08, the Issuer's and the Administrator's obligations under Section
6.07 hereof shall continue for the benefit of the retiring Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided,
however, that such corporation or banking association shall otherwise be
qualified and eligible under Section 6.11 hereof. The Indenture Trustee shall
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Collateral may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Collateral, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 hereof and no notice to Noteholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Collateral or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, jointly with the Indenture
Trustee, subject to all the provisions of this Indenture, specifically including
every provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every such
instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. The Indenture Trustee
shall comply with TIA Section 310(b), including the optional provision permitted
by the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee which has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
Section 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 hereof and the names and addresses of Holders of Notes received
by the Indenture Trustee in its capacity as Note Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01
upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) that the Issuer
may be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with the rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.03(a) and by rules and regulations prescribed
from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each [March 1, beginning with March 1, 1999], the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each securities exchange,
if any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any securities exchange.
Section 7.05. 144A Information. The Indenture Trustee shall provide to any
prospective transferee designated by any such Holder information regarding the
Class B-2 Notes and the Home Loans and such other information as shall be
necessary to satisfy the condition to eligibility set forth in Rule 144A(d)(4)
under the Securities Act for transfer of any such Note without registration
thereof under the Securities Act pursuant to the registration exemption provided
by Rule 144A under the Securities Act. Each Holder of a Class B-2 Note desiring
to effect such a transfer shall, and does hereby agree to, indemnify the Issuer,
the Owner Trustee, the Indenture Trustee and the Depositor against any liability
that may result if the transfer is not so exempt or is not made in accordance
with federal and state securities laws.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Collateral, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V hereof.
Section 8.02. Trust Accounts; Payments. (a) On or prior to the Closing
Date, the Issuer shall cause the Servicer to establish and maintain, in the name
of the Indenture Trustee for the benefit of the Noteholders, or on behalf of the
Owner Trustee for the benefit of the Securityholders, the Trust Accounts as
provided in Article V of the Sale and Servicing Agreement and Article V of the
Grantor Trust Agreement. The Indenture Trustee shall deposit amounts into each
of the Trust Accounts in accordance with the terms hereof, the Sale and
Servicing Agreement and the Servicer's Monthly Remittance Report.
(b) On the second Business Day prior to each Payment Date, so long as the
Issuer or its assignee is the Grantor Trust Holder, the Indenture Trustee shall
withdraw from the Collection Account, pursuant to Section 5.01(b)(2) of the Sale
and Servicing Agreement, as a distribution in respect of the Grantor Trust
Certificate, the Available Collection Amount and shall deposit such amount into
the Note Payment Account. On each Payment Date, to the extent funds are
available in the Note Payment Account, the Indenture Trustee shall either retain
funds in the Note Payment Account for payment on such day or make the
withdrawals from the Note Payment Account and deposits into the Certificate
Distribution Account for distribution on such Payment Date as required pursuant
to Section 5.01(c) of the Sale and Servicing Agreement.
(c) On each Payment Date and Redemption Date, to the extent funds are
available in the Note Payment Account, the Indenture Trustee shall make the
following payments from the amounts on deposit in the Note Payment Account in
the following order of priority (except as otherwise provided in Section 5.04(b)
hereof):
(i) (A) to the Servicer, an amount equal (i) to the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to Section 5.01(b)(1) of the Sale and
Servicing Agreement) and all unpaid Servicing Compensation from prior
Payment Dates and (ii) all Nonrecoverable Servicing Advances not
previously reimbursed, (B) to the Indenture Trustee, an amount equal to
the Indenture Trustee Fee and all unpaid Indenture Trustee Fees from
prior Payment Dates, (C) to the Owner Trustee, an amount equal to the
Owner Trustee Fee and all unpaid Owner Trustee Fees from prior Due
Periods, (D) to the Custodian, an amount equal to the Custodian Fee, if
any, and all unpaid Custodian Fees from prior Payment Dates, and (E) to
the Grantor Trustee, an amount equal to the Grantor Trustee Fee and all
unpaid Grantor Trustee Fees from prior Payment Dates; and
(ii) to the Noteholders, the amounts set forth in Sections
5.01(d) and (e) of the Sale and Servicing Agreement.
(d) On each Payment Date and each Redemption Date, to the extent of the
interest of the Indenture Trustee in the Certificate Distribution Account (as
described in Section 5.03(a) of the Sale and Servicing Agreement), the Indenture
Trustee hereby authorizes the Owner Trustee or the Paying Agent, as applicable,
to make the distributions from the Certificate Distribution Account as required
pursuant to Sections 5.01(d) and (e) of the Sale and Servicing Agreement.
Section 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in Permitted
Investments and reinvested by the Indenture Trustee at the direction of the
Servicer in accordance with the provisions of Article V of the Sale and
Servicing Agreement. All income or other gain from investments of moneys
deposited in the Trust Accounts shall be deposited by the Indenture Trustee into
the Note Payment Account (and any such income or gain in respect of the
Collection Account shall be treated as a distribution in respect of the Grantor
Trust Certificate), and any loss resulting from such investments shall be
charged to such account. The Issuer will not direct the Indenture Trustee to
make any investment of any funds or to sell any investment held in any of the
Trust Accounts unless the security interest Granted and perfected in such
account will continue to be perfected in such investment or the proceeds of such
sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c) hereof, the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m. Eastern Time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable pursuant to Section 5.02 hereof or
(iii) if such Notes shall have been declared due and payable following an Event
of Default, amounts collected or receivable from the Collateral are being
applied in accordance with Section 5.05 hereof as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
Section 8.04. Servicer's Monthly Statements. On each Payment Date, the
Indenture Trustee shall deliver the Servicer's Monthly Remittance Report (as
defined in the Sale and Servicing Agreement) with respect to such Payment Date
to DTC and the Rating Agencies.
Section 8.05. Release of Collateral. (a) Subject to the payment of its fees
and expenses pursuant to Section 6.07 hereof, the Indenture Trustee may, and
when required by the provisions of this Indenture shall, execute instruments
delivered to the Indenture Trustee to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture Trustee
as provided in this Article VIII shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due to the Certificateholders pursuant to Section
5.02(b) of the Sale and Servicing Agreement, to the Servicer pursuant to Section
8.02(c)(i)(A) hereof, to the Indenture Trustee pursuant to Section 8.02(c)(i)(B)
hereof, to the Owner Trustee pursuant to Section 8.02(c)(i)(C) hereof, to the
Custodian pursuant to Section 8.02(c)(i)(D) hereof and to the Grantor Trustee
pursuant to Section 8.02(c)(i)(E) hereof have been paid, release any remaining
portion of the Collateral that secured the Notes from the lien of this Indenture
and release to the Issuer or any other Person entitled thereto any funds then on
deposit in the Trust Accounts. The Indenture Trustee shall release property from
the lien of this Indenture pursuant to this Subsection (b) only upon receipt of
an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and (if required by the TIA) Independent Certificates in accordance with TIA
Sections 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.01 hereof.
Section 8.06. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days' prior notice when requested by the Issuer to take any action
pursuant to Section 8.05(a) hereof, accompanied by copies of any instruments
involved, and the Indenture Trustee may also require, as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Collateral. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided, however, that such action shall not adversely
affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI hereof; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior consent of the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by (i) an
Opinion of Counsel or (ii) satisfaction of the Rating Agency Condition,
adversely affect in any material respect the interests of any Noteholder.
Section 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior consent of the Rating Agencies, and with the consent of the Holders
of not less than a majority of the Voting Interests of the Outstanding Notes, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the Class Principal Balance (or Class Notional
Balance in the case of the Class A-4 IO Notes) thereof, the interest rate
thereon or the Termination Price with respect thereto, change the provisions of
this Indenture relating to the application of collections on, or the proceeds of
the sale of, the Collateral to payment of principal of or interest on the Notes,
or change any place of payment where, or the coin or currency in which, any Note
or the interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the application of
funds available therefor, as provided in Article V hereof, to the payment of any
such amount due on the Notes on or after the respective due dates thereof (or,
in the case of redemption, on or after the Redemption Date);
(b) reduce the percentage of the Voting Interests of the Outstanding Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the definition of the
term "Outstanding" or "Voting Rights";
(d) reduce the percentage of the Voting Rights of the Notes required to
direct the Indenture Trustee to direct the Issuer to sell or liquidate the
Collateral pursuant to Section 5.04 hereof;
(e) modify any provision of this Section except to increase any percentage
specified herein or to provide that certain additional provisions of this
Indenture or the Basic Documents cannot be modified or waived without the
consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as to
affect the calculation of the amount of any payment of interest or principal due
on any Note on any Payment Date (including the calculation of any of the
individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a parity with
the lien of this Indenture with respect to any part of the Collateral or, except
as otherwise permitted or contemplated herein, terminate the lien of this
Indenture on any property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant to
this Section 9.02, the Indenture Trustee shall mail to the Holders of the Notes
to which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. It shall not be
necessary for any Act of Noteholders under this Section 9.02 to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02 hereof, shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Indenture Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Owner Trust Agreement.
Subject to Section 11.1 of the Owner Trust Agreement, the Indenture Trustee
shall, upon Issuer Order, consent to any proposed amendment to the Owner Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Owner Trust Agreement, such consent to be given without the
necessity of obtaining the consent of the Holders of any Notes upon satisfaction
of the requirements under Section 11.1 of the Owner Trust Agreement. Nothing in
this Section shall be construed to require that any Person obtain the consent of
the Indenture Trustee to any amendment or waiver or any provision of any
document where the making of such amendment or the giving of such waiver without
obtaining the consent of the Indenture Trustee is not prohibited by this
Indenture or by the terms of the document that is the subject of the proposed
amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
The Issuer may, at its option, effect an early redemption of the Notes on
any Payment Date on or after the Payment Date on which the Pool Principal
Balance declines to 10% or less of the Original Pool Principal Balance. The
Issuer shall effect such early redemption in the manner specified in and subject
to the provisions of Section 11.02(b) of the Sale and Servicing Agreement and
Section 7.01 of the Grantor Trust Agreement.
The Servicer or the Issuer shall furnish the Rating Agencies notice of any
such redemption in accordance with Section 10.02 hereof.
Section 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 hereof shall be given by the Indenture Trustee by first-class
mail, postage prepaid, or by facsimile mailed or transmitted not later than 10
days prior to the applicable Redemption Date to each Holder of Notes, as of the
close of business on the Record Date preceding the applicable Redemption Date,
at such Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) that on the Redemption Date Noteholders shall receive the Note
Redemption Amount; and
(iii) the place where such Notes are to be surrendered for payment
of the Termination Price (which shall be the office or agency of the Issuer
to be maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name of the Issuer and at the expense of the Servicer. Failure to give to
any Holder of any Note notice of redemption, or any defect therein, shall not
impair or affect the validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date; Provision for Payment of
Indenture Trustee. The Notes to be redeemed shall, following notice of
redemption as required by Section 10.02 (in the case of redemption pursuant to
Section 10.01) hereof, on the Redemption Date become due and payable at the Note
Redemption Amount and (unless the Issuer shall default in the payment of the
Note Redemption Amount) no interest shall accrue thereon for any period after
the date to which accrued interest is calculated for purposes of calculating the
Note Redemption Amount. The Issuer may not redeem the Notes unless (i) all
outstanding obligations under the Notes have been paid in full and (ii) the
Indenture Trustee has been paid all amounts to which it is entitled hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture (except with respect to the Servicer's
servicing activity in the ordinary course of its business), the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate
or opinion has read or has caused to be read such
covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
(3) a statement that, in the opinion of each such
signatory, such signatory has made such examination
or investigation as is necessary to enable such
signatory to express an informed opinion as to
whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been
complied with.
(b) Prior to the deposit of any Collateral or other property or securities
with the Indenture Trustee that is to be made the basis for the release of any
property or securities subject to the lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 11.01(a) hereof or elsewhere in
this Indenture, furnish to the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such deposit) to the Issuer of the Collateral
or other property or securities to be so deposited.
(c) Whenever the Issuer is required to furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of any signer thereof as
to the matters described in subsection (b) above, the Issuer shall also deliver
to the Indenture Trustee an Independent Certificate as to the same matters, if
the fair value to the Issuer of the securities to be so deposited and of all
other such securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to subsection (b) above and this subsection (c),
is 10% or more of the Outstanding Amount of the Notes, but such a certificate
need not be furnished with respect to any securities so deposited, if the fair
value thereof to the Issuer as set forth in the related Officer's Certificate is
less than $25,000 or less than one percent of the Outstanding Amount of the
Notes.
(d) Whenever any property or securities are to be released from the lien of
this Indenture, the Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the opinion
of such person the proposed release will not impair the security under this
Indenture in contravention of the provisions hereof.
(e) Whenever the Issuer is required to furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of any signer thereof as
to the matters described in subsection (d) above, the Issuer shall also furnish
to the Indenture Trustee an Independent Certificate as to the same matters if
the fair value of the property or securities and of all other property, other
than securities released from the lien of this Indenture since the commencement
of the then-current calendar year, as set forth in the certificates required by
subsection (d) above and this subsection (e), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be furnished in
the case of any release of property or securities if the fair value thereof as
set forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the then Outstanding Amount of the Notes.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Transferor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Transferor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI hereof.
Section 11.03. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01
hereof) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section 11.03.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and
made, given, furnished or filed with the Issuer addressed to: Master
Financial Asset Securitization Trust 1998-2, in care of Wilmington
Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration,
or at any other address previously furnished in writing to the
Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to
the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
DCR, at the following address: Duff & Phelps Credit Rating Co., 55 East Monroe
Street, 38th Floor, Chicago, Illinois 60603 Attention: MBS Monitoring, (ii) in
the case of Moody's, 99 Church Street, New York, New York 10007, Attention:
Residential Mortgage Pass-Through Group, and (iii) in the case of Fitch, One
State Street Plaza, New York, New York 10004, Attention: Asset Backed
Surveillance Department.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have duly been given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
Section 11.06. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.07. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 11.08. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-trustees and agents.
Section 11.09. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.13. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 11.14. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 11.15. Owner Trust Obligation. No recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or, except as expressly provided for in
Article VI hereof, under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Indenture Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may expressly have agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Owner Trust Agreement.
Section 11.16. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Transferor, the Servicer or
the Issuer, or join in any institution against the Transferor, the Servicer or
the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law, in connection with any obligations relating to
the Notes, this Indenture or any of the Basic Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may reasonably be requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By:-----------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Indenture Trustee
By:-----------------------------------------
Name:
Title:
<PAGE>
STATE OF __________
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ___________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of the
said WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee on behalf of MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a
Delaware business trust, and that such person executed the same as the act of
said business trust for the purpose and consideration therein expressed, and in
the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of May, 1998.
----------------------------------------------
Notary Public in and for the State of New York
My commission expires:
- ---------------------
<PAGE>
STATE OF __________
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared __________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of THE
BANK OF NEW YORK, a New York banking corporation, and that such person executed
the same as the act of said corporation for the purpose and consideration
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of May, 1998.
----------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- ---------------------
<PAGE>
EXHIBIT A
CLASS A-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$74,260,000
No. A-1-1 CUSIP NO. 57634N BD 4
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS A-1 FLOATING RATE HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Seventy Four Million Two Hundred Sixty
Thousand Dollars ($74,260,000) payable on each Payment Date in an amount equal
to the result obtained by multiplying (i) a fraction the numerator of which is
the initial principal amount of this Class A-1 Note and the denominator of which
is the aggregate principal amount of all Class A-1 Notes by (ii) the aggregate
amount, if any payable from the Note Payment Account in respect of principal on
the Class A-1 Notes pursuant to Section 5.01(d) and (e) of the Sale and
Servicing Agreement dated as of May 1, 1998; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
(i) the applicable Maturity Date, (ii) the Termination Date, if any, pursuant to
Section 11.01 of the Sale and Servicing Agreement or (iii) the date on which an
Event of Default shall have occurred and be continuing, if the Indenture Trustee
at the direction of or with the prior written consent of the Majority Highest
Priority Classes Noteholders has declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture (the
"Indenture") dated as of May 1, 1998 between the Issuer and The Bank of New
York, a national banking association, which also contains rules as to
construction that shall be applicable herein.
The Issuer will pay interest on this Note at a rate per annum equal to
LIBOR for the related LIBOR Determination Date plus 0.08%, subject to a maximum
rate equal to the Net Weighted Average Rate on each Payment Date until the
principal of this Note is paid or made available for payment in full, on the
principal amount of this Note outstanding on the preceding Payment Date (after
giving effect to all payments of principal made on the preceding Payment Date);
provided, however, that commencing on the first day of the month in which the
Clean-up Call Date occurs, the rate of interest payable on this Note shall be
increased by a per annum rate equal to 0.50%. "LIBOR" means, with respect to
each Accrual Period (other than the initial Accrual Period), the rate for United
States dollar deposits for one month that appears on the Telerate Screen Page
3750 as of 11:00 a.m., London time, on the related LIBOR Determination Date. If
such rate does not appear on such page (or such other page as may replace that
page on that service, or if such service is no longer offered, such other
service for displaying LIBOR or comparable rates as may be reasonably selected
by the Indenture Trustee), LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Indenture
Trustee and no Reference Bank Rate is available, LIBOR will be LIBOR applicable
to the preceding Accrual Period. Interest on this Note will accrue for each
Payment Date during the period beginning on the Payment Date in the calendar
month preceding the month in which the related Payment Date occurs (or, in the
case of the first Payment Date, May 28, 1998) and ending on the day preceding
the related Payment Date (each, an "Accrual Period"). Interest will be computed
on the basis of a 360-day year and the actual number of days elapsed in each
Accrual Period. Such principal of and interest on this Note shall be paid in the
manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May__, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May__, 1998
THE BANK OF NEW YORK,
not in its individual capacity but
solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 Floating Rate Home Loan Asset Backed Notes (herein
called the "Class A-1 Notes"), all issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Class A-1 Notes are subject
to all terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes, has declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-1 Notes shall be made pro rata to the holders of the Class A-1 Notes entitled
thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
________________________________*/
Signature Guaranteed:
________________________________*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS A-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$32,072,000
No. A-2-1 CUSIP NO. 57634N BE 2
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS A-2 6.34% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Thirty-Two Million Seventy-Two Thousand
Dollars ($32,072,000) payable on each Payment Date in an amount equal to the
result obtained by multiplying (i) a fraction the numerator of which is the
initial principal amount of this Class A-2 Note and the denominator of which is
the aggregate principal amount of all Class A-2 Notes by (ii) the aggregate
amount, if any payable from the Note Payment Account in respect of principal on
the Class A-2 Notes pursuant to Section 5.01(d) and (e) of the Sale and
Servicing Agreement dated as of May 1, 1998; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
(i) the applicable Maturity Date, (ii) the Termination Date, if any, pursuant to
Section 11.01 of the Sale and Servicing Agreement or (iii) the date on which an
Event of Default shall have occurred and be continuing, if the Indenture Trustee
at the direction of or with the prior written consent of the Majority Highest
Priority Classes Noteholders has declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture (the
"Indenture") dated as of May 1, 1998 between the Issuer and The Bank of New
York, a national banking association, which also contains rules as to
construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%.
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:__________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 6.34% Home Loan Asset Backed Notes (herein called
the "Class A-2 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class A-2 Notes shall be made pro rata to the holders of the Class A-2 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-2 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
*/
___________________________________
Signature Guaranteed:
*/
___________________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS A-3 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$28,084,000
No. A-3-1 CUSIP NO. 57634N BF 9
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS A-3 6.60% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-Eight Million Eighty-Four
Thousand Dollars ($28,084,000) payable on each Payment Date in an amount equal
to the result obtained by multiplying (i) a fraction the numerator of which is
the initial principal amount of this Class A-3 Note and the denominator of which
is the aggregate principal amount of all Class A-3 Notes by (ii) the aggregate
amount, if any payable from the Note Payment Account in respect of principal on
the Class A-3 Notes pursuant to Section 5.01(d) and (e) of the Sale and
Servicing Agreement dated as of May 1, 1998; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
(i) the applicable Maturity Date, (ii) the Termination Date, if any, pursuant to
Section 11.01 of the Sale and Servicing Agreement or (iii) the date on which an
Event of Default shall have occurred and be continuing, if the Indenture Trustee
at the direction of or with the prior written consent of the Majority Highest
Priority Classes Noteholders has declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture (the
"Indenture") dated as of May 1, 1998 between the Issuer and The Bank Of New
York, a national banking association, which also contains rules as to
construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%..
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 6.60% Home Loan Asset Backed Notes (herein called
the "Class A-3 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-3 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class A-3 Notes shall be made pro rata to the holders of the Class A-3 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-3 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
__________________________________
Signature Guaranteed:
*/
__________________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS A-4 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$17,589,000
No. A-4-1 CUSIP NO. 57634N BG 7
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS A-4 7.07% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Seventeen Million Five Hundred
Eighty-Nine Thousand Dollars ($17,589,000) payable on each Payment Date in an
amount equal to the result obtained by multiplying (i) a fraction the numerator
of which is the initial principal amount of this Class A-4 Note and the
denominator of which is the aggregate principal amount of all Class A-4 Notes by
(ii) the aggregate amount, if any payable from the Note Payment Account in
respect of principal on the Class A-4 Notes pursuant to Section 5.01(d) and (e)
of the Sale and Servicing Agreement dated as of May 1, 1998; provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of (i) the applicable Maturity Date, (ii) the Termination Date, if
any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii) the
date on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee at the direction of or with the prior written consent of the
Majority Highest Priority Classes Noteholders has declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of May 1, 1998 between the Issuer
and The Bank of New York, a national banking association, which also contains
rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%.
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 7.07% Home Loan Asset Backed Notes (herein called
the "Class A-4 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-4 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class B-2
Notes (collectively, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-4 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class A-4 Notes shall be made pro rata to the holders of the Class A-4 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-4 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:____________
*/
_______________________________
Signature Guaranteed:
*/
_______________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS A-4 IO NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE NOTIONAL AMOUNT OF THIS NOTE WILL BE REDUCED AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING NOTIONAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$17,589,000
No. A-4 IO-1 CUSIP NO. 57634N BM 4
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS A-4 IO 6.32% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the notional amount of this Note is reduced to zero;
provided, however, that commencing on the first day of the month in which the
Clean up Call Date occurs, the rate of interest payable on this Note shall be
increased by a per annum rate equal to 0.50%. Interest on this Note will accrue
for each Payment Date during the calendar month preceding such Payment Date
(each, an "Accrual Period") (or in the case of the first Payment Date, beginning
May 28, 1998). Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Such interest on this Note shall be paid in the manner
specified on the reverse hereof.
The interest on this Note is payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts. All payments made by the Issuer with respect to this
Note shall be applied to interest due and payable on this Note as provided
above.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 IO 6.32% Home Loan Asset Backed Notes (herein called
the "Class A-4 IO Notes"), all issued under the Indenture, to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-4 IO Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Interest on the Class A-4 IO Notes will be payable on each Payment Date in
an amount described on the face hereof. "Payment Date" means the 20th day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing in June 1998.
This Note shall be due and payable on the earlier of the applicable
Maturity Date and the Termination Date, if any, pursuant to Section 11.01 of the
Sale and Servicing Agreement. Notwithstanding the foregoing, the Notes shall be
due and payable on the date on which an Event of Default shall have occurred and
be continuing and the Indenture Trustee, at the direction or upon the prior
written consent of the Majority Highest Priority Classes Noteholders has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-4 IO Notes
shall be made pro rata to the holders of the Class A-4 IO Notes entitled
thereto.
Payments of interest on this Note due and payable on each Payment Date, if
any, shall be made by check mailed to the Person whose name appears as the
Registered Holder of this Note (or one or more Predecessor Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the notional amount of this Note (or any
one or more Predecessor Notes) shall be binding upon all future Holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not noted hereon.
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-4 IO Notes may be redeemed (a) in whole, but not in part, at the option
of the Issuer on any Payment Date on and after the date on which the Pool
Principal Balance is less than 10% of the sum of the Original Pool Principal
Balance and the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:___________
*/
___________________________________________
Signature Guaranteed:
*/
___________________________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS M-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$21,715,000
No. M-1-1 CUSIP NO. 57634N BH 5
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS M-1 7.29% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-One Million Seven Hundred
Fifteen Thousand Dollars ($21,715,000) payable on each Payment Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is the initial principal amount of this Class M-1 Note and the denominator
of which is the aggregate principal amount of all Class M-1 Notes by (ii) the
aggregate amount, if any payable from the Note Payment Account in respect of
principal on the Class M-1 Notes pursuant to Section 5.01(d) and (e) of the Sale
and Servicing Agreement dated as of May 1, 1998; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the applicable Maturity Date, (ii) the Termination Date, if any,
pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii) the date
on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee at the direction of or with the prior written consent of the
Majority Highest Priority Classes Noteholders has declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of May 1, 1998 between the Issuer
and The Bank of New York, a national banking association, which also contains
rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%.
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-1 7.29% Home Loan Asset Backed Notes (herein called
the "Class M-1 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class M-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class M-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class M-1 Notes shall be made pro rata to the holders of the Class M-1 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class M-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:____________
*/
_______________________________
Signature Guaranteed:
*/
_______________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS M-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$19,543,500
No. M-2-1 CUSIP NO. 57634N BJ 1
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS M-2 7.60% ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Nineteen Million Five Hundred
Forty-Three Thousand Five Hundred Dollars ($19,543,500) payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class M-2 Note and
the denominator of which is the aggregate principal amount of all Class M-2
Notes by (ii) the aggregate amount, if any payable from the Note Payment Account
in respect of principal on the Class M-2 Notes pursuant to Section 5.01(d) and
(e) of the Sale and Servicing Agreement dated as of May 1, 1998; provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the earlier of (i) the applicable Maturity Date, (ii) the Termination
Date, if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or
(iii) the date on which an Event of Default shall have occurred and be
continuing, if the Indenture Trustee at the direction of or with the prior
written consent of the Majority Highest Priority Classes Noteholders has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. Capitalized terms used but not defined herein are
defined in Article I of the Indenture (the "Indenture") dated as of May 1, 1998
between the Issuer and The Bank of New York, a national banking association,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%.
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-2 7.60% Home Loan Asset Backed Notes (herein called
the "Class M-2 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class M-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class M-2 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class M-2 Notes shall be made pro rata to the holders of the Class M-2 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class M-2 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
_________________________________
Signature Guaranteed:
*/
_________________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS B-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$17,372,000
No. B-1-1 CUSIP NO. 57634N BL 6
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS B-1 8.73% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Seventeen Million Three Hundred
Seventy-Two Dollars (($17,372,000) payable on each Payment Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is the initial principal amount of this Class B-1 Note and the denominator
of which is the aggregate principal amount of all Class B-1 Notes by (ii) the
aggregate amount, if any payable from the Note Payment Account in respect of
principal on the Class B-1 Notes pursuant to Section 5.01(d) and (e) of the Sale
and Servicing Agreement dated as of May 1, 1998; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the applicable Maturity Date, (ii) the Termination Date, if any,
pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii) the date
on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee at the direction of or with the prior written consent of the
Majority Highest Priority Classes Noteholders has declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of May 1, 1998 between the Issuer
and The Bank of New York, a national banking association, which also contains
rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%.
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-1 8.73% Home Loan Asset Backed Notes (herein called
the "Class B-1 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class B-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class B-1 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class B-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
Termination Date, if any, pursuant to Section 11.01 of the Sale and Servicing
Agreement. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. All principal payments on
the Class B-1 Notes shall be made pro rata to the holders of the Class B-1 Notes
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class B-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
________________________________
Signature Guaranteed:
*/
________________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
CLASS B-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
ANY PERSON WHO PURCHASES THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
DEEMED TO HAVE MADE, UPON SUCH PURCHASE, THE REPRESENTATIONS SET FORTH UNDER THE
HEADING "NOTICES TO INVESTORS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED MAY 22,
1998 FOR THE MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2 HOME LOAN ASSET
BACKED NOTES, SERIES 1998-1.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
1933 ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF
THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
Note Principal Amount: See Schedule I Attached Hereto
No. B-2-1 CUSIP NO. 57634N BM 4
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
CLASS B-2 10.02% HOME LOAN ASSET BACKED NOTES
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum set forth on Schedule I attached hereto
payable on each Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Class B-2 Note and the denominator of which is the aggregate
principal amount of all Class B-2 Notes by (ii) the aggregate amount, if any
payable from the Note Payment Account in respect of principal on the Class B-2
Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing Agreement
dated as of May 1, 1998; provided, however, that the entire unpaid principal
amount of this Note shall be due and payable on the earlier of (i) the
applicable Maturity Date, (ii) the Termination Date, if any, pursuant to Section
11.01 of the Sale and Servicing Agreement or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Indenture Trustee at the
direction of or with the prior written consent of the Majority Highest Priority
Classes Noteholders has declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. Capitalized terms used but
not defined herein are defined in Article I of the Indenture (the "Indenture")
dated as of May 1, 1998 between the Issuer and The Bank of New York, a national
banking association, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Payment Date until the principal of this Note is paid or made available
for payment in full, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date); provided, however, that commencing on the first day
of the month in which the Clean-up Call Date occurs, the rate of interest
payable on this Note shall be increased by a per annum rate equal to 0.50%.
Interest on this Note will accrue for each Payment Date during the calendar
month preceding such Payment Date (each, an "Accrual Period") (or in the case of
the first Payment Date, beginning May 28, 1998). Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: May 28, 1998
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By:________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: May 28, 1998
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Indenture Trustee
By:________________________________________
Authorized Signatory
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-2 10.02% Home Loan Asset Backed Notes (herein called
the "Class B-2 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class B-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class A-4 IO Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and Class
B-2 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class B-2 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the 20th day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing in June 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the applicable Maturity Date and the
termination of the Sale and Servicing Agreement pursuant to Section 11.01(a)
thereof. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class B-2 Notes
shall be made pro rata to the holders of the Class B-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed or transmitted by facsimile prior to such Payment Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in (New York, New York).
As provided in the Indenture and the Sale and Servicing Agreement, the
Class B-2 Notes may be redeemed (a) in whole, but not in part, at the option of
the Issuer on any Payment Date on and after the date on which the Pool Principal
Balance is less than 10% of the sum of the Original Pool Principal Balance and
the Original Pre-Funding Amount.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Owner Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing not
less than a majority of the Voting Interests of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:____________
*/
__________________________________
Signature Guaranteed:
*/
__________________________________
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
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SCHEDULE I
- --------------------------------------------------------------------------
Amount Date Initial
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$6,514,500 May 28, 1998
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================================================================================
SALE AND SERVICING AGREEMENT
Dated as of February 1, 1998
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1998-1
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
EMPIRE FUNDING CORP.
(Transferor and Servicer)
and
U.S. BANK NATIONAL ASSOCIATION, d/b/a FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Grantor Trustee)
EMPIRE FUNDING HOME LOAN OWNER TRUST 1998-1
HOME LOAN ASSET BACKED NOTES
SERIES 1998-1
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.......................................................
Section 1.02 Other Definitional Provisions.....................................
ARTICLE II
CONVEYANCE OF THE GRANTOR TRUST CERTIFICATE
Section 2.01 Conveyance of the Grantor Trust Certificate.......................
Section 2.02 Ownership and Possession of Grantor Trust Certificate.............
Section 2.03 Books and Records; Principal Place of Business....................
Section 2.04 Delivery of Grantor Trust Certificate; Further Assurances.........
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor...................
Section 3.02 Representations and Warranties of the Transferor..................
Section 3.03 Representations, Warranties and Covenants of the Servicer.........
Section 3.04 Representations and Warranties Regarding Individual Home Loans....
Section 3.05 Purchase and Substitution.........................................
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer............................................
Section 4.02 Payment of Taxes, Insurance and Other Charges.....................
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.....................
Section 4.04 Filing of Continuation Statements.................................
Section 4.05 Superior Liens....................................................
Section 4.06 Subservicing......................................................
Section 4.07 Successor Servicers...............................................
Section 4.08 Maintenance of Insurance..........................................
Section 4.09 Reports to the Securities and Exchange Commission;
144A Information..................................................
Section 4.10 Foreclosure; Foreclosure Alternatives..............................
Section 4.11 Title, Management and Disposition of Foreclosure Property.........
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Payment Account.......................
Section 5.02 Certificate Distribution Account..................................
Section 5.03 Trust Accounts; Trust Account Property............................
Section 5.04 Allocation of Losses..............................................
Section 5.05 Pre-Funding Account...............................................
Section 5.06 Capitalized Interest Account......................................
ARTICLE VI
STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01 Statements........................................................
Section 6.02 Withholding.......................................................
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance...................................
Section 7.02 Release of Home Loan Files........................................
Section 7.03 Servicing Compensation............................................
Section 7.04 Statement as to Compliance and Financial Statements...............
Section 7.05 Independent Public Accountants' Servicing Report..................
Section 7.06 Right to Examine Servicer Records.................................
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements...
Section 7.08 Financial Statements..............................................
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims...............................
Section 9.02 Merger or Consolidation of the Servicer...........................
Section 9.03 Limitation on Liability of the Servicer and Others................
Section 9.04 Servicer Not to Resign; Assignment................................
Section 9.05 Relationship of Servicer to the Grantor Trust
and the Grantor Trustee...........................................
Section 9.06 Servicer May Own Securities.......................................
ARTICLE X
DEFAULT
Section 10.01 Events of Default................................................
Section 10.02 Grantor Trustee to Act; Appointment of Successor.................
Section 10.03 Waiver of Defaults...............................................
Section 10.04 Accounting Upon Termination of Servicer..........................
ARTICLE XI
TERMINATION
Section 11.01 Termination......................................................
Section 11.02 Optional Termination.............................................
Section 11.03 Notice of Termination............................................
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders..............................................
Section 12.02 Amendment........................................................
Section 12.03 Recordation of Agreement.........................................
Section 12.04 Duration of Agreement............................................
Section 12.05 Governing Law....................................................
Section 12.06 Notices..........................................................
Section 12.07 Severability of Provisions.......................................
Section 12.08 No Partnership...................................................
Section 12.09 Counterparts.....................................................
Section 12.10 Successors and Assigns...........................................
Section 12.11 Headings.........................................................
Section 12.12 Actions of Securityholders.......................................
Section 12.13 Reports to Rating Agencies.......................................
Section 12.14 Holders of the Residual Interest Certificates....................
<PAGE>
EXHIBIT A - Home Loan Schedule (available upon request from the Depositor)
EXHIBIT B - Servicer's Monthly Remittance Report to Trustee (available upon
request from the Depositor)
<PAGE>
This Sale and Servicing Agreement is entered into effective as of February
1, 1998, among EMPIRE FUNDING HOME LOAN OWNER TRUST 1998-1, a Delaware business
trust (the "Issuer" or the "Owner Trust"), PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, a Delaware corporation, as Depositor (the "Depositor"), EMPIRE
FUNDING CORP., an Oklahoma corporation ("Empire Funding"), as Transferor (in
such capacity, the "Transferor") and Servicer (in such capacity, the
"Servicer"), and U.S. BANK NATIONAL ASSOCIATION, d/b/a FIRST BANK NATIONAL
ASSOCIATION, a national banking association, as Indenture Trustee on behalf of
the Noteholders (in such capacity, the "Indenture Trustee") and as Grantor
Trustee on behalf of the holder of the Grantor Trust Certificate (in such
capacity, the "Grantor Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the Issuer, the
Depositor, the Transferor, the Servicer, the Grantor Trustee and the Indenture
Trustee hereby agree as follows for the benefit of each of them and for the
benefit of the holders of the Notes issued under the Indenture, the Residual
Interest Certificates issued under the Owner Trust Agreement and the Grantor
Trust Certificate issued under the Grantor Trust Agreement:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months, except that with respect to the Class A-1 Notes, calculations of accrued
interest shall be made on the basis of a 360-day year and the actual number of
days elapsed in each Accrual Period.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing mortgage loans such as the
Home Loans held for its own account, giving due consideration to standards of
practice of prudent mortgage lenders and loan servicers that originate and
service mortgage loans comparable to the Home Loans and the reliance placed by
the Securityholders on the Servicer for the servicing of the Home Loans but
without regard to:
(i) any relationship that the Servicer, any Subservicer or any Affiliate of
the Servicer or any Subservicer may have with the related Obligor;
(ii) the ownership of any Notes or the Residual Interest Certificates by
the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive compensation for
its services hereunder with respect to any particular transaction.
Accrual Period: With respect to the Class A-1 Notes, the period beginning
on the Payment Date in the calendar month preceding the month in which the
related Payment Date occurs (or, in the case of the first Payment Date, February
26, 1998) and ending on the day preceding the related Payment Date. With respect
to the other Classes of Notes, the calendar month preceding the month in which
the related Payment Date occurs.
Addition Notice: For any date during the Pre-Funding Period, a notice
(which may be verbal or written) given to the Rating Agencies, the Indenture
Trustee and the Grantor Trustee pursuant to Section 2.07 of the Grantor Trust
Agreement.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, the term "control", when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have corresponding meanings.
Agreement: This Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
Allocable Loss Amount: With respect to each Payment Date after the Initial
Undercollateralization Amount has been reduced to zero, the excess, if any, of
(a) the aggregate of the Class Principal Balances of all Classes of Notes (after
giving effect to all payments on such Payment Date) over (b) the sum of the Pool
Principal Balance and the Pre-Funding Amount, each as of the end of the
preceding Due Period. With respect to each Payment Date prior to the Payment
Date on which the Undercollateralization Amount is reduced to zero, zero.
Allocable Loss Amount Priority: With respect to any Payment Date,
sequentially, to the Class B-2 Notes, the Class B-1 Notes, the Class M-2 Notes
and the Class M-1 Notes, in that order.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the sale of the related Home Loan which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering Mortgages secured by Mortgaged Properties located
in the same county, if permitted by law.
Available Collection Amount: With respect to any Payment Date, an amount
without duplication equal to the sum of: (i) all amounts received on the Home
Loans or required to be paid by the Servicer or the Transferor during the
related Due Period (exclusive of amounts not required to be deposited by the
Servicer in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof) as reduced by any portion thereof
that may not be withdrawn therefrom pursuant to an order of a United States
bankruptcy court of competent jurisdiction imposing a stay pursuant to section
362 of the United States Bankruptcy Code; (ii) any and all income or gain from
investments in the Collection Account, Note Payment Account and Certificate
Distribution Account; (iii) upon exercise of optional termination of the Notes
pursuant to Section 11.02 hereof, the Termination Price; (iv) the Purchase Price
paid for any Home Loans required to be purchased pursuant to Section 3.05 hereof
prior to the related Determination Date and the Substitution Adjustment to be
deposited in the Collection Account in connection with any substitution, in each
case prior to the related Determination Date; and (v) the Capitalized Interest
Requirement, if any, with respect to such Payment Date.
Available Payment Amount: With respect to any Payment Date, the Available
Collection Amount minus the amount required to be paid from the Note Payment
Account pursuant to Section 5.01(c)(i), plus on the Payment Date relating to the
Due Period in which the termination of the Pre-Funding Period shall have
occurred, the amount on deposit in the Pre-Funding Account at such time net of
any Pre-Funding Earnings.
Bankers Trust Custodial Agreement: The custodial agreement dated as of
February 1, 1998 by and among the Depositor, Empire Funding, as the Transferor,
U.S. Bank National Association, d/b/a First Bank National Association, as
Grantor Trustee, the Servicer, and Bankers Trust Company of California, N.A., as
the custodian, providing for the retention of the applicable Grantor Trustee's
Home Loan Files by such custodian on behalf of the Grantor Trustee.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in The City of New York or in the city in which the
corporate trust office of the Indenture Trustee or Grantor Trustee is located or
the city in which the Servicer's servicing operations are located and are
authorized or obligated by law or executive order to be closed.
Capitalized Interest Account: The account designated as such, established
and maintained pursuant to Section 5.06 hereof.
Capitalized Interest Initial Deposit: $658,393.06.
Capitalized Interest Requirement: With respect to the Payment Date in March
1998, (i) the product of (a) the Pre-Funding Amount on the Closing Date and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 5.775% per
annum) minus 2.5%, and minus (ii) in the case of any Subsequent Loan transferred
to the Grantor Trustee during the related Due Period, the amount of any interest
collected after the Cut-Off Date applicable to such Subsequent Loan and during
such related Due Period.
With respect to the Payment Date in April 1998, (i) the product of (a) the
Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 7.775% per
annum) minus 2.5%, and minus (ii) in the case of any Subsequent Loan transferred
to the Grantor Trustee during the related Due Period, the amount of any interest
collected after the Cut-Off Date applicable to such Subsequent Loan and during
such related Due Period.
With respect to the Payment Date in May 1998, (i) the product of (a) the
Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 7.775% per
annum) minus 2.5%, and minus (ii) in the case of any Subsequent Loan transferred
to the Grantor Trustee during the related Due Period, the amount of any interest
collected after the Cut-Off Date applicable to such Subsequent Loan and during
such related Due Period.
With respect to the Payment Date in June 1998, (i) the product of (a) the
Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 7.775% per
annum) minus 2.5%, and minus (ii) in the case of any Subsequent Loan transferred
to the Grantor Trustee during the related Due Period, the amount of any interest
collected after the Cut-Off Date applicable to such Subsequent Loan and during
such related Due Period.
Capitalized Interest Subsequent Deposit: As defined in Section
2.07(b)(vii)(B)(IV) of the Grantor Trust Agreement.
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to Section 3.4 of
the Owner Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Class: With respect to the Notes, all Notes bearing the same class
designation.
Class A Notes: Collectively the Class A-1, Class A-2, Class A-3 Class A-4
and Class A-5 Notes.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class A-5
Note, Class M-1 Note, Class M-2 Note, Class B-1 Note and Class B-2 Note: The
respective meanings assigned thereto in the Indenture.
Class B-1 Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes and the Mezzanine Notes
(after taking into account any payments made on such Payment Date in reduction
of the Class Principal Balances of the Classes of Class A Notes and Mezzanine
Notes) and (ii) the greater of (x) the sum of (1) 7.07% of the Pool Principal
Balance as of the related Determination Date and (2) the Overcollateralization
Target Amount for such Payment Date (calculated without giving effect to the
proviso in the definition thereof) and (y) 0.50% of the Maximum Collateral
Amount; provided, however, that such amount shall never be less than zero or
greater than the Original Class Principal Balance of the Class B-1 Notes.
Class B-2 Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes, the Mezzanine Notes and
the Class B-1 Notes (after taking into account any payments made on such Payment
Date in reduction of the Class Principal Balances of the Classes of Class A
Notes, Mezzanine Notes and Class B-1 Notes) and (ii) the Overcollateralization
Target Amount for such Payment Date; provided, however, that such amount shall
never be less than zero or greater than the Original Class Principal Balance of
the Class B-2 Notes.
Class Factor: With respect to each Class and any date of determination, the
then applicable Class Principal Balance of such Class divided by the Original
Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes (after taking into
account payments made on such Payment Date in reduction of the Class Principal
Balances of the Classes of Class A Notes) and (ii) the greater of (x) the sum of
(1) 37.37% of the Pool Principal Balance as of the related Determination Date
and (2) the Overcollateralization Target Amount for such Payment Date
(calculated without giving effect to the proviso in the definition thereof) and
(y) 0.50% of the Maximum Collateral Amount; provided, however, that such amount
shall never be less than zero or greater than the Original Class Principal
Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes (after taking into
account any payments made on such Payment Date in reduction of the Class
Principal Balances of the Classes of Class A Notes) plus the Class Principal
Balance of the Class M-1 Notes (after taking into account any payments made on
such Payment Date in reduction of the Class Principal Balance of the Class M-1
Notes) and (ii) the greater of (x) the sum of (1) 21.21% of the Pool Principal
Balance as of the related Determination Date and (2) the Overcollateralization
Target Amount for such Payment Date (without giving effect to the proviso in the
definition thereof) and (y) 0.50% of the Maximum Collateral Amount; provided,
however, that such amount shall never be less than zero or greater than the
Original Class Principal Balance of the Class M-2 Notes.
Class Principal Balance: With respect to each Class of Notes and as of any
date of determination, the Original Class Principal Balance of such Class
reduced by the sum of (i) all amounts previously distributed in respect of
principal of such Class on all previous Payment Dates and (ii) with respect to
the Class M-1, Class M-2, Class B-1 and Class B-2 Notes, all Allocable Loss
Amounts applied in reduction of principal of such Classes on all previous
Payment Dates.
Clean-up Call Date: The first Payment Date on which the Pool Principal
Balance declines to 10% or less of the Maximum Collateral Amount.
Closing Date: February 26, 1998.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
Collection Account: The account designated as such, established and
maintained by the Servicer, for the benefit of the Grantor Trust Holder, in
accordance with Section 5.01 hereof.
Combination Loan: A loan, the proceeds of which were used by the Obligor in
combination to finance property improvements and for debt consolidation or other
purposes.
Combined Loan-to-Value Ratio: With respect to any Home Loan, the fraction,
expressed as a percentage, the numerator of which is the principal balance of
such Home Loan at origination plus, in the case of a junior lien Home Loan, the
aggregate outstanding principal balance of each related Superior Lien on the
date of origination of such Home Loan, and the denominator of which is the
stated value of the related Mortgaged Property at the time of origination of
such Home Loan.
Credit Score: The credit evaluation scoring methodology developed by Fair,
Isaac and Company.
Custodial Agreement: Either the U.S. Bank Custodial Agreement and the
Bankers Trust Custodial Agreement, as applicable.
Custodian: Any custodian appointed by the Grantor Trustee pursuant to the
Custodial Agreement, which custodian shall not be affiliated with the Servicer,
the Transferor, any Subservicer or the Depositor. U.S. Bank National
Association, d/b/a First Bank National Association, shall be the initial
Custodian pursuant to the terms of the U.S. Bank Custodial Agreement. Bankers
Trust Company of California, N.A. shall be the initial Custodian pursuant to the
terms of the Bankers Trust Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to any Custodian,
calculated and payable monthly on each Payment Date pursuant to Section
5.01(c)(i) hereof equal to the fee, if any, set forth in the Custodial
Agreement.
Custodian's Final Certification: As defined in Section 2.06(c) of the
Grantor Trust Agreement.
Custodian's Initial Certification: As defined in Section 2.06(a) of the
Grantor Trust Agreement.
Custodian's Updated Certification: As defined in Section 2.06(c) of the
Grantor Trust Agreement.
Cut-Off Date: With respect to the Initial Loans, the close of business on
January 31, 1998 and, with respect to any Subsequent Loan, the date designated
as such in the related Subsequent Transfer Agreement.
DCR: Duff & Phelps Credit Rating Co.
Debt Consolidation Loan: A loan, the proceeds of which were primarily used
by the related Obligor for debt consolidation purposes or purposes other than to
finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any Home
Loan, including, without limitation, any Liquidated Home Loan with respect to
which any of the following has occurred as of the end of the preceding Due
Period: (a) foreclosure or similar proceedings have been commenced; (b) any
portion of a Monthly Payment becomes 180 days past due by the related Obligor;
or (c) the Servicer or any Subservicer has determined in good faith and in
accordance with customary servicing practices that such Home Loan is in default
or imminent default.
Defective Home Loan: As defined in Section 3.05 hereof.
Deleted Home Loan: A Home Loan replaced or to be replaced by one or more
than one Qualified Substitute Home Loan.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due thereon
is not made by the close of business on the day such Monthly Payment is
scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
due or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such
month), then on the last day of such immediately succeeding month. The
determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc. shall be made in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Indenture Trustee
or its nominee or custodian by physical delivery to the Indenture Trustee
or its nominee or custodian endorsed to, or registered in the name of, the
Indenture Trustee or its nominee or custodian or endorsed in blank, and,
with respect to a certificated security (as defined in Section 8-102 of the
UCC), transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank to a financial intermediary (as
defined in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Indenture
Trustee or its nominee or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of the UCC) and the
making by such clearing corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary
by the amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank"
(as defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such securities and the making by
such financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or its
nominee or custodian (all of the foregoing, "Physical Property") and, in
any event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property (as defined herein) to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: the making by a
Federal Reserve Bank of an appropriate entry crediting such Trust Account
property to an account of a financial intermediary that is also a
"participant" pursuant to applicable federal regulations; the making by
such financial intermediary of entries in its books and records crediting
such book-entry security held through the Federal Reserve System pursuant
to federal book-entry regulations to the securities account of the
Indenture Trustee or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or its nominee or custodian and the sending by such
financial intermediary of confirmation of the purchase by the Indenture
Trustee or its nominee or custodian of such book-entry security; and such
additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Trust Account Property to
the Indenture Trustee or its nominee or custodian, consistent with changes
in applicable law or regulations or the interpretation thereof including,
without limitation, Article 8 of the UCC; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such uncertificated security, and
the making by such financial intermediary of entries on its books and
records identifying such uncertificated certificates as belonging to the
Indenture Trustee or its nominee or custodian.
Denomination: With respect to a Note, the portion of the Original Class
Principal Balance represented by such Note as specified on the face thereof.
Depositor: PaineWebber Mortgage Acceptance Corporation IV, a Delaware
corporation, and any successor thereto.
Determination Date: With respect to any Payment Date, the 14th calendar day
of the month in which such Payment Date occurs or if such day is not a Business
Day, the immediately preceding Business Day.
Due Date: The day of the month on which the Monthly Payment is due from the
Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Payment Date, the
calendar month immediately preceding such Determination Date or Payment Date, as
the case may be.
Eligible Account: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account the deposits in which are fully
insured by either the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC; (iii) a trust account (which shall be a "segregated trust
account") maintained with the corporate trust department of a federal or state
chartered depository institution or trust company with trust powers and acting
in its fiduciary capacity for the benefit of the Indenture Trustee and the
Issuer, which depository institution or trust company shall have capital and
surplus of not less than $50,000,000; or (iv) an account that will not cause any
Rating Agency to downgrade or withdraw its then-current rating(s) assigned to
the Notes, as evidenced in writing by such Rating Agency. (Each reference in
this definition of "Eligible Account" to the Rating Agency shall be construed as
a reference to Moody's, Fitch and DCR).
Eligible Servicer: A Person that (i) has demonstrated the ability
professionally and competently to service a portfolio of mortgage loans similar
to the Home Loans and (ii) has a net worth calculated in accordance with GAAP of
at least $500,000.
Empire Funding: Empire Funding Corp., an Oklahoma corporation.
Event of Default: As described in Section 10.01 hereof.
Excess Spread: With respect to any Payment Date, the excess of (a) the
Available Payment Amount over (b) the Regular Payment Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fidelity Bond: As described in Section 4.03 hereof.
Fitch: Fitch IBCA, Inc. or any successor thereto.
FNMA: The Federal National Mortgage Association and any successor thereto.
Foreclosed Loan: As of any date of determination, any Home Loan that has
been discharged as a result of (i) the completion of foreclosure or comparable
proceedings; (ii) the Grantor Trustee's acceptance of the deed or other evidence
of title to the related Property in lieu of foreclosure or other comparable
proceeding; or (iii) the acquisition by the Grantor Trustee of title to the
related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that has
been acquired by the Servicer through foreclosure, deed in lieu of foreclosure
or similar proceedings in respect of the related Home Loan.
GAAP: Generally accepted accounting principles as in effect in the United
States.
Grantor Trust: Empire Funding Grantor Trust 1998-1, formed pursuant to the
Grantor Trust Agreement.
Grantor Trust Agreement: The Grantor Trust Agreement dated as of February
1, 1998, among PaineWebber Mortgage Acceptance Corporation IV, as Depositor,
Empire Funding and the Grantor Trustee.
Grantor Trust Certificate: The trust certificate issued by the Grantor
Trust evidencing an undivided beneficial ownership interest of 100% of the
Grantor Trust.
Grantor Trust Holder: Any holder of the Grantor Trust Certificate.
Grantor Trustee: U.S. Bank National Association, d/b/a First Bank National
Association, a national banking association, as Grantor Trustee under the
Grantor Trust Agreement, or any successor Grantor Trustee hereunder.
Grantor Trustee Fee: As to any Payment Date, $0.00.
Grantor Trustee's Home Loan File: As defined in Section 2.05(a) of the
Grantor Trust Agreement.
Home Loan: Any Debt Consolidation Loan or Combination Loan that is included
in the Home Loan Pool. As applicable, a Home Loan shall be deemed to refer to
the related Debt Instrument, the Mortgage, if any, and any related Foreclosure
Property. The term "Home Loan" includes each Subsequent Loan.
Home Loan File: As to each Home Loan, the Grantor Trustee's Home Loan File
and the Servicer's Home Loan File.
Home Loan Interest Rate: The fixed annual rate of interest borne by a Debt
Instrument, as shown on the related Home Loan Schedule as the same may be
modified by the Servicer in accordance with Section 4.01(c) or 4.10 hereof.
Home Loan Pool: The pool of Home Loans conveyed to the Grantor Trustee
pursuant to the Grantor Trust Agreement on the Closing Date and pursuant to the
Subsequent Transfer Agreements on the Subsequent Transfer Dates, together with
the rights and obligations of a holder thereof, and the payments thereon and
proceeds therefrom received after the applicable Cut-Off Date, as identified on
the Home Loan Schedule annexed hereto as Exhibit A.
Home Loan Purchase Agreement: The Home Loan Purchase Agreement between the
Transferor and the Depositor, dated as of February 1, 1998.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto, as amended or supplemented from time to time specifying, with
respect to each Home Loan, the following information: (i) the Transferor's Home
Loan number; (ii) the Obligor's name and the street address; (iii) the current
principal balance; (iv) the original principal amount with respect to any Home
Loan originated by the Transferor and the principal amount purchased by the
Transferor with respect to a Home Loan acquired by the Transferor subsequent to
its origination; (v) the Combined Loan-to-Value Ratio as of the date of the
origination of the related Home Loan; (vi) the paid through date; (vii) the Home
Loan Interest Rate; (viii) the final maturity date under the Debt Instrument;
(ix) the Monthly Payment; (x) the occupancy status of the Mortgaged Property, if
any; (xi) the lien priority of the Mortgage, if any; (xii) the original term of
the Debt Instrument; (xiii) the Credit Score, if applicable; and (xiv) the debt
to income ratio of the related Obligor.
ICI: ICI Funding Corporation, a California corporation.
ICI Purchase Agreement: The Mortgage Loan Purchase and Warranties
Agreement, dated as of October 6, 1997, between PWRES, as purchaser, and ICI, as
seller, which was assigned by PWRES to the Transferor pursuant to the PWRES
Assignment and Assumption Agreement.
ICI Guarantee: The Guarantee, dated as of October 6, 1997, made by ICMHI in
favor of PWRES, which was assigned by PWRES to the Transferor pursuant to the
PWRES Assignment and Assumption Agreement.
ICMHI: Imperial Credit Mortgage Holdings, Inc., a Maryland corporation.
Indenture: The Indenture, dated as of February 1, 1998, between the Issuer
and the Indenture Trustee.
Indenture Trustee: U.S. Bank National Association, d/b/a First Bank
National Association, a national banking association, as Indenture Trustee under
the Indenture and this Agreement acting on behalf of the Noteholders, or any
successor indenture trustee under the Indenture or this Agreement.
Indenture Trustee Fee: As to any Payment Date, the greater of (a)
one-twelfth of 0.008% times the Pool Principal Balance as of the opening of
business on the first day of the calendar month preceding the calendar month of
such Payment Date (or, with respect to the first Payment Date, the Original Pool
Principal Balance) and (b) one-twelfth of $10,000.
Independent: When used with respect to any specified Person, such Person
(i) is in fact independent of the Transferor, the Servicer, the Depositor or any
of their respective Affiliates, (ii) does not have any direct financial interest
in, or any material indirect financial interest in, any of the Transferor, the
Servicer, the Depositor or any of their respective Affiliates and (iii) is not
connected with any of the Transferor, the Servicer, the Depositor or any of
their respective Affiliates, as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions; provided,
however, that a Person shall not fail to be Independent of the Transferor, the
Servicer, the Depositor or any of their respective Affiliates merely because
such Person is the beneficial owner of 1% or less of any class of securities
issued by the Transferor, the Servicer, the Depositor or any of their respective
Affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is Independent.
Initial Loan: Each Home Loan conveyed to the Grantor Trustee pursuant to
the Grantor Trust Agreement on the Closing Date.
Insurance Policies: With respect to any Property, any related insurance
policy.
Insurance Proceeds: With respect to any Property, all amounts collected in
respect of Insurance Policies and not required to be applied to the restoration
of the related Property or paid to the related Obligor.
LIBOR: With respect to each Accrual Period (other than the initial Accrual
Period) and each Class of LIBOR Notes, the rate for United States dollar
deposits for one month that appears on the Telerate Screen Page 3750 as of 11:00
a.m., London time, on the related LIBOR Determination Date. If such rate does
not appear on such page (or such other page as may replace that page on that
service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Indenture Trustee), LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Indenture
Trustee and no Reference Bank Rate is available, LIBOR will be LIBOR applicable
to the preceding Accrual Period. LIBOR for the initial Accrual Period will be
5.625%.
LIBOR Business Day: Any day on which banks are open for dealing in foreign
currency and exchange in London and New York City.
LIBOR Determination Date: With respect to each Accrual Period, the second
LIBOR Business Day before the first day of such Accrual Period, as determined by
the Indenture Trustee.
LIBOR Notes: The Class A-1 Notes.
Liquidated Home Loan: With respect to any date of determination, any
Foreclosure Property or any Home Loan in respect of which a Monthly Payment is
in excess of 30 days past due and as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to collect have been
recovered from or on account of such Home Loan or the related Foreclosure
Property; provided, however, that in any event such Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore be a Liquidated
Home Loan upon the earliest to occur of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from the
Home Loan and any related Mortgaged Property, or (c) the date on which any
portion of a Monthly Payment on any Home Loan is in excess of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition, any
cash amounts received in connection with the management of the Mortgaged
Properties from Defaulted Home Loans and any other amounts required to be
deposited in the Collection Account pursuant to Section 5.01(b) hereof, in each
case other than Insurance Proceeds and Released Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Payment Date and the
Class M-1 Notes, Class M-2 Notes, Class B-1 Notes or the Class B-2 Notes, the
amount of Allocable Loss Amounts applied to the reduction of the Class Principal
Balance of such Class and not reimbursed pursuant to Section 5.01 hereof as of
such Payment Date plus interest accrued on the unreimbursed portion thereof at
the applicable Note Interest Rate through the end of the Due Period immediately
preceding such Payment Date; provided, however, that no interest shall accrue on
any amount of such accrued and unpaid interest.
Majority Noteholders: Until such time as the sum of the Class Principal
Balances of all Classes of Notes has been reduced to zero, the holder or holders
of in excess of 50% of the Class Principal Balance of all Classes of Notes.
Majority Residual Interestholders: The holder or holders of in excess of
50% of the Residual Interest.
Mandatory Redemption Date: The Payment Date immediately following the end
of the Pre-Funding Period.
Maturity Date means, with respect to each Class of Notes, the applicable
maturity date set forth below:
Class Maturity Date
A-1 September 25, 2006
A-2 March 25, 2009
A-3 June 25, 2010
A-4 December 25, 2012
A-5 June 25, 2019
M-1 June 25, 2024
M-2 June 25, 2024
B-1 June 25, 2024
B-2 June 25, 2024
Maximum Collateral Amount: The sum of the Original Pool Principal Balance
and the Original Pre-Funding Amount.
Mezzanine Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Mezzanine Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Mezzanine Noteholders' Interest Carry-Forward Amount for preceding Payment
Dates, over (B) the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date net of the Senior
Noteholders' Interest Payment Amount for such preceding Payment Date; it being
understood that the interest of the Class M-1 Noteholders in the Mezzanine
Noteholders' Interest Carry-Forward Amount is senior to that of the Class M-2
Noteholders.
Mezzanine Noteholders' Interest Payment Amount: With respect to any Payment
Date, the sum of the Mezzanine Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Mezzanine Noteholders' Interest Carry-Forward Amount
for such Payment Date.
Mezzanine Noteholders' Monthly Interest Payment Amount: With respect to
each Payment Date and the Classes of Mezzanine Notes, the interest accrued at
the respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment Date, on the Closing Date) after giving effect to all payments of
principal to the holders of such Classes of Notes on or prior to such preceding
Payment Date.
Mezzanine Notes: The Class M-1 Notes and Class M-2 Notes.
Monthly Cut-Off Date: The last day of any calendar month and, with respect
to any Payment Date, the last day of the calendar month immediately preceding
such Payment Date.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by an Obligor on the related Home Loan, as set forth in the
related Debt Instrument.
Moody's: Moody's Investors Service, or any successor thereto.
Mortgage: The mortgage, deed of trust or other security instrument creating
a lien in accordance with applicable law on a Mortgaged Property to secure the
Debt Instrument which evidences a secured Home Loan.
Mortgaged Property: The real property encumbered by the Mortgage which
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing a Home Loan is located as set forth in the Home Loan Schedule.
Multiplier: The Multiplier will initially equal 1.5 and may from time to
time be permanently modified to a lesser amount (including zero) in the event
that the Issuer shall have delivered to the Indenture Trustee written
confirmation from each Rating Agency that the rating assigned by it to each
Class of Notes which it originally rated will not be downgraded or withdrawn as
a result of such reduction.
Net Delinquency Calculation Amount: With respect to any Payment Date, the
excess, if any, of (x) the product of the Multiplier and the Six-Month Rolling
Delinquency Average over (y) the aggregate of the amounts of Excess Spread for
the three preceding Payment Dates.
Net Liquidation Proceeds: With respect to any Payment Date, Liquidation
Proceeds received during the related Due Period, net of any reimbursements to
the Servicer made from such amounts for any unreimbursed Servicing Compensation
and Servicing Advances (including Nonrecoverable Servicing Advances) made and
any other fees and expenses paid in connection with the foreclosure,
conservation and liquidation of the related Liquidated Home Loans or Foreclosure
Properties pursuant to Section 4.11 hereof.
Net Loan Losses: With respect to any Defaulted Home Loan that is subject to
a modification pursuant to Section 4.01(c) hereof, an amount equal to the
portion of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
Interest Rate, less the rate at which the Servicing Fee is calculated.
Net Weighted Average Rate: With respect to any Accrual Period, a rate per
annum equal to the weighted average (by principal balance) of the Home Loan
Interest Rates as of the first day of the related Due Period less 1.008%.
Nonrecoverable Servicing Advance: With respect to any Foreclosure Property,
(a) any Servicing Advance previously made and not reimbursed from late
collections, Liquidation Proceeds, Insurance Proceeds or the Released Mortgaged
Property Proceeds or (b) a Servicing Advance proposed to be made in respect of a
Home Loan or Foreclosure Property either of which, in the good faith business
judgment of the Servicer, as evidenced by an Officer's Certificate delivered to
the Indenture Trustee, would not be ultimately recoverable.
Note: Any of the Senior Notes, the Mezzanine Notes or the Subordinate
Notes.
Note Interest Rate: With respect to each Class of Notes, the annual rate of
interest payable to the holders of such Class of Notes, as specified below:
Class Note Interest Rate
----- ------------------
Class A-1 Floating Rate (1) (2)
Class A-2 6.22%(2)
Class A-3 6.26%(2)
Class A-4 6.64%(2)
Class A-5 7.18%(2)
Class M-1 7.23%(2)
Class M-2 7.43%(2)
Class B-1 8.56%(2)
Class B-2 9.74%(2)
(1) Interest will accrue on the Class A-1 Notes during each
Accrual Period at a per annum interest rate equal to LIBOR for
the related LIBOR Determination Date plus 0.15%, subject to a
maximum rate equal to the Net Weighted Average Rate. The Note
Interest Rate applicable to the Class A-1 Notes for the
initial Accrual Period will be approximately 5.775% per annum.
(2) Commencing on the first day of the month in which the Clean-up
Call Date occurs, the Note Interest Rate shall be increased by
0.50% per annum.
Note Payment Account: The Eligible Account established and maintained
pursuant to Section 5.01(a)(2) hereof.
Note Redemption Amount: As of any date of determination, an amount without
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Notes plus all accrued and unpaid interest thereon,
(ii) any Trust Fees and Expenses due and unpaid on such date and (iii) any
Servicing Advance Reimbursement Amount.
Noteholder: A holder of a Note.
Noteholders' Interest Payment Amount: The sum of the Senior Noteholders'
Interest Payment Amount, the Mezzanine Noteholders' Interest Payment Amount and
the Subordinate Noteholders' Interest Payment Amount.
Obligor: Each obligor on a Debt Instrument.
Officer's Certificate: A certificate delivered to the Indenture Trustee or
the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Depositor, the Servicer or the Transferor, in each case, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to the
Rating Agencies), who may be employed by the Transferor, the Servicer, the
Depositor or any of their respective Affiliates.
Original Class Principal Balance: With respect to the Classes of Notes, as
follows: Class A-1: $57,530,000; Class A-2: $36,928,000; Class A-3: $23,094,000;
Class A-4: $31,843,000; Class A-5: $18,501,075; Class M-1: $20,193,700; Class
M-2: $18,462,800; Class B-1: $16,154,950; and Class B-2: $8,077,475.
Original Pool Principal Balance: $170,653,194.62, which is the Pool
Principal Balance as of the Cut-Off Date.
Original Pre-Funding Amount: $57,846,805.38.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Payment Date, the amount
equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funding Amount, each as of the end of the preceding Due Period, over (B) the
aggregate of the Class Principal Balances of the Notes (after giving effect to
the payments made on such date pursuant to Section 5.01(d)) hereof.
Overcollateralization Deficiency Amount: With respect to any Payment Date,
the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount (after giving effect to all prior payments on the
Classes of Notes and to any prior distribution on the Residual Interest
Certificates on such Payment Date pursuant to Section 5.01(d) hereof).
Overcollateralization Target Amount: (I) With respect to any Payment Date
occurring prior to the Stepdown Date, an amount equal to the greater of (x) 3.5%
of the Maximum Collateral Amount and (y) the Net Delinquency Calculation Amount;
and (II) with respect to any other Payment Date, an amount equal to the greater
of (x) 7.0% of the Pool Principal Balance as of the end of the related Due
Period and (y) the Net Delinquency Calculation Amount; provided, however, that
the Overcollateralization Target Amount shall in no event be less than 0.50% of
the Maximum Collateral Amount or greater than the sum of the aggregate Class
Principal Balances of all Classes of Notes.
Owner Trust: The Issuer.
Owner Trust Agreement: The Owner Trust Agreement dated as of February 1,
1998, among the Depositor, the Company and the Owner Trustee.
Owner Trust Estate: The assets subject to this Agreement, the Owner Trust
Agreement and the Indenture and assigned to the Issuer, which assets consist of:
(i) the contribution of $1 referred to in Section 2.5 of the Owner Trust
Agreement, (ii) the Grantor Trust Certificate, (iii) all payments on and
distributions in respect of the Grantor Trust Certificate, (iv) all right, title
and interest of the Depositor in and to the Collection Account and the
Pre-Funding Account (such accounts were collaterally assigned to the Depositor
by the Grantor Trustee in connection with the conveyance of the Grantor Trust
Certificate to the Depositor pursuant to the Grantor Trust Agreement), (v) such
assets and funds as are from time to time deposited in the Trust Accounts,
including amounts on deposit in such accounts which are invested in Permitted
Investments, and (vi) all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing.
Owner Trustee: Wilmington Trust Company, as owner trustee under the Owner
Trust Agreement, and any successor owner trustee under the Owner Trust
Agreement.
Owner Trustee Fee: The annual fee of $4,000 in equal monthly installments
to the Servicer which shall in turn pay such $4,000 to the Owner Trustee on the
Payment Date occurring in December each year during the term of this Agreement
commencing in March 1998; provided, however, that the initial Owner Trustee Fee
shall be paid by the Transferor on the Closing Date.
Ownership Interest: As to any Note, any ownership or security interest in
such Note, including any interest in such Note as the holder thereof and any
other interest therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Payment Date: The 25th day of any month or if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in March 1998.
Payment Statement: As defined in Section 6.01 hereof.
Percentage Interest: As defined in the Owner Trust Agreement.
Permitted Investments: Each of the following:
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(2) a repurchase agreement that satisfies the following criteria:
(A) it must be between the Indenture Trustee and either (x) primary dealers
on the Federal Reserve reporting dealer list which are rated in one of the
two highest categories for long-term unsecured debt obligations by each
Rating Agency or (y) banks rated in the highest categories for long-term
unsecured debt obligations by each Rating Agency; and (B) it must be in
writing and include the following terms: (a) the securities acceptable for
transfer are either (i) direct U.S. government obligations or (ii)
obligations of a federal agency that are backed by the full faith and
credit of the U.S. government or by FNMA or FHLMC; (b) a term no greater
than 60 days for any repurchase transaction; (c) the collateral must be
delivered to the Indenture Trustee or a third party custodian acting as
agent for the Indenture Trustee by appropriate book entries and
confirmation statements, and must have been delivered before or
simultaneously with payment (i.e., perfection by possession of certificated
securities); and (d) the securities sold thereunder must be valued weekly,
marked-to-market at current market price plus accrued interest and the
value of the collateral must be equal to at least 104% of the amount of
cash transferred by the Indenture Trustee under the repurchase agreement
and, if the value of the securities held as collateral declines to an
amount below 104% of the cash transferred by the Indenture Trustee plus
accrued interest (i.e., a margin call), then additional cash and/or
acceptable securities must be transferred to the Indenture Trustee to
satisfy such margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company incorporated
under the laws of the United States or any state, including the Indenture
Trustee; provided, however, that the debt obligations of such depository
institution or trust company at the date of the acquisition thereof have
been rated by each Rating Agency in the highest long-term rating
categories;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
Affiliates of the Indenture Trustee, which at the date of acquisition is
rated by each Rating Agency in its highest short-term rating category and
which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category (or
those investments specified in (3) above with depository institutions which
have debt obligations rated by each Rating Agency in the highest long-term
rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand withdrawals
being conclusively deemed to satisfy any maturity requirements for
Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided, however, that no instrument described in the foregoing subparagraphs
shall evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to each of Moody's, Fitch and DCR.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, estate, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period; provided, however, that the Pool Principal Balance on any Payment
Date on which the Termination Price is to be paid to Noteholders will be deemed
to have been equal to zero as of such date.
Preferred: Preferred Credit Corporation, a California corporation.
Preferred Indemnification Agreement: The letter agreement, dated October
16, 1997, among Preferred, PWRES and the Transferor, whereby Preferred agreed to
indemnify the Transferor and PWRES with respect to the loans purchased by PWRES
(and subsequently sold to the Transferor pursuant to the PWRES Assignment and
Assumption Agreement) from ICI.
Preferred Purchase Agreement: The Home Equity/Property Improvement Loan
Purchase and Sale Agreement, dated as of December 10, 1997 between the
Transferor, as buyer, and Preferred, as seller.
Preferred Transaction Documents: The ICI Purchase Agreement, the ICI
Guarantee, the Preferred Purchase Agreement and the Preferred Indemnification
Agreement.
Pre-Funding Account: The account created and maintained by the Indenture
Trustee, for the benefit of the Grantor Trust Holder, pursuant to Section 5.05
hereof.
Pre-Funding Amount: With respect to any date, the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings).
Pre-Funding Earnings: With respect to the Payment Date in April 1998, the
actual investment earnings earned on amounts on deposit in the Pre-Funding
Account during the period from February 26, 1998 through and including March 31,
1998. With respect to the Payment Date in May 1998, the actual investment
earnings earned on amounts on deposit in the Pre-Funding Account from April 1,
1998 through and including April 30, 1998. With respect to the Payment Date in
June 1998, the actual investment earnings earned on amounts on deposit in the
Pre-Funding Account from May 1, 1998 through and including May 31, 1998.
Pre-Funding Payment Trigger: With respect to the Payment Date following the
Due Period in which the termination of the Pre-Funding Period occurs, a
Pre-Funding Payment Trigger will be deemed to have occurred if, at such time,
the Pre-Funding Amount is greater than or equal to $50,000.
Pre-Funding Period: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre-Funding Earnings) is less than
$50,000, (ii) the date on which any Event of Default relating to the Servicer
occurs and (iii) May 26, 1998.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as of
the last day of the preceding Due Period (after giving effect to all payments
received thereon and the allocation of any Net Loan Losses with respect thereto
for a Defaulted Home Loan which relates to such Due Period), without giving
effect to amounts received in respect of such Home Loan or related Foreclosure
Property after such Due Period; provided, however, that any Liquidated Home Loan
shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period, any
principal amount received on a Home Loan in excess of the principal of the
Monthly Payment due in such Due Period.
Private Placement Memorandum: The Private Placement Memorandum to be
prepared by the Depositor in connection with the Class B-2 Notes.
Property: The property (real, personal or mixed) encumbered by the Mortgage
which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus dated November 18, 1997 as
supplemented by the Prospectus Supplement dated February 19, 1998.
Prospectus Supplement: The Prospectus Supplement dated February 19, 1998 to
be prepared by the Depositor in connection with the issuance and sale of the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class M-1, Class M-2 and
Class B-1 Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the date of repurchase computed at
the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Defective Home Loan
(after deducting therefrom any amounts received in respect of such repurchased
Defective Home Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the date of repurchase).
PWRES: Paine Webber Real Estate Securities Inc., a Delaware corporation.
PWRES Assignment and Assumption Agreement: The Assignment and Assumption
Agreement, dated as of October 20, 1997 between PWRES and the Transferor.
Qualified Substitute Home Loan: A home loan or home loans substituted for a
Deleted Home Loan pursuant to Section 2.06 of the Grantor Trust Agreement or
Section 3.05 hereof, which (i) has or have an interest rate or rates of not less
than, and not more than two percentage points greater than, the Home Loan
Interest Rate for the Deleted Home Loan, (ii) matures or mature not more than
one year than, and not more than one year earlier, than the maturity date of
Deleted Home Loan, (iii) has or have a principal balance or principal balances
(after application of all payments received on or prior to the date of
substitution) equal to or less than the Principal Balance or Balances of the
Deleted Home Loan or Loans as of such date, (iv) has or have a lien priority
equal or superior to that of the Deleted Home Loan or Loans, (v) has or have a
borrower or borrowers with a comparable credit grade classification to the
credit grade classification of the Obligor on the Deleted Home Loan or Loans,
including a Credit Score equal to or greater than such Deleted Home Loan, (vi)
has or have a borrower or borrowers with a debt-to-income ratio no higher than
the debt-to-income ratio of the Obligor with respect to the Deleted Loan, and
(vii) complies or comply as of the date of substitution with each representation
and warranty set forth in Section 3.04 hereof and is or are not more than 29
days delinquent as of the date of substitution for such Deleted Home Loan or
Loans. For purposes of determining whether multiple mortgage loans proposed to
be substituted for one or more Deleted Home Loans pursuant to Section 2.06 of
the Grantor Trust Agreement or Section 3.05 hereof are in fact "Qualified
Substitute Home Loans" as provided above, the criteria specified in clauses (i)
and (iii) above may be considered on an aggregate or weighted average basis,
rather than on a loan-by-loan basis (i.e., so long as the weighted average Home
Loan Interest Rate of any loans proposed to be substituted is not less than two
percentage points less than and not more than two percentage points greater than
the Home Loan Interest Rate for the designated Deleted Home Loan or Loans, the
requirements of clause (i) above would be deemed satisfied).
Rating Agencies: Moody's, Fitch and DCR. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable person designated
by the Servicer, notice of which designation shall have been given to the
Indenture Trustee and the Issuer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Payment Date, the close of business on
the last Business Day of the month immediately preceding the month in which such
Payment Date occurs.
Reference Bank Rate: With respect to any Accrual Period, the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for United States dollar deposits for one month that are
offered by the Reference Banks as of 11:00 a.m., New York City time, on the
second LIBOR Business Day prior to the first day of such Accrual Period to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the outstanding Class Principal Balance of the Class A-1
Notes, provided that at least two such Reference Banks provide such rate. If
fewer than two offered rates appear, the Reference Bank Rate will be arithmetic
mean of the rates quoted by one or more major banks in New York City, selected
by the Indenture Trustee, as of 11:00 a.m., New York City time, on such date for
loans in U.S. Dollars to leading European Banks for a period of one month in
amounts approximately equal to the outstanding Class Principal Balance of the
Class A-1 Notes. If no such quotation can be obtained, the Reference Bank Rate
will be the Reference Bank Rate applicable to the preceding Accrual Period.
Reference Banks: Three money center banks selected by the Indenture
Trustee.
Regular Payment Amount: With respect to any Payment Date, the lesser of (a)
the Available Payment Amount and (b) the sum of (i) the Noteholders' Interest
Payment Amount and (ii) the Regular Principal Payment Amount.
Regular Principal Payment Amount: On each Payment Date, an amount equal to
the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes
of Notes immediately prior to such Payment Date; and
(B) the sum of (i) each scheduled payment of principal collected
by the Servicer in the related Due Period, (ii) all full and partial
principal prepayments applied by the Servicer during such related Due
Period, (iii) the principal portion of all Net Liquidation Proceeds,
Insurance Proceeds and Released Mortgaged Property Proceeds received during
the related Due Period, (iv) that portion of the Purchase Price of any
repurchased Home Loan which represents principal received prior to the
related Determination Date, (v) the principal portion of any Substitution
Adjustments required to be deposited in the Collection Account as of the
related Determination Date, (vi) if such Payment Date relates to the Due
Period in which the Pre-Funding Period shall have ended and at the
termination of such Pre-Funding Period a Pre-Funding Payment Trigger shall
have occurred, the amount on deposit in the Pre-Funding Account on such
date, and (vii) on the Payment Date on which the Issuer and the Grantor
Trust are to be terminated pursuant to Section 11.02 hereof, the
Termination Price (net of any accrued and unpaid interest, Trust Fees and
Expenses due and unpaid on such date and Servicing Advance Reimbursement
Amount).
Released Mortgaged Property Proceeds: With respect to any secured Home
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which proceeds in either case are not released to the Obligor in accordance with
applicable law, Accepted Servicing Procedures and this Agreement.
Residual Interest: The meaning assigned thereto in the Owner Trust
Agreement.
Residual Interest Certificate: The meaning assigned thereto in the Owner
Trust Agreement.
Responsible Officer: When used with respect to the Indenture Trustee or
Grantor Trustee, any officer within the Corporate Trust Office of the Indenture
Trustee or Grantor Trustee, as the case may be, including any Vice President,
Assistant Vice President, Secretary, Assistant Secretary or any other officer of
the Indenture Trustee or Grantor Trustee, as the case may be, customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to the Issuer,
any officer in the Corporate Trust Administration Department of the Owner
Trustee with direct responsibility for the administration of the Owner Trust
Agreement and this Agreement on behalf of the Issuer. When used with respect to
the Depositor, the Transferor, the Servicer or any Custodian, the President or
any Vice President, Assistant Vice President, or any Secretary or Assistant
Secretary.
Securities: The Notes or Residual Interest Certificates.
Securityholder: Any Noteholder or Certificateholder.
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Senior Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Senior Noteholders' Interest Carry-Forward Amount for preceding Payment Dates,
over (B) the amount in respect of interest that is actually deposited in the
Note Payment Account on such preceding Payment Date.
Senior Noteholders' Interest Payment Amount: With respect to any Payment
Date, the sum of the Senior Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Senior Noteholders' Interest Carry-Forward Amount for
such Payment Date.
Senior Noteholders' Monthly Interest Payment Amount: With respect to each
Payment Date and the Classes of Class A Notes, the interest accrued at the
respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment Date, on the Closing Date) after giving effect to all payments of
principal to the holders of such Classes of Notes on or prior to such preceding
Payment Date.
Senior Notes: The Class A Notes.
Senior Optimal Principal Balance: With respect to any Payment Date prior to
the Stepdown Date, zero; with respect to any other Payment Date, an amount equal
to the Pool Principal Balance as of the related Determination Date minus the
greater of (a) the sum of (1) 55.045% of the Pool Principal Balance as of the
related Determination Date and (2) the Overcollateralization Target Amount for
such Payment Date (without giving effect to the proviso in the definition
thereof) and (b) 0.50% of the Maximum Collateral Amount; provided, however, that
such amount shall never be less than zero or greater than the sum of the
Original Class Principal Balances of the Notes.
Series or Series 1998-1: Empire Funding Home Loan Asset Backed Notes,
Series 1998-1.
Servicer: Empire Funding, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant to
Section 10.01(b) hereof.
Servicer's Fiscal Year: January 1st through December 31st of each year.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
customarily included in the servicer's loan file for the related type of Home
Loan as specifically set forth in Section 2.05(b) of the Grantor Trust
Agreement.
Servicer's Monthly Remittance Report: A report prepared and computed by the
Servicer in substantially the form of Exhibit B attached hereto.
Servicing Advance Reimbursement Amount: With respect to any date of
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date, including Nonrecoverable Servicing Advances.
Servicing Advances: Subject to Section 4.01(b) hereof, all reasonable,
customary and necessary "out of pocket" costs and expenses advanced or paid by
the Servicer with respect to the Home Loans in accordance with the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of a Mortgaged Property, including without limitation advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including without limitation foreclosures, collections
and liquidations pursuant to Section 4.10 hereof, (iii) the conservation,
management and sale or other disposition of a Foreclosure Property pursuant to
Section 4.11 hereof, (iv) the preservation of the security for a Home Loan if
any lienholder under a Superior Lien has accelerated or intends to accelerate
the obligations secured by such Superior Lien pursuant to Section 4.05 hereof;
provided, however, that such Servicing Advances are reimbursable to the Servicer
out of Net Liquidation Proceeds.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.03 hereof.
Servicing Fee: As to each Home Loan (including any Home Loan that has been
foreclosed and has become a Foreclosure Property, but excluding any Liquidated
Home Loan), the fee payable monthly to the Servicer on each Payment Date, which
shall be the product of 1.00% (100 basis points) and the Principal Balance of
such Home Loan as of the beginning of the immediately preceding Due Period,
divided by 12. The Servicing Fee includes any servicing fees owed or payable to
any Subservicer, which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Home Loans whose
name and specimen signature appears on a list of servicing officers annexed to
an Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, to the Grantor Trustee and the Indenture Trustee, on behalf of the
Noteholders, as such list may from time to time be amended.
Six-Month Rolling Delinquency Average: With respect to any Payment Date,
the average of the applicable 60-Day Delinquency Amounts for each of the six
immediately preceding Due Periods, where the 60-Day Delinquency Amount for any
Due Period is the aggregate of the Principal Balances of all Home Loans that are
60 or more days delinquent, in foreclosure or Foreclosure Property as of the end
of such Due Period.
Stepdown Date: The first Payment Date occurring after February 2001, upon
which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.0% of the Maximum
Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 3.50% of the
Maximum Collateral Amount; and
(3) the aggregate of the Class Principal Balances of the Class A Notes will
be able to be reduced on such Payment Date (such determination to be made
by the Indenture Trustee prior to giving effect to payment of principal on
such Payment Date) to the excess of:
(I) the Pool Principal Balance as of the related Determination Date
over
(II) the greater of
(a) the sum of
(1) 55.045% of the Pool Principal Balance as of the related
Determination Date and
(2) the Overcollateralization Target Amount for such
Payment Date (such amount to be calculated (x) without
giving effect to the proviso in the definition thereof
and (y) pursuant only to clause (II) of the definition
thereof); and
(b) 0.50% of the Maximum Collateral Amount.
Subordinate Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Subordinate Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Subordinate Noteholders' Interest Carry-Forward Amount for preceding Payment
Dates, over (B) the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date net of the Senior
Noteholders' Interest Payment Amount and the Mezzanine Noteholders' Interest
Payment Amount for such preceding Payment Date; it being understood that the
interest of the Class B-1 Noteholders in the Subordinate Noteholders' Interest
Carry-Forward Amount is senior to that of the Class B-2 Noteholders.
Subordinate Noteholders' Interest Payment Amount: With respect to any
Payment Date, the sum of the Subordinate Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Subordinate Noteholders' Interest
Carry-Forward Amount for such Payment Date.
Subordinate Noteholders' Monthly Interest Payment Amount: With respect to
each Payment Date and the Classes of Subordinate Notes, the interest accrued at
the respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment Date, on the Closing Date) after giving effect to all payments of
principal to the holders of such Classes of Notes on or prior to such preceding
Payment Date.
Subordinate Notes: The Class B-1 Notes and Class B-2 Notes.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan transferred to the Grantor Trustee during any
month, which Subsequent Loan does not have a Monthly Payment due until the
second Due Period following such month, an amount equal to the product of (a)
the Loan Balance of such Subsequent Loan on the related Cut-Off Date and (b)
one-twelfth of the Net Loan Rate on such Subsequent Loan.
Subsequent Loan: Each Home Loan sold to the Grantor Trustee for inclusion
pursuant to Section 2.07 of the Grantor Trust Agreement and the related
Subsequent Transfer Agreement, which Home Loan shall be listed on the related
Subsequent Loan Schedule.
Subsequent Loan Schedule: The schedule of Subsequent Loans transferred to
the Grantor Trustee pursuant to the related Subsequent Transfer Agreement and
attached thereto.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Grantor Trustee, Indenture Trustee and the Transferor substantially in
the form of Exhibit C attached to the Grantor Trust Agreement by which
Subsequent Loans are sold and assigned to the Grantor Trustee.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement; provided, however, that in no event shall there be more than three
(3) such Subsequent Transfer Agreements.
Subservicer: Any Person with which the Servicer has entered into a
Subservicing Agreement and which is an Eligible Servicer and satisfies any
requirements set forth in Section 4.06(a) hereof in respect of the
qualifications of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant to a
Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.06(a) hereof, copies of which shall be made
available, along with any modifications thereto, to the Issuer, the Grantor
Trustee and the Indenture Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Sections 2.06 of the Grantor Trust Agreement or Section 3.05 hereof,
the amount, if any, by which (a) the sum of the aggregate principal balance
(after application of principal payments received on or before the date of
substitution) of any Qualified Substitute Home Loans as of the date of
substitution, plus any accrued and unpaid interest thereon to the date of
substitution, is less than (b) the sum of the aggregate of the Principal
Balances, together with accrued and unpaid interest thereon to the date of
substitution, of the related Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
other than a first priority lien, the mortgage loan(s) having a superior
priority lien on the related Mortgaged Property.
Termination Price: As of any date of determination, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Home Loan included in the Grantor Trust
as of the applicable Monthly Cut-Off Date; (ii) all unpaid interest accrued on
the Principal Balance of each such Home Loan at the related Net Loan Rate to
such Monthly Cut-Off Date; and (iii) the aggregate fair market value of each
Foreclosure Property included in the Grantor Trust on such Monthly Cut-Off Date,
as determined by an Independent appraiser acceptable to the Indenture Trustee as
of a date not more than 30 days prior to such Monthly Cut-Off Date.
Transferor: Empire Funding, in its capacity as the transferor hereunder.
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 Issuer.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in the Trust Accounts and all proceeds of the foregoing.
Trust Accounts: The Note Payment Account, the Certificate Distribution
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account.
Trust Fees and Expenses: As of each Payment Date, an amount equal to the
Servicing Compensation, the Indenture Trustee Fee, the Grantor Trustee Fee, the
Owner Trustee Fee and the Custodian Fee, if any.
UCC: The Uniform Commercial Code as in effect in the State of New York.
Undercollateral Amount : With respect to any Payment Date, an amount (not
less than zero) equal to the excess, if any, of (a) the aggregate of the Class
Principal Balances of all Classes of Notes, after giving effect to payments in
respect of the Notes and the Residual Interest Certificates on such Payment
Date, over (b) the sum of (i) the Pool Principal Balance as of the end of the
preceding Due Period and (ii) the amount, if any, on deposit in the Pre-Funding
Account as of the end of such Due Period. Notwithstanding the foregoing, on any
date after the Payment Date on which the Undercollateralization Amount is first
reduced to zero, such amount shall be deemed to be zero.
U.S. Bank Custodial Agreement: The custodial agreement dated as of February
1, 1998 by and among the Depositor, Empire Funding, as the Transferor and the
Servicer, and U.S. Bank National Association, d/b/a First Bank National
Association, a national banking association, as the custodian and the Grantor
Trustee, providing for the retention of the applicable Grantor Trustee's Home
Loan Files by such custodian on behalf of the Grantor Trustee.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture and the Owner Trust
Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined
in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such
certificate or other document to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that the
definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under GAAP, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references
to Articles, Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term "including" shall mean "including
without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
CONVEYANCE OF THE GRANTOR TRUST CERTIFICATE
Section 2.01 Conveyance of the Grantor Trust Certificate.
(a) As of the Closing Date, in consideration of the Issuer's delivery of
the Notes and the Residual Interest Certificates to the Depositor or its
designee, upon the order of the Depositor, the Depositor, as of the Closing Date
and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right, title and interest of the Depositor in and to the Owner Trust Estate. The
foregoing sale, transfer, assignment, set over and conveyance does not, and is
not intended to, result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Transferor or any other person in connection
with the Owner Trust Estate or under any agreement or instrument relating
thereto except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to it of
the Owner Trust Estate, including all right, title and interest of the Depositor
in and to the Owner Trust Estate, receipt of which is hereby acknowledged by the
Issuer. Concurrently with such delivery and in exchange therefor, the Issuer has
pledged the Owner Trust Estate to the Indenture Trustee, and the Indenture
Trustee, pursuant to the written instructions of the Issuer, has executed and
caused the Notes to be authenticated and delivered to the Depositor or its
designee, upon the order of the Issuer. In addition, concurrently with such
delivery and in exchange therefor, the Owner Trustee, pursuant to the
instructions of the Depositor, has executed (not in its individual capacity, but
solely as Owner Trustee on behalf of the Issuer) and caused the Residual
Interest Certificates to be authenticated and delivered to the Depositor or its
designee, upon the order of the Depositor.
Section 2.02 Ownership and Possession of Grantor Trust Certificate.
Upon the issuance of the Notes, the ownership of the Grantor Trust
Certificate shall be vested in the Indenture Trustee for the benefit of the
Securityholders.
Section 2.03 Books and Records; Principal Place of Business
The sale of the Grantor Trust Certificate shall be reflected on the balance
sheets and other financial statements of the Depositor, as a sale of assets by
the Depositor under GAAP.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Grantor Trust Certificate and the other property specified in Section 2.01(a)
hereof from the Depositor to the Issuer and such property shall not be property
of the Depositor. If the assignment and transfer of the Grantor Trust
Certificate and the other property specified in Section 2.01(a) hereof to the
Owner Trustee pursuant to this Agreement or the conveyance of the Grantor Trust
Certificate or any of such other property to the Owner Trustee is held or deemed
not to be a sale or is held or deemed to be a pledge of security for a loan, the
Depositor intends that the rights and obligations of the parties shall be
established pursuant to the terms of this Agreement and that, in such event, (i)
the Depositor shall be deemed to have granted and does hereby grant to the Owner
Trustee a first priority security interest in the entire right, title and
interest of the Depositor in and to the Grantor Trust Certificate and all other
property conveyed to the Owner Trustee pursuant to Section 2.01 hereof and all
proceeds thereof and (ii) this Agreement shall constitute a security agreement
under applicable law. Within ten (10) days of the Closing Date, the Depositor
shall cause to be filed UCC-1 financing statements naming the Owner Trustee as
"secured parties" and describing the Grantor Trust Certificate being sold by the
Depositor to the Issuer with the office of the Secretary of State of the state
in which the Depositor is located.
Section 2.04 Delivery of Grantor Trust Certificate; Further Assurances.
(a) The Depositor shall, on the Closing Date, upon the order of the Issuer,
deliver or cause to be delivered, the Grantor Trust Certificate registered in
the name of U.S. Bank National Association, d/b/a First Bank National
Association, as Indenture Trustee, to the Indenture Trustee for the benefit of
the Noteholders.
(b) The Depositor shall execute and deliver all such other instruments,
documents and certificates and take all such other actions deemed necessary by
the Owner Trustee in connection with, or in furtherance of, the transactions
contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Servicer, the Grantor Trustee, the Indenture Trustee, the Owner Trustee and the
Noteholders that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has, and
had at all relevant times, full power to own its property, to carry on its
business as currently conducted, to enter into and perform its obligations
under this Agreement and to create the Owner Trust pursuant to the Owner
Trust Agreement;
(b) The execution and delivery of this Agreement by the Depositor and
its performance of and compliance with the terms of this Agreement will not
violate the Depositor's certificate of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Depositor is a party or which may be applicable to the Depositor
or any of its assets;
(c) The Depositor has the full power and authority to enter into and
consummate the transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement and
has duly executed and delivered this Agreement. This Agreement, assuming
due authorization, execution and delivery by the Owner Trustee, the
Indenture Trustee, the Grantor Trustee, the Transferor and the Servicer,
constitutes a valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless
of whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court or any order or
regulation of any federal, state, municipal or governmental agency having
jurisdiction, which violation would materially and adversely affect the
condition (financial or otherwise) or operations of the Depositor or its
properties or materially and adversely affect the performance of its duties
hereunder;
(e) There are no actions or proceedings against, or investigations of,
the Depositor currently pending with regard to which the Depositor has
received service of process and no action or proceeding against, or
investigation of, the Depositor is, to the knowledge of the Depositor,
threatened or otherwise pending before any court, administrative agency or
other tribunal that (A) if determined adversely, would prohibit its
entering into this Agreement or render the Notes invalid, (B) seek to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or (C) if determined adversely,
would prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of,
this Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the Notes, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery
of this Agreement or its obligations hereunder; no petition of bankruptcy
(or similar insolvency proceeding) has been filed by or against the
Depositor prior to the date hereof;
(h) The Depositor did not sell (i) the Home Loans to the Grantor
Trustee or (ii) the Grantor Trust Certificate to the Issuer, with any
intent to hinder, delay or defraud any of its creditors; the Depositor will
not be rendered insolvent as a result of the sale of the Home Loans to the
Grantor Trustee and the sale of the Grantor Trust Certificate to the
Issuer;
(i) As of the Closing Date, the Depositor had good title to, and was
the sole beneficial owner of, the Grantor Trust Certificate and had good
and marketable title thereto, free and clear of any lien or options in
favor of, or claims of, any other Person, other than any such lien released
simultaneously with the sale contemplated herein, and, immediately upon
each transfer and assignment herein contemplated, the Depositor will have
delivered to the Issuer good title to, and the Issuer will be the sole
beneficial owner of, the Grantor Trust Certificate free and clear of any
lien or options in favor of, or claims of, any other Person;
(j) The Grantor Trust Certificate has been validly issued, and is
fully paid and non-assessable and not subject to preemptive rights, and the
Grantor Trust Certificate has been offered, issued and sold in compliance
with all applicable laws and (A) there are no outstanding rights, options,
warrants or agreements for the purchase from, or sale or issuance, in
connection with the Grantor Trust Certificate; (B) there are no agreements
on the part of the Depositor to issue, sell or distribute the Grantor Trust
Certificate; and (C) the Depositor has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any securities or any
interest therein or to pay any dividend or make any distribution in respect
of the Grantor Trust Certificate;
(k) The Depositor acquired title to each of the Grantor Trust
Certificate in good faith, without notice of any adverse claim;
(l) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading; and
(m) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
Section 3.02 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Servicer, the
Indenture Trustee, the Owner Trustee, the Grantor Trustee, the Noteholders and
the Depositor that as of the Closing Date or the Subsequent Transfer Date, as
the case may be (except as otherwise specifically provided herein):
(a) The Transferor is a corporation licensed as a mortgage lender duly
organized, validly existing and in good standing under the laws of the
State of Oklahoma and has and had at all relevant times, full corporate
power to originate or purchase the Home Loans, to own its property, to
carry on its business as presently conducted and to enter into and perform
its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the Transferor and
its performance of and compliance with the terms of this Agreement will not
violate the Transferor's articles of incorporation or by-laws or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach or acceleration of,
any material contract, agreement or other instrument to which the
Transferor is a party or which may be applicable to the Transferor or any
of its assets;
(c) The Transferor has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Owner Trustee, the Indenture Trustee, the Grantor Trustee
and the Depositor, constitutes a valid, legal and binding obligation of the
Transferor, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to
or affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Transferor is not in violation of, and the execution and
delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court or any order or
regulation of any federal, state, municipal or governmental agency having
jurisdiction, which violation would materially and adversely affect the
condition (financial or otherwise) or operations of the Transferor or its
properties or materially and adversely affect the performance of its duties
hereunder;
(e) There are no actions or proceedings against, or investigations of,
the Transferor currently pending with regard to which the Transferor has
received service of process and no action or proceeding against, or
investigation of, the Transferor is, to the knowledge of the Transferor,
threatened or otherwise pending, before any court, administrative agency or
other tribunal that (A) if determined adversely, would prohibit its
entering into this Agreement or render the Notes invalid, (B) seek to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or (C) if determined adversely,
would prohibit or materially and adversely affect the sale of the Home
Loans to the Depositor, the performance by the Transferor of its
obligations under, or the validity or enforceability of, this Agreement or
the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery
and performance by the Transferor of, or compliance by the Transferor with,
this Agreement or the Grantor Trust Agreement, (2) the issuance of the
Notes, (3) the sale of the Home Loans under the Home Loan Purchase
Agreement or (4) the consummation of the transactions required of it by
this Agreement, except such as shall have been obtained before the Closing
Date;
(g) The Transferor acquired title to the Home Loans in good faith,
without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect to
the Home Loans have been, in all material respects, legal, proper, prudent
and customary in the non-conforming mortgage servicing business;
(i) No Officer's Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading;
(j) The Transferor is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery
of this Agreement or by the performance of its obligations hereunder; no
petition of bankruptcy (or similar insolvency proceeding) has been filed by
or against the Transferor prior to the date hereof;
(k) The Prospectus Supplement (other than (i) the statements set forth
in the paragraph immediately preceding the final paragraph of the cover of
the Prospectus Supplement and the first sentence of the final paragraph of
the cover of the Prospectus Supplement and (ii) the statements under the
following captions: "SUMMARY -- Securities Issued", "-- Priority of
Payments", "--Maturity Date", "-- Credit Enhancement", "-- Tax Status", "--
ERISA", "-- Legal Investment", "DESCRIPTION OF THE OFFERED NOTES",
"DESCRIPTION OF CREDIT ENHANCEMENT", "FEDERAL INCOME TAX CONSEQUENCES",
"ERISA CONSIDERATIONS", "LEGAL INVESTMENT MATTERS" and "UNDERWRITING", as
to which the Transferor makes no statement) does not contain an untrue
statement of a material fact and does not omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(l) The Transferor has transferred the Home Loans without any intent
to hinder, delay or defraud any of its creditors;
(m) The Private Placement Memorandum (other than (i) the statements
set forth in the first sentence of the second paragraph immediately
preceding the final paragraph of the cover of the Private Placement
Memorandum and (ii) the statements under the following captions:
"DESCRIPTION OF THE OFFERED NOTES", "FEDERAL INCOME TAX CONSEQUENCES",
"ERISA CONSIDERATIONS", "LEGAL INVESTMENT CONSIDERATIONS" and "PLAN OF
OFFERING", as to which the Transferor makes no statement) does not contain
an untrue statement of a material fact and does not omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(n) The Preferred Transaction Documents are in full force and effect
and have not been amended or modified in any respect, the Transferor has
provided complete copies of the Preferred Transaction Documents to the
Depositor and the Grantor Trustee, and has notified Preferred, ICI or
ICMHI, as applicable, of its assignment of rights thereunder to the Grantor
Trustee.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Grantor
Trustee's Home Loan Files to the applicable Custodian (as the agent of the
Grantor Trustee) and shall inure to the benefit of the Securityholders, the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee, the Grantor
Trustee, the Grantor Trust and the Owner Trust. Upon discovery by any of the
Transferor, the Depositor, the Servicer, the Indenture Trustee, the Grantor
Trustee or the Owner Trustee of a breach of any of the foregoing representations
and warranties that materially and adversely affects the value of any Home Loan
or the interests of the Grantor Trust Holder therein, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the other parties. The obligations of the
Transferor set forth in Section 3.05 hereof shall constitute the sole remedies
available hereunder to the Securityholders, the Depositor, the Servicer, the
Indenture Trustee, the Grantor Trustee or the Owner Trustee respecting a breach
of the representations and warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the Owner
Trustee, the Indenture Trustee, the Grantor Trustee, the Noteholders, the
Depositor and the Transferor that as of the Closing Date or as of such date
specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Oklahoma and is or will be
in compliance with the laws of each state in which any Mortgaged Property
is located to the extent necessary to ensure the enforceability of each
Loan in accordance with the terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer and
its performance of and compliance with the terms of this Agreement will not
violate the Servicer's articles of incorporation or by-laws or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach or acceleration of,
any material contract, agreement or other instrument to which the Servicer
is a party or which may be applicable to the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement and
has duly executed and delivered this Agreement. This Agreement, assuming
due authorization, execution and delivery by the Indenture Trustee, the
Owner Trustee, the Grantor Trustee and the Depositor, constitutes a valid,
legal and binding obligation of the Servicer, enforceable against it in
accordance with the terms hereof, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court or any order or
regulation of any federal, state, municipal or governmental agency having
jurisdiction, which violation would materially and adversely affect the
condition (financial or otherwise) or operations of the Servicer or
materially and adversely affect the performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations of,
the Servicer currently pending with regard to which the Servicer has
received service of process and no action or proceeding against, or
investigation of, the Servicer is to the knowledge of the Servicer,
threatened or otherwise pending, before any court, administrative agency or
other tribunal that (A) if determined adversely, would prohibit its
entering into this Agreement or render the Notes invalid, (B) seek to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or (C) if determined adversely,
would prohibit or materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Notes, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
(g) The Servicer is duly licensed where required as a "Licensee" or is
otherwise qualified in each state in which it transacts business and is not
in default of such state's applicable laws, rules and regulations, except
where the failure to so qualify or such default would not have a material
adverse effect on the ability of the Servicer to conduct its business or
perform its obligations hereunder;
(h) The Servicer is an Eligible Servicer and services mortgage loans
in accordance with Accepted Servicing Procedures;
(i) No Officer's Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it pursuant to
this Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading;
(j) The Servicer is solvent and will not be rendered insolvent as a
result of the performance of its obligations pursuant to this Agreement;
(k) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the related
Mortgage;
(l) The Servicer will cause to be performed any and all acts required
to be performed by the Servicer to preserve the rights and remedies of the
Grantor Trustee, the Owner Trustee and the Indenture Trustee in any
Insurance Policies applicable to the Home Loans including, without
limitation, in each case, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Grantor
Trustee, the Owner Trustee and the Indenture Trustee;
(m) The Servicer shall comply with, and shall service, or cause to be
serviced, each Home Loan, in accordance with all applicable laws; and
(n) The Servicer agrees that, so long as it shall continue to serve in
the capacity contemplated under the terms of this Agreement, it shall
remain in good standing under the laws governing its creation and existence
and qualified under the laws of each state in which it is necessary to
perform its obligations under this Agreement or in which the nature of its
business requires such qualification; it shall maintain all licenses,
permits and other approvals required by any law or regulations as may be
necessary to perform its obligations under this Agreement and to retain all
rights to service the Loans; and it shall not dissolve or otherwise dispose
of all or substantially all of its assets.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Grantor Trustee's Home Loan Files to the Indenture Trustee and shall
inure to the benefit of the Depositor, the Noteholders, the Owner Trustee, the
Grantor Trustee and the Indenture Trustee. Upon discovery by any of the
Transferor, the Depositor, the Servicer, the Indenture Trustee, the Grantor
Trustee or the Owner Trustee of a breach of any of the foregoing
representations, warranties and covenants that materially and adversely affects
the value of any Home Loan or the interests of such Person therein, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the other parties.
Section 3.04 Representations and Warranties Regarding Individual Home
Loans.
The Transferor hereby represents and warrants to the Depositor, the Issuer,
the Indenture Trustee, the Grantor Trustee, the Owner Trustee and the
Noteholders, with respect to each Home Loan as of the Closing Date, and with
respect to each Subsequent Loan, as of the related Subsequent Transfer Date,
except as otherwise expressly stated:
(a) The information pertaining to each Home Loan set forth in the Home
Loan Schedule was true and correct in all material respects as of the
Cut-Off Date;
(b) As of the applicable Cut-Off Date, none of the Home Loans was 30
or more days past due (without giving effect to any grace period); the
Transferor has not advanced funds, induced, solicited or knowingly received
any advance of funds from a party other than the Obligor, directly or
indirectly, for the payment of any amount required by any Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage contain
the entire agreement of the parties thereto and have not been impaired,
waived, altered or modified in any respect, except by written instruments
reflected in the related Grantor Trustee's Home Loan File and recorded, if
necessary, to maintain the lien priority of the any related Mortgage; no
instrument of waiver, alteration, expansion or modification has been
executed, and no Obligor has been released, in whole or in part, except in
connection with an assumption agreement which assumption agreement is part
of the related Grantor Trustee's Home Loan File and the payment terms of
which are reflected in the related Home Loan Schedule;
(d) The Debt Instrument and any related Mortgage are not subject to
any set-off, claims, counterclaim or defense, including the defense of
usury or of fraud in the inducement, and will not be so subject in the
future with respect to the goods and services provided under the Debt
Instrument; and neither the operation of any of the terms of the Debt
Instrument and any related Mortgage, nor the exercise of any right
thereunder, will render such Debt Instrument or Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such right
of rescission, set-off, counterclaim or defense has been asserted with
respect thereto;
(e) Any and all requirements of any federal, state or local law
applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto) have
been complied with;
(f) No Debt Instrument or Mortgage has been satisfied, canceled,
rescinded or subordinated, in whole or part; and the Transferor, except as
otherwise permitted by clause (c) of this Section 3.04, has not waived the
performance by the Obligor of any action, if the Obligor's failure to
perform such action would cause the Debt Instrument or Home Loan to be in
default; and, the related Property has not been released from the lien of
the Mortgage, in whole or in part, nor has any instrument been executed
that would effect any such satisfaction, subordination, release,
cancellation or rescission;
(g) Each related Mortgage is a valid, subsisting and enforceable lien
on the related Property, including the land and all buildings on the
Property;
(h) The Debt Instrument and any related Mortgage are genuine and each
is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights in general and by general principles of equity;
(i) To the best of the Transferor's knowledge, all parties to the Debt
Instrument and any related Mortgage had legal capacity at the time to enter
into the Home Loan and to execute and deliver the Debt Instrument and any
related Mortgage, and the Debt Instrument and any related Mortgage have
been duly and properly executed by such parties;
(j) As of the applicable Cut-Off Date, the proceeds of the Home Loan
have been fully disbursed and there is no requirement for future advances
thereunder, and any and all applicable requirements set forth in the Home
Loan documents have been complied with; the Obligor is not entitled to any
refund of any amounts paid or due under the Debt Instrument or any related
Mortgage;
(k) Immediately prior to the sale, transfer and assignment to the
Depositor, the Transferor will have good and indefeasible legal title to
the Home Loan, the related Debt Instrument and any related Mortgage and the
full right to transfer such Home Loan, the related Debt Instrument and any
related Mortgage, and the Transferor will have been the sole owner thereof,
subject to no liens, pledges, charges, mortgages, encumbrances or rights of
others, except for such liens as will be released simultaneously with the
transfer and assignment of the Home Loans to the Depositor (and the Grantor
Trustee's Home Loan File will contain no evidence inconsistent with the
foregoing); and immediately upon the sale, transfer and assignment
contemplated by the Home Loan Purchase Agreement, the Depositor will hold
good title to, and be the sole owner of each Home Loan, the related Debt
Instrument and any related Mortgage, free of all liens, pledges, charges,
mortgages, encumbrances or rights of others;
(l) Except for those Home Loans referred to in clause (b) of this
Section 3.04 that are delinquent as of the Cut-Off Date, there is no
default, breach, violation or event of acceleration known to the Transferor
under the Home Loan, the related Debt Instrument and any related Mortgage
and there is no event known to the Transferor which, with the passage of
time or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration thereunder
and neither the Transferor nor its predecessors have waived any such
default, breach, violation or event of acceleration;
(m) The Debt Instrument and any related Mortgage contain customary and
enforceable provisions so as to render the rights and remedies of the
holder thereof adequate for the realization against the Property of the
benefits of the security provided thereby, including, (A) in the case of
any Mortgage designated as a deed of trust, by trustee's sale, and (B)
otherwise by judicial foreclosure;
(n) Each Home Loan is a fixed rate loan; the Debt Instrument shall
mature within not more than 25 years from the date of origination of the
Home Loan; the Debt Instrument is payable in substantially equal Monthly
Payments, with interest payable in arrears, and requires a Monthly Payment
which is sufficient to fully amortize the original principal balance over
the original term and to pay interest at the related Home Loan Interest
Rate; interest on each Home Loan is calculated on the basis of a 360-day
year consisting of twelve 30-day months, and the Debt Instrument does not
provide for any extension of the original term;
(o) The related Debt Instrument is not and has not been secured by any
collateral except, the lien of the corresponding Mortgage;
(p) If the related Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, or a valid
substitution of trustee has been recorded, and no extraordinary fees or
expenses are or will become payable to the trustee under the deed of trust,
except in connection with default proceedings and a trustee's sale after
default by the Obligor;
(q) The Transferor has no knowledge of any circumstances or conditions
not reflected in the representations set forth herein, or in the Home Loan
Schedule, or in the related Grantor Trustee's Home Loan File with respect
to the related Mortgage, the related Property or the Obligor which could
reasonably be expected to materially and adversely affect the value of the
related Property or the marketability of the Home Loan or cause the Home
Loan to become delinquent or otherwise be in default;
(r) Assuming no material change to the applicable law or regulations
in effect as of the Closing Date, after the consummation of the
transactions contemplated by this Agreement, the Grantor Trustee will have
the ability to foreclose or otherwise realize upon a Property, if the Home
Loan is a Home Loan, or to enforce the provisions of the related Home Loan
against the Obligor thereunder, if the foreclosure upon any such Property
or enforcement of the provisions of the related Home Loan against the
Obligor is undertaken as set forth in Section 4.10 hereof;
(s) There exists a Home Loan File relating to each Home Loan and such
Home Loan File contains all of the original or certified documentation
listed in Section 2.04 hereof for such Home Loan. Each Grantor Trustee's
Home Loan File has been delivered to the applicable Custodian and each
Servicer's Home Loan File is being held in trust by the Servicer for the
benefit of, and as agent for, the Grantor Trust Holder and the Grantor
Trustee as their respective interest appear herein. Each document included
in the Home Loan File which is required to be executed by the Obligor has
been executed by the Obligor in the appropriate places. With respect to
each Home Loan, the related Assignment of Mortgage to the Grantor Trustee
is in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Property is located. All blanks on any form
required to be completed have been so completed;
(t) Each Property is improved by a residential dwelling and is not a
Home Loan in respect of a manufactured home or mobile home or the land on
which a manufactured home or mobile home has been placed, unless such
manufactured home or mobile home is treated as real estate under applicable
law;
(u) Each Home Loan was underwritten by the Transferor in accordance
with the Transferor's underwriting guidelines;
(v) If the Property securing any Home Loan is in an area identified by
the Federal Emergency Management Agency ("FEMA") as having special flood
hazards, unless the community in which the area is situated is not
participating in the National Flood Insurance Program and the regulations
thereunder or less than a year has passed since FEMA notification regarding
such hazards, a flood insurance policy is in effect with respect to such
Property with a generally acceptable carrier which complies with section
102(a) of the Flood Disaster Protection Act of 1968, as amended; all
improvements upon each Property securing a Home Loan are insured by a
generally acceptable insurer against loss by fire, hazards of extended
coverage and such other hazards as are customary in the area where the
Property is located, pursuant to insurance policies conforming to the
requirements of the Agreement; all such policies contain a standard
mortgagee clause naming the Transferor or its predecessor in interest, its
successors and assigns, as loss payee;
(w) All costs, fees and expenses incurred in originating and closing
the Home Loan and in recording any related Mortgage were paid and the
Obligor is not entitled to any refund of any amounts paid or due to the
lender pursuant to the Debt Instrument or any related Mortgage;
(x) There is no obligation on the part of the Transferor or any other
party other than the Obligor to make payments with respect to the Home
Loan;
(y) At the time of origination of the Home Loan, each related Superior
Lien, if any, was certified by the Obligor as not being 30 or more days
delinquent;
(z) To the best of the Transferor's knowledge, all parties which have
had any interest in the Home Loan, whether as mortgagee, assignee, pledgee
or otherwise, are (or, during the period in which they held and disposed of
such interest, were) (i) in compliance with any and all applicable
licensing requirements of the laws of the state wherein the Property is
located, and (ii) (A) organized under the laws of such state, or (B)
qualified to do business in such state, or (C) federal savings and loan
associations or national banks having principal offices in such state, or
(D) not doing business in such state;
(aa) With respect to each Home Loan, the related Mortgage contains an
enforceable provision requiring the consent of the mortgagee to assumption
of the related Home Loan upon sale of the Property;
(ab) With respect to each Home Loan, there is no homestead or other
exemption available to the mortgagor which would materially interfere with
the right to sell the related Property at a trustee's sale or the right to
foreclose the Mortgage; no relief has been requested or allowed to the
mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940;
(ac) The related Servicer's Home Loan File for each Home Loan contains
a title document with respect to such Home Loan reflecting that title to
the related Mortgaged Property is vested at least 50% in the related
Obligor;
(ad) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) is free of damage
which materially and adversely affects the value thereof and there is no
proceeding pending for the total or partial condemnation of any Property;
(ae) Each Home Loan was originated in compliance with all applicable
laws and, to the best of the Transferor's knowledge, no fraud or
misrepresentation was committed by any Person in connection therewith;
(af) Each Home Loan has been serviced in accordance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud or
misrepresentation was committed by any Person in connection therewith;
(ag) The transfer, assignment and conveyance of the Debt Instruments
and the Mortgages by the Transferor to the Depositor were not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
(ah) Any Home Loan originated in the State of Texas, was originated
pursuant to either Chapter 3 or Chapter 6 of the Texas Consumer Credit
Code;
(ai) As of the applicable Cut-Off Date, no Obligor is a debtor under
proceedings under the United States Bankruptcy Code, and no Obligor has
defaulted in payments on a Home Loan after the filing of such bankruptcy
case, whether under a plan or reorganization or otherwise;
(aj) To the best of the Transferor's knowledge, the Transferor has not
advanced funds, or induced, solicited or knowingly received any advance of
loan payments from a party other than, the owner of the Property subject to
the Mortgage;
(ak) The Home Loans were originated by the Transferor or through the
Transferor's network of dealers and correspondents (including Home Loans
acquired by such correspondents); no Home Loan was originated earlier than
January 1985;
(al) Each Home Loan either complies with the Home Ownership and Equity
Protection Act of 1994 or is not subject to such act;
(am) The Transferor has caused to be performed or shall cause to be
performed within one month of the Closing Date any and all acts required to
preserve the rights and remedies of the Grantor Trustee in any insurance
policies applicable to each Home Loan including, without limitation, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishment of coinsured, joint loss payee and mortgagee
rights in favor of the Grantor Trustee;
(an) To the best of the Transferor's knowledge, the Property is free
from any and all toxic and hazardous substances and there exists no
violation of any environmental law, rule or regulation (whether local,
state or federal) in respect of the Property which violation has or could
have a material adverse effect on the market value of such Property. The
Transferor has no knowledge of any pending action or proceeding directly
involving the related Property in which compliance with any environmental
law, rule or regulation is in issue; and, to the Transferor's best
knowledge, nothing further remains to be done to satisfy in full all
requirements of each such law, rule or regulation constituting a
prerequisite to the use and enjoyment of such Property;
(ao) At the time of its origination no Home Loan was secured by a
Mortgage on a non-owner occupied Mortgaged Property;
(ap) With respect to the Initial Loans, on the Closing Date, and with
respect to the Subsequent Loans, as of the Subsequent Transfer Date, 55% or
more (by aggregate Principal Balance) of the Home Loans do not constitute
"real estate mortgages" for the purpose of Treasury Regulations Section
301.7701(i). For this purpose a Home Loan does not constitute a "real
estate mortgage" if:
(i) The Home Loan is not secured by an interest in real property,
or
(ii) The Home Loan is not an "obligation principally secured by
an interest in real property." For this purpose an "obligation is
principally secured by an interest in real property" if it satisfies
either test set out in paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally
secured by an interest in real property if the fair market value
of the interest in real property securing the obligation (A) was
at least equal to 80 percent of the adjusted issue price of the
obligation at the time the obligation was originated (or, if
later, the time the obligation was significantly modified); or
(B) is at least equal to 80 percent of the adjusted issue price
of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of the real
property interest must be first reduced by the amount of any lien on
the real property interest that is senior to the obligation being
tested, and must be further reduced by a proprotionate amount of
any lien that is in parity with the obligation being tested, in each
case before the percentages set forth in (1)(A) and (1)(B) are
determined. The adjusted issue price of an obligation is its issue
price plus the amount of accrued original issue discount, if any,
as of the date of determination.
(2) Alternative test. An obligation is principally secured
by an interest in real property if substantially all of the
proceeds of the obligation were used to acquire or to improve or
protect an interest in real property that, at the origination
date, is the only security for the obligation. For purposes of
this test, loan guarantees made by the United States or any state
(or any political subdivision, agency, or instrumentality of the
United States or of any state), or other third party credit
enhancement are not viewed as additional security for a loan. An
obligation is not considered to be secured by property other than
real property solely because the obligor is personally liable on
the obligation. For this purpose only, substantially all of the
proceeds of the obligations means 66 2/3% or more of the gross
proceeds.
(aq) No Home Loan was adversely selected as to credit risk from the
pool of home loans owned by the Transferor;
(ar) With respect to each Home Loan that is not a first lien mortgage
loan, either (i) no consent for the Home Loan was required by the holder of
the related Superior Lien or (ii) such consent has been obtained and has
been delivered to the Indenture Trustee;
(as) Each Home Loan is a home improvement loan for goods or services,
a debt consolidation loan or a home equity loan;
(at) Each Debt Instrument is comprised of an original promissory note
and each promissory note constitutes an "instrument" or "chattel paper" for
purposes of Article 9 of the UCC; each Debt Instrument has been delivered
to the applicable Custodian;
(au) To the best of the Transferor's knowledge, all improvements which
were considered in determining the appraised value of the Property lay
wholly within the boundaries and building restriction lines of the Property
and no improvements on adjoining properties encroach upon the Mortgaged
Property. No improvement located on or being part of the Mortgaged Property
is in violation of any applicable zoning law or regulation;
(av) To the best of the Transferor's knowledge, all inspections,
licenses and certificates required to be made, obtained and issued as of
the Closing Date with respect to the improvements and the use and occupancy
of all occupied portions of all Properties have been made, obtained or
issued as applicable;
(aw) In the event that the Home Loan was originated by an entity (such
entity, the "Originator") other than the Transferor or an affiliate of the
Transferor, the Grantor Trustee and the Indenture Trustee may enforce any
remedies for breach of representations and warranties made by the
Transferor with respect to such Home Loan;
(ax) The Home Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any
separate account established by the Transferor, the Obligor or anyone on
behalf of the Obligor, or paid by any source other than the Obligor nor
does it contain any other similar provisions currently in effect which may
constitute a "buydown" provision. The Home Loan is not a graduated payment
Home Loan and the Home Loan does not have a shared appreciation or other
contingent interest feature; and
(ay) The Transferor has reviewed all of the documents constituting the
Mortgage File and has made such inquiries as it deems necessary to make and
confirm the accuracy of the representations set forth herein.
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties set
forth in Section 3.04 hereof shall survive the conveyance of the Home Loans to
the Grantor Trustee, the conveyance of the Grantor Trust Certificate to the
Issuer, the pledge of the Grantor Trust Certificate to the Indenture Trustee and
the delivery of the Notes to the Noteholders. Upon discovery by the Depositor,
the Servicer, the Transferor, any Custodian, the Issuer, the Indenture Trustee,
the Grantor Trustee, the Owner Trustee or any Securityholder of a breach of any
of such representations and warranties or the representations and warranties set
forth in Section 3.04 which materially and adversely affects the value of the
Home Loans or the interests of the Grantor Trustee, the Owner Trustee or the
Indenture Trustee in the related Home Loan (notwithstanding that such
representation and warranty was made to the Transferor's best knowledge), the
party discovering such breach shall give prompt written notice to the others.
The Transferor shall within 60 days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, including any
breach of the representation set forth in Section 3.04(ap) hereof as a result of
an aggregate of Home Loans which would not otherwise cause a breach of any other
representation or warranty, promptly cure such breach in all material respects.
If within 60 days after the earlier of the Transferor's discovery of such breach
or the Transferor's receiving notice thereof such breach has not been remedied
by the Transferor and such breach materially and adversely affects the interests
of the Grantor Trustee, the Owner Trustee or the Indenture Trustee in, or the
value of, the related Home Loan (the "Defective Home Loan"), the Transferor
shall on or before the Determination Date next succeeding the end of such 60-day
period either (i) remove such Defective Home Loan from the Grantor Trust (in
which case it shall become a Deleted Home Loan) and substitute one or more
Qualified Substitute Home Loans in the manner and subject to the conditions set
forth in this Section 3.05 or (ii) purchase such Defective Home Loan at a
purchase price equal to the Purchase Price by depositing such Purchase Price in
the Collection Account. The Transferor shall provide the Servicer, the Indenture
Trustee, the Grantor Trustee and the Owner Trustee with a certification of a
Responsible Officer on the Determination Date next succeeding the end of such
60-day period indicating whether the Transferor is purchasing the Defective Home
Loan or substituting in lieu of such Defective Home Loan a Qualified Substitute
Home Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Transferor of the Substitution Adjustment, if any,
to be deposited in the Collection Account. For purposes of calculating the
Available Collection Amount for any Payment Date, amounts paid by the Transferor
pursuant to this Section 3.05 in connection with the repurchase or substitution
of any Defective Home Loan that are on deposit in the Collection Account as of
the Determination Date for such Payment Date shall be deemed to have been paid
during the related Due Period and shall be transferred to the Note Payment
Account as part of the Available Collection Amount to be retained therein or
transferred to the Certificate Distribution Account, if applicable, pursuant to
Section 5.01(c) hereof.
In addition to such cure, repurchase or substitution obligation, the
Transferor shall indemnify the Issuer, the Depositor, the Indenture Trustee, the
Grantor Trustee and the Securityholders against any losses, damages, penalties,
fines, forfeitures, reasonable and necessary legal fees and related costs,
judgements, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach by
the Transferor of any of it representations and warranties contained in Section
3.02 and Section 3.04.
(b) As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Indenture Trustee and Grantor Trustee (i) a
certification executed by a Responsible Officer of the Transferor to the effect
that the Substitution Adjustment has been credited to the Collection Account and
(ii) the documents constituting the Grantor Trustee's Home Loan File for such
Qualified Substitute Home Loan or Loans.
The Servicer shall deposit in the Collection Account all payments received
in connection with such Qualified Substitute Home Loan or Loans after the date
of such substitution. Monthly Payments received with respect to Qualified
Substitute Home Loans on or before the date of substitution will be retained by
the Transferor. The Grantor Trustee will be entitled to all payments received on
the Deleted Home Loan on or before the date of substitution and the Transferor
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Home Loan. The Transferor shall give written notice to
the Grantor Trustee, the Servicer (if the Transferor is not then acting as
such), the Indenture Trustee and Owner Trustee that such substitution has taken
place and the Servicer shall amend the Home Loan Schedule to reflect (i) the
removal of such Deleted Home Loan from the terms of this Agreement and (ii) the
substitution of the Qualified Substitute Home Loan. The Transferor shall
promptly deliver to the Grantor Trustee, the Servicer (if the Transferor is not
then acting as such), the Indenture Trustee and Owner Trustee, a copy of the
amended Home Loan Schedule. Upon such substitution, such Qualified Substitute
Home Loan or Loans shall be subject to the terms of this Agreement in all
respects, and the Transferor shall be deemed to have made with respect to such
Qualified Substitute Home Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 3.04 hereof. On
the date of such substitution, the Transferor will deposit into the Collection
Account an amount equal to the related Substitution Adjustment, if any.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor pursuant to this Agreement, upon the deposit of
the Purchase Price therefor into the Collection Account, the Grantor Trustee
shall assign to the Transferor, without recourse, representation or warranty,
all the Grantor Trustee's right, title and interest in and to such Defective
Home Loans or other Home Loans, which right, title and interest were conveyed to
the Grantor Trustee pursuant to the Grantor Trust Agreement, including, solely
with respect to such Defective Home Loans or other Home Loans, all rights with
respect thereto under any applicable Preferred Transaction Document. The Grantor
Trustee shall take any actions as shall be reasonably requested by the
Transferor to effect the repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor to
cure or to repurchase or substitute any such Home Loan, and to indemnify for any
breach of any representation or warranty with respect thereto, pursuant to this
Section 3.05 shall constitute the sole remedies against it with respect to such
breach of the foregoing representations or warranties or the existence of the
foregoing conditions. With respect to representations and warranties made by the
Transferor pursuant to Section 3.04 hereof that are made to the Transferor's
best knowledge, if it is discovered by any of the Depositor, the Transferor, the
Indenture Trustee, the Grantor Trustee or the Owner Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Home Loan, notwithstanding the
Transferor's lack of knowledge, such inaccuracy shall be deemed a breach of the
applicable representation and warranty. Any cause of action against the
Transferor relating to or arising out of a defect in a Grantor Trustee's Home
Loan File as contemplated by Section 2.06 of the Grantor Trust Agreement or
against the Transferor relating to or arising out of a breach of any
representations and warranties made in Section 3.04 hereof shall accrue as to
any Home Loan upon (i) discovery of such defect or breach by any party and
notice thereof to the Transferor or notice thereof by the Transferor to the
Indenture Trustee, (ii) failure by the Transferor to cure such defect or breach
or purchase or substitute such Home Loan as specified above, and (iii) demand
upon the Transferor, as applicable, by the Grantor Trustee or the Grantor Trust
Holder for all amounts payable in respect of such Home Loan.
(e) If the Transferor does not perform its obligation to cure, repurchase
or substitute in lieu of a Defective Home Loan as provided in Section 3.05(a),
the Indenture Trustee shall promptly provide notice of the Defective Home Loan
to: (i) Preferred, with respect to a Defective Home Loan which was acquired by
the Transferor pursuant to the Preferred Purchase Agreement and (ii) Preferred
and ICI, with respect to a Defective Loan which was acquired by the Transferor
pursuant to the PWRES Assignment and Assumption Agreement and request that such
party perform its cure, repurchase, substitution, indemnification or other
obligations with respect to such Defective Home Loan as set forth in the
applicable Preferred Transaction Documents.
In the event that the Transferor repurchases or substitutes in lieu of a
Defective Home Loan pursuant to Section 3.05(a), the Grantor Trustee agrees to
release and assign to the Transferor all rights of the Grantor Trustee under the
Preferred Transaction Documents with respect to such Defective Home Loan.
(f) Neither the Grantor Trustee, the Owner Trustee nor the Indenture
Trustee shall have any duty to conduct any affirmative investigation other than
as specifically set forth in this Agreement as to the occurrence of any
condition requiring the repurchase or substitution of any Home Loan pursuant to
this Section or the eligibility of any Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor, shall
service and administer the Home Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the ordinary servicing practices of prudent
mortgage lending institutions. Notwithstanding anything to the contrary
contained herein, the Servicer, in servicing and administering the Home Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure, liquidation and Foreclosure Property management and liquidation
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering loans of the same type as the Home Loans for its
own account, all in accordance with Accepted Servicing Procedures of prudent
lending institutions and servicers of loans of the same type as the Home Loans
and giving due consideration to the Grantor Trust Holder's and Securityholders'
reliance on the Servicer. The Servicer has and shall maintain the facilities,
procedures and experienced personnel necessary to comply with the servicing
standard set forth in this subsection (a) and the duties of the Servicer set
forth in this Agreement relating to the servicing and administration of the Home
Loans. In performing its obligations hereunder the Servicer shall at all times
act in good faith in a commercially reasonable manner in accordance with
applicable law and the Debt Instruments and Mortgages.
(b) Servicing Advances. In accordance with the preceding general servicing
standard, the Servicer, or any Subservicer on behalf of the Servicer, shall make
all Servicing Advances in connection with the servicing of each Home Loan
hereunder. Notwithstanding any provision to the contrary herein, neither the
Servicer nor any Subservicer on behalf of the Servicer shall have any obligation
to advance its own funds for any delinquent scheduled payments of principal and
interest on any Home Loan or to satisfy or keep current the indebtedness secured
by any Superior Liens on the related Mortgaged Property. No costs incurred by
the Servicer or any Subservicer in respect of Servicing Advances shall, for the
purposes of distributions in respect of the Grantor Trust Certificate to
Securityholders, be added to the amount owing under the related Home Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Home Loan, before making any Servicing Advance that
is material in relation to the outstanding principal balance of such Home Loan,
the Servicer shall assess the reasonable likelihood of (i) recovering such
Servicing Advance and any prior Servicing Advances for such Home Loan and (ii)
recovering any amounts attributable to outstanding interest and principal owing
on such Home Loan for the benefit of the Securityholders in excess of the costs,
expenses and other deductions to obtain such recovery, including without
limitation any Servicing Advances therefor and, if applicable, the outstanding
indebtedness of all Superior Liens. The Servicer shall only make a Servicing
Advance with respect to a Home Loan to the extent that the Servicer determines
in its reasonable, good faith judgment that such Servicing Advance would likely
be recovered as aforesaid; provided, however, that the Servicer will be entitled
to be reimbursed for any Nonrecoverable Servicing Advance pursuant to this
Agreement.
(c) Waivers, Modifications and Extensions; Subordination. The Servicer
shall make reasonably diligent efforts to collect all payments called for under
the terms and provisions of the Home Loans and shall, to the extent such
procedures shall be consistent with this Agreement, follow Accepted Servicing
Procedures. The Servicer may in its discretion waive or permit to be waived any
penalty interest or any other fee or charge which the Servicer would be entitled
to retain hereunder as servicing compensation and extend the Due Date on a Debt
Instrument for a period (with respect to each payment as to which the Due Date
is extended) not greater than 90 days after the initially scheduled due date for
such payment. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any additional extension or modification with respect
to any Home Loan other than that permitted by the immediately preceding sentence
unless the Home Loan is a Defaulted Home Loan. The Servicer may in its
discretion enter in subordination agreements with respect to any Home Loan,
provided that the Servicer determines, consistent with this Agreement and
Accepted Servicing Procedures that the entering into of such subordination
agreement is in the best interests of the Grantor Trust.
(d) Instruments of Satisfaction or Release. Without limiting the generality
of subsection (c) of this Section 4.01, the Servicer, in its own name or in the
name of a Subservicer, is hereby authorized and empowered, when the Servicer
believes it appropriate in its best judgment, to execute and deliver, on behalf
of the Grantor Trust Holder and the Grantor Trustee or any of them, and upon
notice to the Grantor Trustee, any and all instruments of satisfaction or
cancellation or of partial or full release or discharge, and all other
comparable instruments with respect to the Home Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed in lieu of
foreclosure so as to convert the ownership of such properties, and to hold or
cause to be held title to such properties, on behalf of the Grantor Trustee and
Grantor Trust Holder. The Servicer shall service and administer the Home Loans
in accordance with applicable state and federal law and shall provide to the
Obligors any reports required to be provided to them thereby. The Grantor
Trustee shall execute, at the written direction of the Servicer, any limited or
special powers of attorney and other documents reasonably acceptable to the
Grantor Trustee to enable the Servicer or any Subservicer to carry out their
servicing and administrative duties hereunder, including, without limitation,
limited or special powers of attorney with respect to any Foreclosure Property,
and the Grantor Trustee shall not be accountable for the actions of the Servicer
or any Subservicers under such powers of attorney and shall be indemnified by
such parties with respect to such actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers shall,
establish and maintain one or more accounts (each, a "Servicing Account") into
which any collections from the Obligors (or related advances from Subservicers)
for the payment of taxes, assessments, hazard insurance premiums and comparable
items for the account of the Obligors shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. Withdrawals of amounts so collected from a
Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, hazard insurance premiums and comparable items; (ii) reimburse the
Servicer (or a Subservicer to the extent provided in the related Subservicing
Agreement) out of related collections for any advances with respect to taxes,
assessments, hazard insurance premiums and comparable items; (iii) refund to
Obligors any sums as may be determined to be overages; (iv) pay interest, if
required and as described below, to Obligors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
this Agreement in accordance with Section 11.01 hereof. As part of its servicing
duties, the Servicer or Subservicers shall pay to the Obligors interest on funds
in Servicing Accounts to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement from the
Indenture Trustee, the Grantor Trustee, the Owner Trustee or the Depositor. Upon
request of the Indenture Trustee or Grantor Trustee, the Transferor or the
Servicer shall cause the bank, savings association or other depository for each
Servicing Account to forward to the Indenture Trustee or Grantor Trustee, as the
case may be, copies of such statements or reports as the Indenture Trustee or
Grantor Trustee, the Depositor or any Grantor Trust Holder shall reasonably
request.
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy in
such amounts as required by, and satisfying any other requirements of, the
Federal Housing Administration and the FHLMC, with broad coverage on all
officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Home Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including losses
resulting from forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts (including acts relating to the origination and servicing of
loans of the same type as the Home Loans) of such Servicer Employees. Such
fidelity bond shall also protect and insure the Servicer against losses in
connection with the release or satisfaction of a Home Loan without having
obtained payment in full of the indebtedness secured thereby. In the event of
any loss of principal or interest on a Home Loan for which reimbursement is
received from the Servicer's fidelity bond or errors and omissions insurance,
the proceeds from any such insurance will be deposited in the Collection
Account. No provision of this Section 4.03 requiring such fidelity bond and
errors and omission insurance shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. Upon the request of the
Grantor Trustee or the Indenture Trustee, the Servicer shall cause to be
delivered to the requesting party a certified true copy of such fidelity bond
and insurance policy.
Section 4.04 Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by the Transferor and the Depositor, respectively, with respect to
the assets conveyed to the Grantor Trustee or to the Owner Trust, the Transferor
and the Depositor shall prepare, have executed by the necessary parties and file
in the proper jurisdictions all financing and continuation statements necessary
to maintain the liens, security interests and priorities of such liens and
security interests that have been granted by the Transferor and the Depositor,
respectively, the Transferor and the Depositor shall continue to file on or
before each fifth anniversary of the filing of any financing and continuation
statements such additional financing and continuation statements until the Owner
Trust and Grantor Trust have terminated pursuant to Section 9.1 of the Owner
Trust Agreement and Section 7.01 of the Grantor Trust Agreement, respectively.
The Indenture Trustee and Grantor Trustee agree to cooperate with the Transferor
and the Depositor in preparing, executing and filing such statements. The
Indenture Trustee and Grantor Trustee agree to notify the Transferor and the
Depositor on the third Payment Date prior to each such fifth anniversary of the
requirement that they file such financing and continuation statements. The
filing of any such statement with respect to the Transferor and the Depositor
shall not be construed as any indication of an intent of any party contrary to
the expressed intent set forth in Section 2.03 hereof and Section 2.04 of the
Grantor Trust Agreement. If the Transferor or the Depositor has ceased to do
business whenever any such financing and continuation statements must be filed
or the Transferor or the Depositor fails to file any such financing statements
or continuation statements at least one month prior to the expiration thereof,
each of the Transferor and the Depositor does hereby make, constitute and
appoint the Grantor Trustee its attorney-in-fact, with full power and authority,
to execute and file in its name and on its behalf any such financing statements
or continuation statements required under this Section 4.04 relating to assets
conveyed to the Grantor Trustee and the Depositor does hereby make, constitute
and appoint the Indenture Trustee its attorney-in-fact, with full power and
authority, to execute and file in its name and on its behalf any such financing
statements or continuation statements required under this Section 4.04 relating
to assets conveyed to the Owner Trust.
Section 4.05 Superior Liens.
If the Servicer is notified that any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien, or has declared or intends to declare a default under the related mortgage
or the promissory note secured thereby, or has filed or intends to file an
election to have any Mortgaged Property sold or foreclosed, the Servicer shall
take, on behalf of the Grantor Trust and the Grantor Trustee, all reasonable
actions that are necessary to protect the interests of the Grantor Trust Holder
and/or to preserve the security of the related Home Loan, including making any
Servicing Advances that are necessary to cure the default or reinstate the
Superior Lien. The Servicer shall promptly notify the Grantor Trustee if it
takes any such action. Any Servicing Advances by the Servicer pursuant to its
obligations in this Section 4.05 shall comply with requirements set forth in
Section 4.01(b) hereof.
Section 4.06 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for any servicing
and administration of Home Loans with any institution that is an Eligible
Servicer and in compliance with the laws of each state necessary to enable it to
perform its obligations under such Subservicing Agreement. The Servicer shall
give prior written notice to the Grantor Trustee of the appointment of any
Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either service the related Home Loans directly or enter into a
Subservicing Agreement with a successor subservicer which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Home Loans.
Each Subservicing Agreement shall include the provision that such agreement
may be immediately terminated by the Grantor Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall any
Subservicing Agreement require the Grantor Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to terminate
such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Grantor Trustee
and the Grantor Trust Holder for the servicing and administration of the Home
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Home Loans. For purposes of this Agreement,
the Servicer shall be deemed to have received payments on Home Loans when the
Subservicer has actually received such payments and, unless the context
otherwise requires, references in this Agreement to actions taken or to be taken
by the Servicer in servicing the Home Loans include actions taken or to be taken
by a Subservicer on behalf of the Servicer. The Servicer shall be entitled to
enter into any agreement with a Subservicer for indemnification of the Servicer
by such Subservicer, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Grantor Trustee, the Indenture Trustee, the Securityholders and
the Grantor Trust Holder pursuant to Section 4.07 hereof, shall thereupon assume
all of the rights and obligations of the Servicer under each Subservicing
Agreement that the Servicer may have entered into, unless the successor Servicer
elects to terminate any Subservicing Agreement in accordance with its terms. The
successor Servicer shall be deemed to have assumed all of the Servicer's
interest therein and to have replaced the Servicer as a party to each
Subservicing Agreement to the same extent as if the Subservicing Agreements had
been assigned to the assuming party, except that the Servicer shall not thereby
be relieved of any liability or obligations under the Subservicing Agreements
which accrued prior to the transfer of servicing to the successor Servicer. The
Servicer, at its expense and without right of reimbursement therefor, shall,
upon request of the successor Servicer, deliver to the assuming party all
documents and records relating to each Subservicing Agreement and the Home Loans
then being serviced and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
the Subservicing Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer for the
benefit, of the Grantor Trust, the Grantor Trustee, the Grantor Trust Holder and
the Securityholders, shall enforce the obligations of each Subservicer under the
related Subservicing Agreement. Such enforcement, including, without limitation,
the legal prosecution of claims and the pursuit of other appropriate remedies,
shall be in such form and carried out to such an extent and at such time as the
Servicer, in its good faith business judgment, would require were it the owner
of the related Home Loans. The Servicer shall pay the costs of such enforcement
at its own expense and shall be reimbursed therefor only (i) from a general
recovery resulting from such enforcement to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Home Loan or (ii)
from a specific recovery of costs, expenses or attorneys' fees against the party
against which such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none of
the Grantor Trustee, the Owner Trustee, the Indenture Trustee, the
Securityholders or the Grantor Trust Holder shall be deemed parties thereto or
shall have any claims, rights, obligations, duties or liabilities with respect
to the Subservicer in its capacity as such except as set forth in subsection (c)
of this Section 4.06.
(f) In those cases where a Subservicer is servicing a Home Loan pursuant to
a Subservicing Agreement, the Subservicer will be required to establish and
maintain one or more accounts (collectively, the "Subservicing Account"). The
Subservicing Account shall be an Eligible Account. The Subservicer will be
required to deposit into the Subservicing Account, no later than the first
Business Day after receipt, all proceeds of Home Loans received by the
Subservicer and remit such proceeds to the Servicer for deposit in the
Collection Account not later than the Business Day following receipt thereof by
the Subservicer. Notwithstanding anything in this subsection (f) to the
contrary, the Subservicer shall only be able to withdraw funds from the
Subservicing Account for the purpose of remitting such funds to the Servicer for
deposit into the Collection Account. The Servicer shall require the Subservicer
to cause any collection agent of the Subservicer to send a copy to the Servicer
of each statement of monthly payments collected by or on behalf of the
Subservicer within five Business Days after the end of every month, and the
Servicer shall compare the information provided in such reports with the
deposits made by the Subservicer into the Collection Account for the same
period. The Servicer shall be deemed to have received payments on the Home Loans
on the date on which the Subservicer has received such payments.
Section 4.07 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes unable
to perform its obligations under this Agreement, the Grantor Trustee will become
the successor servicer or will appoint a successor servicer in accordance with
the provisions of Section 10.02 hereof; provided, however, that any successor
servicer, excluding the Grantor Trustee, shall satisfy the requirements of an
Eligible Servicer and shall be approved by the Rating Agencies.
Section 4.08 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained for each Foreclosure Property
acquired by the Grantor Trustee such types and amounts of insurance coverage as
the Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home Loan:
(A) for the restoration or repair of the affected Property, in
which event such amounts shall be released to the Obligor in
accordance with the terms of the related Debt Instrument or
(B) to the extent not so used, in reduction of the Principal
Balance of the related Home Loan, in which event such
amounts shall be deposited into the Collection Account,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.10 hereof, in the case of amounts received
in respect of any Foreclosure Property, for the restoration or repair of
such Foreclosure Property, unless the Servicer determines, consistent with
the servicing standard set forth in Section 4.01 hereof, that such
restoration or repair is not in the best economic interest of the Grantor
Trust Holder, in which event such amounts shall be deposited into the
Collection Account as a payment received from the operation of such
Foreclosure Property.
Section 4.09 Reports to the Securities and Exchange Commission; 144A
Information.
(a) The Indenture Trustee shall, on behalf of the Issuer, cause to be filed
with the Securities and Exchange Commission all monthly reports on Form 8-K and
annual reports on Form 10-K required to be filed under the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Upon the request of the
Indenture Trustee, each of the Servicer and the Transferor shall cooperate with
the Indenture Trustee in the preparation of any such report and shall provide to
the Indenture Trustee in a timely manner all such information or documentation
as the Indenture Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section 4.09. The Indenture
Trustee shall indemnify and hold harmless each of the Issuer and the Depositor
for any costs, expenses or liability arising as a result of the failure of the
Indenture Trustee to perform its duties and obligations under this Section 4.09.
(b) The Servicer shall provide to the Indenture Trustee, if requested,
information regarding the Class B-2 Notes and the Home Loans and such other
information as the Indenture Trustee shall be required to deliver to any holder
of a Class B-2 Note and any prospective transferee designated by any such holder
to satisfy the condition of eligibility set forth in Rule 144A(d)(4) under the
Securities Act.
Section 4.10 Foreclosure; Foreclosure Alternatives.
(a) If any monthly payment due under any Home Loan is not paid when the
same is due and payable, or if the Obligor fails to perform any other covenant
or obligation under such Home Loan and such failure continues beyond any
applicable grace period, the Servicer shall, in accordance with the standard of
care specified in Section 4.01(a), take such action as it shall deem to be in
the best interest of the Grantor Trust Holder, including but not limited to
proceeding against the Mortgaged Property securing such Home Loan, accepting
short pay offs, short sales, entering into assumptions and modifications,
pursuing collection litigation or alternative court proceedings to foreclosure
actions. In the event that the Servicer determines not to proceed against the
Mortgaged Property or Obligor, as applicable, on or before the Determination
Date following such determination, the Servicer shall determine in good faith in
accordance with customary servicing practices that all amounts which it expects
to receive with respect to such Home Loan have been received. If the Servicer
makes such a determination, it shall give notice to such effect to the Grantor
Trustee and the Indenture Trustee.
(b) In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, unless otherwise
prohibited by applicable law or court or administrative order, the Servicer, on
behalf of the Grantor Trust Holders, may, at any time, institute foreclosure
proceedings to the extent permitted by law, exercise any power of sale to the
extent permitted by law, obtain a deed in lieu of foreclosure, or otherwise
acquire possession of or title to the related Mortgaged Property, by operation
of law or otherwise.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to the
extent permitted by law, obtain a deed in lieu of foreclosure or otherwise
acquire possession of or title to any Property, by operation of law or
otherwise, only in the event that in the Servicer's reasonable judgment such
action is likely to result in a positive economic benefit to the Grantor Trust
by creating net liquidation proceeds (after reimbursement of all amounts owed
with respect to such Home Loan to the Servicer).
Prior to acquiring any Foreclosure Property, however, the Servicer shall
cause a review to be performed, in accordance with Accepted Servicing
Procedures, on the related Mortgaged Property by a company such as Equifax, Inc.
or Toxicheck, and the scope of such review shall be limited to the review of
public records and documents for indications that such Mortgaged Property has on
it, has under it, or is near hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental problem,
the Servicer shall provide a copy to the Grantor Trustee and the Indenture
Trustee of the related report with an attached certification of a Responsible
Officer that based on an analysis of all available information (including
potential clean up costs and liability claims) at the time it is the best
judgment of such Responsible Officer that such foreclosure shall increase Net
Liquidation Proceeds to the Grantor Trust and the Grantor Trustee shall take
title to such Mortgaged Property. The Grantor Trustee shall promptly forward
such report and certification to the Grantor Trust Holder.
(c) The Grantor Trustee shall furnish the Servicer, within 5 days after
request of the Servicer therefor, any powers of attorney and other documents
necessary and appropriate to carry out its duties hereunder, including any
documents or powers of attorney necessary to foreclose any Mortgage. The forms
of any such powers or documents shall be appended to such requests.
Section 4.11 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Grantor Trustee
for the benefit of the Grantor Trust Holder. The Servicer shall manage,
conserve, protect and operate each Foreclosure Property for the Grantor Trustee
and the Grantor Trust Holder solely for the purpose of the prudent and prompt
disposition and sale of such Foreclosure Property. The Servicer shall, either
itself or through an agent selected by the Servicer, manage, conserve, protect
and operate the Foreclosure Property in the same manner that it manages,
conserves, protects and operates other foreclosure property for its own account.
Subject to Section 4.10 hereof, the Servicer shall, consistent with the
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of Properties securing such of the Home Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. In connection with realization upon
defaulted Home Loans, the Servicer shall follow such practices and procedures as
it shall deem necessary or advisable, as shall be normal and usual in accordance
with Accepted Servicing Procedures and as shall meet the requirements of
insurers under any insurance policy required to be maintained hereunder with
respect to the related Home Loan. The Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings; provided, however,
that such costs and expenses will be recoverable as Servicing Advances by the
Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
any cause of damage to a Mortgaged Property such that the complete restoration
of such property is not fully reimbursable by the hazard insurance policies
required to be maintained pursuant to this Agreement unless it shall determine
in its reasonable judgment, as evidenced by a certificate of a Servicing
Officer, that such foreclosure or restoration, as the case may be, will increase
the proceeds of liquidation of the related Home Loan after reimbursement to
itself of Servicing Advances. Any Servicing Advances made with respect to a Home
Loan shall be recoverable by the Servicer only from recoveries on such Home Loan
except to the extent such Servicing Advance is deemed a Nonrecoverable Servicing
Advance.
The Servicer may offer to sell to any Person any Foreclosure Property, if
and when the Servicer determines, in a manner consistent with Accepted Servicing
Procedures, that such a sale would be in the best interests of the Grantor
Trust. The Servicer shall give the Grantor Trustee and the Indenture Trustee not
less than five days' prior notice of its intention to sell any Foreclosure
Property and shall accept the highest bid received from any Person for any
Foreclosure Property in an amount at least equal to the sum of:
(1) the Principal Balance of the related foreclosed Home Loan plus the
outstanding amount of any Superior Liens; and
(2) all unpaid interest accrued thereon at the related Home Loan
Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of any
bid determined to be fair as aforesaid, the Servicer shall offer the affected
Foreclosure Property for sale to any Person, other than an Interested Person, in
a commercially reasonable manner for a period of not less than 10 or more than
30 days, and shall accept the highest cash bid received therefor in excess of
the highest bid previously submitted. If no such bid is received, any Interested
Person may resubmit its original bid and the Servicer shall accept the highest
outstanding cash bid, regardless of from whom received. No Interested Person
shall be obligated to submit a bid to purchase any Foreclosure Property and,
notwithstanding anything to the contrary herein, neither the Grantor Trustee,
the Owner Trustee or the Indenture Trustee, in its individual capacity, nor any
of its Affiliates may bid for or purchase any Foreclosure Property pursuant
hereto.
In determining whether any bid constitutes a fair price for any Foreclosure
Property, the Servicer shall take into account, and any appraiser or other
expert in real estate matters shall be instructed to take into account, as
applicable, among other factors, the financial standing of any tenant of the
Foreclosure Property, the physical condition of the Foreclosure Property and the
state of the local and national economies.
Subject to the provisions of Section 4.10 hereof, the Servicer shall act on
behalf of the Grantor Trustee in negotiating and taking any other action
necessary or appropriate in connection with the sale of any Foreclosure
Property, including the collection of all amounts payable in connection
therewith. Any sale of a Foreclosure Property shall be without recourse to the
Grantor Trustee, the Servicer or the Grantor Trust and, if consummated in
accordance with the terms of this Agreement, neither the Servicer nor the
Grantor Trustee shall have any liability to any Grantor Trust Holder or
Securityholder with respect to the purchase price therefor accepted by the
Servicer or the Grantor Trustee.
The Servicer may contract with any independent contractor for the operation
and management of any Foreclosure Property; provided, however, that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than 30 days following the receipt thereof by such independent contractor;
(iii) none of the provisions of this Section 4.11 relating to any such
contract or to actions taken through any such independent contractor shall
be deemed to relieve the Servicer of any of its duties and obligations
hereunder with respect to the operation and management of any such
Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the same
extent as if it alone were performing all duties and obligations in
connection with the operation and management of such Foreclosure Property.
The Servicer shall be entitled to enter into any agreement with any
independent contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Servicer by such
independent contractor, and nothing in this Agreement shall be deemed to
limit or modify such indemnification. The Servicer shall not be liable for
any fees owed by it to any such independent contractor and any amounts so
expended shall be deemed Servicing Advances. Each liquidation of a
Foreclosure Property shall be carried by the Servicer at such price and
upon such terms and conditions as the Servicer shall deem necessary or
advisable and as shall be normal and usual in its several servicing
activities, and the resulting Liquidation Proceeds shall be distributed in
accordance with Section 5.01 hereof.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Payment Account.
(a) (1) Establishment of Collection Account. The Servicer, for the
benefit of the Grantor Trust Holder, shall cause to be established and
maintained one or more Collection Accounts (collectively, the "Collection
Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Collection Account, U.S. Bank National
Association, as Indenture Trustee, in trust for the Empire Funding Home
Loan Asset Backed Notes, Series 1998-1". The Collection Account may be
maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of any Collection Account other than one maintained
with the Indenture Trustee shall be evidenced by a letter agreement between
the Servicer and the depository institution acceptable to the Indenture
Trustee. A copy of such letter agreement shall be furnished to the
Indenture Trustee and, upon request of any Grantor Trust Holder, to such
Grantor Trust Holder. Funds in the Collection Account shall be invested in
accordance with Section 5.03 hereof.
The Collection Account shall be established, as of the Closing Date, with
the Indenture Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Grantor Trustee and the
Indenture Trustee, be transferred to a different depository institution so long
as such transfer is to an Eligible Account acceptable to the Indenture Trustee.
The Depositor hereby collaterally assigns the Collection Account to the Issuer
in connection with the sale of the Grantor Trust Certificate to the Issuer
hereunder.
(2) Establishment of Note Payment Account. No later than the Closing
Date, the Servicer, for the benefit of the Noteholders, shall cause to be
established and maintained with the Indenture Trustee one or more Note
Payment Accounts (collectively, the "Note Payment Account"), which shall be
separate Eligible Accounts and may be interest-bearing, entitled "Note
Payment Account, U.S. Bank National Association, as Indenture Trustee, in
trust for the Empire Funding Home Loan Asset Backed Notes, Series 1998-1".
Funds in the Note Payment Account shall be invested in accordance with
Section 5.03 hereof.
(b) (1) Deposits to Collection Account. The Servicer shall use its
best efforts to deposit or cause to be deposited (without duplication),
within two (2) Business Days after receipt thereof, into the Collection
Account and retain therein in trust for the benefit of the Grantor Trust
Holder:
(i) all payments on account of principal and interest on the Home
Loans collected after the Cut-Off Date, including any amounts required
to be deposited in the Collection Account pursuant to Section
2.07(b)(vii)(B)(IV) of the Grantor Trust Agreement;
(ii) all Net Liquidation Proceeds pursuant to Section 4.11
hereof;
(iii) all Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds;
(v) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Section 2.06 of the Grantor Trust Agreement and Section 3.05 hereof;
(vi) the deposit of the Termination Price under Section 11.01
hereof;
(vii) any amount to be deposited from the Pre-Funding Account or
the Capitalized Interest Account; and
(viii) interest and gains on funds held in the Collection
Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03 hereof,
and such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to the
Servicer from the Note Payment Account on the next Payment Date following such
Due Period.
(2) Deposits to Note Payment Account. On the second Business Day prior
to each Payment Date, the Indenture Trustee (based on information provided
by the Servicer for such Payment Date) shall withdraw from the Collection
Account the Available Collection Amount as a distribution in respect of the
Grantor Trust Certificate pursuant to Section 5.02 of the Grantor Trust
Agreement and deposit such into the Note Payment Account for such Payment
Date.
(3) Withdrawals from Collection Account. The Indenture Trustee, at the
direction of the Servicer, shall also make the following withdrawals from
the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicing Advance Reimbursement Amount;
(iii) to clear and terminate the Collection Account in connection
with the termination of this Agreement; and
(iv) to make the payments set forth in Section 9.01(e) hereof.
(c) Withdrawals from Note Payment Account. To the extent funds are
available in the Note Payment Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Payment Date) shall make withdrawals therefrom by
9:00 a.m. (New York City time) on each Payment Date, for application in the
following order of priority:
(i) to distribute on such Payment Date the following amounts
pursuant to the Indenture in the following order: (a) to the Servicer
on behalf of the Grantor Trustee, an amount equal to (i) the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to subsection (b)(1) above) and all unpaid
Servicing Compensation from prior Payment Dates and (ii) all
Nonrecoverable Servicing Advances not previously reimbursed, (b) to
the Indenture Trustee, an amount equal to the Indenture Trustee Fee
and all unpaid Indenture Trustee Fees from prior Payment Dates, (c) to
the Owner Trustee, an amount equal to the Owner Trustee Fee and all
unpaid Owner Trustee Fees from prior Due Periods, (d) to the Custodian
on behalf of the Grantor Trustee, an amount equal to the Custodian
Fee, if any, and all unpaid Custodian Fees from prior Payment Dates,
and (e) to the Grantor Trustee, an amount equal to the Grantor Trustee
Fee, if any, and all unpaid Grantor Trustee Fees from prior Payment
Dates; and
(ii) to deposit into the Certificate Distribution Account any
Pre-Funding Earnings deposited therein pursuant to Section 5.05(c) and
the applicable portions of the Available Payment Amount distributable
in respect of the Residual Interest calculated pursuant to subsections
(d) and (e) of this Section 5.01 on such Payment Date.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Payment Account hereunder until the Class Principal Balance of each
Class of Notes has been reduced to zero.
(d) On each Payment Date, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance Report
for such Payment Date) shall distribute the Regular Payment Amount from the Note
Payment Account (in the case of all amounts distributable to Noteholders) and
from the Certificate Distribution Account (in the case of all amounts
distributable to Certificateholders), in the following order of priority:
(i) to the holders of the Senior Notes pro rata, their respective
portions of the Senior Noteholders Interest Payment Amount for such
Payment Date;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, their respective portions of the Mezzanine
Noteholders' Interest Payment Amount for such Payment Date;
(iii) sequentially, to the holders of the Class B-1 and Class B-2
Notes, in that order, their respective portions of the Subordinate
Noteholders' Interest Payment Amount for such Payment Date;
(iv) if with respect to such Payment Date the Pre-Funding Payment
Trigger shall have occurred, the amount on deposit in the Pre-Funding
Account at the end of the Pre-Funding Period will be paid as principal
to all Classes of Notes then outstanding, pro rata, based on the
Original Class Principal Balances thereof;
(v) sequentially, to the holders of the Class A-1, Class A-2,
Class A-3, Class A-4 Notes and Class A-5 Notes, in that order, until
the respective Class Principal Balances thereof are reduced to zero,
the amount necessary to reduce the aggregate Class Principal Balance
of the Class A Notes to the Senior Optimal Principal Balance for such
Payment Date; provided, however, that on each Payment Date occurring
on or after any reduction of the Class Principal Balances of the Class
M-1 Notes, Class M-2 Notes, Class B-1 Notes and the Class B-2 Notes to
zero through the application of Allocable Loss Amounts, payments shall
be made among the then outstanding Class A Notes pro rata in
accordance with their outstanding Class Principal Balances and not
sequentially, until the respective Class Principal Balances thereof
are reduced to zero;
(vi) sequentially, to the holders of the Class M-1 Notes and
Class M-2 Notes in that order, the amount necessary to reduce the
Class Principal Balances thereof to the Class M-1 Optimal Principal
Balance and the Class M-2 Optimal Principal Balance, respectively, for
such Payment Date;
(vii) sequentially, to the holders of the Class B-1 and Class B-2
Notes, in that order, the amount necessary to reduce the Class
Principal Balances thereof to the Class B-1 Optimal Principal Balance
and the Class B-2 Optimal Principal Balance, respectively, for such
Payment Date;
(viii) to the appropriate Class of Notes, an amount equal to the
Overcollateralization Deficiency Amount, if any, in the priorities and
amounts specified in Section 5.01(e) hereof (after giving effect to
payments made pursuant to clauses (i) through (vii) above), and
thereafter sequentially, to the Class M-1 Notes, Class M-2 Notes,
Class B-1 and the Class B-2 Notes, in that order, until their
respective Loss Reimbursement Deficiencies have been paid in full
(first, to the reimbursement of Allocable Loss Amounts, until
completely reimbursed and then, to any accrued interest thereon); and
(ix) any remaining amount to the holders of the Residual Interest
Certificates.
(e) On each Payment Date, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance Report
for such Payment Date) shall distribute the Excess Spread, if any, in the
following order of priority (in each case after giving effect to all payments
specified in Section 5.01(d) hereof):
(i) in an amount equal to the Overcollateralization Deficiency
Amount, if any, as follows:
(A) sequentially, to the holders of the Class A-1, Class
A-2, Class A-3, Class A-4 Notes and Class A-5 Notes, in
that order, until the respective Class Principal
Balances thereof are reduced to zero and until the
aggregate of their Class Principal Balances have been
reduced to the Senior Optimal Principal Balance for
such Payment Date;
(B) sequentially, to the holders of the Class M-1 Notes and
Class M-2 Notes, in that order, until the respective
Class Principal Balances thereof have been reduced to
the Class M-1 Optimal Principal Balance and Class M-2
Optimal Principal Balance, respectively, for such
Payment Date; and
(C) sequentially, to the holders of the Class B-1 Notes and
Class B-2 Notes, until the respective Class Principal
Balances thereof have been reduced to the Class B-1
Optimal Principal Balance and the Class B-2 Optimal
Principal Balance for such Payment Date; and
(ii) sequentially, to the Class M-1 Notes, the Class M-2 Notes,
Class B-1 Notes and the Class B-2 Notes, in that order,
until their respective Loss Reimbursement Deficiencies, if
any, have been paid in full (in the case of the Class M-1
Notes and Class M-2 Notes: first, to the reimbursement of
Allocable Loss Amounts until completely reimbursed and,
then, to any accrued interest thereon); and
(iii)any remaining amount to the holders of the Residual
Interest Certificates.
Section 5.02 Certificate Distribution Account.
(a) Establishment of Certificate Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Certificateholders, shall
cause to be established and maintained with the Indenture Trustee for the
benefit of the Owner Trustee on behalf of the Certificateholders one or more
Certificate Distribution Accounts (collectively, the "Certificate Distribution
Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Certificate Distribution Account, U.S. Bank National
Association, as Indenture Trustee, in trust for the Empire Funding Home Loan
Owner Trust Series 1998-1". Funds in the Certificate Distribution Account shall
be invested in accordance with Section 5.03 hereof.
(b) Distributions. On each Payment Date the Indenture Trustee shall
withdraw from the Note Payment Account all amounts required to be deposited into
the Certificate Distribution Account with respect to such Payment Date pursuant
to Section 5.01(c)(ii) hereof and, on behalf of the Owner Trustee, shall deposit
such amounts into the Certificate Distribution Account. The Indenture Trustee
shall make payments of all remaining amounts on deposit in the Note Payment
Account to the holders of the Notes to the extent of amounts due and unpaid on
the Notes for principal thereof and interest thereon. The Indenture Trustee, on
behalf of the Owner Trustee shall distribute all amounts on deposit in the
Certificate Distribution Account to the holders of the Residual Interest
Certificates.
(c) All payments made on each Class of Notes on each Payment Date will be
made on a pro rata basis among the Noteholders of record of such Class of Notes
on the next preceding Record Date based on the Percentage Interest represented
by their respective Notes, without preference or priority of any kind, and,
except as otherwise provided in the next succeeding sentence, shall be made by
wire transfer of immediately available funds to the account of such Noteholder,
if such Noteholder shall own of record Notes in original Denominations
aggregating at least $250,000 and shall have so notified the Indenture Trustee,
and otherwise by check mailed to the address of such Noteholder appearing in the
Notes Register. The final payment on each Note will be made in like manner, but
only upon presentment and surrender of such Note at the location specified in
the notice to Noteholders of such final payment.
(d) All distributions made on the Residual Interest Certificates on each
Payment Date will be made pro rata among the holders of the Residual Interest
Certificates of record on the next preceding Record Date based on their
percentage holdings in the Residual Interest, without preference or priority of
any kind, and, except as otherwise provided in the next succeeding sentence,
shall be made by wire transfer of immediately available funds to the account of
each such holder, if such holder shall own of record a Residual Interest
Certificate in an original denomination aggregating at least a 50% holding of
the Residual Interest and shall have so notified the Indenture Trustee, and
otherwise by check mailed to the address of such Residual Interest holder
appearing in the Certificate Register. The final distribution on each Residual
Interest Certificate will be made in like manner, but only upon presentment and
surrender of such Residual Interest Certificate at the location specified in the
notice to holders of the Residual Interest Certificates of such final
distribution. Any amount distributed to the holders of the Residual Interest
Certificates on any Payment Date shall not be subject to any claim or interest
of holders of the other Classes of Notes.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts (or interests
therein) established hereunder has been pledged by the Issuer to the Indenture
Trustee under the Indenture and shall be subject to the lien of the Indenture.
In addition to the provisions hereunder, each of the Trust Accounts shall also
be established and maintained pursuant to the Indenture. Amounts distributed
from each Trust Account in accordance with the Indenture and this Agreement
shall be released from the lien of the Indenture upon such distribution
thereunder or hereunder. The Indenture Trustee shall possess all right, title
and interest in and to all funds on deposit from time to time in the Trust
Accounts (other than the Certificate Distribution Account) and in all proceeds
thereof (including all income thereon) and all such funds, investments, proceeds
and income shall be part of the Trust Account Property and the Owner Trust
Estate. If, at any time, any Trust Account ceases to be an Eligible Account, the
Indenture Trustee (or the Servicer on its behalf) shall, within ten Business
Days (or such longer period, not to exceed 30 calendar days, as to which each
Rating Agency may consent) (i) establish a new Trust Account as an Eligible
Account, (ii) terminate the ineligible Trust Account, and (iii) transfer any
cash and investments from such ineligible Trust Account to such new Trust
Account.
With respect to the Trust Accounts (other than the Certificate Distribution
Account), the Indenture Trustee agrees, by its acceptance hereof, that each such
Trust Account shall be subject to the sole and exclusive custody and control of
the Indenture Trustee (in the case of the Collection Account and the Pre-Funding
Account, on behalf of the Grantor Trustee) for the benefit of the Noteholders
and the Issuer, as the case may be, and the Indenture Trustee shall have sole
signature and withdrawal authority with respect thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder shall also be subject to and
established and maintained in accordance with the Owner Trust Agreement. Subject
to rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee shall possess for the benefit of the Certificateholders all right, title
and interest in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof (including all income thereon)
and all such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Owner Trust Estate. Subject to the rights of the
Indenture Trustee, the Owner Trustee agrees, by its acceptance hereof, that such
Certificate Distribution Account shall be subject to the sole and exclusive
custody and control of the Owner Trustee for the benefit of the Issuer and the
parties entitled to payments and distributions therefrom, including, without
limitation, the Certificateholders, and the Owner Trustee shall have sole
signature and withdrawal authority with respect to the Certificate Distribution
Account. Notwithstanding the preceding, the distribution of amounts from the
Certificate Distribution Account in accordance with Section 5.01(c)(ii) hereof
shall also be made for the benefit of the Indenture Trustee (including without
limitation with respect to its duties under the Indenture and this Agreement
relating to the Owner Trust Estate), and the Indenture Trustee (in its capacity
as Indenture Trustee) shall have the right, but not the obligation, to take
custody and control of the Certificate Distribution Account and to cause the
distribution of amounts therefrom in the event that the Owner Trustee fails to
distribute such amounts in accordance with subsections (c) and (d) of Section
5.02.
The Servicer shall have the power, revocable by the Indenture Trustee or by
the Owner Trustee with the consent of the Indenture Trustee, to instruct the
Indenture Trustee or Owner Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer to carry out its
duties hereunder or permitting the Indenture Trustee or Owner Trustee to carry
out their respective duties herein or under the Indenture, the Owner Trust
Agreement or the Grantor Trust Agreement, as applicable.
(b) (1) Investment of Funds. So long as no Event of Default
shall have occurred and be continuing, the funds held in any Trust
Account may be invested (to the extent practicable and consistent with
any requirements of the Code) in Permitted Investments, as directed by
the Transferor in writing or by telephone or facsimile transmission
confirmed in writing by the Servicer. In any case, funds in any Trust
Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for
withdrawal, not later than the Business Day immediately preceding the
Payment Date next following the date of such investment and shall not
be sold or disposed of prior to its maturity subject to subsection
(b)(2) of this Section. All interest and any other investment earnings
on amounts or investments held in any Trust Account shall be deposited
into such Trust Account immediately upon receipt by the Indenture
Trustee. All Permitted Investments in which funds in any Trust Account
(other than the Certificate Distribution Account) are invested must be
held by or registered in the name of "U.S. Bank National Association,
as Indenture Trustee, in trust for the Empire Funding Home Loan Asset
Backed Notes, Series 1998-1". While the Indenture Trustee holds the
Certificate Distribution Account, on behalf of the Owner Trustee, all
Permitted Investments in which funds in the Certificate Distribution
Account are invested shall be held by or registered in the name of
"U.S. Bank National Association, on behalf of the Owner Trustee, in
trust for the Empire Funding Home Loan Asset Backed Notes, Series
1998-1".
(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from any Trust Account held by or on
behalf of the Indenture Trustee and sufficient uninvested funds are
not available to make such disbursement, the Indenture Trustee shall
cause to be sold or otherwise converted to cash a sufficient amount of
the investments in such Trust Account. The Indenture Trustee shall not
be liable for any investment loss or other charge resulting therefrom,
unless such loss or charge is caused by the failure of the Indenture
Trustee or Owner Trustee, respectively, to perform in accordance with
this Section 5.03.
If any losses are realized in connection with any investment in any Trust
Account pursuant to this Agreement and the Indenture, then the Transferor shall
deposit the amount of such losses (to the extent not offset by income from other
investments in such Trust Account) into such Trust Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be the income of the Issuer (or, when
there is a single beneficial owner of a Residual Interest Certificate, such
owner), and for federal and state income tax purposes the Issuer (or such single
beneficial owner) shall be the owner (or beneficial owner in the case of the
Pre-Funding Account and the Collection Account).
(c) Subject to section 6.01 of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on any
Permitted Investment included therein (except to the extent that the Indenture
Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Accounts, subject to the last sentence
of subsection (a) of this Section 5.03; and each such Eligible Account
shall be subject to the sole and exclusive dominion, custody and control of
the Indenture Trustee; and, without limitation on the foregoing, the
Indenture Trustee shall have sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with paragraph
(a) of the definition of "Delivery" in Section 1.1 hereof and shall be
held, pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in section 8-313(4) of the
UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" in Section 1.1 hereof and shall be maintained by
the Indenture Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by clause
(3) above shall be delivered to the Indenture Trustee in accordance with
paragraph (c) of the definition of "Delivery" in Section 1.1 hereof and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's (or
its nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture Trustee
or by the Issuer with the consent of the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer or the Issuer to carry out their
respective duties hereunder or permitting the Indenture Trustee to carry out its
duties under the Indenture.
Section 5.04 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than the
related Principal Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Home Loan, such Net Liquidation
Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds or partial
payment shall be applied to payment of the related Debt Instrument, first, to
interest accrued at the Home Loan Interest Rate and, then, to principal.
(b) On any Payment Date, any Allocable Loss Amounts shall be applied to the
reduction of the Class Principal Balances of the Class B-2, the Class B-1 Notes,
the Class M-1 Notes and Class M-2 Notes in accordance with the Allocable Loss
Amount Priority.
Section 5.05 Pre-Funding Account.
(a) The Servicer, for the benefit of the Grantor Trust Holder, shall cause
to be established and maintained in the name of the Indenture Trustee a
Pre-Funding Account (the "Pre-Funding Account"), which shall be a separate
Eligible Account and may be interest-bearing, entitled "Pre-Funding Account,
U.S. Bank National Association, as Indenture Trustee, in trust for the Empire
Funding Home Loan Asset Backed Notes, Series 1998-1." The Pre-Funding Account
may be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of a Pre-Funding Account other than one maintained with
the Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Indenture Trustee. A
copy of such letter agreement shall be furnished to the Indenture Trustee and,
upon request of any Grantor Trust Holder, to such Grantor Trust Holder. Funds in
the Pre-Funding Account shall be invested in accordance with Section 5.03
hereof.
On the Closing Date, the Grantor Trustee will deposit in the Pre-Funding
Account the Pre-Funding Amount (which Pre-Funding Amount was received from the
Depositor and derived from the net proceeds of the sale of the Notes). On each
Subsequent Transfer Date, upon satisfaction of the conditions set forth in
Section 2.07 of the Grantor Trust Agreement with respect to such transfer, the
Indenture Trustee shall withdraw from the Pre-Funding Account an amount equal to
the Principal Balances of the Subsequent Loans transferred to the Grantor
Trustee on such Subsequent Transfer Date and distribute such amount to or upon
the order of the Transferor.
(b) If the Pre-Funding Amount has not been reduced to zero on the last day
of the Pre-Funding Period after giving effect to any reductions in the
Pre-Funding Amount on such date pursuant to paragraph (a) above, the Indenture
Trustee in writing shall withdraw from the Pre-Funding Account on the Mandatory
Redemption Date, as a distribution in respect of the Grantor Trust Certificate
(i) if the Pre-Funding Amount is less than $50,000, and deposit such amount in
the Note Payment Account to be applied to reduce the Outstanding Amount of the
Class of Notes then entitled to payments of principal and (ii) if the
Pre-Funding Amount is greater than or equal to $50,000, and deposit such amounts
to the Note Payment Account to be applied in reduction of the Class Principal
Balance of each Class of Notes, pro rata, based on the respective Original Class
Principal Balances.
(c) On the Business Day preceding each of the second, third and fourth
Payment Dates, if applicable, the Indenture Trustee shall withdraw the related
Pre-Funding Earnings for the related Due Period and deposit such amounts in the
Note Payment Account.
Section 5.06 Capitalized Interest Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the name of the Indenture Trustee a Capitalized
Interest Account (the "Capitalized Interest Account"), which shall be a separate
Eligible Account and may be interest-bearing, entitled "Capitalized Interest
Account, U.S. Bank National Association, as Indenture Trustee, in trust for the
Empire Funding Home Loan Asset Backed Notes, Series 1998-1." The Capitalized
Interest Account may be maintained with the Indenture Trustee or any other
depository institution which satisfies the requirements set forth in the
definition of Eligible Account. The creation of a Capitalized Interest Account
other than one maintained with the Indenture Trustee shall be evidenced by a
letter agreement between the Servicer and the depository institution acceptable
to the Indenture Trustee. A copy of such letter agreement shall be furnished to
the Indenture Trustee and, upon request of any Securityholder, to such
Securityholder. Funds in the Capitalized Interest Account shall be invested in
accordance with Section 5.03 hereof.
On the Closing Date, the Owner Trustee will deposit in the Capitalized
Interest Account the Capitalized Interest Initial Deposit from the net proceeds
of the sale of the Notes and the Certificates and on each Subsequent Transfer
Date the Owner Trustee will deposit in the Capitalized Interest Account any
applicable Capitalized Interest Subsequent Deposit with respect to each
Subsequent Loan.
(b) On each Determination Date during the Pre-Funding Period (including the
Determination Date in the month following the Due Period during which the
Pre-Funding Period ends), the Indenture Trustee will withdraw from the
Capitalized Interest Account an amount equal to the Capitalized Interest
Requirement and deposit such amount into the Collection Account.
(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account, after payment of the Capitalized Interest
Requirement, if any, on such date, shall be paid to the Transferor.
ARTICLE VI
STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver to
the Indenture Trustee by facsimile, the receipt and legibility of which shall be
confirmed by telephone, and with hard copy thereof to be delivered no later than
one (1) Business Day after such Determination Date, the Servicer's Monthly
Remittance Report, setting forth the date of such Report (day, month and year),
the name of the Issuer (i.e. "Empire Funding Home Loan Owner Trust 1998-1"), the
Series designation of the Notes (i.e. "Series 1998-1") and the date of this
Agreement, all in substantially the form set out in Exhibit B hereto.
Furthermore, no later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee a magnetic tape or computer disk providing such
information regarding the Servicer's activities in servicing the Home Loans
during the related Due Period as the Indenture Trustee may reasonably require.
(b) On each Payment Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Payment
Statement") to the Depositor, the Securityholders and the Rating Agencies,
stating the date of original issuance of the Notes (day, month and year), the
name of the Issuer (i.e. "Empire Funding Home Loan Owner Trust 1998-1"), the
Series designation of the Notes (i.e., "Series 1998-1"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available Payment Amount
for the related Payment Date;
(ii) the Class Principal Balance of each Class of Notes before
and after giving effect to payments made to the holders of such Notes
on such Payment Date, and the Pool Principal Balance as of the first
and last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the Notes
then outstanding;
(iv) the amount of principal, if any, and interest to be
distributed to each Class of Notes on the related Payment Date;
(v) with respect to each Class of Notes, the Optimal Principal
Balance thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount
to be distributed to the Noteholders or the holders of the Residual
Interest on such Payment Date;
(vii) the Servicing Compensation, the Indenture Trustee Fee, the
Grantor Trustee Fee, the Owner Trustee Fee and, the Custodian Fee, if
any, for such Payment Date;
(viii) the Overcollateralization Amount (or
Undercollateralization Amount) on such Payment Date, the
Overcollateralization Target Amount as of such Payment Date, the Net
Loan Losses incurred during the related Due Period, the cumulative Net
Loan Losses as of such Payment Date, the Allocable Loss Amount for
such Payment Date and the application of the Allocable Loss Amount
Priority for such Payment Date;
(ix) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans;
(x) certain performance information, including, without
limitation, delinquency and foreclosure information with respect to
the Home Loans and 60-Day Delinquency Amounts (as defined in the
definition of "Six-Month Rolling Delinquency Average" in Section 1.01
hereof), as set forth in the Servicer's Monthly Remittance Report;
(xi) the number of and aggregate Principal Balance of all Home
Loans in foreclosure proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the
last day of the related Due Period;
(xii) the number of and the aggregate Principal Balance of the
Home Loans in bankruptcy proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the
last day of the related Due Period;
(xiii) the number of Foreclosure Properties, the aggregate
Principal Balance of the related Home Loans, the book value of such
Foreclosure Properties and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the last day of the
related Due Period;
(xiv) during the related Due Period (and cumulatively, from the
Closing Date through the most current Due Period), the number and
aggregate Principal Balance of Home Loans for each of the following:
(A) that became Defaulted Home Loans, (B) that became Liquidated Home
Loans, (C) that became Deleted Home Loans pursuant to Section 3.05
hereof as a result of such Deleted Home Loans being Defective Home
Loans, and (D) that became Deleted Home loans pursuant to Section 3.05
hereof as a result of such Deleted Home Loans being Defaulted Home
Loans or a Home Loan in default or imminent default, including the
foregoing amounts by loan type (i.e., Combination Loans, or Debt
Consolidation Loans);
(xv) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due
Period; and
(xvi) the number and aggregate Principal Balance of Home Loans
that were 30, 60 or 90 days Delinquent as of the close of business on
the last day of the related Due Period.
In the case of information furnished to Securityholders pursuant to
subclause (b)(iv) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note with a $1,000 Denomination.
All reports prepared by the Indenture Trustee of the withdrawals from and
deposits into the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the Indenture
Trustee may fully rely upon and shall have no liability with respect to such
information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a Securityholder such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b)(iv) of this Section 6.01, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Securityholder.
(d) On each Payment Date, the Indenture Trustee shall forward to the
holders of the Residual Interest Certificates a copy of the Payment Statement in
respect of such Payment Date and a statement setting forth the amounts actually
distributed to such holders of the Residual Interest Certificates on such
Payment Date, together with such other information as the Indenture Trustee
deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a holder of Residual Interest Certificates, if
requested in writing by such Person, a statement containing the information
provided pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a holder of Residual
Interest Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each holder
of a Residual Interest Certificate, during the term of this Agreement, such
periodic, special or other reports, including information tax returns or reports
required with respect to the Notes and the Residual Interest Certificates, as
shall be necessary, reasonable, or appropriate with respect to the Noteholders
or the holders of Residual Interest Certificates, or otherwise with respect to
the purposes of this Agreement, all such reports or information in the case of
the Residual Interest Certificates to be provided by and in accordance with such
applicable instructions and directions as the Majority Residual Interestholders
may reasonably require.
(g) Reports and computer tapes furnished by the Servicer and the Indenture
Trustee pursuant to this Agreement shall be deemed confidential and of a
proprietary nature and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Depositor or the Servicer or for
any other purpose except as set forth in this Agreement.
Section 6.02 Withholding.
The Indenture Trustee shall comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any payments
made to any Noteholder of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in connection therewith,
giving due effect to any applicable exemptions from such withholding and
effective certifications or forms provided by the recipient. Any amounts
withheld pursuant to this Section 6.02 shall be deemed to have been paid to the
Noteholders for all purposes of this Agreement or the Indenture.
ARTICLE VII
ENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the related
lender's option) become due and payable upon the sale or other
transfer of an interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without the
consent of the related lender in connection with any such sale or
other transfer, then, for so long as such Home Loan is included in the
Grantor Trust, the Servicer, on behalf of the Grantor Trustee, shall
exercise any right the Grantor Trustee may have as the lender of
record with respect to such Home Loan (x) to accelerate the payments
thereon or (y) to withhold its consent to any such sale or other
transfer, in a manner consistent with Accepted Servicing Procedures.
(b) If any Home Loan contains a provision in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the related
lender's option) become due and payable upon the creation of any lien
or other encumbrance on the related Property; or
(ii) requires the consent of the related lender to the creation
of any such lien or other encumbrance on the related Property, then,
for so long as such Home Loan is included in the Grantor Trust, the
Servicer, on behalf of the Grantor Trustee, shall exercise any right
the Grantor Trustee may have as the lender of record with respect to
such Home Loan (x) to accelerate the payments thereon or (y) to
withhold its consent to the creation of any such lien or other
encumbrance, in a manner consistent with Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the Grantor
Trustee's right to receive notice of any assumption of a Home Loan, any sale or
other transfer of the related Mortgaged Property or the creation of any lien or
other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus all
interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment in full
of such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to
the Grantor Trustee pursuant to Section 3.05 hereof;
(iv) such Home Loan or the related Foreclosure Property has been
sold in connection with the termination of the Issuer and the Grantor
Trust pursuant to Section 11.01 hereof; or
(v) the related Foreclosure Property has been sold pursuant to
Section 4.11 hereof;
then in each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this Agreement
with respect to such Home Loan and requesting that the Grantor Trustee release
to the Servicer the related Grantor Trustee's Home Loan File, and the Grantor
Trustee shall, within five Business Days or such shorter period as may be
required by applicable law, release, or cause the applicable Custodian to
release (unless such Grantor Trustee's Home Loan File has previously been
released), the related Grantor Trustee's Home Loan File to the Servicer and
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest ownership of such Home Loan in
the Servicer or such other Person as may be specified in such certificate, the
forms of any such instrument to be appended to such certificate.
(b) From time to time and as appropriate for the servicing or foreclosure
of any Home Loan, the Grantor Trustee shall, upon request of the Servicer,
release the related Grantor Trustee's Home Loan File (or any requested portion
thereof) to the Servicer in accordance with Section 3(a) of the applicable
Custodial Agreement.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be entitled
to receive from the Collection Account the Servicing Fee (which Servicing Fee is
an expense of the Grantor Trust), out of which the Servicer shall pay any
servicing fees owed or payable to any Subservicer. Additional servicing
compensation in the form of assumption fees, modification fees, and other
administrative fees, insufficient funds charges, amounts remitted pursuant to
Section 7.01 hereof and late payment charges shall be part of the Servicing
Compensation payable to the Servicer hereunder and shall be paid either by the
Servicer's retaining such additional servicing compensation prior to deposit
into the Collection Account pursuant to Section 5.01(b)(1) hereof or, if
deposited into the Collection Account, as part of the Servicing Compensation
withdrawn from the Note Payment Account pursuant to Section 5.01(c)(1) hereof.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred by
any successor Servicer or the Grantor Trustee in replacing the Servicer in the
event of a default by the Servicer in the performance of its duties under the
terms and conditions of this Agreement and (ii) the annual monitoring fees of
the Rating Agencies.
Section 7.04 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Indenture Trustee, the Grantor Trustee,
the Depositor and the Rating Agencies not later than 90 days following the end
of each fiscal year of the Servicer (beginning in 1999), an Officer's
Certificate stating that (i) a review of the activities of the Servicer during
the preceding year and of performance under this Agreement has been made under
such officer's supervision and (ii) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all of its obligations under
this Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and what action the Servicer proposes
to take with respect thereto.
Contemporaneously with the submission of the Officer's Certificate required
by the preceding paragraph, the Servicer shall deliver to the Indenture Trustee
and the Grantor Trustee a copy of its annual audited financial statements
prepared in the ordinary course of business. The Servicer shall, upon the
request of the Depositor, deliver to such party any unaudited quarterly
financial statements of the Servicer.
The Servicer agrees to make available to the Depositor on a reasonable
basis a knowledgeable officer of the Servicer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor on
reasonable notice to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Depositor that the Servicer has
the ability to service the Home Loans in accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel relating
to the performance of the obligations of the Servicer hereunder, (ii) its
financial condition, (iii) the Home Loans and (iv) the performance of the
obligations of any Subservicer under the related Subservicing Agreement, in each
case as the Indenture Trustee, the Grantor Trustee or the Depositor may
reasonably request from time to time.
Section 7.05 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer (beginning with fiscal year 1999), the Servicer at its expense shall
cause any of Arthur Andersen & Co., Coopers & Lybrand LLP, Deloitte & Touche
LLP, Ernst & Young LLP, KPMG Peat Marwick LLP and Price Waterhouse & Co. or some
other nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Grantor Trustee, the Rating Agencies and the
Depositor to the effect that such firm has examined certain documents and
records relating to the servicing of the Home Loans under this Agreement or of
mortgage loans under pooling and servicing agreements (including the Home Loans
and this Agreement) substantially similar to one another (such statement to have
attached thereto a schedule setting forth the pooling and servicing agreements
covered thereby) and that, on the basis of such examination conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
firm confirms that such servicing has been conducted in compliance with such
pooling and servicing agreements except for such significant exceptions or
errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers or the Attestation Program for
Mortgages serviced for FHLMC requires it to report, each of which errors and
omissions shall be specified in such statement. In rendering such statement,
such firm may rely, as to matters relating to direct servicing of mortgage loans
by Subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of independent public accountants with
respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder, Grantor Trust Holder, the Indenture Trustee, the
Grantor Trustee, the Owner Trustee and each of their respective agents shall
have the right upon reasonable prior notice, during normal business hours and as
often as reasonably required, to examine, audit and copy, at the expense of the
Person making such examination, any and all of the books, records or other
information of the Servicer (including without limitation any Subservicer to the
extent provided in the related Subservicing Agreement), whether held by the
Servicer or by another on behalf of the Servicer, which may be relevant to the
performance or observance by the Servicer of the terms, covenants or conditions
of this Agreement. In the case of the supervisory agents and examiners of the
Issuer, the Indenture Trustee, the Grantor Trustee, the Owner Trustee, the
Grantor Trust Holder and the Securityholders, access to the documentation
regarding the Home Loans required by applicable state and federal regulations
shall be afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Servicer designated by it. Each
Securityholder, Grantor Trust Holder, the Indenture Trustee, the Grantor Trustee
and the Owner Trustee agree that any information obtained pursuant to the terms
of this Agreement shall be held confidential.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Securityholders and any prospective Securityholder to
inspect the Servicer's servicing facilities during normal business hours for the
purpose of satisfying the Securityholders and such prospective Securityholder
that the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
Section 7.07 Reports to the Indenture Trustee;
Collection Account Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.01(b)(1) hereof, the aggregate of withdrawals from the
Collection Account for each category of withdrawal specified in Section
5.01(b)(2) and (3) hereof, in each case, for the related Due Period.
Section 7.08 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders annual audited financial statements
of the Servicer for one or more of the most recently completed five fiscal years
for which such statements are available, which request shall not be unreasonably
denied.
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Transferor, the Owner Trustee, the
Issuer, the Grantor Trust, the Depositor, the Grantor Trustee and the Indenture
Trustee (each an "Indemnified Party") and hold harmless each of them against any
and all claims, losses, damages, penalties, fines, forfeitures, reasonable legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
from, a breach of any of the Servicer's representations and warranties and
covenants contained in this Agreement or in any way relating to the failure of
the Servicer to perform its duties and service the Home Loans in compliance with
the terms of this Agreement; provided, however, that if the Servicer is not
liable pursuant to the provisions of Section 9.01(d) hereof for its failure to
perform its duties and service the Home Loans in compliance with the terms of
this Agreement, then the provisions of this Section 9.01 shall have no force and
effect with respect to such failure.
(b) The Transferor, the Depositor, the Grantor Trustee, the Owner Trustee
or the Indenture Trustee, as the case may be, shall promptly notify the Servicer
if a claim is made by a third party with respect to a breach of any of the
Servicer's representations and warranties and covenants contained in this
Agreement or in any way relating to the failure of the Servicer to perform its
duties and service the Home Loans in compliance with the terms of this
Agreement. The Servicer shall promptly notify the Indenture Trustee, the Grantor
Trustee, the Owner Trustee and the Depositor of any claim of which it has been
notified pursuant to this Section 9.01 by a Person other than the Depositor,
and, in any event, shall promptly notify the Depositor of its intended course of
action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (i) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (ii) the Servicer has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Servicer and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Servicer. The Servicer shall not be
liable for any settlement of any such claim or action unless the Servicer shall
have consented thereto or be in default on its obligations hereunder. Any
failure by an Indemnified Party to comply with the provisions of this Section
9.01 shall relieve the Servicer of liability only if such failure is materially
prejudicial to the position of the Servicer and then only to the extent of such
prejudice.
(d) None of the Transferor, the Depositor, the Servicer or any of the
directors, officers, employees or agents of the Transferor, the Depositor or the
Servicer, or members or Affiliates of the Depositor shall be under any liability
to the Issuer or the Securityholders for any action taken, or for refraining
from the taking of any action, in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Transferor, the Depositor, the Servicer or any such person against the remedies
provided herein for the breach of any warranties, representations or covenants
made herein, or against any specific liability imposed on the Transferor, the
Depositor or the Servicer herein, or against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of the duties of the Servicer, the Depositor or the Transferor, as
the case may be, or by reason of reckless disregard of the obligations and
duties of the Servicer, the Depositor or the Transferor, as the case may be,
hereunder. The Transferor, the Depositor, the Servicer and any director,
officer, employee or agent of the Transferor, the Depositor or the Servicer, or
any member or Affiliate of the Depositor may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Issuer and held harmless against any loss, liability
or expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Securities, other than any loss, liability or
expense related to any specific Home Loan or Home Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Except as
otherwise provided herein, none of the Transferor, the Depositor or the Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not related to its respective duties under this Agreement; provided,
however, that, except as otherwise provided herein, any of the Transferor, the
Depositor or the Servicer may, with the prior consent of the Indenture Trustee,
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Securityholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Issuer, and the
Transferor, the Depositor and the Servicer shall be entitled to be reimbursed
therefor out of the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and will obtain and preserve its qualification to do business
as a foreign corporation and maintain such other licenses and permits in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Home Loans and to perform its duties under this
Agreement; provided, however, that the Servicer may merge or consolidate with
any other corporation upon the satisfaction of the conditions set forth in the
following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee, the Grantor
Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
hereof, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Grantor Trustee and Indenture
Trustee or (b) upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination pursuant to clause (b)
of the preceding sentence permitting the resignation of the Servicer shall be
evidenced by an independent opinion of counsel to such effect delivered (at the
expense of the Servicer) to the Grantor Trustee and the Indenture Trustee. No
resignation of the Servicer shall become effective until the Grantor Trustee or
a successor servicer, appointed pursuant to the provisions of Section 10.02
hereof and satisfying the requirements of Section 4.07 hereof with respect to
the qualifications of a successor Servicer, shall have assumed the Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder and any agreement, instrument or act purporting to effect
any such assignment, transfer, delegation or appointment shall be void.
The Servicer agrees to cooperate with any successor Servicer in effecting
the transfer of the Servicer's servicing responsibilities and rights hereunder
pursuant to the first paragraph of this Section 9.04, including, without
limitation, the transfer to such successor of all relevant records and documents
(including any Home Loan Files in the possession of the Servicer) and all
amounts received with respect to the Home Loans and not otherwise permitted to
be retained by the Servicer pursuant to this Agreement. In addition, the
Servicer, at its sole cost and expense, shall prepare, execute and deliver any
and all documents and instruments to the successor Servicer including all Home
Loan Files in its possession and do or accomplish all other acts necessary or
appropriate to effect such termination and transfer of servicing
responsibilities.
Section 9.05 Relationship of Servicer to the Grantor Trust
and the Grantor Trustee.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Grantor Trust and the Grantor Trustee
under this Agreement is intended by the parties hereto to be that of an
independent contractor and not of a joint venturer, agent or partner of the
Issuer or the Indenture Trustee.
Section 9.06 Servicer May Own Securities.
Each of the Servicer and any Affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Securities with
the same rights as it would have if it were not the Servicer or an Affiliate
thereof except as otherwise specifically provided herein. Securities so owned by
or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Servicer or any Affiliate thereof,
during the time such Securities are owned by them, shall be without voting
rights for any purpose set forth in this Agreement. The Servicer shall notify
the Indenture Trustee promptly after it or any of its Affiliates becomes the
owner or pledgee of a Security.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
In case one or more of the following Events of Default by the Servicer
shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection Account
in accordance with Section 5.01(b) hereof any payments in respect of the
Home Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues unremedied
for a period of 30 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice is
a "Notice of Default" hereunder, shall have been given (a) to the Servicer
by the Indenture Trustee, the Grantor Trustee or the Issuer, or (b) to the
Servicer, the Indenture Trustee, the Grantor Trustee or the Issuer by the
Majority Noteholders; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property; or
(v) the Servicer shall admit in writing its inability to pay its debts
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations; or
(vi) the Majority Noteholders and the Grantor Trust Holder (A) shall
receive notice from the Servicer that the Servicer is no longer able to
discharge its duties under this Agreement or (B) shall determine, in their
reasonable judgment and based upon published reports (including wire
services), which they reasonably believe in good faith to be reliable,
that:
a) the Servicer has experienced a material adverse change in its
business, assets, liabilities, operations, condition (financial or
otherwise) or prospects,
b) the Servicer has defaulted on any of its material obligations,
or
c) the Servicer has ceased to conduct its business in the
ordinary course, or
d) as of any Determination Date, the total Expected Loan Loss
Percentage (as defined below) exceeds (1) up to the fifth (5th)
anniversary of the January 31, 1998 Cut-Off Date, 22.125%, or (2)
thereafter 33.187% (where the "Expected Loan Loss Percentage" shall be
the sum of (A) the cumulative Net Loan Losses divided by the Original
Pool Principal Balance, plus (B) 25% of the aggregate Principal
Balance of the Home Loans which are then more than 30 but less than 60
days delinquent divided by the Original Pool Principal Balance, plus
(C) 50% of the aggregate Principal Balance of the Home Loans which are
then more than 60 but less than 90 days delinquent divided by the
Original Pool Principal Balance, plus (D) 100% of the aggregate
Principal Balance of the Home Loans which are then more than 90 days
delinquent divided by the Original Pool Principal Balance);
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Indenture Trustee, the Grantor Trustee, the Grantor
Trust Holder or the Majority Noteholders, by notice in writing to the Servicer
may, in addition to whatever rights such Person may have at law or in equity to
damages, including injunctive relief and specific performance, may terminate all
the rights and obligations of the Servicer under this Agreement and in and to
the Home Loans and the proceeds thereof, as servicer under this Agreement. Upon
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Home Loans or
otherwise, shall, subject to Section 10.02 hereof, pass to and be vested in a
successor servicer, or the Grantor Trustee if a successor servicer cannot be
retained in a timely manner, and the successor servicer, or Grantor Trustee, as
applicable, is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, any and all documents and
other instruments and do or cause to be done all other acts or things necessary
or appropriate to effect the purposes of such notice of termination, including,
but not limited to, the transfer and endorsement or assignment of the Home Loans
and related documents. The Servicer agrees to cooperate with the successor
servicer in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the successor
servicer for administration by it of all amounts which shall at the time be
credited by the Servicer to each Collection Account or thereafter received with
respect to the Home Loans.
Section 10.02 Grantor Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01 hereof, or the Grantor Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel or accompanied by
the consents required by Section 9.04 hereof, or the Servicer is removed as
servicer pursuant to this Article X, then, subject to Section 4.07 hereof, the
Grantor Trustee shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior to
it; and, provided further, that if a successor servicer cannot be retained in a
timely manner, the Grantor Trustee shall act as successor Servicer. In the event
the Grantor Trustee assumes the responsibilities of the Servicer pursuant to
this Section 10.02, the Grantor Trustee will make reasonable efforts consistent
with applicable law to become licensed, qualified and in good standing in each
Mortgaged Property State the laws of which require licensing or qualification in
order to perform its obligations as Servicer hereunder or, alternatively, shall
retain an agent that is so licensed, qualified and in good standing in any such
Mortgaged Property State.
In the case that the Grantor Trustee serves as successor servicer, the
Grantor Trustee in such capacity shall not be liable for any servicing of the
Home Loans prior to its date of appointment and shall not be subject to any
obligations to repurchase any Home Loans. The successor servicer shall be
obligated to make Servicing Advances hereunder. As compensation therefor, the
successor servicer appointed pursuant to the following paragraph, shall be
entitled to all funds relating to the Home Loans which the Servicer would have
been entitled to receive from the Note Payment Account pursuant to Section
5.01(c) hereof as if the Servicer had continued to act as servicer hereunder,
together with other Servicing Compensation in the form of assumption fees, late
payment charges or otherwise as provided in Section 7.03 hereof. The Servicer
shall not be entitled to any termination fee if it is terminated pursuant to
Section 10.01 hereof but shall be entitled to any accrued and unpaid Servicing
Fee to the date of termination.
Any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Grantor Trustee or the Indenture Trustee, as assignee
of the Grantor Trust Certificate, and remitted directly to the Grantor Trustee
or the Indenture Trustee or, at the direction of the Grantor Trustee or the
Indenture Trustee, to the successor servicer. The compensation of any successor
servicer (including, without limitation, the Grantor Trustee) so appointed shall
be the Servicing Fee, together with other Servicing Compensation provided for
herein. In the event the Grantor Trustee is required to solicit bids to appoint
a successor servicer, the Grantor Trustee shall solicit, by public announcement,
bids from Eligible Servicers. Such public announcement shall specify that the
successor servicer shall be entitled to the full amount of the Servicing Fee and
Servicing Compensation provided for herein. Within 30 days after any such public
announcement, the Grantor Trustee shall negotiate and effect the sale, transfer
and assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Grantor Trustee shall
deduct from any sum received by the Grantor Trustee from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder and the amount of any unpaid
Servicing Fees and unreimbursed Servicing Advances made by the Grantor Trustee.
After such deductions, the remainder of such sum shall be paid by the Grantor
Trustee to the Servicer at the time of such sale, transfer and assignment to the
Servicer's successor. The Grantor Trustee, any Custodian, the Servicer and any
such successor servicer shall take such action, consistent with this Agreement,
as shall be necessary to effect any such succession. The Servicer agrees to
cooperate with the Grantor Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights hereunder
and shall promptly provide the Grantor Trustee or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Grantor Trustee or the Indenture Trustee, as assignee of the Grantor Trust
Certificate, or such successor servicer, as applicable, all amounts which then
have been or should have been deposited in any Trust Account maintained by the
Servicer or which are thereafter received with respect to the Home Loans.
Neither the Grantor Trustee nor any other successor servicer shall be held
liable by reason of any failure to make, or any delay in making, any payment or
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Grantor Trustee to the Indenture Trustee, each
Securityholder, each Grantor Trust Holder, the Owner Trustee and the Depositor
and, except in the case of the appointment of the Grantor Trustee as successor
to the Servicer (when no consent shall be required), the Depositor, the Grantor
Trust Holder and the Majority Noteholders shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the Grantor
Trustee shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Grantor Trustee may make such
arrangements for the compensation of such successor servicer out of payments on
the Home Loans as it and such successor servicer shall agree; provided, however,
that no such compensation shall be in excess of that permitted the Servicer
pursuant to Section 7.03 hereof, together with other Servicing Compensation in
the form of assumption fees, late payment charges or otherwise as provided in
this Agreement.
Section 10.03 Waiver of Defaults.
The Majority Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article X; provided, however, that the
Majority Noteholders may not waive a default in making a required payment on a
Note or distribution on a Residual Interest Certificate without the consent of
the related Noteholder or holder of the Residual Interest Certificate. Upon any
waiver of a past default, such default shall cease to exist and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer shall,
at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed, to
the Indenture Trustee the funds in any Trust Account maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been appointed, to
the Grantor Trustee all Home Loan Files and related documents and statements
held by it hereunder and a Home Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed, to
the Grantor Trustee, the Indenture Trustee, the Grantor Trust Holder and the
Securityholders a full accounting of all funds, including a statement showing
the Monthly Payments collected by it and a statement of monies held in trust by
it for payments or charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts reasonably
requested in order to effect the orderly and efficient transfer of servicing of
the Home Loans to its successor and to more fully and definitively vest in such
successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a)the later of (i) the satisfaction and discharge of the Indenture and
the provisions thereof or (ii) the disposition of all funds with respect to the
last Home Loan and the remittance of all funds due hereunder and the payment of
all amounts due and payable to the Indenture Trustee, the Grantor Trustee, the
Owner Trustee, the Issuer and any Custodian; or (b) the mutual consent of the
Servicer, the Depositor, the Transferor and all Securityholders in writing.
Section 11.02 Optional Termination.
The Majority Residual Interestholders may, at their option, effect an early
termination of the Issuer and the Grantor Trust on or after any Payment Date on
which the Pool Principal Balance declines to 10% or less of the Maximum
Collateral Amount. The Majority Residual Interestholders shall effect such early
termination by providing notice thereof to the Indenture Trustee, the Grantor
Trustee and Owner Trustee and by purchasing all of the Home Loans from the
Grantor Trustee at a purchase price, payable in cash, equal to or greater than
the Termination Price. The expense of any Independent appraiser required under
this Section 11.02 shall be a nonreimbursable expense of Majority Residual
Interestholders.
Any such early termination by the Majority Residual Interestholders shall
be accomplished by depositing into the Collection Account on the third Business
Day prior to the Payment Date on which the purchase is to occur the amount of
the Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to have
been deposited therein pursuant to Section 5.01(b)(1) hereof and any amounts
withdrawable therefrom by the Indenture Trustee pursuant to Section 5.01(b)(3)
hereof) shall be transferred to the Note Payment Account pursuant to Section
5.01(b)(2) hereof as a terminating distribution in respect of the Grantor Trust
Certificate pursuant to Section 5.02 of the Grantor Trust Agreement for payment
to Noteholders on the succeeding Payment Date; and any amounts received with
respect to the Home Loans and Foreclosure Properties subsequent to the Due
Period immediately preceding such final Payment Date shall belong to the
purchaser thereof. For purposes of calculating the Available Payment Amount for
such final Payment Date, amounts transferred to the Note Payment Account
immediately preceding such final Payment Date shall in all cases be deemed to
have been received during the related Due Period, and amounts so transferred
shall be applied pursuant to Section 5.01(d) and (e) hereof.
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer and the Grantor Trust shall be sent (i) by the
Indenture Trustee to the Noteholders in accordance with section 10.02 of the
Indenture, (ii) by the Owner Trustee to the Certificateholders in accordance
with section 9.1(d) of the Owner Trust Agreement, and (iii) by the Grantor
Trustee to the Grantor Trust Holder in accordance with Section 7.02 of the
Grantor Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders.
Except as otherwise specifically provided herein, whenever action, consent
or approval of the Securityholders is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositor, the
Servicer, the Transferor, the Indenture Trustee, the Grantor Trustee and the
Issuer by written agreement with notice thereof to the Securityholders, without
the consent of any of the Securityholders, to cure any error or ambiguity, to
correct or supplement any provisions hereof which may be defective or
inconsistent with any other provisions hereof or to add any other provisions
with respect to matters or questions arising under this Agreement; provided,
however, that such action will not adversely affect in any material respect the
interests of the Securityholders. An amendment described above shall be deemed
not to adversely affect in any material respect the interests of the
Securityholders if either (i) an Opinion of Counsel is obtained to such effect
and (ii) the party requesting the amendment obtains a letter from each of the
Rating Agencies confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by the respective Rating
Agency to any Class of Notes then outstanding.
(b) This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Transferor, the Indenture Trustee, the Grantor Trustee and the
Issuer by written agreement, with the prior written consent of the Majority
Noteholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Home Loans or distributions which are required to be
made on any Security, without the consent of the holders of 100% of each Class
of Notes affected thereby, (ii) adversely affect in any material respect the
interests of the holders of any Class of Notes in any manner other than as
described in clause (i), without the consent of the holders of 100% of such
Class of Notes, or (iii) reduce the percentage of any Class of Notes, the
consent of which is required for any such amendment, without the consent of the
holders of 100% of such Class of Notes.
(c) It shall not be necessary for the consent of Securityholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer, the
Grantor Trustee and the Indenture Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Issuer, the Grantor Trustee and
the Indenture Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Issuer's own rights, duties or immunities of the
Issuer, the Grantor Trustee or the Indenture Trustee, as the case may be, under
this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Noteholders' expense on
direction of the Majority Noteholders but only when accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Noteholders or is necessary for the administration or
servicing of the Home Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to: (i) in
the case of the Depositor, PaineWebber Mortgage Acceptance Corporation IV, 1285
Avenue of the Americas, New York, New York 10019, Attention: John Fearey, Esq.,
or such other addresses as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Depositor; (ii) in the case of the
Issuer, at Empire Funding Home Loan Owner Trust 1998-1, c/o Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Emmett R. Harmon, or such other address as may hereafter be
furnished to the Securityholders and the other parties hereto; (iii) in the case
of the Transferor and Servicer, Empire Funding Corp., 9737 Great Hills Trail,
Austin, Texas 78759, Attention: Richard N. Steed or such other address as may
hereafter be furnished to the Securityholders and the other parties hereto in
writing by the Servicer or the Transferor; (iv) in the case of the Indenture
Trustee and Grantor Trustee, U.S. Bank National Association, 180 East Fifth
Street, St. Paul, Minnesota 55101; Attention: Structured Finance/Empire Funding
1998-1; and (v) in the case of the Securityholders, as set forth in the
applicable Note Register. Any such notices shall be deemed to be effective with
respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Securityholders shall be effective upon mailing or
personal delivery.
Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Indenture Trustee, the Grantor
Trustee, the Issuer, the Noteholders and the Grantor Trust Holder and their
respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer or the Issuer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
Section 12.12.
(b) The fact and date of the execution by any Securityholder of any such
instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Securityholder shall bind every holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 12.12 as it shall deem necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession, merger
or consolidation of the Servicer, any Custodian or the Issuer;
(iv) notice of final payment on the Notes;
(v) notice of any Event of Default;
(vi) copies of the annual independent accountants' report
delivered pursuant to Section 7.05 hereof, and copies of any
compliance reports delivered by the Servicer including under Section
7.04 hereof; and
(vii) copies of any Payment Date Statement pursuant to Section
6.01(b) hereof.
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies, such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Moody's Investors Service, 99 Church Street, New York, New
York 10007, Attention: Residential Mortgage Pass-Through Group., (ii) if to Duff
& Phelps, 55 East Monroe Street, 38th Floor, Chicago, Illinois 60603, Attention:
MBS Monitoring, or (iii) if to Fitch IBCA, Inc., One State Street Plaza, New
York, New York 10004, Attention: Asset Backed Surveillance Department.
Section 12.14 Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Owner Trust Agreement to the holders of the Residual Interest Certificates shall
be paid to such holders pro rata based on their percentage holdings in the
Residual Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest Certificates, such
consent or approval shall be capable of being given by the holder or holders of
not less than 51% of the Residual Interest in aggregate.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Depositor, the Transferor, the
Servicer, the Grantor Trustee and the Indenture Trustee have caused their names
to be signed by their respective officers thereunto duly authorized, as of the
day and year first above written, to this Sale and Servicing Agreement.
EMPIRE FUNDING HOME LOAN OWNER TRUST 1998-1,
By: Wilmington Trust Company, not in its
individual capacity but solely
as Owner Trustee
By: ______________________________________
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
as Depositor
By: ______________________________________
Name:
Title:
EMPIRE FUNDING CORP., as Transferor and Servicer
By: ______________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
as Indenture Trustee and Grantor Trustee
By: ______________________________________
Name:
Title:
<PAGE>
CWT DRAFT 01/26/98
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
February 1998 personally appeared _______________, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said WILMINGTON TRUST
COMPANY, not in its individual capacity but in its capacity as Owner Trustee of
EMPIRE FUNDING HOME LOAN OWNER TRUST 1998-1 as Issuer, and that she executed the
same as the act of such corporation for the purpose and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF WILMINGTON TRUST COMPANY, this the ____ day
of February, 1998.
Notary Public, State of
<PAGE>
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
February 1998 personally appeared Barbara J. Dawson, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, as the Depositor, and that she executed the same as
the act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION
IV, this the ____ day of February, 1998.
Notary Public, State of
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this [__] day of
February 1998 personally appeared _______________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said EMPIRE FUNDING CORP.,
as the Transferor and Servicer, and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EMPIRE FUNDING CORP., this the [____] day
of February, 1998.
Notary Public, State of
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this [__] day of
February 1998 personally appeared ____________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said U.S. BANK NATIONAL
ASSOCIATION, a national banking association, as the Indenture Trustee and
Grantor Trustee, and that she executed the same as the act of such entity for
the purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF U.S. BANK NATIONAL ASSOCIATION, this the
[__] day of February, 1998.
Notary Public, State of
================================================================================
ADMINISTRATION AGREEMENT
dated as of May 1, 1998
among
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
(the "Issuer")
and
THE BANK OF NEW YORK, as Administrator
(the "Administrator")
and
MASTER FINANCIAL, INC.
(the "Company" and "Servicer")
Home Loan Asset Backed Notes, Series 1998-2
================================================================================
<PAGE>
TABLE OF CONTENTS
Section 1. Duties of the Administrator.........................................2
Section 2. Duties of the Company with Respect to the Indenture.................4
Section 3. Records.............................................................6
Section 4. Compensation........................................................6
Section 5. Additional Information to Be Furnished to the Issuer................6
Section 6. Independence of the Administrator...................................7
Section 7. No Joint Venture....................................................7
Section 8. Other Activities of Administrator and Servicer......................7
Section 9. Term of Agreement; Resignation and Removal of
Administrator or Servicer...........................................7
Section 10. Action upon Termination, Resignation or Removal of the
Administrator......................................................8
Section 11. Notices............................................................9
Section 12. Amendments........................................................10
Section 13. Successor and Assigns.............................................10
Section 14. Governing Law.....................................................11
Section 15. Headings..........................................................11
Section 16. Counterparts......................................................11
Section 17. Severability......................................................11
Section 18. Not Applicable to The Bank of New York in Other Capacities........11
Section 19. Limitation of Liability of Owner Trustee..........................11
Section 20. Benefit of Agreement..............................................11
Section 21. Bankruptcy Matters................................................12
Section 22. Indemnification of the Administrator by the Servicer..............12
Section 23. Certain Duties....................................................12
Section 24. Capitalized Terms.................................................12
<PAGE>
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT dated as of May 1, 1998, among MASTER FINANCIAL
ASSET SECURITIZATION TRUST 1998-2, a Delaware business trust, as Issuer (the
"Issuer"), THE BANK OF NEW YORK, a New York banking corporation, not in its
individual capacity but solely as Administrator ("BNY" and in such capacity, the
"Administrator"), and MASTER FINANCIAL, INC., a California corporation, as the
Company and Servicer (respectively, the "Company" and "Servicer").
W I T N E S S E T H:
WHEREAS, the Issuer is a business trust (the "Owner Trust") under the
Delaware Business Trust Act (12 Del. C. Section 3801 et. seq.) created by a
Trust Agreement relating to the Owner Trust dated as of May 1, 1998 (the "Owner
Trust Agreement"), among PaineWebber Mortgage Acceptance Corporation IV, as
depositor (the "Depositor"), Wilmington Trust Company, as Owner Trustee, The
Bank of New York, as Paying Agent (in such capacity, the "Paying Agent") and
Master Financial, Inc.;
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes (the "Notes"),
Series 1998-2;
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture dated as of May 1, 1998 (the
"Indenture"), between the Issuer and BNY, as Indenture Trustee (in such
capacity, the "Indenture Trustee");
WHEREAS, the Issuer has entered into certain agreements in connection with
the issuance of the Notes, including (i) a Sale and Servicing Agreement dated as
of May 1, 1998 (the "Sale and Servicing Agreement"), among the Issuer, Master
Financial, Inc., as servicer and transferor (in such capacities, the "Servicer"
and the "Transferor," respectively), the Depositor and BNY, as Indenture Trustee
and the grantor trustee (in such capacity the "Grantor Trustee"), (ii) a Grantor
Trust Agreement dated as of May 1, 1998 (the "Grantor Trust Agreement"), among
the Depositor, the Grantor Trustee and the Transferor, (iii) the Letter of
Representations, among the Issuer, the Indenture Trustee and The Depository
Trust Company relating to the Notes (the "Note Depository Agreement"), (iv) the
Indenture and (v) one or more Subsequent Transfer Agreements (vi) the Owner
Trust Agreement (the Sale and Servicing Agreement, the Note Depository
Agreement, the Indenture, each subsequent Transfer Agreement, the Grantor Trust
Agreement and the Owner Trust Agreement being hereinafter referred to
collectively as the "Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer is required to
perform certain duties in connection with the Notes and the collateral therefor
pledged pursuant to the Indenture (the "Collateral");
WHEREAS, the Issuer desires to have the Administrator and the Servicer,
respectively, perform certain of the duties of the Issuer referred to in the
preceding clause, and to provide such additional services consistent with the
terms of this Agreement and the Related Agreements as the Issuer may from time
to time request; and
WHEREAS, the Administrator and the Servicer have the capacity to provide
the respective services required hereby and are willing to perform such services
for the Issuer on the terms set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
Section 1. Duties of the Administrator.
(a) Duties with Respect to the Note Depository Agreement, the
Sale and Servicing Agreement and the Indenture.
(i) The Administrator agrees to perform all of the duties of the
Issuer under the Note Depository Agreement and those duties set forth
herein. In addition, the Administrator shall consult with the Owner
Trustee regarding the duties of the Issuer under the Sale and Servicing
Agreement, the Indenture and the Subsequent Transfer Agreement. The
Administrator shall monitor the performance of the Issuer and shall
notify the Owner Trustee when the Adminsitrator has actual knowledge
that action is necessary to comply with the Issuer's duties under the
Subsequent Transfer Agreement, Sale and Servicing Agreement, the
Indenture and the Note Depository Agreement. In addition to the
foregoing, the Administrator shall take all appropriate action that is
the duty of the Issuer to take with respect to the following matters
under the Sale and Servicing Agreement and the Indenture (parenthetical
section references are to sections of the Indenture):
(A) the execution of the Notes upon their issuance
and upon the registration of any transfer or exchange
of the Notes;
(B) the duty to cause the Note Register to be kept and to
give the Indenture Trustee notice of any appointment of a new
Note Registrar and the location, or change in location, of the
Note Register (Section 2.03);
(C) the notification of Noteholders of the final principal
payment on the Notes or of the redemption of the Notes or the
duty to cause the Indenture Trustee to provide such
notification (Sections 2.06(b) and 10.02);
(D) performing the function of the Issuer with respect
to the cancellation of the Notes (Section 2.07);
(E) the maintenance of an office in the Borough of
Manhattan in the City of New York for registration of transfer
or exchange of Notes (Section 3.02);
(F) the delivery to the Indenture Trustee and the Rating
Agencies of prompt written notice of each Event of Default of
which the Adminstrator has actual knowledge under the
Indenture (Section 3.14);
(G) the duty to act as Paying Agent for the Issuer and the
duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in
the Indenture regarding funds held in trust (Section 3.03);
(H) directing the Indenture Trustee to deposit moneys with
Paying Agents, if any, other than the Indenture Trustee
(Section 3.03);
(I) notifying the Indenture Trustee and the Rating
Agencies of the occurrence of an Event of Default under the
Sale and Servicing Agreement by the Servicer or the Transferor
which the Administrator has actual knowledge of;
(J) monitoring the Issuer's obligations as to the
satisfaction and discharge of the Indenture (Section 4.01);
(K) the preparation and filing of all documents and
reports by the Issuer as required under the Exchange Act, the
rules and regulations of the Commission and the TIA at the
expense of the Company(Section 7.03);
(L) notifying the Rating Agencies of a redemption of the
Notes and the duty to cause the Servicer to deposit the
Termination Price into the Note Payment Account and the
Certificate Distribution Account (Section 10.01);
(M) providing the Indenture Trustee with calculations
pertaining to original issue discount, if any, on the Notes
and, if applicable, the accrual of market discount or the
amortization of premium on the Notes to the extent the
Administrator has received from the Depositor sufficient
information to calculate such amounts (Section 3.03); and
(N) filing Internal Revenue Service Form 8811 within 30
days of the Closing Date, designating the officer of the
Indenture Trustee that Noteholders may contact for original
issue discount information with respect to the Notes, and
updating such Form at the time or times required by the Code.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Servicer shall be responsible for
performance of the duties of the Owner Trustee set forth in the Owner
Trust Agreement with respect to, among other things, accounting and
reports to Owners, and the Servicer shall be responsible for the
performance of the tax duties set forth in Section 5.5 of the Owner
Trust Agreement upon receipt of the Opinion of Counsel specified in
Section 5.5 of the Owner Trust Agreement stating that it is necessary
to perform such tax duties; provided, however, that the Owner Trustee
shall retain responsibility for the distribution of the Schedule K-1's
necessary to enable each Owner to prepare its federal and state income
tax returns; provided further, that the Indenture Trustee shall receive
written notification if there shall be two or more beneficial owners of
the Owner Trust.
(iii) The Servicer shall satisfy its obligations with respect to
clauses (a)(ii) above and (b)(ii) below by retaining, at the expense of
the Servicer payable by the Servicer, a firm of independent public
accountants (the "Accountants") acceptable to the Owner Trustee which
shall perform the obligations of the Servicer thereunder. In connection
with paragraph (a)(ii) above, the Accountants will provide a letter in
form and substance satisfactory to the Owner Trustee and the
Administrator as to whether any tax withholding is then required and,
if required, the procedures to be followed with respect thereto to
comply with the requirements of the Code. The Accountants shall be
required to update the letter in each instance that any additional tax
withholding is subsequently required or any previously required tax
withholding shall no longer be required.
(b) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Administrator's opinion, no less favorable to the
Issuer than would be available from unaffiliated parties.
Section 2. Duties of the Company with Respect to the Indenture.
(a) The Company shall take all appropriate action that is the duty of the
Issuer to take with respect to the following matters under the Indenture
(parenthetical section references are to sections of the Indenture):
(i) preparing, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of
Collateral (Section 2.09);
(ii) providing the Indenture Trustee with calculations pertaining
to original issue discount, if any, on the Notes and, if applicable,
the accrual of market discount or the amortization of premium on the
Notes to the extent the Administrator has received from the Depositor
sufficient information to calculate such amounts (Section 3.03); and
(iii) preparation and execution of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of the
Indenture, necessary to protect the Owner Trust Estate (Section 3.05);
(iv) the annual delivery of Opinions of Counsel, in accordance
with Section 3.06 of the Indenture, as to the Owner Trust Estate, and
the annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(v) monitoring the Issuer's compliance with its negative covenants
(Section 3.08) and the compliance of the Servicer with certain of its
obligations under the Sale and Servicing Agreement (Section 3.03);
(vi) compliance with any directive of the Indenture Trustee with
respect to the sale of the Owner Trust Estate in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing under the Indenture (Section 5.04);
(vii) the preparation of an Officer's Certificates and the
obtaining of the Opinion of Counsel and the Independent Certificates
relating thereto with respect to any requests by the Issuer to the
Indenture Trustee to take any action under the Indenture (Sections 4.01
and 11.01);
(viii) appointing a successor Indenture Trustee pursuant to
Section 6.08 of the Indenture
(Section 6.08);
(ix) causing one or more accounts to be opened in the Owner
Trust's name and preparing Issuer Orders, Officers' Certificates and
Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections
8.02 and 8.03);
(x) preparing an Issuer Request and Officers' Certificate and
obtaining an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Owner Trust Estate as defined in the
Indenture (Sections 8.05 and 8.06);
(xi) preparing Issuer Orders and obtaining of Opinions of Counsel
with respect to any proposed amendment of the Owner Trust Agreement or
amendment to or waiver of any provision of any other document relating
to the Owner Trust Agreement pursuant to Section 9.07 of the Indenture
(Section 9.07);
(xii) notifying the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information
required pursuant to Section 11.04 of the Indenture (Section 11.04);
and
(xiii) where applicable, the preparation and delivery on behalf
of the Issuer of Certificates of Fair Value of the Collateral.
(b) The Company will indemnify the Owner Trustee and its agents for, and
hold them harmless against, any losses, liability or expense incurred without
gross negligence or bad faith on their part, arising out of or in connection
with the acceptance or administration of the transactions contemplated by the
Owner Trust Agreement, including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with the exercise or
performance of any of their powers or duties under the Owner Trust Agreement.
(i) Additional Duties. In addition to the duties of the Company
set forth above, the Company shall prepare for execution by the Issuer
or shall cause the preparation by other appropriate persons of all such
documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer to prepare, file or deliver pursuant
to the Related Agreements, and at the request of the Owner Trustee
shall take all appropriate action that it is the duty of the Issuer to
take pursuant to the Related Agreements. Subject to Section 5 hereof
and in accordance with the directions of the Owner Trustee, the Company
shall administer, perform or supervise the performance of such other
activities in connection with the Collateral (including the Related
Agreements) as are not covered by any of the foregoing provisions and
as are expressly requested by the Owner Trustee and are reasonably
within the capability of the Company.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Servicer shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding
tax is imposed on the Owner Trust's payments (or allocations of income)
to an Owner as contemplated in Section 5.2(c) of the Owner Trust
Agreement. Any such notice shall specify the amount of any withholding
tax required to be withheld by the Owner Trustee pursuant to such
provision.
Section 3. Records.
The Administrator shall maintain appropriate books of account and records
relating to services performed hereunder, which books of account and records
shall be accessible for inspection by the Issuer and the Servicer at any time
during normal business hours.
Section 4. Compensation.
The Administrator will perform the duties and provide the services called
for under Section 1 hereof without any separate compensation therefor for so
long as the Indenture and the Sale and Servicing Agreement remain in effect, and
thereafter for such compensation as shall be agreed upon among the
Administrator, the Owner Trustee and the Servicer. The fees of the attorneys
delivering the Opinion of Counsel, the fees of Accountant's retained pursuant to
Section 1(a)(iii) above, and any other amounts of out-of-pocket expenses
reasonably incurred by the Administrator pursuant to the Indenture shall be paid
by the Servicer and the Servicer, by its execution hereof, agrees to pay such
reasonable fees and expenses to the Administrator. The Administrator shall
perform any other services as may be agreed between the Administrator and the
Owner Trustee for such compensation as may be agreed between the Administrator,
the Owner Trustee and the Servicer. The Administrator agrees to perform all its
duties under this Agreement regardless of any non-payment of fees or expenses by
the Company or the Owner Trustee, as applicable.
Section 5. Additional Information to Be Furnished to the Issuer.
The Administrator shall furnish to the Issuer from time to time such
additional information regarding the Collateral as the Issuer shall reasonably
request.
Section 6. Independence of the Administrator.
For all purposes of this Agreement, the Administrator shall be an
independent contractor and shall not be subject to the supervision of the Issuer
or the Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized herein or
by the Issuer, the Administrator shall have no authority to act for or represent
the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
Section 7. No Joint Venture.
Nothing contained in this Agreement (i) shall constitute the Administrator
or the Servicer, respectively, and either the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
Section 8. Other Activities of Administrator and Servicer.
Nothing herein shall prevent the Administrator, the Servicer or their
respective Affiliates from engaging in other businesses or, in its sole
discretion, from acting in a similar capacity as an administrator for any other
person or entity even though such person or entity may engage in business
activities similar to those of the Issuer or the Owner Trustee.
Section 9. Term of Agreement; Resignation and Removal of Administrator or
Servicer.
(a) This Agreement shall continue in force until the termination of the
Owner Trust Agreement in accordance with its terms, upon which event this
Agreement shall automatically terminate.
(b) Subject to Section 9(e) hereof, the Administrator or the Servicer may
resign their respective duties hereunder by providing the Issuer with at least
60 days' prior written notice.
(c) Subject to Section 9(e) hereof, the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 9(e) hereof, the Issuer may remove the Administrator
immediately upon written notice of termination from the Issuer to the
Administrator if any of the following events occurs:
(i) the Administrator defaults in the performance of any of its
duties under this Agreement and, after notice of such default, does not
cure such default within ten days (or, if such default cannot be cured
in such time, does not give within ten days such assurance of cure as
shall be reasonably satisfactory to the Issuer);
(ii)a court having jurisdiction in the premises enters a decree or
order for relief, and such decree or order shall not have been vacated
within 60 days, in respect of the Administrator in any involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoints a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for the
Administrator or any substantial part of its property or orders the
winding-up or liquidation of its affairs; or
(iii) the Administrator commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, consents to the entry of an order for relief in an
involuntary case under any such law, consents to the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
similar official for the Administrator or any substantial part of its
property, consents to the taking of possession by any such official of
any substantial part of its property, makes any general assignment for
the benefit of creditors or fails generally to pay its debts as they
become due.
The Administrator agrees that if any of the events specified in clause (ii)
or clause (iii) of this Section 9(d) shall occur, it shall give written notice
thereof to the Issuer and the Indenture Trustee within seven days after the
happening of such event.
(e) No resignation or removal of the Administrator or Servicer,
respectively, pursuant to this Section 9(d) shall be effective until (i) a
successor Administrator or Servicer, as the case may be, shall have been
appointed by the Issuer and (ii) such successor Administrator or Servicer shall
have agreed in writing to be bound by the terms of this Agreement in the same
manner as the Administrator or Servicer is bound hereunder.
(f) The appointment of any successor Administrator shall be effective only
after satisfaction of the Rating Agency Condition with respect to the proposed
appointment.
(g) Subject to Section 9(e) and (f) hereof, the Administrator acknowledges
that upon the appointment of a successor Indenture Trustee pursuant to Section
6.08 of the Indenture, the Administrator shall immediately resign and such
successor Indenture Trustee shall automatically become the Administrator under
this Agreement. Any such successor Indenture Trustee shall be required to agree
to assume the duties of the Administrator under the terms and conditions of this
Agreement in its acceptance of appointment as successor Indenture Trustee.
(h) The Servicer's appointment hereunder will terminate automatically on
the Servicer's resignation or removal under the Sale and Servicing Agreement.
Section 10. Action upon Termination, Resignation or Removal of the
Administrator.
Promptly upon the effective date of termination of this Agreement pursuant
to Section 9(a) or the resignation or removal of the Administrator pursuant to
Section 9(b) or (c), respectively, the Administrator shall be entitled to be
paid all reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 9(a) deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator and, in the
event of the resignation or removal of the Administrator pursuant to Section
9(b), (c) or (d), the Administrator shall cooperate with the Issuer and take all
reasonable steps requested to assist the Issuer in making an orderly transfer of
the duties of the Administrator.
Section 11. Notices.
Any notice, report or other communication given hereunder shall be in
writing and addressed as follows:
(a) if to the Issuer, to
Master Financial Asset Securitization Trust 1998-2
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
with a copy to the Company at
Master Financial, Inc.
333 South Anita Drive, Suite 150
Orange, California 92868
Attention: Kristi Carlson
(b) if to the Administrator, to
The Bank of New York
101 Barclay Street, Floor 12 East
New York, New York 10286
Attention: Corporate Trust MBS Administration
(c) if to the Servicer, to
Master Financial, Inc.
333 South Anita Drive, Suite 150
Orange, California 92868
Attention: Kristi Carlson
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand delivered
to the address of such party as provided above.
Section 12. Amendments.
This Agreement may be amended from time to time by a written amendment duly
executed and delivered by the Issuer, the Administrator and the Servicer, with
the prior written consent of the Owner Trustee without the consent of the
Noteholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner, the rights of the Noteholders; provided, however, that such
amendment will not materially and adversely affect the interest of any
Noteholder. An amendment described above shall be deemed not to adversely affect
in any material respects the interests of any Noteholder if either (i) an
Opinion of Counsel is obtained to such effect or (ii) the party requesting the
amendment satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended by the Issuer, the Administrator and the
Servicer with the prior written consent of the Owner Trustee and the holders of
Notes evidencing at least a majority of the Outstanding Amount of the Notes for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of Noteholders; provided, however, that no such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments in respect of the Home Loans or payments that are
required to be made for the benefit of the Noteholders or (ii) reduce the
aforesaid percentage of the holders of Notes which are required to consent to
any such amendment, in the case of either clause (i) or clause (ii) hereof,
without the consent of the holders of all the Outstanding Notes. Notwithstanding
the foregoing, the Administrator may not amend this Agreement without the
permission of the Servicer, which permission shall not be withheld unreasonably.
Section 13. Successor and Assigns.
This Agreement may not be assigned by the Administrator unless such
assignment is previously consented to in writing by the Owner Trustee and the
Servicer, subject to the satisfaction of the Rating Agency Condition in respect
thereof. An assignment with such consent and satisfaction, if accepted by the
assignee, shall bind the assignee hereunder in the same manner as the
Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement
may be assigned by the Administrator without the consent of the Owner Trustee or
the Servicer to a corporation or other organization that is a successor (by
merger, consolidation or purchase of assets) to the Administrator; provided,
however, that such successor organization executes and delivers to the Issuer,
the Owner Trustee and the Servicer an agreement in which such corporation or
other organization agrees to be bound hereunder by the terms of said assignment
in the same manner as the Administrator is bound hereunder. Subject to the
foregoing, this Agreement shall bind any successors or assigns of the parties
hereto.
Section 14. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 15. Headings.
The section headings hereof have been inserted for convenience of reference
only and shall not be construed to affect the meaning, construction or effect of
this Agreement.
Section 16. Counterparts.
This Agreement may be executed in counterparts, each of which when so
executed shall together constitute but one and the same agreement.
Section 17. Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 18. Not Applicable to The Bank of New York in Other Capacities.
Nothing in this Agreement shall affect any obligation that The Bank of New
York may have in any other capacity.
Section 19. Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement
has been countersigned by Wilmington Trust Company not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall Wilmington Trust Company in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Articles VI, VII and VIII of the
Owner Trust Agreement.
Section 20. Benefit of Agreement.
It is expressly agreed that in performing its duties under this Agreement,
the Administrator will act for the benefit of holders of the Notes as well as
for the benefit of the Owner Trust, and that such obligations on the part of the
Administrator shall be enforceable at the instance of the Indenture Trustee and
the Owner Trust.
Section 21. Bankruptcy Matters.
No party to this Agreement shall take any action to cause the Owner Trust
or the Depositor to dissolve in whole or in part or file a voluntary petition or
otherwise initiate proceedings to have the Owner Trust or the Depositor
adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Owner Trust or the Depositor, or file a
petition seeking or consenting to reorganization or relief of the Owner Trust or
the Depositor as debtor under any applicable federal or state law relating to
bankruptcy, insolvency or other relief for debtors with respect to the Owner
Trust or the Depositor; or seek or consent to the appointment of any trustee,
receiver, conservator, assignee, sequestrator, custodian, liquidator (or other
similar official) of the Owner Trust or the Depositor or of all or any
substantial part of the properties and assets of the Owner Trust or the
Depositor, or cause the Owner Trust or the Depositor to make any general
assignment for the benefit of creditors of the Owner Trust or the Depositor or
take any action in furtherance of any of the above actions.
Section 22. Indemnification of the Administrator by the Servicer.
The Servicer shall indemnify the Administrator (and any predecessor
Administrator) against any and all loss, liability or expense (including
attorneys' fees and expenses) incurred by it in connection with the
administration or acceptance of this trust and the performance of its duties
hereunder. The Administrator shall notify the Servicer promptly of any claim for
which it may seek indemnity. Failure by the Administrator to so notify the
Servicer shall not relieve the Servicer of its obligations hereunder. The
Servicer shall defend any such claim, and the Administrator may have separate
counsel and the Servicer shall pay the fees and expenses of such counsel. The
Servicer need not reimburse any expense or indemnify against any loss, liability
or expense incurred by the Administrator to the extent attributable the
Administrator's own willful misconduct, gross negligence or bad faith.
Section 23. Certain Duties.
Duties of the Issuer under the Basic Documents to be performed by the
Administrator and the Servicer not otherwise provided for herein shall be
performed by the Servicer.
Section 24. Capitalized Terms.
Capitalized terms used and not defined herein have the meanings assigned to
them in the Indenture. Capitalized terms used and not defined herein or in the
Indenture have the meanings assigned to them in the Sale and Servicing
Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MASTER FINANCIAL ASSET
SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee,
By:___________________________
Name:
Title:
THE BANK OF NEW YORK, not in its
individual capacity but solely as
Administrator,
By:_______________________________
Name:
Title:
MASTER FINANCIAL, INC.,
as the Company and as Servicer,
By:_______________________________
Name:
Title:
================================================================================
OWNER TRUST AGREEMENT
among
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
as Depositor,
MASTER FINANCIAL, INC.,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
THE BANK OF NEW YORK,
as Paying Agent
Dated as of May 1, 1998
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
Home Loan Asset Backed Notes, Series 1998-2
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms................................................1
SECTION 1.2 Other Definitional Provisions....................................4
ARTICLE II
ORGANIZATION
SECTION 2.1 Name.............................................................5
SECTION 2.2 Office...........................................................5
SECTION 2.3 Purposes and Powers..............................................5
SECTION 2.4 Appointment of Owner Trustee.....................................6
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate...............6
SECTION 2.6 Declaration of Trust.............................................6
SECTION 2.7 Title to Trust Property..........................................7
SECTION 2.8 Situs of Trust...................................................7
SECTION 2.9 Representations and Warranties of the Depositor and the
Company; Covenant of the Company...............................7
ARTICLE III
RESIDUAL INTEREST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership................................................9
SECTION 3.2 The Residual Interest Certificates...............................9
SECTION 3.3 Execution, Authentication and Delivery of Residual Interest
Certificates...................................................9
SECTION 3.4 Registration of Transfer and Exchange of Residual Interest
Certificates..................................................10
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Residual Interest
Certificates..................................................11
SECTION 3.6 Persons Deemed Owners...........................................11
SECTION 3.7 Access to List of Owners' Names and Addresses...................11
SECTION 3.8 Maintenance of Office or Agency.................................12
SECTION 3.9 Appointment of Paying Agent.....................................12
SECTION 3.10 Restrictions on Transfer of Residual Interest Certificates.....13
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters;
Covenants....................................................15
SECTION 4.2 Action by Owners with Respect to Certain Matters...............18
SECTION 4.3 Action by Owners with Respect to Bankruptcy....................18
SECTION 4.4 Restrictions on Owners' Power..................................18
SECTION 4.5 Majority Control...............................................18
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account.................................19
SECTION 5.2 Application Of Trust Funds.....................................19
SECTION 5.3 Method of Payment..............................................20
SECTION 5.4 Segregation of Moneys; No Interest.............................20
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others......................21
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority..............................................22
SECTION 6.2 General Duties.................................................22
SECTION 6.3 Action upon Instruction........................................23
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions.................................24
SECTION 6.5 No Action Except Under Specified Documents or Instructions.....24
SECTION 6.6 Restrictions...................................................24
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties................................24
SECTION 7.2 Furnishing of Documents........................................26
SECTION 7.3 Representations and Warranties.................................26
SECTION 7.4 Reliance; Advice of Counsel....................................27
SECTION 7.5 Not Acting in Individual Capacity..............................27
SECTION 7.6 Owner Trustee Not Liable for Residual Interest Certificates
or Home Loans................................................28
SECTION 7.7 Owner Trustee May Own Residual Interest Certificates and
Notes........................................................28
SECTION 7.8 Licenses.......................................................28
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND PAYING AGENT
SECTION 8.1 Fees and Expenses..............................................29
SECTION 8.2 Indemnification................................................29
SECTION 8.3 Payments to the Owner Trustee and Paying Agent.................29
ARTICLE IX
TERMINATION OF OWNER TRUST AGREEMENT
SECTION 9.1 Termination of Owner Trust Agreement...........................30
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee....................31
SECTION 10.2 Resignation or Removal of Owner Trustee.......................31
SECTION 10.3 Successor Owner Trustee.......................................32
SECTION 10.4 Merger or Consolidation of Owner Trustee......................33
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.....33
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments....................................34
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners................35
SECTION 11.3 Limitations on Rights of Others...............................36
SECTION 11.4 Notices.......................................................36
SECTION 11.5 Severability..................................................36
SECTION 11.6 Separate Counterparts.........................................36
SECTION 11.7 Successors and Assigns........................................37
SECTION 11.8 No Petition...................................................37
SECTION 11.9 No Recourse...................................................37
SECTION 11.10 Headings.....................................................37
SECTION 11.11 Governing Law................................................37
SECTION 11.12 Residual Interest Transfer Restrictions......................38
EXHIBIT A Form of Residual Interest Certificate
EXHIBIT B Form of Certificate of Trust
<PAGE>
================================================================================
THIS OWNER TRUST AGREEMENT, dated as of May 1, 1998, among PAINEWEBBER
MORTGAGE ACCEPTANCE CORPORATION IV, a Delaware corporation, as Depositor (the
"Depositor"), MASTER FINANCIAL, INC., a California corporation (the "Company"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the
"Owner Trustee") and THE BANK OF NEW YORK , a New York banking corporation (the
"Paying Agent").
WITNESSETH:
In consideration of the mutual agreements and covenants herein contained,
the Depositor, the Company, the Paying Agent and the Owner Trustee hereby agree
for the benefit of each of them and the holders of the Residual Interest
Certificates as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement, dated
as of May 1, 1998 among the Issuer, the Company, and The Bank of New York , as
Administrator.
"Administrator" shall mean The Bank of New York , or any successor in
interest thereto, in its capacity as Administrator under the Administration
Agreement.
"Agreement" shall mean this Owner Trust Agreement, as the same may be
amended and supplemented from time to time.
"Basic Documents" shall mean the Certificate of Owner Trust, Certificate of
Grantor Trust, this Agreement, the Grantor Trust Agreement, the Indenture, the
Sale and Servicing Agreement, the Administration Agreement, the Custodial
Agreement, the Note Depository Agreement and other documents and certificates
delivered in connection herewith or therewith.
"Benefit Plan Investor" shall have the meaning assigned to such term in
Section 3.10(b).
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Codes. 3801 et seq., as the same may be amended from time to time.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a Trust
Certificate is registered.
"Corporate Trust Office" shall mean, with respect to the Trust, the
principal corporate trust office of the Trust located at Master Financial Asset
Securitization Trust 1998-2, c/o Wilmington Trust Co., Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; or at such other address in the State of Delaware as the Owner
Trustee may designate by notice to the Owners and the Company, or the principal
corporate trust office of any successor Owner Trustee (the address (which shall
be in the State of Delaware) of which the successor owner trustee will notify
the Owners and the Company).
"Definitive Certificate" means a certificated form of security that
represents a Residual Interest Certificate.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Indenture" shall mean the Indenture, dated as of May 1, 1998, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means The Bank of New York, as Indenture Trustee under
the Indenture.
"Issuer" shall mean Master Financial Asset Securitization Trust 1998-2, the
Delaware business trust created pursuant to this Agreement.
"Majority Residual Interestholders" shall mean the Holders of more than an
aggregate 50% Percentage Interest of the Residual Interest.
"Owner" shall mean each holder of a Residual Interest Certificate.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor owner trustee hereunder.
"Paying Agent" shall mean the Indenture Trustee or any successor in
interest thereto or any other paying agent or co-paying agent appointed pursuant
to Section 3.9 hereunder and authorized by the Issuer to make payments to and
distributions from the Certificate Distribution Account.
"Percentage Interest" shall mean with respect to each Residual Interest
Certificate, the percentage portion of all of the Residual Interest evidenced
thereby as stated on the face of such Residual Interest Certificate.
"Prospective Owner" shall have the meaning set forth in Section 3.10(a).
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Depositor, the Servicer, the Owner Trustee and the Issuer in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.
"Record Date" shall mean as to each Payment Date the last Business Day of
the month immediately preceding the month in which such Payment Date occurs.
"Residual Interest" shall mean the right to receive distributions of Excess
Spread, if any, and certain other funds, if any, on each Payment Date, pursuant
to Section 5.2 of this Agreement, Sections 5.01(d), 5.01(e) and 5.02(b) of the
Sale and Servicing Agreement and Section 5.04(b) of the Indenture.
"Residual Interest Certificate" shall mean a certificate substantially in
the form attached as Exhibit A hereto and evidencing the Residual Interest.
"Residual Interestholder" shall mean any Holder of a Percentage Interest of
the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of the date hereof, among the Owner Trust as Issuer, PaineWebber
Mortgage Acceptance Corporation IV, as Depositor, The Bank of New York, as
Indenture Trustee and Grantor Trustee, and the Company, as Transferor and
Servicer, as the same may be amended from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Trust" shall mean the trust established by this Agreement.
"U.S. Person" shall mean a citizen or resident of the United States, a
corporation, partnership (except as provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, an estate that is subject to United States
federal income tax regardless of the source of its income, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more such U.S. Persons have authority to
control all substantial decisions of the trust (or, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible to be treated as U.S. Persons).
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Sale and Servicing Agreement or, if not defined
therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as "Master
Financial Asset Securitization Trust 1998-2", in which name the Owner Trustee
may conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in Delaware as
the Owner Trustee may designate by written notice to the Owners and the Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to engage
in the following activities:
(i) to issue the Notes pursuant to the Indenture
and to sell such Notes;
(ii) with the proceeds of the sale of the Notes, to pay
the organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Depositor and the Company, as their
interests may appear pursuant to the Sale and Servicing Agreement;
(iii) to purchase, hold, assign, grant, transfer,
pledge, mortgage and convey the Owner Trust Estate pursuant to the
Indenture and to hold, manage and distribute to the Owners pursuant to
the terms of the Sale and Servicing Agreement any portion of the Owner
Trust Estate released from the lien of, and remitted to the Trust
pursuant to the Indenture;
(iv) to enter into and perform its obligations
under the Basic Documents to which it is to be a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith;
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Owners and the Noteholders; and
(vii) to issue the Residual Interest Certificates
pursuant to this Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor or
the Company shall pay reasonable organizational expenses of the Trust as they
may arise or shall, upon the request of the Owner Trustee, promptly reimburse
the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares that it
will hold the Owner Trust Estate in trust upon and subject to the conditions set
forth herein for the use and benefit of the Owners, subject to the obligations
of the Trust under the Basic Documents. It is the intention of the parties
hereto that the Trust constitute a business trust under the Business Trust
Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that, solely for
federal, state and local income and franchise tax purposes (i) so long as there
is a sole Owner, the Trust shall be treated as a security arrangement, with the
assets of the Trust being the Grantor Trust Certificate and the other assets
held by the Trust, the owner of the Grantor Trust Certificate being the sole
Owner and the Notes being non-recourse debt of the sole Owner, and (ii) if there
is more than one Owner, the Trust shall be treated as a partnership, with the
assets of the partnership being the Grantor Trust Certificate and other assets
held by the Trust, the partners of the partnership being the holders of the
Residual Interest Certificates and the Notes being non-recourse debt of the
partnership. The Trust shall not elect to be treated as an association under
Treasury Regulations Section 301.7701-3(a) for federal income tax purposes. The
parties agree that, unless otherwise required by appropriate tax authorities,
the sole Owner or the Trust will file or cause to be filed annual or other
necessary returns, reports and other forms consistent with the characterization
of the Trust as provided in the second preceding sentence for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust.
SECTION 2.7 Title to Trust Property.
(a) Subject to the Indenture, legal title to all the Owner Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee and/or a separate trustee, as the case
may be.
(b) The Owners shall not have legal title to any part of the Owner Trust
Estate. No transfer by operation of law or otherwise of any interest of the
Owners shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of any part of
the Owner Trust Estate.
SECTION 2.8 Situs of Trust. The Trust will be located and administered in
the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York, except with respect to accounts maintained by the Indenture Trustee on
behalf of the Owner Trustee. The Trust shall not have any employees; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee from
having employees within or without the State of Delaware. Payments will be
received by the Trust only in Delaware or New York, and payments will be made by
the Trust only from Delaware or New York, except with respect to payments made
by the Indenture Trustee on behalf of the Owner Trustee. The only offices of the
Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.9 Representations and Warranties of the Depositor and the
Company; Covenant of the Company.
(a) The Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Depositor is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and has all licenses necessary to carry on its business as now
being conducted. The Depositor has the power and authority to execute
and deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by
the Depositor and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary action of
the Depositor; this Agreement evidences the valid, binding and
enforceable obligation of the Depositor; and all requisite action has
been taken by the Depositor to make this Agreement valid, binding and
enforceable upon the Depositor in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium and
other, similar laws relating to or affecting creditors' rights
generally or the application of equitable principles in any proceeding,
whether at law or in equity;
(ii) The consummation of the transactions contemplated
by this Agreement will not result in (i) the breach of any terms or
provisions of the Articles of Incorporation or Bylaws of the Depositor,
(ii) the breach of any term or provision of, or conflict with or
constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Depositor, or its
property is subject, or (iii) the violation of any law, rule,
regulation, order, judgment or decree to which the Depositor or its
respective property is subject;
(iii) The Depositor is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any federal, state, municipal or other governmental agency, which
default might have consequences that would materially and adversely
affect the condition (financial or otherwise) or operations of the
Depositor or its properties or might have consequences that would
materially and adversely affect its performance hereunder.
(b) The Company hereby represents and warrants to the Owner Trustee that:
(i) The Company is duly organized and validly existing
as a corporation in good standing under the laws of the State of
California, 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 Company is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(iii) The Company has the power and authority to execute
and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or by-laws of the Company, or any
indenture, agreement or other instrument to which the Company is a
party or by which it is bound; nor result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any law or, to the best of the
Company's knowledge, any order, rule or regulation applicable to the
Company of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending
or, to the Company's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties:
(i) asserting the invalidity of this Agreement, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Company of its
obligations under, or the validity or enforceability of, this
Agreement.
(c) The Company covenants with the Owner Trustee that during the
continuance of this Agreement it will comply in all respects with the provisions
of its Articles of Incorporation in effect from time to time.
ARTICLE III
RESIDUAL INTEREST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Residual Interest Certificates, the Depositor shall be the sole Owner of the
Trust.
SECTION 3.2 The Residual Interest Certificates. The Residual Interest
Certificates shall not be issued with a principal amount. The Residual Interest
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of a Trust Officer of the Owner Trustee. Residual Interest
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Residual Interest
Certificates or did not hold such offices at the date of authentication and
delivery of such Residual Interest Certificates.
A transferee of a Residual Interest Certificate shall become an Owner, and
shall be entitled to the rights and subject to the obligations of an Owner
hereunder and under the Sale and Servicing Agreement, upon such transferee's
acceptance of a Residual Interest Certificate duly registered in such
transferee's name pursuant to Section 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Residual Interest
Certificates. Concurrently with the initial sale of the Grantor Trust
Certificate to the Trust pursuant to the Sale and Servicing Agreement, the Owner
Trustee on behalf of the Trust shall cause the Residual Interest Certificates
representing 100% of the Percentage Interests of the Residual Interest to be
executed, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president or any vice
president, without further corporate action by the Depositor, in authorized
denominations. No Residual Interest Certificate shall entitle its holder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Residual Interest Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Administrator, as the Owner Trustee's authenticating agent,
by manual or facsimile signature; such authentication shall constitute
conclusive evidence that such Residual Interest Certificate shall have been duly
authenticated and delivered hereunder. All Residual Interest Certificates shall
be dated the date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of Residual Interest
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8 a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Residual Interest Certificates and
of transfers and exchanges of Residual Interest Certificates as herein provided.
The Administrator shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Residual Interest
Certificate at the office or agency maintained pursuant to Section 3.8, the
Owner Trustee shall execute, authenticate and deliver (or shall cause the
Administrator as its authenticating agent to authenticate and deliver), in the
name of the designated transferee or transferees, one or more new Residual
Interest Certificates in authorized denominations of a like aggregate amount
dated the date of authentication by the Owner Trustee or any authenticating
agent provided that prior to such execution, authentication and delivery, the
Owner Trustee, the Administrator and the Certificate Registrar shall have
received an Opinion of Counsel to the effect that the proposed transfer will not
cause the Trust to be characterized as an association (or a publicly traded
partnership) taxable as a corporation or alter the tax characterization of the
Notes for federal income tax or California state law purposes. At the option of
an Owner, Residual Interest Certificates may be exchanged for other Residual
Interest Certificates of authorized denominations of a like aggregate amount
upon surrender of the Residual Interest Certificates to be exchanged at the
office or agency maintained pursuant to Section 3.8.
Every Residual Interest Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Owner or his attorney duly authorized
in writing. In addition, each Residual Interest Certificate presented or
surrendered for registration of transfer and exchange must be accompanied by a
letter from the Prospective Owner certifying as to the representations set forth
in Sections 3.10(a) and (b). Each Residual Interest Certificate surrendered for
registration of transfer or exchange shall be canceled and disposed of by the
Owner Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Residual Interest Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Residual Interest Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make and the Certificate Registrar shall not register transfers or
exchanges of Residual Interest Certificates for a period of 15 days preceding
the due date for any payment with respect to the Residual Interest Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Residual Interest
Certificates. If (a) any mutilated Residual Interest Certificate shall be
surrendered to the Certificate Registrar, or if the Certificate Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Residual Interest Certificate and (b) there shall be delivered to the
Certificate Registrar and the Owner Trustee such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Residual Interest Certificate shall have been acquired by a bona fide
purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner
Trustee, or the Administrator as the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Residual Interest Certificate, a new Residual Interest
Certificate of like tenor and denomination. In connection with the issuance of
any new Residual Interest Certificate under this Section, the Owner Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Residual Interest Certificate issued pursuant to this
Section shall constitute conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Residual
Interest Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a Residual
Interest Certificate for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Residual Interest
Certificate shall be registered in the Certificate Register as the owner of such
Residual Interest Certificate for the purpose of receiving distributions
pursuant to Section 5.2 and for all other purposes whatsoever, and neither the
Owner Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
SECTION 3.7 Access to List of Owners' Names and Addresses. The Owner
Trustee shall furnish or cause to be furnished to the Servicer, the Depositor
and the Indenture Trustee, within 15 days after receipt by the Owner Trustee of
a request therefor from the Servicer, the Depositor or the Indenture Trustee in
writing, a list, in such form as the Servicer, the Depositor or the Indenture
Trustee may reasonably require, of the names and addresses of the Owners as of
the most recent Record Date. If a Certificateholder applies in writing to the
Owner Trustee, and such application states that the applicant desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Residual Interest Certificates and such application
is accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Owner, by
receiving and holding a Residual Interest Certificate, shall be deemed to have
agreed not to hold any of the Depositor, the Company, the Certificate Registrar
or the Owner Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain an office or offices or agency or agencies where Residual Interest
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the
Residual Interest Certificates and the Basic Documents may be served. The Owner
Trustee initially designates the Administrator's office in the Borough of
Manhattan, The City of New York as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Company and
to the Certificateholders of any change in the location of the Certificate
Register or any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby appoints
the Indenture Trustee as Paying Agent under this Agreement. The Owner Trustee
hereby appoints the Paying Agent to establish and maintain the Certificate
Distribution Account. The Paying Agent shall make distributions to Residual
Interestholders from the Certificate Distribution Account pursuant to Section
5.2 hereof and Section 5.02 of the Sale and Servicing Agreement and shall report
the amounts of such distributions to the Owner Trustee. The Paying Agent shall
have the revocable power to withdraw funds from the Certificate Distribution
Account for the purpose of making the distributions referred to above. In the
event that the Indenture Trustee shall no longer be the Paying Agent hereunder,
the Owner Trustee shall appoint a successor to act as Paying Agent (which shall
be a bank or trust company). The Owner Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Owner Trustee that as
Paying Agent, such successor Paying Agent or additional Paying Agent will hold
all sums, if any, held by it for payment to the Owners in trust for the benefit
of the Residual Interestholders entitled thereto until such sums shall be paid
to such Owners. The Paying Agent shall return all unclaimed funds to the Owner
Trustee, and upon removal of a Paying Agent, such Paying Agent shall also return
all funds in its possession to the Owner Trustee. The provisions of Sections
7.1, 7.3(b), 7.4 and 8.1 shall apply to the Indenture Trustee also in its role
as Paying Agent, for so long as the Indenture Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise. Notwithstanding anything herein to
the contrary, the Paying Agent shall be the same entity as the Indenture Trustee
under the Indenture and the Sale and Servicing Agreement. If the Paying Agent
ceases to be the same entity as the Indenture Trustee under the Indenture and
the Sale and Servicing Agreement, the Paying Agent shall resign and the Owner
Trustee shall assume the duties and obligations of the Paying Agent hereunder
and under the Sale and Servicing Agreement.
SECTION 3.10 Restrictions on Transfer of Residual Interest Certificates.
(a) Each prospective purchaser and any subsequent transferee of
a Residual Interest Certificate (each, a "Prospective Owner"), other
than the Company, shall represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of their respective
successors that:
(i) Such Person is (A) a "qualified institutional buyer"
as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and is aware that the seller
of the Residual Interest Certificate may be relying on the
exemption from the registration requirements of the Securities
Act provided by Rule 144A and is acquiring such Residual
Interest Certificate for its own account or for the account of
one or more qualified institutional buyers for whom it is
authorized to act, or (B) an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act (an "Institutional
Accredited Investor") that is acquiring the Offered Notes for
its own account, or for the account of such an Institutional
Accredited Investor, for investment purposes and not with a
view to, or for offer or sale in connection with any
distribution in violation of the Security Act.
(ii) Such Person understands that the Residual Interest
Certificate have not been and will not be registered under the
Securities Act and may be offered, sold or otherwise
transferred only to a person whom the seller reasonably
believes is (A) a qualified institutional buyer or (B) an
Institutional Accredited Investor, and in accordance with any
applicable securities laws of any state of the United States.
(iii) Such Person understands that the Residual Interest
Certificates bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY
THIS RESIDUAL INTEREST CERTIFICATE HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. THIS RESIDUAL INTEREST CERTIFICATE MAY BE
DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE
144A OR (II) AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT
LIMITED TO, MASTER FINANCIAL, INC.) IN A TRANSACTION
THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS.
NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL
INTEREST CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(iv) Such Person shall comply with the provisions of
Section 3.10(b), as applicable, relating to the ERISA
restrictions with respect to the acceptance or acquisition of
such Residual Interest Certificate.
(b) Each Prospective Owner, other than the Company, shall
either:
(i) represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of their
respective successors that the Prospective Owner is not (A) an
"employee benefit plan" within the meaning of Section 3(3) of
ERISA, or (B) a "plan" within the meaning of Section
4975(e)(1) of the Code or (C) an entity, including an
insurance company separate account or general account, whose
underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan Investor") and
is not directly or indirectly purchasing such Residual
Interest Certificate on behalf of, as investment manager of,
as named fiduciary of, as trustee of, or with the assets of a
Benefit Plan Investor; or
(ii) furnish to the Owner Trustee and the Certificate
Registrar and any of their respective successors an opinion of
counsel acceptable to such persons that (A) the proposed
transfer of the Residual Interest Certificate to such
Prospective Owner will not cause any assets of the Trust to be
deemed "plan assets" within the meaning of United States
Department of Labor Regulation Section 2510.3-101, or (B) the
proposed transfer of the Residual Interest Certificate will
not give rise to a transaction described in Section 406 of
ERISA or Section 4975(c)(1) of the Code for which a statutory
or administrative exemption is unavailable.
(c) The Residual Interest Certificates shall bear an additional legend
referring to the foregoing restrictions contained in paragraph (b) above.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters;
Covenants. (a) With respect to the following matters, the Owner Trustee shall
not take action, and the Owners shall not direct the Owner Trustee to take any
action, unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Owners in writing of the proposed action and the
Owners shall not have notified the Owner Trustee in writing prior to the 30th
day after such notice is given that such Owners have withheld consent or the
Owners have provided alternative direction:
(i) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the
collection of the Home Loans) and the compromise of any
action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits
for collection of the Home Loans);
(ii) the election by the Trust to file an amendment to
the Certificate of Trust (unless such amendment is required
to be filed under the Business Trust Statute);
(iii) the amendment or other change to this Agreement or
any Basic Document in circumstances where the consent of any
Noteholder is required;
(iv) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any
Noteholder is not required and such amendment materially
adversely affects the interest of the Owners;
(v) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or pursuant
to this Agreement of a successor Certificate Registrar, or the
consent to the assignment by the Note Registrar, Paying Agent
or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as
applicable;
(vi) the consent to the calling or waiver of any defaultof
any Basic Document;
(vii) the consent to the assignment by the Indenture Trustee
or Servicer of their respective obligations under any Basic
Document;
(viii) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(ix) merge or consolidate the Trust with or into any
other entity, or convey or transfer all or substantially all
of the Trust's assets to any other entity;
(x) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement;
(xi) do any act that conflicts with any other Basic Document;
(xii) do any act which would make it impossible to carry on
the ordinary business of the Trust;
(xiii) confess a judgment against the Trust;
(xiv) possess Trust assets, or assign the Trust's right
to property, for other than a Trust purpose;
(xv) cause the Trust to lend any funds to any entity; or
(xvi) change the Trust's purpose and powers from
those set forth in this Owner Trust Agreement.
(b) The Owner Trustee on behalf of the Trust agrees to abide by the
following restrictions:
(i) Other than as contemplated by the Basic
Documents and related documentation, the Trust shall not incur
any indebtedness.
(ii) Other than as contemplated by the Basic Documents
and related documentation, the Trust shall not engage in any
dissolution, liquidation, consolidation, merger or sale of
assets.
(iii) The Trust shall not engage in any business
activity in which it is not currently engaged other than as
contemplated by the Basic Documents and related documentation.
(iv) The Trust shall not form, or cause to be formed,
any subsidiaries and shall not own or acquire any asset other
than as contemplated by the Basic Documents and related
documentation.
(v) Other than as contemplated by the Basic Documents
and related documentation, the Trust shall not follow the
directions or instructions of the Company.
(c) The Owner Trustee on behalf of the Trust shall:
(i) Maintain books and records separate from any
other person or entity.
(ii) Maintain its bank accounts separate from any
other person or entity.
(iii) Not commingle its assets with those of any
other person or entity.
(iv) Conduct its own business in its own name.
(v) Other than as contemplated by the Basic
Documents and related documentation, pay its own
liabilities and expenses only out of its own funds.
(vi) Observe all formalities required under the
Business Trust Statute.
(vii) Enter into transactions with Affiliates or the
Company only if each such transaction is intrinsically fair,
commercially reasonable, and on the same terms as would be
available in an arm's length transaction with a person or
entity that is not an Affiliate.
(viii) Not guarantee or become obligated for the
debts of any other entity or person.
(ix) Not hold out its credit as being available
to satisfy the obligation of any other person or entity.
(x) Not acquire the obligations or securities of
its Affiliates or the Company.
(xi) Other than as contemplated by the Basic
Documents and related documentation, not make loans to any
other person or entity or buy or hold evidence of indebtedness
issued by any other person or entity.
(xii) Other than as contemplated by the Basic
Documents and related documentation, not pledge its assets for
the benefit of any other person or entity.
(xiii) Hold itself out as a separate entity from the
Company and not conduct any business in the name of the
Company.
(xiv) Correct any known misunderstanding regarding
its separate identity.
(xv) Not identify itself as a division of any
other person or entity.
So long as the Notes or any other amounts owed under the Indenture remain
outstanding, the Trust shall not amend this Section 4.1 without the prior
written consent of 100% of the Voting Interests of the Notes and the consent of
each Rating Agency, in addition to the requirements under Section 11.1.
(d) The Owner Trustee shall not have the power, except upon the direction
of the Owners and, subject to Section 11.16 of the Indenture, 100% of the
Noteholders, and to the extent otherwise consistent with the Basic Documents, to
(i) remove or replace the Servicer, the Indenture Trustee or the Grantor
Trustee, (ii) institute proceedings to have the Trust declared or adjudicated a
bankrupt or insolvent, (iii) consent to the institution of bankruptcy or
insolvency proceedings against the Trust, (iv) file a petition or consent to a
petition seeking reorganization or relief on behalf of the Trust under any
applicable federal or state law relating to bankruptcy, (v) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any
similar official) of the Trust or a substantial portion of the property of the
Trust, (vi) make any assignment for the benefit of the Trust's creditors, (vii)
cause the Trust to admit in writing its inability to pay its debts generally as
they become due, (viii) take any action, or cause the Trust to take any action,
in furtherance of any of the foregoing (any of the above, a "Bankruptcy
Action"). So long as the Indenture remains in effect, no Certificateholder shall
have the power to take, and shall not take, any Bankruptcy Action with respect
to the Trust or the Company or direct the Owner Trustee to take any Bankruptcy
Action with respect to the Trust or the Company.
SECTION 4.2 Action by Owners with Respect to Certain Matters. The Owner
Trustee shall not have the power, except upon the direction of the Owners, to
(a) remove the Administrator under the Administration Agreement pursuant to
Section 8 thereof, (b) appoint a successor Administrator pursuant to Section 8
of the Administration Agreement, (c) remove the Servicer under the Sale and
Servicing Agreement pursuant to Section 10.01 thereof or (d) sell the Grantor
Trust Certificate after the termination of the Indenture. The Owner Trustee
shall take the actions referred to in the preceding sentence only upon written
instructions signed by the Owners.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The Owner Trustee
shall not have the power to commence a voluntary Bankruptcy Action relating to
the Trust unless the conditions specified in Section 4.1 (d) are satisfied.
SECTION 4.4 Restrictions on Owners' Power. The Owners shall not direct the
Owner Trustee to take or refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Majority Residual Interestholders. Except as expressly provided herein, any
written notice of the Owners delivered pursuant to this Agreement shall be
effective if signed by the Majority Residual Interestholders at the time of the
delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Owner Trustee shall cause
the Servicer, for the benefit of the Owners, to establish and maintain with The
Bank of New York for the benefit of the Owner Trustee one or more Eligible
Accounts which, so long as the Indenture Trustee holds such Trust Account on
behalf of the Owner Trustee, shall be entitled "Certificate Distribution
Account, The Bank of New York, on behalf of the Owner Trustee, in trust for the
Master Financial Home Loan Asset Backed Securities, Series 1998-2". Funds shall
be deposited in the Certificate Distribution Account as required by the Sale and
Servicing Agreement.
All of the right, title and interest of the Owner Trustee and the Paying
Agent in all funds on deposit from time to time in the Certificate Distribution
Account and in all proceeds thereof shall be held for the benefit of the Owners
and such other persons entitled to distributions therefrom. Except as otherwise
expressly provided herein or in the Sale and Servicing Agreement, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee or Paying Agent for the benefit of the Owners and the
Servicer.
In addition to the foregoing, the Certificate Distribution Account is a
Trust Account under the Sale and Servicing Agreement and constitutes part of the
Owner Trust Estate pledged by the Trust to the Indenture Trustee under the
Indenture. The Certificate Distribution Account shall be subject to and
established and maintained in accordance with the applicable provisions of the
Sale and Servicing Agreement and the Indenture, including, without limitation,
the provisions of Section 5.02(c) of the Sale and Servicing Agreement regarding
distributions from the Certificate Distribution Account.
The Company agrees to direct and shall have the sole authority to direct
the Owner Trustee or Indenture Trustee or their successor in interest, as to the
Permitted Investments in which the funds on deposit in the Trust Accounts (as
such term is defined in the Sale and Servicing Agreement) may be invested.
SECTION 5.2 Application Of Trust Funds.
(a) On each Payment Date, the Owner Trustee or Indenture Trustee, on behalf
of the Owner Trustee, shall direct the Paying Agent to distribute to the
Servicer and the Residual Interestholders from amounts on deposit in the
Certificate Distribution Account the distributions as provided in Section
5.02(b) of the Sale and Servicing Agreement with respect to such Payment Date.
(b) On each Payment Date, the Owner Trustee shall cause the Paying Agent to
send to DTC and each Residual Interestholder the statement provided to the Owner
Trustee by the Servicer pursuant to Section 6.01 of the Sale and Servicing
Agreement with respect to such Payment Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. In the event of any
claimed overwithholding, Owners shall have no claim for recovery against the
Trust or other Owners. If the amount withheld was not withheld from actual
distributions, the Trust may, at its option, (i) require the Owner to reimburse
the Trust for such withholding (and each Owner agrees to reimburse the Trust
promptly following such request) or (ii) reduce any subsequent distributions by
the amount of such withholding. If the Owner Trustee determines that a
withholding tax is payable with respect to a distribution (such as a
distribution to an Owner (or any other beneficial owner of the Owner Trust) that
is not a U.S. Person and that has not established an applicable exemption from
withholding (such as an effective Form W-8, Form 1001 or Form 4224), the Owner
Trustee shall in its sole discretion withhold such amounts as it determines are
required to be withheld in accordance with this paragraph (c). In the event that
an Owner wishes to apply for a refund of any such withholding tax, the Owner
Trustee shall reasonably cooperate with such owner in making such claim so long
as such Owner agrees to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
SECTION 5.3 Method of Payment. Subject to Section 3.10, distributions
required to be made to Owners on any Payment Date shall be made to each Owner of
record on the preceding Record Date either by wire transfer, in immediately
available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if such Owner shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Payment Date; or, if not, by check mailed to such Owner at
the address of such holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections 4.1 and
5.2, moneys received by the Owner Trustee hereunder and deposited into the
Certificate Distribution Account will be segregated except to the extent
required otherwise by law or the Sale and Servicing Agreement and shall be
invested in Permitted Investments at the direction of the Company. The Owner
Trustee shall not be liable for payment of any interest in respect of such
moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners, the
Internal Revenue Service and Others. The Owner Trustee shall deliver to each
Owner, as may be required by the Code and applicable Treasury Regulations, or as
may be requested by such Owner, such information, reports or statements as may
be necessary to enable each Owner to prepare its federal and state income tax
returns. Consistent with the Trust's characterization for tax purposes as a
security arrangement for the issuance of non-recourse debt so long as the
Company or any other Person is the sole Owner, no federal income tax return
shall be filed on behalf of the Trust unless either (i) the Owner Trustee shall
receive an Opinion of Counsel that, based on a change in applicable law
occurring after the date hereof, or as a result of a transfer by the Company
permitted by Section 3.4, the Code requires such a filing or (ii) the Internal
Revenue Service shall determine that the Trust is required to file such a
return. In the event that there shall be two or more beneficial owners of the
Trust, the Owner Trustee shall inform the Indenture Trustee in writing of such
event, (x) the Owner Trustee shall prepare or shall cause to be prepared federal
and, if applicable, state or local partnership tax returns required to be filed
by the Trust and shall remit such returns to the Company (or if the Company no
longer owns any Residual Interest Certificates, the Owner designated for such
purpose by the Company to the Owner Trustee in writing) at least (5) days before
such returns are due to be filed, and (y) capital accounts shall be maintained
for each Owner (or beneficial owner) in accordance with the Treasury Regulations
under Section 704(b) of the Code reflecting each such Owner's (or beneficial
owner's) share of the income, gains, deductions, and losses of the Trust and/or
guaranteed payments made by the Trust and contributions to, and distributions
from, the Trust. The Company (or such designee Owner, as applicable) shall
promptly sign such returns and deliver such returns after signature to the Owner
Trustee and such returns shall be filed by the Owner Trustee with the
appropriate tax authorities. In the event that a "tax matters partner" (within
the meaning of Code Section 6231(a)(7) is required to be appointed with respect
to the Trust, the Company is hereby designated as tax matters partner or, if the
Company is not an Owner, the Owner selected by a majority of the Owners (by
Percentage Interest) shall be designated as tax matters partner. In no event
shall the Owner Trustee or the Company (or such designee Owner, as applicable)
be liable for any liabilities, costs or expenses of the Trust or the Noteholders
arising out of the application of any tax law, including federal, state, foreign
or local income or excise taxes or any other tax imposed on or measured by
income (or any interest, penalty or addition with respect thereto or arising
from a failure to comply therewith) except for any such liability, cost or
expense attributable to any act or omission by the Owner Trustee or the Company
(or such designee Owner, as applicable), as the case may be, in breach of its
obligations under this Agreement.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and directed
to execute and deliver or cause to be executed and delivered the Notes, the
Residual Interest Certificates and the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument described in Article III, in each
case, in such form as the Company shall approve, as evidenced conclusively by
the Owner Trustee's execution thereof, and, on behalf of the Trust, to direct
the Indenture Trustee to authenticate and deliver Classes of Securities in the
following aggregate principal amounts or notional amounts, as applicable: Class
A-1 Notes, $74,260,000; Class A-2 Notes, $32,072,000; Class A-3 Notes,
$28,084,000; Class A-4 Notes, $17,589,000; Class A-4 IO Notes, $17,589,000;
Class M-1 Notes, $21,715,000; Class M-2 Notes, $19,543,500; Class B-1 Notes,
$17,372,000; and Class B-2 Notes, $6,514,500. The Administrator on behalf of the
Owner Trustee shall authenticate and deliver the Residual Interest Certificates.
In addition to the foregoing, the Owner Trustee is authorized, but shall not be
obligated, to take all actions required of the Trust, pursuant to the Basic
Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the Owners,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed to
have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator or the Indenture Trustee has agreed in
the Administration Agreement or this Agreement, respectively, to perform any act
or to discharge any duty of the Owner Trustee or the Trust hereunder or under
any Basic Document, and the Owner Trustee shall not be held liable for the
default or failure of the Administrator or the Indenture Trustee to carry out
its obligations under the Administration Agreement or this Agreement,
respectively; and
(b) to obtain and preserve, the Issuer's qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Indenture, the Notes, the
Collateral and each other instrument and agreement included in the Owner Trust
Estate.
SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the Basic
Documents, the Owners may by written instruction direct the Owner Trustee in the
management of the Trust but only to the extent consistent with the limited
purpose of the Trust. Such direction may be exercised at any time by written
instruction of the Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely to result in
liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instruction from the Owners as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the Owners, and
shall have no liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or Instructions. The
Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.3 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Owners shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts the
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement and the Basic Documents.
The Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment made by
a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of the
Administrator or the Owners;
(c) no provision of this Agreement or any Basic Document shall require the
Owner Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of any of its rights or powers hereunder or under any Basic
Document if the Owner Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or the Company or for the form, character, genuineness, sufficiency,
value or validity of any of the Owner Trust Estate or for or in respect of the
validity or sufficiency of the Basic Documents, other than the certificate of
authentication on the Residual Interest Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty, or obligation to any
Noteholder or to any Owner, other than as expressly provided for herein and in
the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct of
the Administrator, the Depositor, the Company, the Indenture Trustee, the
Grantor Trustee or the Servicer under any of the Basic Documents or otherwise
and the Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture, the Grantor Trustee under
the Grantor Trust Agreement or the Servicer under the Sale and Servicing
Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in the
performance of any such act provided, that the Owner Trustee shall be liable for
its negligence or willful misconduct in the event that it assumes the duties and
obligations of the Indenture Trustee under the Sale and Servicing Agreement
pursuant to Section 10.5.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish (a) to
the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents and (b) to Noteholders promptly upon written request therefor,
copies of the Sale and Servicing Agreement, the Administration Agreement and the
Owner Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the Depositor and
the Company, for the benefit of the Owners, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Delaware law,
governmental rule or regulation governing the banking or trust powers
of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
(b) The Paying Agent hereby represents and warrants to the Depositor and
the Company that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of New
York. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or New York law,
governmental rule or regulation governing the banking or trust powers
of the Paying Agent or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Residual Interest Certificates or
Home Loans. The recitals contained herein and in the Residual Interest
Certificates (other than the signature and countersignature of the Owner Trustee
on the Residual Interest Certificates) shall be taken as the statements of the
Depositor and the Company, and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, of any Basic Document or of the
Residual Interest Certificates (other than the signature and countersignature of
the Owner Trustee on the Residual Interest Certificates and as specified in
Section 7.3) or the Notes, or of any Home Loans or related documents. The Owner
Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of the Grantor Trust
Certificate, any Home Loan, or the perfection and priority of any security
interest created by any Home Loan or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to Owners under this
Agreement or the Noteholders under the Indenture, including, without limitation:
the existence, condition and ownership of any Mortgaged Property; the existence
and enforceability of any insurance thereon; the existence and contents of any
Home Loan on any computer or other record thereof; the validity of the
assignment of the Grantor Trust Certificate to the Trust or of any intervening
assignment; the completeness of any Home Loan; the performance or enforcement of
any Home Loan; the compliance by the Depositor, the Company or the Servicer with
any warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation or any action of
the Administrator, the Indenture Trustee or the Servicer or any subservicer
taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Residual Interest Certificates and Notes.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Residual Interest Certificates or Notes and may deal with the
Depositor, the Company, the Administrator, the Indenture Trustee and the
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use its
best efforts to obtain and maintain the effectiveness of any licenses required
in connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND PAYING AGENT
SECTION 8.1 Fees and Expenses. The Owner Trustee shall receive as
compensation for its services hereunder such fees as have been separately agreed
upon before the date hereof between the Company and the Owner Trustee, and the
Owner Trustee shall be entitled to be reimbursed by the Company for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder. The Paying Agent shall receive as compensation
for its services hereunder such fees, if any, as have been separately agreed
upon before the date hereof between the Company and the Paying Agent.
SECTION 8.2 Indemnification. The Company shall be liable as primary
obligor, and the Servicer as secondary obligor pursuant to the Administration
Agreement, for, and shall indemnify the Owner Trustee, the Paying Agent and
their successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee or the Paying Agent
hereunder, except only that the Company shall not be liable for or required to
indemnify an Indemnified Party from and against Expenses arising or resulting
from any of the matters described in the provisions of Section 9.01(d) of the
Sale and Servicing Agreement, provided that a standard of gross negligence shall
apply to the Owner Trustee. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's or Paying
Agent's choice of legal counsel shall be subject to the approval of the Company,
which approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee and Paying Agent. Any amounts
paid to the Owner Trustee and/or Paying Agent pursuant to this Article VIII
shall be deemed not to be a part of the Owner Trust Estate immediately after
such payment.
ARTICLE IX
TERMINATION OF OWNER TRUST AGREEMENT
SECTION 9.1 Termination of Owner Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall terminate
and be of no further force or effect on the earlier of: (i) the satisfaction and
discharge of the Indenture pursuant to Section 4.01 of the Indenture and the
termination of the Sale and Servicing Agreement; and (ii) the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy (the late ambassador of the United States to the Court of St. James's)
alive on the date hereof. The bankruptcy, liquidation, dissolution, death or
incapacity of any Owner shall not (x) operate to terminate this Agreement or the
Trust, nor (y) entitle such Owner's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of all or any part of the Trust or Owner Trust Estate nor (z)
otherwise affect the rights, obligations and liabilities of the parties hereto.
(b) The Residual Interest Certificates shall be subject to an early
redemption or termination at the option of the Company in the manner and subject
to the provisions of Section 11.02 of the Sale and Servicing Agreement.
(c) Except as provided in Sections 9.1(a) and (b) above, none of the
Depositor, the Company nor any Owner shall be entitled to revoke or terminate
the Trust.
(d) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Residual Interest
Certificates to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders and
the Rating Agencies mailed within five Business Days of receipt by the Owner
Trustee of notice of such termination pursuant to Section 9.1(a) or (b) above,
which notice given by the Owner Trustee shall state (i) the Payment Date upon or
with respect to which final payment of the Residual Interest Certificates shall
be made upon presentation and surrender of the Residual Interest Certificates at
the office of the Paying Agent therein designated, (ii) the amount of any such
final payment and (iii) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Residual Interest Certificates at the office of the Paying
Agent therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at
the time such notice is given to Certificateholders. Upon presentation and
surrender of the Residual Interest Certificates, the Paying Agent shall cause to
be distributed to Certificateholders amounts distributable on such Payment Date
pursuant to Section 5.02 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not surrender their
Residual Interest Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Residual Interest Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Residual Interest Certificates shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Residual Interest Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Paying Agent to the Residual
Interestholders on a pro rata basis.
(e) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3820 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner Trustee
shall at all times be a corporation satisfying the provisions of Section 3807(a)
of the Business Trust Statute; authorized to exercise corporate powers having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by Federal or state authorities; and having (or having a parent
which has) a long-term rating of at least "A" by Fitch and DCR, and "A2" by
Moody's. If such corporation shall publish reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee . The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Company, Administrator and the Indenture
Trustee. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Owner Trustee may petition any
court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Company, or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Company may remove the Owner Trustee. If the Company shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Company
shall promptly appoint a successor Owner Trustee by written instrument in
duplicate, one copy of which instrument shall be delivered to the outgoing Owner
Trustee so removed and one copy to the successor Owner Trustee and payment of
all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Company shall provide notice of such resignation
or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3 Successor Owner Trustee . Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Company and the Administrator and to its predecessor Owner Trustee an instrument
accepting such appointment under this Agreement, and thereupon the resignation
or removal of the predecessor Owner Trustee shall become effective and such
successor Owner Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Company, Administrator and the
predecessor Owner Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties, and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Company shall mail notice of the successor of such Owner
Trustee to all Owners, the Administrator, the Indenture Trustee, the Noteholders
and the Rating Agencies. If the Company fails to mail such notice within 10 days
after acceptance of appointment by the successor Owner Trustee, the successor
Owner Trustee shall cause such notice to be mailed at the expense of the
Administrator.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation into
which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Mortgaged Property may at the time be located,
and for the purpose of performing certain duties and obligations of the Owner
Trustee with respect to the Trust and the Residual Interest Certificates under
the Sale and Servicing Agreement, the Administrator and the Owner Trustee acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Owner Trustee to act as co-owner
trustee, jointly with the Owner Trustee, or separate trustee or separate
trustees, of all or any part of the Owner Trust Estate, and to vest in such
Person, in such capacity, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Administrator and the Owner Trustee may
consider necessary or desirable. If the Administrator shall not have joined in
such appointment within 25 days after the receipt by it of a request so to do,
the Owner Trustee shall have the power to make such appointment. No co-owner
trustee or separate owner trustee under this Agreement shall be required to meet
the terms of eligibility as a successor trustee pursuant to Section 10.1 and no
notice of the appointment of any co-trustee or separate owner trustee shall be
required pursuant to Section 10.1.
Each separate owner trustee and co-owner trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred upon and
exercised or performed by the Owner Trustee and such separate owner
trustee or co-owner trustee jointly (it being understood that such
separate owner trustee or co-owner trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed, the Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties, and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate owner trustee
or co-owner trustee, but solely at the direction of the Owner Trustee;
provided that Paying Agent, in performing its duties and obligations
under the Sale and Servicing Agreement, may act separately in its
capacity as Indenture Trustee without the Owner Trustee joining in such
Acts;
(ii) no owner trustee under this Agreement shall be
personally liable by reason of any act or omission of any other owner
trustee under this Agreement; and
(iii) the Administrator and the Owner Trustee acting
jointly may at any time accept the resignation of or remove any
separate owner trustee or co-owner trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to the separate owner trustees and co-owner trustees,
as if given to each of them. Every instrument appointing any separate owner
trustee or co-owner trustee, other than this Agreement, shall refer to this
Agreement and to the conditions of this Article. Each separate owner trustee and
co-owner trustee, upon its acceptance of appointment, shall be vested with the
estates specified in its instrument of appointment, either jointly with the
Owner Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Administrator.
Any separate owner trustee or co-owner trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate owner trustee or
co-owner trustee shall die, become incapable of acting, resign or be removed,
all of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
The Indenture Trustee, in its capacity as Paying Agent, shall not have any
rights, duties or obligations except as expressly provided in this Agreement and
the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be amended by
the Depositor, the Company and the Owner Trustee, with prior written notice to
the Rating Agencies, but without the consent of any of the Noteholders or the
Owners or the Indenture Trustee, to cure any ambiguity, to correct or supplement
any provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this Agreement
or of modifying in any manner the rights of the Noteholders or the Owners
provided, however, that such action shall not adversely affect in any material
respect the interests of any Noteholder or Owner. An amendment described above
shall be deemed not to adversely affect in any material respect the interests of
any Noteholder or Owner if (i) an opinion of counsel is obtained to such effect,
and (ii) the party requesting the amendment satisfies the Rating Agency
Condition with respect to such amendment.
This Agreement may also be amended from time to time by the Depositor, the
Company and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the
Holders (as defined in the Indenture) of Notes evidencing more than 50% of the
Outstanding Amount of the Notes and the Majority Residual Interestholders, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or the Owners; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the Grantor Trust Certificate or
distributions that shall be required to be made for the benefit of the
Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of
the Outstanding Amount of the Notes or the Percentage Interests required to
consent to any such amendment, in either case of clause (a) or (b) without the
consent of the holders of all the outstanding Notes, and in the case of clause
(b) without the consent of the holders of all the outstanding Residual Interest
Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee, the Grantor Trustee
and each of the Rating Agencies.
It shall not be necessary for the consent of Owners, the Noteholders or the
Indenture Trustee pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Owners provided for in this Agreement or in any other Basic
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners. The Owners
shall not have legal title to any part of the Owner Trust Estate. The Owners
shall be entitled to receive distributions with respect to their undivided
ownership interest therein only in accordance with Articles V and IX. No
transfer, by operation of law or otherwise, of any right, title, or interest of
the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Company, the Owners, the Administrator, the Paying Agent and, to the extent
expressly provided herein, the Indenture Trustee, the Grantor Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified or permitted
by the terms hereof, all notices shall be in writing, mailed by certified mail,
postage prepaid, return receipt requested, and shall be deemed given upon actual
receipt by the intended recipient, at the following addresses: (i) if to the
Owner Trustee, its Corporate Trust Office; (ii) if to the Depositor, PaineWebber
Mortgage Acceptance Corporation IV, 1285 Avenue of the Americas, New York, New
York 10019, Attention: John Fearey, Esq., General Counsel; (iii) if to the
Company, Master Financial, Inc., 333 South Anita Drive, Orange, California
92868, Attention: Kristi Carlson; (iv) if to the Indenture Trustee, its
Corporate Trust Office; (v) if to the Paying Agent, The Bank of New York , 101
Barclay Street, Floor 12 East, New York, New York 10286; Attention: Corporate
Trust MBS Administration or, as to each such party, at such other address as
shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to an Owner shall be given
by first-class mail, postage prepaid, at the address of such Owner as shown in
the Certificate Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Depositor, the
Company, the Owner Trustee and its successors and each owner and its successors
and permitted assigns, all as herein provided. Any request, notice, direction,
consent, waiver or other instrument or action by an Owner shall bind the
successors and assigns of such Owner.
SECTION 11.8 No Petition. The Owner Trustee, by entering into this
Agreement, each Owner, by accepting a Residual Interest Certificate, and the
Indenture Trustee and each Noteholder by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Company, the Depositor or the Trust, or join in any institution
against the Company or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or law in connection with any
obligations relating to the Residual Interest Certificates, the Notes, this
Agreement or any of the Basic Documents.
SECTION 11.9 No Recourse. (a) Each Owner by accepting a Residual Interest
Certificate acknowledges that such Residual Interest Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Company, the Servicer, the Depositor, the Administrator,
the Owner Trustee, the Indenture Trustee or any Affiliate thereof and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated in this Agreement, the Residual Interest
Certificates or the Basic Documents.
(b) The Depositor shall not be liable for the default or misconduct of the
Administrator, the Owner Trustee, the Indenture Trustee, the Paying Agent or the
Servicer under any of the Basic Documents or otherwise and the Depositor shall
have no obligation or liability to perform the obligations of the Trust under
this Agreement or the Basic Documents that are required to be performed by the
Administrator under the Administration Agreement, the Indenture Trustee under
the Indenture or the Servicer under the Sale and Servicing Agreement.
SECTION 11.10 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 Residual Interest Transfer Restrictions. The Residual
Interest may not be acquired by or for the account of a Benefit Plan Investor.
By accepting and holding a Residual Interest Certificate, the Owner thereof
shall be deemed to have represented and warranted that it is not a Benefit Plan
Investor.
<PAGE>
IN WITNESS OF, the parties hereto have caused this Owner Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
Depositor
By: ______________________________________
Barbara J. Dawson
Senior Vice President
MASTER FINANCIAL, INC.
By: ______________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: ______________________________________
Emmett R. Harmon
Vice President
THE BANK OF NEW YORK, not in its individual
capacity but solely as Paying Agent
By: ______________________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE OWNER TRUST AGREEMENT
FORM OF RESIDUAL INTEREST CERTIFICATE
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO, MASTER
FINANCIAL, INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
RESIDUAL INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.
EXCEPT AS PROVIDED IN SECTION 3.10(B) OF THE OWNER TRUST AGREEMENT, NO TRANSFER
OF THIS RESIDUAL INTEREST CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
MADE UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO
THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT (A) AN "EMPLOYEE BENEFIT PLAN" WITHIN
THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, (B) A "PLAN" WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH,
A "BENEFIT PLAN INVESTOR"), AND (II) IS NOT DIRECTLY OR INDIRECTLY PURCHASING
SUCH RESIDUAL INTEREST CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS
NAMED FIDUCIARY OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A BENEFIT PLAN
INVESTOR.
<PAGE>
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
RESIDUAL INTEREST CERTIFICATE
No. ______
THIS CERTIFIES THAT _______________________________ (the "Owner") is the
registered owner of a ____% residual interest in Master Financial Asset
Securitization Trust 1998-2 (the "Trust") existing under the laws of the State
of Delaware and created pursuant to the Owner Trust Agreement dated as of May 1,
1998 (the "Owner Trust Agreement") between PaineWebber Mortgage Acceptance
Corporation IV, as Depositor, Master Financial, Inc., as the Company, Wilmington
Trust Company, not in its individual capacity but solely in its fiduciary
capacity as owner trustee under the Owner Trust Agreement (the "Owner Trustee")
and The Bank of New York , as Paying Agent (the "Paying Agent"). Initially
capitalized terms used but not defined herein have the meanings assigned to them
in the Owner Trust Agreement. The Owner Trustee, on behalf of the Issuer and not
in its individual capacity, has executed this Residual Interest Certificate by
one of its duly authorized signatories as set forth below. This Residual
Interest Certificate is one of the Residual Interest Certificates referred to in
the Owner Trust Agreement and is issued under and is subject to the terms,
provisions and conditions of the Owner Trust Agreement to which the holder of
this Residual Interest Certificate by virtue of the acceptance hereof agrees and
by which the holder hereof is bound. Reference is hereby made to the Owner Trust
Agreement and the Sale and Servicing Agreement for the rights of the holder of
this Residual Interest Certificate, as well as for the terms and conditions of
the Trust created by the Owner Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this Residual
Interest Certificate except in accordance with terms and provisions of the Owner
Trust Agreement.
<PAGE>
THIS RESIDUAL INTEREST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Residual Interest Certificate to be
duly executed.
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Owner Trust
Agreement
By: _________________________________________
Authorized Signatory
DATED: May _, 1998
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Owner
Trust Agreement.
___________________________.
as Authenticating Agent
By: __________________________________________
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________________________
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated: _______________
____________________________________*/
Signature Guaranteed:
____________________________________*/
___________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
<PAGE>
EXHIBIT B
TO THE OWNER TRUST AGREEMENT
CERTIFICATE OF TRUST OF
MASTER FINANCIAL ASSET SECURITIZATION TRUST 1998-2
THIS Certificate of Trust of Master Financial Asset Securitization Trust
1998-2 (the "Trust"), dated May ___, 1998, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, and The
Bank of New York, as paying agent, to form a business trust under the Delaware
Business Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is Master
Financial Asset Securitization Trust 1998-2.
2. Delaware Trustee. The name and business address of the trustee of
the Trust, in the State of Delaware is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
* * *
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the owner trustee and paying
agent of the Trust, have executed this Certificate of Trust as of the date first
above written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as owner
trustee under an Owner Trust Agreement dated as of
May 1, 1998
By: ________________________________
Name:
Title:
================================================================================
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
and
THE BANK OF NEW YORK
(Grantor Trustee)
and
MASTER FINANCIAL, INC.
(Transferor)
--------------------------------------
GRANTOR TRUST AGREEMENT
Dated as of May 1, 1998
--------------------------------------
MASTER FINANCIAL GRANTOR TRUST 1998-2
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions......................................................1
ARTICLE II
CONVEYANCE OF HOME LOANS; ORIGINAL ISSUANCE OF GRANTOR TRUST CERTIFICATE
Section 2.01. Conveyance of the Home Loans....................................4
Section 2.02. Acceptance by Grantor Trustee; Authentication of Grantor Trust
Certificate.....................................................5
Section 2.03. Ownership and Possession of Home Loan Files.....................5
Section 2.04. Books and Records...............................................5
Section 2.05. Delivery of Home Loan Documents.................................6
Section 2.06. Acceptance by the Grantor Trustee of the Home Loans; Certain
Substitutions; Certification by the Custodian...................8
Section 2.07. Subsequent Transfers...........................................11
Section 2.08. Release and Reconveyance of Home Loans.........................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor................14
ARTICLE IV
THE GRANTOR TRUST CERTIFICATE
Section 4.01. The Grantor Trust Certificate..................................16
Section 4.02. Registration, Transfer and Exchange of Grantor Trust
Certificate....................................................16
Section 4.03. Mutilated, Destroyed, Lost or Stolen Grantor Trust
Certificate....................................................20
Section 4.04. Persons Deemed Owners..........................................21
Section 4.05. Maintenance of Office or Agency................................21
ARTICLE V
GRANTOR TRUST ACCOUNTS; PAYMENTS TO GRANTOR TRUST HOLDER
Section 5.01. Collection Account.............................................21
Section 5.02. Distributions from Collection Account..........................22
Section 5.03. Pre-Funding Account............................................22
ARTICLE VI
CONCERNING THE GRANTOR TRUSTEE
Section 6.01. Duties of Grantor Trustee......................................22
Section 6.02. Certain Matters Affecting the Grantor Trustee..................23
Section 6.03. Grantor Trustee not Required to Make Investigation.............24
Section 6.04. Grantor Trustee's Fees.........................................24
Section 6.05. Compliance with Code...........................................24
Section 6.06. Eligibility Requirements for Grantor Trustee...................25
Section 6.07. Resignation and Removal of Grantor Trustee.....................25
Section 6.08. Successor Grantor Trustee......................................26
Section 6.09. Merger or Consolidation of Grantor Trustee.....................26
Section 6.10. Authenticating Agent...........................................27
ARTICLE VII
TERMINATION
Section 7.01. Termination....................................................28
Section 7.02. Procedure Upon Termination of Grantor Trust....................28
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Binding Nature of Agreement; Assignment........................29
Section 8.02. Entire Agreement...............................................29
Section 8.03. Amendment......................................................29
Section 8.04. Governing Law..................................................30
Section 8.05. Notices........................................................30
Section 8.06. Severability of Provisions.....................................30
Section 8.07. Indulgences; No Waivers........................................30
Section 8.08. Headings Not To Affect Interpretation..........................30
Section 8.09. Benefits of Agreement..........................................31
Section 8.10. Counterparts...................................................31
Section 8.11. Security Interest..............................................31
EXHIBIT A FORM OF GRANTOR TRUST CERTIFICATE
EXHIBIT B FORM OF INVESTMENT AND ERISA REPRESENTATION LETTER
EXHIBIT C FORM OF SUBSEQUENT TRANSFER AGREEMENT
<PAGE>
THIS GRANTOR TRUST AGREEMENT ("Grantor Trust Agreement" or "Agreement"),
dated as of May 1, 1998, by and among PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor, THE BANK OF NEW YORK, as Grantor Trustee and
MASTER FINANCIAL, INC., as Transferor.
The parties hereto intend that this Grantor Trust Agreement be construed so
as to create an "investment trust" formed to facilitate the direct investment by
the Grantor Trust Holder in the assets of the Grantor Trust Estate, within the
meaning of Section 301.7701-4(c) of the regulations of the U.S. Department of
the Treasury, and not a partnership or an association taxable as a corporation,
and that the rights, duties, and powers of the Grantor Trustee hereunder be
construed so as not to confer on the Grantor Trustee any power to vary the
investment of the Grantor Trust Holder by taking advantage of market
fluctuations to improve its rate of return.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article. Capitalized terms used without definition
herein shall have the respective meanings assigned to them in the Sale and
Servicing Agreement.
Act: The Securities Act of 1933, as amended, and as it may be amended from
time to time.
Authenticating Agent: Any authenticating agent appointed by the Grantor
Trustee pursuant to Section 6.10.
Certificate Register and Certificate Registrar: Respectively, the register
maintained pursuant to and the registrar provided for in Section 4.02. The
initial Certificate Registrar is the Grantor Trustee.
Claims Administrator: Master Financial, Inc. in its capacity as the claims
administrator hereunder.
Combination Loan: A loan, the proceeds of which were used by the Obligor in
combination to finance property improvements and for debt consolidation or other
purposes.
Contract of Insurance: The contract of insurance under Title I covering the
FHA Loans under the name The Bank of New York, or any successor thereto, as
Contract of Insurance Holder hereunder.
Contract of Insurance Holder: The Bank of New York, its successors in
interest, and any successor thereto pursuant to the terms of this Agreement.
Cut-Off Date: Close of business on April 30, 1998.
Corporate Trust Office: The principal office of the Grantor Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of execution of this Agreement is located at 101
Barclay Street, Floor 12 East, New York, New York 10286; Attention: Corporate
Trust MBS Administration, or at such other address as the Grantor Trustee may
designate from time to time by notice to the Grantor Trust Holder and the
Issuer, or the principal corporate trust office of any successor Grantor Trustee
at the address designated by such successor Grantor Trustee by notice to the
Grantor Trust Holder and the Issuer.
Custodian: The Bank of New York, a New York banking corporation, as
custodian pursuant to the Custodial Agreement.
DCR: Duff & Phelps Credit Rating Co.
ERISA: The Employee Retirement Income Security Act of 1974, as amended from
time to time.
FHA: The Federal Housing Administration and any successor thereto.
FHA Insurance: Insurance issued by FHA pursuant to Title I of the National
Housing Act of 1934, as amended.
FHA Loans:The Home Loans designated as FHA Loans on the Home Loan Schedule.
FHA Premium Account: The account which is an Eligible Account established
and maintained by the Indenture Trustee pursuant to Section 5.01(a)(3) of the
Sale and Servicing Agreement.
Grantor Trust Certificate: The pass-through certificate issued pursuant to
this Agreement, in substantially the form attached hereto as Exhibit A.
Grantor Trustee: The Bank of New York, or any successor grantor trustee
appointed as herein provided.
Grantor Trustee Fee: With respect to any Payment Date, the fee payable to
the Grantor Trustee pursuant to Section 6.04 as compensation for its activities
hereunder.
Grantor Trust Estate: The corpus of the trust created by this Agreement,
consisting of (i) such Home Loans as from time to time are subject to this
Agreement as listed in the Home Loan Schedule, as the same may be amended or
supplemented from time to time including by the addition of Subsequent Loans,
the removal of Deleted Home Loans and the addition of Qualified Substitute Home
Loans, together with the Servicer's Home Loan Files and the Indenture Trustee's
Home Loan Files relating thereto and all proceeds thereof, (ii) the Mortgages
and security interests in Mortgaged Properties, (iii) all payments in respect of
interest and all principal received after the Cut-Off Date and all payments of
premiums on FHA Insurance after the Cut-Off Date, (iv) the rights to FHA
Insurance and FHA Insurance reserves attributable to the FHA Loans as of the
Cut-Off Date, (v) such assets as from time to time are identified as Foreclosure
Property, (vi) such assets and funds as are from time to time deposited in the
FHA Premium Account, Collection Account and the Pre-Funding Account, including
amounts on deposit in such accounts which are invested in Permitted Investments,
(vii) the Depositor's rights under all insurance policies with respect to the
Home Loans and any Insurance Proceeds, (viii) Net Liquidation Proceeds,
Post-Liquidation Proceeds and Released Mortgaged Property Proceeds, (ix) all
rights of the Depositor under the Home Loan Purchase Agreement (other than the
Depositor's rights under Article V of the Home Loan Purchase Agreement, which
the Depositor shall not assign to the Grantor Trustee) pursuant to which the
Depositor acquired the Home Loans from the Transferor, and (x) all proceeds of
any of the foregoing.
Grantor Trust Holder: The Person in whose name the Grantor Trust
Certificate is registered in the Certificate Register.
HUD: The United States Department of Housing and Urban Development and any
successor thereto.
Investment Representation Letter: As defined in Section 3.02(d).
Non-FHA Loans: The Home Loans not designated as FHA Loans on the Home Loan
Schedule.
Non-U.S. Person: A Person that is not considered under the Code (i) a
citizen or resident of the United States, (ii) a corporation, partnership
(except to the extent provided in applicable Treasury regulations) or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate whose income from sources without
the United States is includible in gross income for United States federal income
tax purposes regardless of its source or (iv) a trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust, and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust (or, to the extent provided in
applicable Treasury regulations, certain trusts in existence on August 20, 1996
which are eligible to elect to be treated as U.S. Persons).
Obligor: Each obligor on a Debt Instrument.
Officers' Certificate: Certificate signed on behalf of the applicable
entity by the Chairman of the Board, the Vice Chairman of the Board, the
President, any Senior Vice President or Vice President or Managing Director or
an Assistant Vice President (each, however denominated), the Treasurer, the
Secretary, one of the Assistant Treasurers or Assistant Secretaries, any Trust
Officer or other officer of the Depositor or Grantor Trustee, as the case may
be, customarily performing functions similar to those performed by any of the
above designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject, or an authorized
officer of the Depositor, and delivered to the Depositor and/or the Grantor
Trustee, as the case may be.
Opinion of Counsel: A written opinion of counsel acceptable to the Grantor
Trustee, who, in the case of an opinion required pursuant to Section 4.02, may
be outside or salaried counsel for the Grantor Trust Holder or any affiliate of
the Grantor Trust Holder.
Percentage Interest: With respect to the Grantor Trust Certificate, the
undivided percentage interest as specified on the face of the Grantor Trust
Certificate.
Plan: As defined in Section 4.02(b).
Sale and Servicing Agreement: The Sale and Servicing Agreement, dated as of
May 1, 1998, among PaineWebber Mortgage Acceptance Corporation IV, as depositor,
Master Financial, Inc., as servicer, transferor and claims administrator, Master
Financial Asset Securitization Trust 1998-2, as issuer, and The Bank of New
York, as indenture trustee, grantor trustee and contract of insurance holder.
Single Certificate: With respect to the Grantor Trust Certificate, a
certificate representing a minimum denomination of 100% Percentage Interest.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Grantor Trustee, Indenture Trustee and the Transferor substantially in
the form of Exhibit C attached hereto by which Subsequent Loans are sold and
assigned to the Grantor Trustee.
Title I: Section 2 of Title I of the National Housing Act of 1934, as
amended, and the rules and regulations promulgated thereunder as each may be
amended from time to time and any successor statute, rules or regulations
thereto.
ARTICLE II
CONVEYANCE OF HOME LOANS;
ORIGINAL ISSUANCE OF GRANTOR TRUST CERTIFICATE
Section 2.01. Conveyance of the Home Loans. As of the Closing Date, in
consideration of the Grantor Trustee's delivery of the Grantor Trust Certificate
and a collateral assignment of the Collection Account and the Pre-Funding
Account to the Depositor (as initial holder of the Grantor Trust Certificate),
the Depositor, as of the Closing Date and concurrently with the execution and
delivery hereof, does hereby sell, transfer, assign, set over and otherwise
convey to the Grantor Trustee, without recourse, but subject to the other terms
and provisions of this Agreement, and in accordance with the requirements for
transfer of an insured loan in Title I and 24 C.F.R. Section 201.32(c), all of
the right, title and interest of the Depositor in and to the Grantor Trust
Estate. The Grantor Trustee does hereby collaterally assign all of its rights in
and to the FHA Premium Account, Collection Account and the Prefunding Account
and all funds and other investments contained in such accounts to the Grantor
Trust Holder.
Section 2.02. Acceptance by Grantor Trustee; Authentication of Grantor
Trust Certificate. As of the Closing Date, the Grantor Trustee acknowledges the
conveyance to it of the Grantor Trust Estate, including all right, title and
interest of the Depositor in and to the Grantor Trust Estate, receipt of which
is hereby acknowledged by the Grantor Trustee and declares that the Grantor
Trustee holds and will hold the Home Loans, rights and agreements and other
property, including property yet to be received in the Grantor Trust Estate, in
trust, upon the trusts herein set forth, for the benefit of all present and
future Grantor Trust Holders. Concurrently with such receipt and assignment, the
Grantor Trustee has executed, authenticated and delivered to or upon the written
order of the Depositor, the Grantor Trust Certificate duly authenticated by the
Grantor Trustee in the authorized percentage of 100% Percentage Interest and
evidencing the entire beneficial ownership of the Grantor Trust Estate.
Section 2.03. Ownership and Possession of Home Loan Files. Upon the
issuance of the Grantor Trust Certificate, with respect to the Home Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of the
related Servicer's Home Loan File and the Grantor Trustee's Home Loan File shall
be vested in the Grantor Trustee for the benefit of the Grantor Trust Holder,
although possession of the Servicer's Home Loan Files (other than items required
to be maintained in the Grantor Trustee's Home Loan Files) on behalf of and for
the benefit of the Grantor Trust Holder shall remain with the Servicer, and the
Custodian shall take possession of the applicable Grantor Trustee's Home Loan
Files as contemplated in Section 2.06 hereof.
Section 2.04. Books and Records. The sale of each Home Loan shall be
reflected on the balance sheets and other financial statements of the Depositor,
as a sale of assets by the Depositor, under GAAP. Each of the Servicer and the
Custodian shall be responsible for maintaining, and shall maintain, a complete
set of books and records for each Home Loan which shall be clearly marked to
reflect the ownership of each Home Loan by the Grantor Trustee for the benefit
of the Grantor Trust Holder.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01 hereof from the Depositor
to the Grantor Trustee and such property shall not be property of the Depositor.
If the assignment and transfer of the Home Loans and the other property
specified in Section 2.01 hereof to the Grantor Trustee pursuant to this
Agreement or the conveyance of the Home Loans or any of such other property to
the Grantor Trustee is held or deemed not to be a sale or is held or deemed to
be a pledge of security for a loan, the Depositor intends that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, (i) the Depositor shall be deemed to have
granted and does hereby grant to the Grantor Trustee a first priority security
interest in the entire right, title and interest of the Depositor in and to the
Grantor Trust Estate pursuant to Section 2.01 hereof and all proceeds thereof
and (ii) this Agreement shall constitute a security agreement under applicable
law. Within ten (10) days of the Closing Date, the Depositor shall cause to be
filed UCC-1 financing statements naming the Grantor Trustee as "secured party"
and describing the Home Loans being sold by the Depositor to the Grantor Trust
with the office of the Secretary of State of the state in which the Depositor is
located.
Section 2.05. Delivery of Home Loan Documents.
(a) With respect to each Home Loan, the Depositor and the Transferor shall,
on the Closing Date, deliver or caused to be delivered to the Custodian, as the
designated agent of the Grantor Trustee, each of the following documents
(collectively, the "Grantor Trustee's Home Loan File"):
(i) The original Debt Instrument, endorsed in blank or in the
following form: "Pay to the order of The Bank of New York, as Grantor
Trustee under the Trust Agreement, dated as of May 1, 1998, Master
Financial Grantor Trust 1998-2, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement from
origination of the Home Loan to the Transferor;
(ii) If such Home Loan is a Mortgage Loan, the original
Mortgage with evidence of recording thereon (or, if the original
Mortgage has not been returned from the applicable public recording
office or is not otherwise available, a copy of the Mortgage certified
by a Responsible Officer of the Transferor or by the closing attorney
or by an officer of the title insurer or agent of the title insurer
which issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original Mortgage
submitted for recording) and, if the Mortgage was executed pursuant to
a power of attorney, the original power of attorney with evidence of
recording thereon (or, if the original power of attorney has not been
returned from the applicable public recording office or is not
otherwise available, a copy of the power of attorney certified by a
Responsible Officer of the Transferor or by the closing attorney or by
an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, if any, or commitment
therefor, to be a true and complete copy of the original power of
attorney submitted for recording);
(iii) If such Home Loan is a Mortgage Loan, the original
executed Assignment of Mortgage, in recordable form. The Assignment of
Mortgage may be a blanket assignment, to the extent such assignment is
effective under applicable law, for Mortgages covering Mortgaged
Properties situated within the same county. If the Assignment of
Mortgage is in blanket form, an Assignment of Mortgage need not be
included in the individual Grantor Trustee's Home Loan File;
(iv) If such Home Loan is a Mortgage Loan, all original
intervening assignments of mortgage, with evidence of recording
thereon, showing a complete chain of assignment from origination of the
Home Loan to the Transferor (or, if any such assignment of mortgage has
not been returned from the applicable public recording office or is not
otherwise available, a copy of such assignment of mortgage certified by
a Responsible Officer of the Transferor or by the closing attorney or
by an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original assignment
submitted for recording); and
(v) The original, or a copy certified by the Transferor to be
a true and correct copy of the original, of each assumption,
modification, written assurance or substitution agreement, if any.
(b) With respect to each Home Loan, the Transferor and the Depositor shall,
on the Closing Date, deliver or caused to be delivered to the Servicer, as the
designated agent of the Grantor Trustee, each of the following documents
(collectively, the "Servicer's Home Loan Files"): (i) If such Home Loan is an
FHA Loan, an original or copy of notice signed by the Obligor acknowledging HUD
insurance, (ii) an original or copy of truth-in-lending disclosure, (iii) an
original or copy of the credit application, (iv) an original or copy of the
consumer credit report, (v) an original or copy of verification of employment
and income, or verification of self-employment income, (vi) if such Home Loan is
an FHA Loan, an original or copy of evidence of the Obligor's interest in the
Property, (vii) if the Home Loan is a Combination Loan, an original or copy of
contract of work or written description with cost estimates, if any, (viii) if
such Home Loan is an FHA Loan either (x) an original or copy of the completion
certificate (or, if such certificate is not yet due, a notice to that effect) or
an original or copy of notice of non-compliance, if applicable or (y) an
original or copy of report of inspection of improvements to the Property or if
such report is not yet due a notice to that effect or an original or copy of
notice of non-compliance, if applicable, or (ix) if the Home Loan is a
Combination Loan for which the Transferor prepares an inspection report, an
original or copy of the report of inspection of improvements to the Property,
(x) to the extent not included in (clause (iii) of this Section 2.04(b), an
original or copy of a written verification (or a notice of telephonic
verification, with written verification to follow) that the Obligor at the time
of origination was not more than 30 days delinquent on any Superior Lien on the
Mortgaged Property, (xi) if such Home Loan is an FHA Loan for which an appraisal
is required pursuant to the applicable regulations, an original or a copy of an
appraisal of the Property as of the time of origination of such FHA Loan or
(xii) if such Home Loan is a Non-FHA Loan and secured by a Mortgage, a copy of
the HUD-1 or HUD 1-A Closing Statement indicating the sale price, or an existing
Uniform Residential Appraisal Report, or a Drive-by Appraisal documented on
FHLMC Form 704, or a tax assessment, or a full Uniform Residential Appraisal
Report prepared by a national appraisal firm in accordance with the Transferor's
underwriting guidelines, and (xiii) an original or a copy of a title search as
of the time of origination with respect to the Property in accordance with the
Transferor's underwriting guidelines, (xiv) an original or a copy of a title
search as of the time of origination with respect to the Property in accordance
with the Transferor's guidelines, and (xv) if such Home Loan is an FHA Loan, any
other documents required for the submission of a claim with respect to such FHA
Loan to the FHA.
(c) The Transferor, at the direction of the Depositor, concurrently with
the execution and delivery hereof, has delivered to the Indenture Trustee cash
in an amount equal to the accrued annual FHA premium due on each FHA Loan to the
applicable Cut-Off Date. The Indenture Trustee shall distribute such amounts
referred to in the previous sentence into the FHA Premium Account.
(d) The Grantor Trustee shall cause the Custodian to take and maintain
continuous physical possession of the Grantor Trustee's Home Loan Files held by
it in the State of California or such other location mutually acceptable to the
Issuer, the Transferor and the Grantor Trustee, and in connection therewith, the
Custodian shall act solely as agent for the Grantor Trust Holder in accordance
with the terms hereof and not as agent for the Transferor or any other party.
(e) Within 60 days after the Closing Date in the case of Initial Loan or,
in the case of the Subsequent Loans, within 60 days of the related Subsequent
Transfer Date, the Transferor, at its own expense, shall record each Assignment
of Mortgage (which may be a blanket assignment if permitted by applicable law)
in the appropriate real property or other records; provided, however, that the
Transferor need not record any such Assignment of Mortgage in any jurisdiction
under the laws of which, as evidenced by an Opinion of Counsel delivered by the
Transferor (at the Transferor's expense) to the Grantor Trustee, the Indenture
Trustee and the Rating Agencies, the recordation of such Assignment of Mortgage
is not necessary to protect the Grantor Trustee's and the Grantor Trust Holder's
interest in the related Home Loan. With respect to any Assignment of Mortgage as
to which the related recording information is unavailable within 60 days
following the Closing Date in the case of Initial Loans or, in the case of
Subsequent Loans, within 60 days of the related Subsequent Transfer Date, such
Assignment of Mortgage shall be submitted for recording within 30 days after
receipt of such information but in no event later than one year after the
Closing Date. The Custodian, on behalf of the Grantor Trustee, upon receipt from
the Transferor shall be required to retain a copy of each Assignment of Mortgage
submitted for recording. In the event that any such Assignment of Mortgage is
lost or returned unrecorded because of a defect therein, the Transferor shall
promptly prepare a substitute Assignment of Mortgage or cure such defect, as the
case may be, and thereafter the Transferor shall be required to submit each such
Assignment of Mortgage for recording.
(f) All recordings required pursuant to this Section 2.05 shall be
accomplished by and at the expense of the Transferor.
Section 2.06. Acceptance by the Grantor Trustee of the Home Loans;
Certain Substitutions; Certification by the Custodian.
(a) The Grantor Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date an acknowledgment of receipt of the Grantor
Trustee's Home Loan File for each Home Loan held by it. The Grantor Trustee
declares that it will cause the Custodian to hold such documents and any
amendments, replacements or supplements thereto, as well as any other assets
included in the Grantor Trust Estate and delivered to the Custodian, in trust,
upon and subject to the conditions set forth herein. The Grantor Trustee agrees
to cause the Custodian to review each Grantor Trustee's Home Loan File held by
it within 45 days after the Closing Date (or, with respect to any Subsequent
Loan or any Qualified Substitute Home Loan, within 45 days after the conveyance
of the related Home Loan to the Grantor Trust) and to cause the Custodian to
deliver to the Transferor, the Depositor, the Grantor Trustee and the Servicer a
certification (the "Custodian's Initial Certification") to the effect that, as
to each Home Loan listed in the Home Loan Schedule (other than any Home Loan
paid in full or any Home Loan specifically identified as an exception to such
certification), (i) all documents required to be delivered to the Grantor
Trustee pursuant to this Agreement are in its possession or in the possession of
the Custodian on its behalf (other than as expressly permitted by Section 2.05
hereof), (ii) all documents delivered by the Depositor and the Transferor to the
Custodian pursuant to Section 2.05 hereof have been reviewed by the Custodian
and have not been mutilated or damaged and appear regular on their face
(handwritten additions, changes or corrections shall not constitute
irregularities if initialed by the Obligor) and relate to such Home Loan, (iii)
based on the examination of the Custodian on behalf of the Grantor Trustee, and
only as to the foregoing documents, the information set forth on the Home Loan
Schedule accurately reflects the information set forth in the Grantor Trustee's
Home Loan File and (iv) each Debt Instrument has been endorsed as provided in
Section 2.04 hereof. Neither the Grantor Trustee nor the Custodian shall be
under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable or appropriate for the represented purpose or that they are
other than what they purport to be on their face or (ii) to determine whether
any Grantor Trustee's Home Loan File should include any of the documents
specified in Section 2.05(a)(v) hereof.
(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Grantor Trust Holder and the
Grantor Trustee as the owner thereof for so long as this Agreement continues in
full force and effect. It is intended that, by the Servicer's agreement pursuant
to this Section 2.06(b), the Grantor Trustee shall be deemed to have possession
of the Servicer's Home Loan Files for purposes of Section 9-305 of the Uniform
Commercial Code of the state in which such documents or instruments are located.
The Servicer shall promptly report to the Grantor Trustee any failure by it to
hold the Servicer's Home Loan File as herein provided and shall promptly take
appropriate action to remedy any such failure. In acting as custodian of such
documents and instruments, the Servicer agrees not to assert any legal or
beneficial ownership interest in the Home Loans or such documents or
instruments. The Servicer agrees to indemnify the Grantor Trust Holder and the
Grantor Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Grantor Trust Holder or the Grantor Trustee
as the result of any act or omission by the Servicer relating to the maintenance
and custody of such documents or instruments which have been delivered to the
Servicer; provided, however, that the Servicer will not be liable for any
portion of any such amount resulting from the negligence or misconduct of the
Grantor Trust Holder or the Grantor Trustee; and provided, further, that the
Servicer will not be liable for any portion of any such amount resulting from
the Servicer's compliance with any instructions or directions consistent with
this Agreement issued to the Servicer by the Grantor Trustee. The Grantor
Trustee shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
(c) The Custodian shall, for the benefit of the Grantor Trust Holder,
review each Grantor Trustee's Home Loan File within 60 days after the date it
delivered a Custodian's Initial Certification and deliver to the Transferor, the
Depositor, the Grantor Trustee and the Servicer an updated certification (a
"Custodian's Updated Certification"), setting forth those exceptions listed on
the Custodian's Initial Certification which continue to exist on the date of the
Custodian's Updated Certification. With respect to any Home Loans which are set
forth as exceptions in the Custodian's Updated Certification because recorded
assignments or original or certified copies of Mortgages have not yet been
delivered to the Custodian, the Transferor shall cure such exceptions by
delivering such missing documents to the Custodian no later than 360 days after
the Closing Date.
The Custodian agrees, for the benefit of the Grantor Trust Holder, to
review each Grantor Trustee's Home Loan File within 360 days after the Closing
Date with respect to Initial Loans or within 360 days after the applicable
Subsequent Transfer Date with respect to the Subsequent Loans, and to deliver to
the Transferor, the Depositor, the Grantor Trustee and the Servicer a final
certification (a "Custodian's Final Certification"), setting forth those
exceptions listed on the Custodian's Updated Certification which continue to
exist on the date of Custodian's Final Certification.
In performing any such review, the Custodian may conclusively rely on the
Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Grantor Trustee nor the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Grantor Trustee's Home Loan File is discovered, then the Depositor and
Transferor shall comply with the cure, substitution and repurchase provisions of
Section 3.05 of the Sale and Servicing Agreement.
Section 2.07. Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in this Article
II and pursuant to the terms of the related Subsequent Transfer Agreement, in
consideration of the Indenture Trustee's delivery, on behalf of the Grantor
Trustee, on each Subsequent Transfer Date to or upon the order of the
Transferor, of all or a portion of the balance of funds in the Pre-Funding
Account, the Transferor shall on such Subsequent Transfer Date sell, transfer,
assign, set over and otherwise convey without recourse to the Grantor Trustee,
all of its right, title and interest in and to each Subsequent Loan listed on
the related Subsequent Loan Schedule. The transfer by the Transferor to the
Grantor Trustee of the Subsequent Loans set forth in the related Subsequent
Transfer Agreement shall be absolute and shall be intended by all parties hereto
to be treated as a sale by the Transferor to the Grantor Trustee. If the
assignment and transfer of the Subsequent Loans and the other property specified
in this Section 2.07(a) from the Transferor to the Grantor Trustee pursuant to
this Agreement is held or deemed not to be a sale or is held or deemed to be a
pledge of security for a loan, the Transferor intends that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, (i) the Transferor shall be deemed to have
granted and does hereby grant to the Grantor Trustee as of each Subsequent
Transfer Date a perfected, first priority security interest in the entire right,
title and interest of the Transferor in and to the related Subsequent Loans and
all other property conveyed to the Grantor Trustee pursuant to this Section
2.07(a) and all proceeds thereof, and (ii) this Agreement shall constitute a
security agreement under applicable law. The amount released to the Transferor
from the Pre-Funding Account shall be one hundred percent (100%) of the
aggregate Principal Balances of the Subsequent Loans as of the related Cut-Off
Date so transferred.
(b) The Indenture Trustee, on behalf of the Grantor Trustee and as provided
in Section 5.05 of the Sale and Servicing Agreement, shall contribute from the
Pre-Funding Account funds in an amount equal to one hundred percent (100%) of
the aggregate Principal Balances of the Subsequent Loans as of the related
Cut-Off Date so transferred to the Grantor Trustee and use such cash to purchase
the Subsequent Loans on behalf of the Grantor Trustee, along with the other
property and rights related thereto described in paragraph (a) above only upon
the satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) the Transferor shall have provided the Indenture Trustee,
Grantor Trustee and the Rating Agencies with an Addition Notice, which
notice shall be given no fewer than two Business Days prior to the
related Subsequent Transfer Date and shall designate the Subsequent
Loans to be sold to the Grantor Trustee and the aggregate Principal
Balances of such Subsequent Loans as of the related Cut-Off Date and
the Rating Agencies shall have provided written confirmation that the
purchase of such Subsequent Loans will not result in a downgrade,
withdrawal or qualification of the ratings then in effect for the
Outstanding Notes;
(ii) the Transferor shall have deposited in the Collection
Account all principal collected after the related Cut-Off Date and
interest payments collected after the related Cut-Off Date in respect
of each Subsequent Loan and the related Subsequent Cut-Off Date
Deposit;
(iii) the Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee and the Grantor Trustee confirming
that, as of each Subsequent Transfer Date, the Transferor was not
insolvent, would not be made insolvent by such transfer and was not
aware of any pending insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) the Transferor shall have delivered to the Indenture
Trustee and the Grantor Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b) and in the related Subsequent Transfer Agreement;
(vi) the Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee and the Grantor Trustee confirming
that the representations and warranties of the Transferor pursuant to
Section 3.04 of the Sale and Servicing Agreement (other than to the
extent representations and warranties relate to statistical information
as to the characteristics of the Initial Loans in the aggregate, except
for Section 3.04(2) thereof) and pursuant to Section 3.02 of the Sale
and Servicing Agreement are true and correct with respect to the
Subsequent Loans and Transferor, as applicable, as of the Subsequent
Transfer Date;
(vii) the Grantor Trustee shall not purchase a Subsequent Loan
unless (A) the Rating Agencies shall consent thereto (which consent
shall not be unreasonably withheld and shall be evidenced by a letter
from the Rating Agencies) and (B) the following conditions shall have
been satisfied: (I) no Subsequent Loans may be 30 or more days
contractually delinquent as of the applicable Cut-Off Date; (II) the
lien securing any such Subsequent Loan must not be lower than third
priority; (III) such Subsequent Loan must have an outstanding Principal
Balance of at least $2,500 as of the applicable Cut-Off Date; (IV) the
first payment on such Subsequent Loan must be due no later than the
last day of the Due Period immediately succeeding the Due Period in
which it is transferred, unless the Transferor deposits into the
Collection Account 30 days' interest on such Subsequent Loan at the
Home Loan Interest Rate less the applicable Servicing Fee rate (each
such amount, a "Capitalized Interest Subsequent Deposit"), in which
event the first payment on such Subsequent Loan must be due no later
than the last day of the second Due Period following the Due Period in
which the transfer occurs; (V) such Subsequent Loan is a fully
amortizing loan with level payments over the remaining term of no fewer
than 10 years and no more than 25 years and the scheduled maturity will
be no later than August 28, 2023; (VI) such Subsequent Loan must have a
Home Loan Interest Rate of at least 9.99%; (VII) any such Subsequent
Loan must have an original Combined Loan-to-Value Ratio of no more than
125%, (VIII) such Subsequent Loan must be underwritten, re-underwritten
or reviewed, as applicable, in accordance with the underwriting
guidelines of the Transferor in effect at such time or in a manner
similar to the Initial Loans, (IX) the representation and warranty
contained in Section 3.04(2) of the Sale and Servicing Agreement,
concerning the status of the Home Loans on each subsequent Transfer
Date under Treasury Regulation Section 301.7701(i)-1, is true, and (X)
following the purchase of such Subsequent Loans by the Grantor Trustee,
the Home Loans included in the Pool must have a weighted average
interest rate and a weighted average remaining term to maturity as of
each respective Cut-Off Date comparable to those of the Initial Loans
included in the initial Pool;
(viii) in connection with the transfer and assignment of the
Subsequent Loans, the Transferor shall satisfy the document delivery
requirements set forth in Section 2.05 hereof; and
(ix) each proposed Subsequent Loan must be listed on the Home
Loan Schedule hereto as the same may be amended from time to time with
the approval of the Depositor.
(c) In connection with each Subsequent Transfer Date and on the related
Payment Date, the Indenture Trustee shall determine (i) the amount and correct
dispositions of the Capitalized Interest Requirement and Pre-Funding Account
Earnings for such Payment Date in accordance with the provisions of the Sale and
Servicing Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and the Capitalized Interest Account.
In the event that any amounts are released as a result of calculation error by
the Indenture Trustee from the Pre-Funding Account or from the Capitalized
Interest Account, the Indenture Trustee shall not be liable therefor and the
Transferor shall immediately repay such amounts to the Indenture Trustee.
Section 2.08. Release and Reconveyance of Home Loans.
(a) A Home Loan shall be released by the Grantor Trustee and reconveyed to
the Transferor at any time (i) after a repurchase or substitution pursuant to
Section 3.05 of the Sale and Servicing Agreement, (ii) after liquidation of the
Home Loan in accordance with Section 4.02 of the Sale and Servicing Agreement
and the deposit of all Recoveries thereon in the Collection Account, or (iii)
upon the termination of a Home Loan (due to, among other causes, a prepayment in
full of the Home Loan and sale or other disposition of the related Mortgaged
Property), if the Transferor delivers to the Grantor Trustee a written request
(A) identifying the Home Loan and the related Mortgaged Property to be released
and reconveyed, (B) requesting the release and reconveyance thereof, (C) setting
forth the amount deposited in the Collection Account with respect thereto, and
(D) certifying that the amount deposited in the Collection Account (x) equals
the Substitution Adjustment related to the Qualified Substitute Home Loan and
the Deleted Home Loan released from the Grantor Trust Agreement pursuant to item
(i) above, or (y) equals the entire amount of recoveries received with respect
to such Home Loan and the related Mortgaged Property in the event of a release
from the Grantor Trust Agreement pursuant to items (ii) or (iii) above.
(b) The Grantor Trustee shall, if requested by the Servicer, temporarily
release or cause the Custodian to temporarily release to the Servicer the
Grantor Trustee's Home Loan File held by the Custodian pursuant to the
provisions of Section 7.02 of the Sale and Servicing Agreement upon compliance
by the Servicer with the provisions thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Grantor Trustee and the Grantor
Trust Holder that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its property,
to carry on its business as currently conducted, to enter into and
perform its obligations under this Agreement and to create the Grantor
Trust pursuant to this Agreement;
(b) The execution and delivery of this Agreement by the
Depositor and its performance of and compliance with the terms of this
Agreement will not violate the Depositor's certificate of incorporation
or by-laws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in
the breach or acceleration of, any material contract, agreement or
other instrument to which the Depositor is a party or which may be
applicable to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter
into and consummate the transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Grantor Trustee and the Transferor, constitutes a valid, legal and
binding obligation of the Depositor, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Depositor is not in violation of, and the execution
and delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Depositor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Depositor currently pending with regard to which
the Depositor has received service of process and no action or
proceeding against, or investigation of, the Depositor is, to the
knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined
adversely, would prohibit its entering into this Agreement or render
the Grantor Trust Certificate invalid, (B) seek to prevent the issuance
of the Grantor Trust Certificate or the consummation of any of the
transactions contemplated by this Agreement or (C) if determined
adversely, would prohibit or materially and adversely affect the
performance by the Depositor of its obligations under, or the validity
or enforceability of, this Agreement or the Grantor Trust Certificate;
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, this Agreement or the Grantor Trust Certificate, or for the
consummation of the transactions contemplated by this Agreement, except
for such consents, approvals, authorizations and orders, if any, that
have been obtained prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not convey the Home Loans to the Grantor
Trustee with any intent to hinder, delay or defraud any of its
creditors; the Depositor will not be rendered insolvent as a result of
the conveyance of the Home Loans to the Grantor Trustee;
(i) As of the Closing Date, the Depositor had good title to,
and was the sole owner of, each Home Loan free and clear of any lien
other than any such lien released simultaneously with the sale
contemplated herein, and, immediately upon each transfer and assignment
herein contemplated, the Depositor will have delivered to the Grantor
Trustee good title to, and the Grantor Trustee will be the sole owner
of, each Home Loan free and clear of any lien;
(j) The Depositor acquired title to each of the Home Loans in
good faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other
document prepared by the Depositor and furnished or to be furnished by
it pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Depositor pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
THE GRANTOR TRUST CERTIFICATE
Section 4.01. The Grantor Trust Certificate.
(a) The Grantor Trust Certificate shall be issued only in the minimum 100%
Percentage Interest of a Single Certificate and shall be substantially in the
form attached hereto as Exhibit A. On original issue the Grantor Trust
Certificate shall be executed and delivered by the Grantor Trustee to or upon
the written order of the Depositor. The Grantor Trust Certificate shall be
executed by manual or facsimile signature on behalf of the Grantor Trustee by a
Responsible Officer thereof. The Grantor Trust Certificate bearing the manual or
facsimile signatures of individuals who were at any time the proper officers of
the Grantor Trustee shall bind the Grantor Trustee notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Grantor Trust Certificate. The Grantor Trust
Certificate shall not be entitled to any benefit under this Agreement, or be
valid for any purpose, unless manually countersigned by a Responsible Officer of
the Grantor Trustee, or unless there appears on the Grantor Trust Certificate a
certificate of authentication executed by the Authenticating Agent by manual
signature, and such countersignature or certificate upon the Grantor Trust
Certificate shall be conclusive evidence, and the only evidence, that the
Grantor Trust Certificate has been duly countersigned or authenticated and
delivered hereunder. The Grantor Trust Certificate shall be dated the date of
its countersignature or authentication.
Section 4.02. Registration, Transfer and Exchange of Grantor Trust
Certificate.
(a) The Grantor Trustee shall cause to be kept at one of the offices or
agencies to be maintained in accordance with the provisions of Section 4.05 a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Grantor Trustee shall provide for the registration of the Grantor
Trust Certificate and of transfers and exchanges of the Grantor Trust
Certificate as herein provided. The Grantor Trustee shall act as, or shall
appoint, a Certificate Registrar for the purpose of registering the Grantor
Trust Certificate and transfers and exchanges of the Grantor Trust Certificate
as herein provided.
Upon surrender for registration or transfer of the Grantor Trust
Certificate at any office or agency maintained for such purpose pursuant to
Section 4.05 (and subject to the provisions of this Section 4.02) the Grantor
Trustee shall execute, and shall date, authenticate (or cause the Authenticating
Agent to authenticate) and deliver, in the name of the designated transferee or
transferees, a new Grantor Trust Certificate of a like 100% Percentage Interest.
At the option of the Grantor Trust Holder, the Grantor Trust Certificate
may be exchanged for a Grantor Trust Certificate of an authorized Percentage
Interest of a like 100% Percentage Interest upon surrender of the Grantor Trust
Certificate to be exchanged at any such office or agency. Whenever the Grantor
Trust Certificate is so surrendered for exchange, the Grantor Trustee shall
execute, and shall date, countersign or authenticate, as the case may be (or
cause the Authenticating Agent to authenticate) and deliver, the Grantor Trust
Certificate which such Grantor Trust Holder making the exchange is entitled to
receive. The Grantor Trust Certificate presented or surrendered for transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Certificate Registrar duly executed by, the
Grantor Trust Holder or his attorney duly authorized in writing.
No service charge shall be made for any transfer or exchange of the Grantor
Trust Certificate, but the Grantor Trustee or the Certificate Registrar may
require payment from the Grantor Trust Holder of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer
or exchange of the Grantor Trust Certificate.
The Grantor Trust Certificate surrendered for transfer and exchange shall
be canceled by the Certificate Registrar, the Grantor Trustee or the
Authenticating Agent in accordance with their standard procedures.
(b) No sale, transfer or other disposition by the Grantor Trust Holder of
the Grantor Trust Certificate (other than (i) the initial transfers of the
Grantor Trust Certificate by the Grantor Trustee to the Depositor, and by the
Depositor to the Issuer, and (ii) the pledge of the Grantor Trust Certificate by
the Issuer to the Indenture Trustee pursuant to the terms of the Indenture)
shall be made unless the Grantor Trustee shall have received either (i) a
representation letter from the proposed purchaser or transferee of the Grantor
Trust Certificate substantially in the form of paragraph 3 of Exhibit B attached
hereto, to the effect that such proposed purchaser or transferee is not a Person
which is an employee benefit plan subject to the fiduciary responsibility
provisions of ERISA or a plan subject to Section 4975 of the Code, or a
governmental plan as defined in Section 3(32) of ERISA, subject to any federal,
state or local law which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (collectively, a "Plan"), or a Person acting on
behalf of any such Plan or using the assets of such Plan to acquire such
Certificate or (ii) if such Grantor Trust Certificate is presented for
registration in the name of such a Plan subject to the fiduciary responsibility
provisions of ERISA or Section 4975 of the Code (or comparable provisions of any
subsequent enactments), or a trustee of any such Plan, or a governmental plan as
defined in Section 3(32) of ERISA, subject to any federal, state or local law
which is, to a material extent, similar to the foregoing provisions of ERISA or
the Code, or any other Person who is using the assets of any such Plan to effect
such acquisition, an Opinion of Counsel in form and substance satisfactory to
the Grantor Trustee to the effect that such acquisition and holding of the
Grantor Trust Certificate will not constitute or result in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, and will not subject the Grantor Trustee, the Certificate Registrar, the
Servicer or the Depositor to any obligation or liability under ERISA or Section
4975 of the Code. The Certificate Registrar shall not register the sale,
transfer, pledge or other disposition of the Grantor Trust Certificate unless
the Certificate Registrar has received notification and acknowledgment from the
Grantor Trustee that they have received either the representation letter
described in clause (i) above or the Opinion of Counsel described in clause (ii)
above. The costs of any of the foregoing representation letters or Opinions of
Counsel shall not be borne by any of the Depositor, the Grantor Trustee, the
Certificate Registrar or the Grantor Trust. Any transfer, sale, pledge or other
disposition of the Grantor Trust Certificate that would constitute or result in
a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
or otherwise violate the provisions of this Section 3.02(b) shall be deemed
absolutely null and void ab initio, to the extent permitted under applicable
law.
(c) No offer, sale or other transfer of the Grantor Trust Certificate shall
be made unless such transfer is made pursuant to an effective registration
statement or otherwise in accordance with the requirements under the Act, and
effective registration or qualification under applicable state securities laws,
or is made in a transaction which does not require such registration or
qualification. If a transfer (other than (i) the initial transfers of the
Grantor Trust Certificate by the Grantor Trustee to the Depositor, and by the
Depositor to the Issuer, and (ii) the pledge of the Grantor Trust Certificate by
the Issuer to the Indenture Trustee pursuant to the terms of the Indenture) is
to be made in reliance upon an exemption from the Act, and under the applicable
state securities laws, then either: (i) the Certificate Registrar shall require
that the transferee deliver to the Certificate Registrar an investment
representation letter (the "Investment Representation Letter") substantially in
the form of Exhibit B attached hereto, which Investment Representation Letter
shall certify, among other things, that the transferee is an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Act or a "qualified institutional buyer" as defined in Rule 144A under the Act,
and the Certificate Registrar may also require that the transferee deliver to
the Certificate Registrar an Opinion of Counsel if such transferee is not a
qualified institutional buyer within the meaning of Rule 144A under the Act; or
(ii) if the certifications described in the preceding clause (i) cannot be
provided (A) the Certificate Registrar shall require an Opinion of Counsel
reasonably satisfactory to the Certificate Registrar and the Depositor that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from registration or qualification under the
Act, applicable state securities laws and other relevant laws, which Opinion of
Counsel shall not be an expense of the Certificate Registrar, the Depositor, the
Grantor Trust or the Grantor Trustee, and (B) the Certificate Registrar shall
require the transferor to execute a certification in form and substance
satisfactory to the Certificate Registrar setting forth the facts surrounding
such transfer. In each case, the Certificate Registrar will be entitled without
further investigation to rely upon such certification or Opinion of Counsel. The
Holder desiring to effect such transfer shall, and does hereby agree to,
indemnify the Certificate Registrar, the Grantor Trustee and the Depositor
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws. None of the Depositor, the
Grantor Trustee or the Certificate Registrar is under any obligation to register
or qualify the Grantor Trust Certificate.
Unless the Grantor Trust Certificate has been registered under the Act, the
Grantor Trust Certificate shall bear a legend substantially to the following
effect:
THIS GRANTOR TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS. NEITHER THIS GRANTOR TRUST
CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION,
PROVIDED, HOWEVER, THAT THIS GRANTOR TRUST CERTIFICATE SHALL
BE PLEDGED BY THE HOLDER THEREOF TO THE INDENTURE TRUSTEE
PURSUANT TO THE TERMS OF THE INDENTURE.
THE HOLDER OF THIS GRANTOR TRUST CERTIFICATE BY ITS ACCEPTANCE
HEREOF AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
GRANTOR TRUST CERTIFICATE EXCEPT IN ACCORDANCE WITH ALL
APPLICABLE STATE SECURITIES LAWS AND (A) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (B) FOR SO LONG AS THIS GRANTOR TRUST
CERTIFICATE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO THE
DEPOSITOR REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT, OR (D) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE
FOREGOING CASES TO THE COMPLETION AND DELIVERY BY THE
TRANSFEROR TO THE GRANTOR TRUSTEE OF A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE LAST PAGE OF THIS GRANTOR TRUST
CERTIFICATE, EXCEPT IN THE CASE OF THE PLEDGE DESCRIBED ABOVE
AND THE INITIAL TRANSFERS OF THIS GRANTOR TRUST CERTIFICATE BY
THE GRANTOR TRUSTEE TO THE DEPOSITOR, AND BY THE DEPOSITOR TO
THE ISSUER.
THE INITIAL INVESTOR IN THIS GRANTOR TRUST CERTIFICATE, AND
EACH SUBSEQUENT PURCHASER OF THIS GRANTOR TRUST CERTIFICATE,
BY PURCHASING THIS GRANTOR TRUST CERTIFICATE OR AN INTEREST
HEREIN, IS DEEMED TO HAVE AGREED TO COMPLY WITH CERTAIN
TRANSFER REQUIREMENTS SET FORTH IN THE GRANTOR TRUST
AGREEMENT. A TRANSFEREE IS ALSO REQUIRED TO DELIVER AN
INVESTMENT REPRESENTATION LETTER SUBSTANTIALLY IN THE FORM OF
EXHIBIT B TO THE GRANTOR TRUST AGREEMENT IF SUCH TRANSFEREE IS
A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INSTITUTIONAL
INVESTOR, AND MAY ALSO BE REQUIRED TO DELIVER AN OPINION OF
COUNSEL IF SUCH TRANSFEREE IS NOT A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Grantor Trust
Certificate. If (i) the Grantor Trust Certificate is surrendered to the Grantor
Trustee or the Authenticating Agent as mutilated or the Grantor Trustee or the
Authenticating Agent receives evidence to its satisfaction of the destruction,
loss or theft of the Grantor Trust Certificate, and (ii) there is delivered to
the Grantor Trustee or Authenticating Agent such security or indemnity as may be
required by them to hold each of them harmless, then, in the absence of notice
to the Grantor Trustee or Authenticating Agent that the Grantor Trust
Certificate has been acquired by a bona fide purchaser, the Grantor Trustee
shall execute and countersign or authenticate (or cause the Authenticating Agent
to authenticate), as the case may be, and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Grantor Trust Certificate, a new
Grantor Trust Certificate of like 100% Percentage Interest. Upon the issuance of
a new Grantor Trust Certificate under this Section, the Grantor Trustee or the
Certificate Registrar may require from the Grantor Trust Holder the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expense (including the fees and expenses of
the Grantor Trustee or Authenticating Agent) in connection therewith. Unless a
bona fide purchaser of the original Grantor Trust Certificate presents such
Grantor Trust Certificate, any duplicate Grantor Trust Certificate issued
pursuant to this Section shall constitute complete and indefeasible evidence of
ownership in the Grantor Trust, as if originally issued, whether or not the
lost, stolen, or destroyed Grantor Trust Certificate shall be found at any time.
Section 4.04. Persons Deemed Owners. Prior to the due presentation of the
Grantor Trust Certificate for registration or transfer, the Depositor, the
Grantor Trustee, the Certificate Registrar and any agent of the Depositor, the
Grantor Trustee or the Certificate Registrar may treat the Person in whose name
the Grantor Trust Certificate is registered as the owner of the Grantor Trust
Certificate for the purpose of receiving distributions pursuant to Section 4.02
and for all other purposes whatsoever, and neither the Depositor, the Grantor
Trustee, the Certificate Registrar nor any agent of the Depositor, the Grantor
Trustee or the Certificate Registrar shall be affected by notice to the
contrary.
Section 4.05. Maintenance of Office or Agency. The Grantor Trustee will
maintain, at its expense, an office or agency where the Grantor Trust
Certificate may be surrendered for registration or transfer or exchange and
where notices and demands to or upon the Certificate Registrar in respect of the
Grantor Trust Certificate and this Agreement may be served. The Grantor Trustee
initially designates its Corporate Trust Office as its offices and agencies for
said purposes.
ARTICLE V
GRANTOR TRUST ACCOUNTS;
PAYMENTS TO GRANTOR TRUST HOLDER
Section 5.01. Collection Account. The Servicer, on behalf of the Grantor
Trustee shall establish and maintain with, and in the name of, the Indenture
Trustee, one or more collection accounts (the "Collection Account") for the
benefit of the Grantor Trust Holder pursuant to the terms of Section 5.01(a) of
the Sale and Servicing Agreement. The Servicer shall make deposits into the
Certificate Account in accordance with Section 5.01(b)(1) of the Sale and
Servicing Agreement. All amounts so deposited in the Collection Account shall be
held by the Indenture Trustee, on behalf of the Grantor Trustee, as part of the
Grantor Trust Estate as herein provided, subject to withdrawal as set forth in
Section 5.02 of this Agreement.
Section 5.02. Distributions from Collection Account.
(a) On the second Business Day prior to each Payment Date, so long as the
Issuer or its assignee is the Grantor Trust Holder, the Indenture Trustee, in
accordance with Section 5.01(b)(2) of the Sale and Servicing Agreement, shall
withdraw from the Collection Account the Available Collection Amount for such
Payment Date and deposit such amount into the Note Payment Account. Such
deposits into the Note Payment Account from the Collection Account shall be
deemed to constitute distributions to and on behalf of the Grantor Trust Holder.
(b) The Indenture Trustee may also make withdrawals from the Collection
Account pursuant to Section 5.01(b)(3) of the Sale and Servicing Agreement.
Section 5.03. Pre-Funding Account. The Servicer, on behalf of the Grantor
Trustee shall establish and maintain with, and in the name of, the Indenture
Trustee, a Pre-Funding Account (the "Pre-Funding Account") for the benefit of
the Grantor Trust Holder pursuant to the terms of Section 5.05 of the Sale and
Servicing Agreement. On the Closing Date, the Grantor Trustee will deposit in
the Pre-Funding Account the Pre-Funding Amount. On each Subsequent Transfer
Date, upon satisfaction of the conditions set forth in Section 2.07 with respect
to such transfer, the Indenture Trustee, on behalf of the Grantor Trustee, shall
withdraw from the Pre-Funding Account an amount equal to the Principal Balances
of the Subsequent Loans transferred to the Grantor Trust on such Subsequent
Transfer Date and distribute such amount to or upon the written order of the
Transferor. All other withdrawals from the Pre-Funding Account shall be made by
the Indenture Trustee pursuant to Section 5.05 of the Sale and Servicing
Agreement.
ARTICLE VI
CONCERNING THE GRANTOR TRUSTEE
Section 6.01. Duties of Grantor Trustee. The Grantor Trustee undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement.
The Grantor Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Grantor Trustee which are specifically required to be furnished pursuant
to any provision of this Agreement, shall examine them to determine whether they
are in the form required by this Agreement but the Grantor Trustee shall not be
required to determine, confirm or recalculate information contained in such
instruments.
No provision of this Agreement shall be construed to relieve the Grantor
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
(i) The duties and obligations of the Grantor Trustee shall be determined
solely by the express provisions of this Agreement, the Grantor Trustee shall
not be liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or obligations
shall be read into this Agreement against the Grantor Trustee and, in the
absence of bad faith on the part of the Grantor Trustee, the Grantor Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Grantor Trustee and conforming to the requirements of this Agreement;
(ii)The Grantor Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of the Grantor Trust Holder relating to the time, method and
place of conducting any proceeding for any remedy available to the Grantor
Trustee, or exercising any trust or power conferred upon the Grantor Trustee,
under this Agreement; and
(iii) The Grantor Trustee shall not be personally liable for any error of
judgment made in good faith by any Responsible Officer, unless it shall be
proved that the Grantor Trustee or such Responsible Officer was negligent in
ascertaining the pertinent facts.
None of the provisions contained in this Agreement shall require the
Grantor Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties as Grantor Trustee
hereunder or in the exercise of any of its rights or powers if there is
reasonable ground for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Section 6.02. Certain Matters Affecting the Grantor Trustee. Except as
otherwise provided in Section 6.01:
(i) The Grantor Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii)The Grantor Trustee may consult with counsel of its selection, and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(iii) The Grantor Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(iv)The Grantor Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys;
(v) All rights of action under this Agreement or under the Grantor Trust
Certificate, enforceable by the Grantor Trustee, may be enforced by it without
the possession of the Grantor Trust Certificate, or the production thereof at
the trial or other proceeding relating thereto, and any such suit, action or
proceeding instituted by the Grantor Trustee shall be brought in its name for
the benefit the Grantor Trust Holder, subject to the provisions of this
Agreement; and
(vi)To the extent applicable to its duties hereunder, the Grantor Trustee
shall comply with the requirements of Title I with respect to all FHA Loans.
Section 6.03. Grantor Trustee not Required to Make Investigation. The
Grantor 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, or other paper or document (provided
the same appears regular on its face) or to take any remedial action, unless
directed in writing to do so by the Grantor Trust Holder; provided however, that
if the payment to the Grantor Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of any such investigation or the
taking of any such remedial action so directed by the Grantor Trust Holder is,
in the opinion of the Grantor Trustee, not reasonably assured to the Grantor
Trustee by the security afforded to it by the terms of this Agreement, the
Grantor Trustee may require reasonable security or indemnity for the payment or
reimbursement of any such expense or security for any such liability as a
condition to so proceeding. The reasonable expense of every such investigation
so directed by the Grantor Trust Holder shall be paid by the Grantor Trust
Holder or, if paid by the Grantor Trustee, shall be repaid by the Grantor Trust
Holder upon demand.
Section 6.04. Grantor Trustee's Fees. The Grantor Trustee shall be entitled
to be paid the Grantor Trustee Fee pursuant to Section 5.01(c) of the Sale and
Servicing Agreement. Except as otherwise provided herein, the Grantor Trustee
will be responsible for all ordinary expenses it incurs in respect of any of its
duties or obligations hereunder and will not be entitled to any additional
amounts. The Grantor Trustee acknowledges and agrees that the Grantor Trustee
Fee constitutes reasonable compensation for its activities as Grantor Trustee
hereunder.
Section 6.05. Compliance with Code. The Grantor Trustee shall be authorized
to and shall prepare and file and furnish to the Grantor Trust Holder, or cause
to be prepared and filed and furnished, all federal, and if applicable, state
and local income tax and information returns or reports relating to the Grantor
Trust (including, without limitation, information with respect to interest or
discount income, gain or loss with respect to the Home Loans and reinvestment
income, gain or loss with respect to the Pre-Funding Account and the Collection
Account) at the time and in the manner required by the Code. In connection with
the filing of any such returns, the Grantor Trustee shall have the right to
employ accountants and other personnel to assist in the preparation of such
filings.
Section 6.06. Eligibility Requirements for Grantor Trustee. The Grantor
Trustee hereunder shall at all times be a corporation having its principal
office in a state and city acceptable to the Depositor, organized and doing
business under the laws of such state or the United States of America,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, or shall be a member of a bank
holding system, the aggregate combined capital and surplus of which is at least
$50,000,000, provided that the Grantor Trustee's separate capital and surplus
shall at all times be at least the amount specified in Section 310(a)(2) of the
Trust Indenture Act of 1939, and shall be subject to supervision or examination
by federal or state authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Grantor Trustee shall cease to
be eligible in accordance with the provisions of this Section, the Grantor
Trustee shall resign immediately in the manner and with the effect specified in
Section 6.07.
Section 6.07. Resignation and Removal of Grantor Trustee. The Grantor
Trustee may resign and be discharged from the trust hereby created only by (i)
giving written notice of resignation to the Depositor and the Grantor Trust
Holder and (ii) arranging for a successor trustee to be appointed. The successor
trustee shall be acceptable to the Grantor Trust Holder, shall be eligible in
accordance with the provisions of Section 6.06, and shall be compensated solely
(A) pursuant to the provisions of this Agreement, and (B) if such arrangement is
not acceptable to such successor, pursuant to an arrangement between the
successor trustee and the Transferor. Any such resignation of the Grantor
Trustee shall only be effective upon the appointment of a successor trustee.
Upon receiving such notice of resignation, the Transferor shall promptly appoint
a successor trustee by written instrument, in triplicate, one copy of which
instrument shall be delivered to the resigning Grantor Trustee, one copy to the
successor trustee and one copy to the Depositor. If no successor trustee shall
have been appointed and have accepted appointment within 60 days after the
giving of such notice of resignation or removal (as provided below), the
resigning or removed Grantor Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 6.06 and shall fail to resign after written request
for the Grantor Trustee's resignation by the Grantor Trust Holder, or if at any
time the Grantor Trustee shall become incapable of acting, or an order for
relief shall have been entered in any bankruptcy or insolvency proceeding with
respect to the Grantor Trustee, or a receiver of the Grantor Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Grantor Trustee or of its property or affairs for the purpose of
rehabilitation, conversion or liquidation, or in order to change the status of
the Grantor Trust for state tax reasons, then the Grantor Trust Holder shall
remove the Grantor Trustee and appoint a successor trustee by written
instrument, in triplicate, one copy of which instrument shall be delivered to
the Grantor Trustee so removed, one copy to the successor trustee and one copy
to the Depositor.
The Grantor Trust Holder may at any time remove the Grantor Trustee and
appoint a successor trustee by written instrument or instruments, in triplicate,
signed by such holders or their attorneys-in-fact duly authorized, one complete
set of which instruments shall be delivered to the Depositor, one complete set
of which shall be delivered to the Grantor Trustee so removed and one complete
set of which shall be delivered to the successor so appointed.
Any resignation or removal of the Grantor Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 6.08.
Section 6.08. Successor Grantor Trustee. Any successor trustee appointed as
provided in Section 6.07 shall execute, acknowledge and deliver to the Grantor
Trust Holder, the Depositor and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor trustee shall become effective, and such successor trustee,
without any further act, deed or reconveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if originally named as trustee herein. The predecessor
trustee shall deliver to the successor trustee documents and statements relating
to the Grantor Trust Estate held by it hereunder, and the Depositor and the
predecessor trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor trustee all such rights, powers, duties and
obligations.
No successor trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 6.06.
Section 6.09. Merger or Consolidation of Grantor Trustee. Any Person into
which the Grantor Trustee may be merged or converted or with which it may be
consolidated, to which it may sell or transfer its corporate trust business and
assets as a whole or substantially as a whole or any Person resulting from any
merger, sale, transfer, conversion or consolidation to which the Grantor Trustee
shall be a party, or any Person succeeding to the business of the Grantor
Trustee, shall be the successor of the Grantor Trustee hereunder, provided that
(i) such Person shall be eligible under the provisions of Section 6.06, 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, and (ii)
the Grantor Trustee shall deliver an opinion of counsel to the Depositor to the
effect that such merger, consolidation, sale or transfer will not subject the
Grantor Trust to federal, state or local tax.
Section 6.10. Authenticating Agent. The Grantor Trustee may appoint an
Authenticating Agent, which shall be authorized to act on behalf of the Grantor
Trustee in authenticating or countersigning the Grantor Trust Certificate.
Wherever reference is made in this Agreement to the authentication of the
Grantor Trust Certificate by the Grantor Trustee or the Grantor Trustee's
countersignature, such reference shall be deemed to include authentication on
behalf of the Grantor Trustee by the Authenticating Agent and a certification of
authentication executed on behalf of the Grantor Trustee by the Authenticating
Agent. The Authenticating Agent must be acceptable to the Depositor and must be
a corporation organized and doing business under the laws of the United States
of America or of any state, having a principal office and place of business in a
state and city acceptable to the Depositor, having a combined capital and
surplus of at least $15,000,000, authorized under such laws to do a trust
business and subject to supervision or examination by Federal or state
authorities.
Any corporation into which the Authenticating Agent 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 Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of the Authenticating Agent, shall be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Grantor
Trustee or the Authenticating Agent.
The Authenticating Agent may at any time resign by giving at least 30 day's
advance written notice of resignation to the Grantor Trustee and the Depositor.
The Grantor Trustee may at any time terminate the agency of the Authenticating
Agent by giving written notice to the Depositor. Upon receiving a notice of
resignation or upon such a termination, or in case at any time the
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.10, the Grantor Trustee promptly shall appoint a
successor Authenticating Agent, which shall be acceptable to the Depositor, and
shall give written notice of such appointment to the Depositor, and shall mail
notice of such appointment to the Grantor Trust Holder. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent herein. No successor Authenticating Agent shall be appointed unless
eligible under the provisions of this Section 6.10.
The Authenticating Agent shall have no responsibility or liability for any
action taken by it as such at the direction of the Grantor Trustee. Any
compensation paid to the Authenticating Agent shall be at the expense of the
Grantor Trustee pursuant to Section 6.04.
ARTICLE VII
TERMINATION
Section 7.01. Termination. The respective obligations and responsibilities
of the Depositor and the Grantor Trustee created hereby and the Grantor Trust
created hereby shall terminate only upon the liquidation of all the Home Loans
or an optional termination pursuant to Section 11.02 of the Sale and Servicing
Agreement; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late Ambassador of the United
States of America to the Court of St. James's, living on the date thereof.
Section 7.02. Procedure Upon Termination of Grantor Trust.
(a) Notice of any termination pursuant to the provisions of Section 7.01,
specifying the Payment Date upon which the final distribution shall be made,
shall be given promptly by the Grantor Trustee by first class mail to the
Grantor Trust Holder. Such notice shall specify (A) the Payment Date upon which
final distribution on the Grantor Trust Certificate will be made upon
presentation and surrender of the Grantor Trust Certificate at the Corporate
Trust Office, and (B) that the Record Date otherwise applicable to such Payment
Date is not applicable, distribution being made only upon presentation and
surrender of the Grantor Trust Certificate at the office or agency of the
Grantor Trustee therein specified. The Grantor Trustee shall give such notice to
the Depositor and the Certificate Registrar at the time such notice is given to
the Grantor Trust Holder.
(b) In the event that the Grantor Trust Holder does not surrender the
Grantor Trust Certificate for cancellation within three months after the time
specified in the above-mentioned written notice, the Grantor Trustee shall give
a second written notice to the Grantor Trust Holder to surrender the Grantor
Trust Certificate for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice the Grantor Trust
Certificate shall not have been surrendered for cancellation, the Grantor
Trustee may take appropriate steps to contact the Grantor Trust Holder
concerning surrender of the Grantor Trust Certificate, and the cost thereof
shall be paid out of the amounts distributable to such Grantor Trust Holder. If
within two years after the second notice the Grantor Trust Certificate shall not
have been surrendered for cancellation, the Grantor Trustee shall, subject to
applicable state law relating to escheatment, hold all amounts distributable to
the Grantor Trust Holder for the benefit of the Grantor Trust Holder. No
interest shall accrue on any amount held by the Grantor Trustee and not
distributed to a Grantor Trust Holder due to such Grantor Trust Holder's failure
to surrender its Grantor Trust Certificate for payment of the final distribution
therein in accordance with this Section.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Binding Nature of Agreement; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 8.02. Entire Agreement. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof.
Section 8.03. Amendment.
(a) This Agreement may be amended from time to time by the Depositor, the
Transferor and the Grantor Trustee with the consent of the Grantor Trust Holder;
provided, however, any amendments relating to or affecting Article VII or this
Section 8.03, or any other provision of this Agreement relating to termination
of the Grantor Trust, amendment of this Agreement, shall also require the
consent of all of the holders of all of the Notes.
(b) Promptly after the execution of any such amendment, the Grantor Trustee
shall furnish written notification of the substance of such amendment to the
Grantor Trust Holder and the Depositor.
(c) It shall be necessary for the consent of the Grantor Trust Holder under
this Section 8.03 for the Holders to approve the particular form of any proposed
amendment. The manner of obtaining such consent and of evidencing the
authorization of the execution thereof by the Grantor Trust Holder shall be
subject to such reasonable rules and procedures as the Grantor Trustee may
prescribe.
(d) Prior to the execution of any amendment to this Agreement the Grantor
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Grantor Trustee may, but shall
not be obligated to, enter into any such supplemental indenture which affects
the Grantor Trustee's own rights, duties or immunities under this Agreement or
otherwise.
Section 8.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES APPLIED IN NEW YORK.
Section 8.05. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when received by
(a) in the case of Depositor, to PaineWebber Mortgage Acceptance Corporation IV,
1285 Avenue of the Americas, New York, New York 10019, Attention: John Fearey,
Esq., (b) in the case of the Grantor Trustee, to The Bank of New York, 101
Barclay Street, Floor 12 East, New York, New York 10286; Attention: Corporate
Trust MBS Administration, and (c) in the case of the Transferor, to Master
Financial, Inc., 333 South Anita Drive, Orange, California 92868, Attention:
Kristi Carlson; or as to each party such other address as may hereafter be
furnished by such party to the other parties in writing. Any notice required or
permitted to be mailed to a Grantor Trust Holder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not a Grantor
Trust Holder receives such notice.
Section 8.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this 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 Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the Grantor Trust
Certificate or the rights of the Grantor Trust Holder thereof.
Section 8.07. Indulgences; No Waivers. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed a waiver of such right, remedy, power or privilege with
respect to any other occurrence. No waiver shall be effective unless it is in
writing and is signed by the party asserted to have granted such waiver.
Section 8.08. Headings Not To Affect Interpretation. The headings contained
in this Agreement are for convenience of reference only, and they shall not be
used in the interpretation hereof.
Section 8.09. Benefits of Agreement. Nothing in this Agreement or in the
Grantor Trust Certificate, express or implied, shall give to any Person, other
than the parties to this Agreement and their successors hereunder and the
Grantor Trust Holder, any benefit or any legal or equitable right, power, remedy
or claim under this Agreement; provided, however, that notwithstanding the
foregoing, the holders of the Notes are and shall be intended third party
beneficiaries of this Agreement with respect to Section 8.03 hereof.
Section 8.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
Section 8.11. Security Interest. It is the express intent of the parties
hereto that the conveyance of the Home Loans and the other assets included in
the Grantor Trust Estate by the Depositor be treated for all purposes as a sale
by the Depositor of all of its right, title and interest in and to the Grantor
Trust Estate. The Depositor hereby pledges and grants to the Grantor Trustee a
security interest in the Depositor's interest in the Grantor Trust Estate to
secure payment (in the event of recharacterization notwithstanding the parties'
intent) and performance by the Depositor of its obligations hereunder.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
NYLIB1/0247732.03
IN WITNESS WHEREOF, the Depositor, the Transferor and the Grantor Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first written above.
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By: _________________________________
Barbara J. Dawson
Senior Vice President
MASTER FINANCIAL, INC., as Transferor
By: _________________________________
Name:
Title:
THE BANK OF NEW YORK, as Grantor Trustee
By: _________________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of May, 1998, before me, a notary public in and for the
State of New York, personally appeared Barbara J. Dawson, known to me who, being
by me duly sworn, did depose and say that she resides at ___________________;
that she is a Senior Vice President of PaineWebber Mortgage Acceptance
Corporation IV, one of the parties that executed the foregoing instrument and
that she is authorized by PaineWebber Mortgage Acceptance Corporation IV to sign
her name thereto.
_______________________
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF _______________ )
) ss.:
COUNTY OF ______________ )
On this ___ day of May, 1998, before me, a notary public in and for the
State of _____________, personally appeared _____________, known to me who,
being by me duly sworn, did depose and say that he resides at
___________________; that he is a __________________ of Master Financial, Inc.,
one of the parties that executed the foregoing instrument and that he is
authorized by Master Financial, Inc. to sign his name thereto.
_________________________
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF _______________ )
) ss.:
COUNTY OF ______________ )
On this ___ day of May, 1998, before me, a notary public in and for the
State of _________, personally appeared _____________, known to me who, being by
me duly sworn, did depose and say that he resides at ___________________; that
he is a __________________ of The Bank of New York, one of the parties that
executed the foregoing instrument and that he is authorized by The Bank of New
York to sign his name thereto.
__________________________
Notary Public
[NOTARIAL SEAL]
<PAGE>
EXHIBIT A
FORM OF GRANTOR TRUST CERTIFICATE
THIS GRANTOR TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS GRANTOR TRUST CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION, PROVIDED, HOWEVER, THAT THIS GRANTOR TRUST CERTIFICATE
SHALL BE PLEDGED BY THE HOLDER THEREOF TO THE INDENTURE TRUSTEE PURSUANT TO THE
TERMS OF THE INDENTURE.
THE HOLDER OF THIS GRANTOR TRUST CERTIFICATE BY ITS ACCEPTANCE HEREOF AGREES NOT
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH GRANTOR TRUST CERTIFICATE EXCEPT IN
ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND (A) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (B) FOR SO LONG AS THIS GRANTOR TRUST CERTIFICATE IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHO
THE DEPOSITOR REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, OR (D) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO THE COMPLETION AND DELIVERY BY
THE TRANSFEROR TO THE GRANTOR TRUSTEE OF A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE LAST PAGE OF THIS GRANTOR TRUST CERTIFICATE, EXCEPT IN THE CASE
OF THE PLEDGE DESCRIBED ABOVE AND THE INITIAL TRANSFERS OF THIS GRANTOR TRUST
CERTIFICATE BY THE GRANTOR TRUSTEE TO THE DEPOSITOR, AND BY THE DEPOSITOR TO THE
ISSUER.
THE INITIAL INVESTOR IN THIS GRANTOR TRUST CERTIFICATE, AND EACH SUBSEQUENT
PURCHASER OF THIS GRANTOR TRUST CERTIFICATE, BY PURCHASING THIS GRANTOR TRUST
CERTIFICATE OR AN INTEREST HEREIN, IS DEEMED TO HAVE AGREED TO COMPLY WITH
CERTAIN TRANSFER REQUIREMENTS SET FORTH IN THE GRANTOR TRUST AGREEMENT. A
TRANSFEREE IS ALSO REQUIRED TO DELIVER AN INVESTMENT REPRESENTATION LETTER
SUBSTANTIALLY IN THE FORM OF EXHIBIT B TO THE GRANTOR TRUST AGREEMENT IF SUCH
TRANSFEREE IS A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INSTITUTIONAL
INVESTOR, AND MAY ALSO BE REQUIRED TO DELIVER AN OPINION OF COUNSEL IF SUCH
TRANSFEREE IS NOT A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A.
THIS GRANTOR TRUST CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED UNLESS THE
GRANTOR TRUSTEE SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE
PROPOSED PURCHASER OR TRANSFEREE OF SUCH GRANTOR TRUST CERTIFICATE IN FORM AND
SUBSTANCE SATISFACTORY TO THE GRANTOR TRUSTEE AND THE DEPOSITOR, TO THE EFFECT
THAT SUCH PROPOSED PURCHASER OR TRANSFEREE IS NOT A PERSON WHICH IS AN EMPLOYEE
BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR A PLAN SUBJECT
TO SECTION 4975 OF THE CODE, OR A GOVERNMENTAL PLAN AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,
A "PLAN"), OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF
SUCH PLAN TO ACQUIRE SUCH GRANTOR TRUST CERTIFICATE OR (ii) IF SUCH GRANTOR
TRUST CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF SUCH A PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR SECTION 4975 OF
THE CODE (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE
OF ANY SUCH PLAN, OR A GOVERNMENTAL PLAN AS DEFINED IN SECTION 3(32) OF ERISA,
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE, OR ANY OTHER PERSON
WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE GRANTOR TRUSTEE TO THE
EFFECT THAT SUCH ACQUISITION AND HOLDING OF SUCH GRANTOR TRUST CERTIFICATE
(WITHOUT REGARD TO THE IDENTITY OR NATURE OF THE OTHER HOLDERS OF SUCH GRANTOR
TRUST CERTIFICATE) WILL NOT CONSTITUTE OR RESULT IN A "PROHIBITED TRANSACTION"
WITHIN THE MEANING OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL
NOT SUBJECT THE GRANTOR TRUSTEE, THE CERTIFICATE REGISTRAR, THE SERVICER OR THE
DEPOSITOR TO ANY OBLIGATION OR LIABILITY UNDER ERISA OR SECTION 4975 OF THE
CODE.
THE HOLDER OF THIS GRANTOR TRUST CERTIFICATE WILL BE TREATED AS THE OWNER OF A
PRO RATA UNDIVIDED BENEFICIAL INTEREST IN THE HOME LOANS. EACH TRANSFEREE OF
THIS GRANTOR TRUST CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED
THIS GRANTOR TRUST CERTIFICATE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFERABILITY, AS SET FORTH IN SECTION 4.02 OF THE GRANTOR TRUST AGREEMENT.
<PAGE>
MASTER FINANCIAL GRANTOR TRUST 1998-2
evidencing an interest in a trust
the assets of which consist primarily
of the Home Loans
Certificate No. __
Percentage Interest evidenced
by this Grantor Trust Certificate: 100%
First Payment Date: May, 1998
THIS CERTIFIES THAT THE BANK OF NEW YORK, as Indenture Trustee is the
registered owner of the Percentage Interest evidenced by this Grantor Trust
Certificate in monthly distributions to the Grantor Trust Holder with respect to
the Grantor Trust consisting of a trust the assets of which consist primarily of
the Home Loans. The Grantor Trust was created pursuant to a Grantor Trust
Agreement dated as of May 1, 1998 ("Agreement") among PaineWebber Mortgage
Acceptance Corporation IV (the "Depositor"), Master Financial, Inc. (the
"Transferor"), and The Bank of New York, as Grantor Trustee (the "Grantor
Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This Grantor
Trust Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the holder of this Grantor Trust
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound.
Pursuant to the terms of the Agreement, distributions will be made on this
Grantor Trust Certificate to the Person in whose name this Grantor Trust
Certificate is registered at the close of business on the last day of the
calendar month preceding the month of such distribution, or if such day is not a
Business Day, the Business Day immediately preceding such day, in an amount
equal to the product of the Percentage Interest evidenced by this Grantor Trust
Certificate and the amount required to be distributed to the Grantor Trust
Holder on such Payment Date pursuant to Section 5.02 of the Agreement.
Distributions on this Grantor Trust Certificate will be made by the Grantor
Trustee by check mailed to the address of the Person entitled thereto, as such
name and address shall appear on the Certificate Register unless such Person
notifies the Grantor Trustee in writing at least five Business Days prior to a
Payment Date that such payments are to be made by wire transfer of immediately
available funds to the account specified by such person. Notwithstanding the
above, the final distribution on this Grantor Trust Certificate will be made
after due notice of the pendency of such distribution and only upon presentation
and surrender of this Grantor Trust Certificate at the office or agency
specified by the Trustee for that purpose in the notice of final distribution.
No offer, sale, or other transfer of the Grantor Trust Certificate (other
than the initial transfers of the Grantor Trust Certificate by the Grantor
Trustee to the Depositor, and by the Depositor to the Issuer) shall be made
unless such transfer is made pursuant to an effective registration statement or
otherwise in accordance with the requirements under the Act, and effective
registration or qualification under applicable state securities laws, or is made
in a transaction which does not require such registration or qualification. If a
transfer (other than the initial transfer by the Grantor Trustee to the
Depositor or one by the Depositor or an affiliate thereof) is to be made in
reliance upon an exemption from the Act, and under the applicable state
securities laws, then either: (i) the Certificate Registrar shall require that
the transferee deliver to the Certificate Registrar an investment representation
letter (the "Investment Representation Letter") substantially in the form of
Exhibit B to the Grantor Trust Agreement, which Investment Representation Letter
shall certify, among other things, that the transferee is an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Act or a "qualified institutional buyer" as defined in Rule 144A under the Act,
and the Certificate Registrar may also require that the transferee deliver to
the Certificate Registrar an Opinion of Counsel if such transferee is not a
qualified institutional buyer within the meaning of Rule 144A under the Act; or
(ii) if the certifications described in the preceding clause (i) cannot be
provided (A) the Certificate Registrar shall require an Opinion of Counsel
reasonably satisfactory to the Certificate Registrar and the Depositor that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from registration or qualification under the
Act, applicable state securities laws and other relevant laws, which Opinion of
Counsel shall not be an expense of the Certificate Registrar, the Depositor, the
Grantor Trust or the Grantor Trustee, and (B) the Certificate Registrar shall
require the transferor to execute a certification in form and substance
satisfactory to the Certificate Registrar setting forth the facts surrounding
such transfer. In each case, the Certificate Registrar will be entitled without
further investigation to rely upon such certification or Opinion of Counsel. A
Grantor Trust Holder desiring to effect such transfer shall, and does hereby
agree to, indemnify the Certificate Registrar, the Grantor Trustee and the
Depositor against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws. The Grantor Trust
Holder shall pledge the Grantor Trust Certificate to the Indenture Trustee
pursuant to the terms of the Indenture.
The Agreement does not permit the amendment of the Agreement and the
modification of the rights and obligations of the Depositor, the Grantor Trustee
and the Transferor and the rights of the Grantor Trust Holder under the
Agreement without the consent of Grantor Trust Holder; provided, however, any
amendments relating to or affecting Article VII or Section 8.03, or any other
provision of the Agreement relating to termination of the Grantor Trust or
amendment of the Agreement, shall require the consent of all of the holders of
all of the Notes.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Grantor Trust Certificate is registrable in the
Certificate Register upon surrender of this Grantor Trust Certificate for
registration of transfer at the office or agency appointed by the Grantor
Trustee, duly endorsed by, or accompanied by an assignment in the form below or
other written instrument of transfer in form satisfactory to the Grantor Trustee
and the Certificate Registrar, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon a new Grantor Trust
Certificate of authorized 100% Percentage Interest will be issued to the
designated transferee.
The Grantor Trust Certificate is issuable only as a registered Grantor
Trust Certificate without coupons in the Percentage Interest specified in the
Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, the Grantor Trust Certificate is exchangeable for a new
Grantor Trust Certificate of authorized 100% Percentage Interest, as requested
by the Grantor Trust Holder surrendering the same.
The Grantor Trust Holder may at any time remove the Grantor Trustee with or
without cause, and appoint a successor trustee. If such removal is without
cause, the Grantor Trust Holder shall be responsible for making satisfactory
arrangements for compensation of the successor trustee.
No service charge will be made for any such registration of transfer or
exchange, but the Grantor Trustee or the Certificate Registrar may require
payment from the Grantor Trust Holder of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
The Depositor, the Grantor Trustee and the Certificate Registrar, and any
agent of the Depositor, the Grantor Trustee or the Certificate Registrar, may
treat the Person in whose name this Grantor Trust Certificate is registered as
the owner hereof for all purposes, and neither the Depositor, the Grantor
Trustee, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement in respect of the Grantor Trust
Certificate and the Grantor Trust created thereby shall terminate only upon the
liquidation of all the Home Loans or the Majority Residual Interest Holders'
purchase of all the Home Loans pursuant to Section 11.02 of the Sale and
Servicing Agreement; provided, however, that the Trust Fund will in no event
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date of the Agreement.
Unless this Grantor Trust Certificate has been countersigned by an
authorized officer of the Grantor Trustee, by manual signature, this Grantor
Trust Certificate shall not be entitled to any benefit under the Agreement or be
valid for any purpose.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Grantor Trustee has caused this Grantor Trust
Certificate to be duly executed as of the date set forth below.
THE BANK OF NEW YORK, as Grantor Trustee
By: ___________________________________
Name:
Title:
Countersigned:
Dated:
THE BANK OF NEW YORK, as Grantor Trustee
By: ___________________________________
Name:
Title:
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto______________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
the beneficial interest evidenced by the within Grantor Trust Certificate and
hereby authorizes the transfer of registration of such interest to assignee on
the Certificate Register of the Grantor Trust.
I (We) further direct the Certificate Registrar to issue a new Grantor
Trust Certificate of a like Percentage Interest, to the above named assignee
and deliver such Grantor Trust Certificate to the following address:
______________________________________________________________________
Social Security or other Identifying Number of Assignee:
______________________________________________________________________
Dated:
___________________________________
Signature by or on behalf of assignor
___________________________________
Signature Guaranteed
<PAGE>
[DISTRIBUTION INSTRUCTIONS]
The assignee should include the following for purposes of distribution:
Distributions shall be made, if the assignee is eligible to receive
distributions in immediately available funds, by wire transfer or otherwise, in
immediately available funds to
________________________________________________________________ for the account
of ______________________________________________ account number ______________,
or, if mailed by check, to ____________________________________________________.
_________________________________________. Applicable statements should be
mailed to _____________________________________________________________________.
This information is provided by ______________________, the assignee named
above, or ___________________________________, as its agent.
<PAGE>
EXHIBIT B
FORM OF INVESTMENT AND ERISA REPRESENTATION LETTER
The Bank of New York as Grantor Trustee and Certificate Registrar
101 Barclay Street, Floor 12 East
New York, New York 10286
Attention: Corporate Trust MBS Administration
Re: Transfer of Master Financial Grantor Trust 1998-2,
Grantor Trust Certificate
Ladies and Gentlemen:
This letter is delivered pursuant to Section 4.02 of the Trust Agreement
dated as of May 1, 1998 (the "Trust Agreement"), by and among PaineWebber
Mortgage Acceptance Corporation IV, as Depositor, Master Financial, Inc., as
Transferor, and The Bank of New York, as Grantor Trustee, on behalf of the
holders of Master Financial Grantor Trust 1998-2 Grantor Trust Certificate (the
"Grantor Trust Certificate"), in connection with the transfer by
_________________ (the "Seller") to the undersigned (the "Purchaser") of a 100%
Percentage Interest in the Grantor Trust Certificate. Terms used but not defined
herein shall have the meanings ascribed thereto in the Trust Agreement.
In connection with such transfer, the undersigned hereby represents and
warrants to you as follows:
[[For Institutional Accredited Investors] 1. The Purchaser is an
"institutional accredited investor" (an entity meeting the requirements of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act")) and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Grantor Trust Certificate, and the Purchaser and
any accounts for which it is acting are each able to bear the economic risk of
the Purchaser's or such account's investment. The Purchaser is acquiring the
Grantor Trust Certificate purchased by it for its own account or for one or more
accounts (each of which is an "institutional accredited investor") as to each of
which the Purchaser exercises sole investment discretion. The Purchaser hereby
undertakes to reimburse the Grantor Trustee for any costs incurred by it in
connection with this transfer.]
[[For Qualified Institutional Buyers only] 1. The Purchaser is a "qualified
institutional buyer" within the meaning of Rule 144A ("Rule 144A") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). The
Purchaser is aware that the transfer is being made in reliance on Rule 144A, and
the Purchaser has had the opportunity to obtain the information required to be
provided pursuant to paragraph (d)(4)(i) of Rule 144A.]
2. The Purchaser's intention is to acquire the Grantor Trust Certificate
(a) for investment for the Purchaser's own account or (b) for resale to (i)
"qualified institutional buyers" in transactions under Rule 144A, and not in any
event with the view to, or for resale in connection with, any distribution
thereof, or (ii) to "institutional accredited investors" meeting the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated
under the Securities Act, pursuant to any other exemption from the registration
requirements of the Securities Act, subject in the case of this clause (ii) to
(a) the receipt by the Certificate Registrar of a letter substantially in the
form hereof, (b) the receipt by the Certificate Registrar of an opinion of
counsel acceptable to the Certificate Registrar that such reoffer, resale,
pledge or transfer is in compliance with the Securities Act, (c) the receipt by
the Certificate Registrar of such other evidence acceptable to the Certificate
Registrar that such reoffer, resale, pledge or transfer is in compliance with
the Securities Act and other applicable laws, and (d) a written undertaking to
reimburse the Grantor Trust for any costs incurred by it in connection with the
proposed transfer. The Purchaser understands that the Grantor Trust Certificate
(and any subsequent Grantor Trust Certificate) has not been registered under the
Securities Act, by reason of a specified exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the Purchaser's investment intent (or intent to resell to
only certain investors in certain exempted transactions) as expressed herein.
3. The Purchaser is not a Person which is an employee benefit plan subject
to the fiduciary responsibility provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or a plan subject to Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or a governmental
plan as defined in Section 3(32) of ERISA, subject to any federal, state or
local law which is, to a material extent, similar to the foregoing provisions of
ERISA or the Code (collectively, a "Plan"), or a Person acting on behalf of any
such Plan or using the assets of such Plan to acquire such Grantor Trust
Certificate.
4. The Purchaser acknowledges that the Grantor Trust Certificate (and any
Grantor Trust Certificate issued on transfer or exchange thereof) has not been
registered or qualified under the Securities Act or the securities laws of any
State or any other jurisdiction, and that the Grantor Trust Certificate cannot
be resold unless it is registered or qualified thereunder or unless an exemption
from such registration or qualification is available.
5. The Purchaser hereby undertakes to be bound by the terms and conditions
of the Trust Agreement in its capacity as an owner of the Grantor Trust
Certificate (the "Grantor Trust Holder"), in all respects as if it were a
signatory thereto. This undertaking is made for the benefit of the Grantor
Trust, the Grantor Trustee, the Certificate Registrar and all Grantor Trust
Holders present and future.
6. The Purchaser will not sell or otherwise transfer any portion of the
Grantor Trust Certificate, except in compliance with Section 4.02 of the Trust
Agreement.
[Please make all payments due on the Grantor Trust Certificate:*
_____ (a) by wire transfer to the following account at a bank or entity in
New York, New York, having appropriate facilities therefore:
Account number _________ Institution __________________
_____ (b) by mailing a check or draft to the following address:
________________________
________________________
________________________
Very truly yours,
__________________________
[The Purchaser]
By: ______________________
Name:
Title:
Dated: ____ __, ____
Receipt hereby acknowledged:
___________________________________
* Please select (a) or (b).
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EXHIBIT C
SUBSEQUENT TRANSFER AGREEMENT (the "Subsequent Transfer Agreement"), dated
as of [________, 199_], between MASTER FINANCIAL, INC. ("Transferor") and THE
BANK OF NEW YORK, as grantor trustee (in such capacity, the "Grantor Trustee")
and indenture trustee (in such capacity, the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, pursuant to the terms of a Home Loan Purchase Agreement, dated as
of May 1, 1998 (the "Purchase Agreement"), between PaineWebber Mortgage
Acceptance Corporation IV, as Depositor (the "Depositor"), and the Transferor
has sold, transferred, assigned and otherwise conveyed to the Depositor all its
right, title and interest in and to certain Home Loans.
WHEREAS, pursuant to the terms of a Grantor Trust Agreement, dated as of
May 1, 1998 (the "Grantor Trust Agreement"), among the Depositor, the Transferor
and the Grantor Trustee, the Transferor has the obligation to sell, transfer,
assign and otherwise convey to the Grantor Trustee all its right, title and
interest in and to certain home loans as listed on Schedule I attached hereto
and the Related Documents thereto (as defined below) (the "Subsequent Loans")
pursuant to and in accordance with this Subsequent Transfer Agreement;
WHEREAS, the parties hereto desire that the Transferor sell all its right,
title and interest in and to the Subsequent Loans and the Related Documents to
the Grantor Trustee pursuant to the terms of this Subsequent Transfer Agreement;
and
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1 Definitions.______Capitalized terms used but not defined herein have the
meanings assigned thereto in the Grantor Trust Agreement.
2. Sale of Subsequent Loans to Grantor Trustee. The Transferor concurrently
with the execution and delivery of this Subsequent Transfer Agreement, does
hereby sell, transfer, assign, set over, and otherwise convey to the Grantor
Trustee, without recourse but subject to the other terms and provisions of this
Agreement and the Grantor Trust Agreement, all of its right, title and interest
in and to the following, whether now existing or hereafter acquired and wherever
located: (i) such Subsequent Loans as listed in the Subsequent Loan Schedule, as
of the [_________ 1, 199_] (the "Cut-Off Date"), together with the Servicer's
Home Loan Files and the Grantor Trustee's Home Loan Files relating thereto and
all proceeds thereof, (ii) the Mortgages and security interests in Mortgaged
Properties, (iii) all payments in respect of interest due with respect to such
Subsequent Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date, (iv) the Transferor's rights under
all insurance policies with respect to such Subsequent Loans and any Insurance
Proceeds, and (v) all proceeds of any of the foregoing.
3. Obligations of the Transferor Upon Sale. In connection with any transfer
pursuant to Section 2 hereof, the Transferor further agrees, at its own expense,
on or prior to the Subsequent Transfer Date (a) to indicate in its books and
records that the Subsequent Loans have been sold to the Grantor Trustee pursuant
to this Subsequent Transfer Agreement and (b) to deliver to the Grantor Trustee
a computer file containing a true and complete list of all Subsequent Loans in
the format required by Section 2.2 of the Purchase Agreement.
In connection with any conveyance by the Transferor, the Transferor shall
on behalf of the Grantor Trustee deliver to, and deposit with the Custodian, on
behalf of the Grantor Trustee, on or before the Subsequent Transfer Date the
Related Documents (as defined in the Purchase Agreement) with respect to each
Subsequent Loan.
In connection with any conveyance by the Transferor, the Transferor shall
on behalf of the Grantor Trustee deliver to, and deposit with the Servicer, as
the designated agent of the Grantor Trustee, on or before the Subsequent
Transfer Date the Servicer's Home Loan File with respect to each Subsequent
Loan.
The Transferor further hereby confirms to the Grantor Trustee that, as of
the Subsequent Transfer Date it has caused the portions of the Transferor's
electronic ledger relating to the Subsequent Loans to be clearly and
unambiguously marked to indicate that the Subsequent Loans have been sold to the
Grantor Trustee.
The parties hereto intend that each of the transactions set forth herein be
a sale by the Transferor to the Grantor Trustee of all of the Transferor's
right, title and interest in and to the Subsequent Loans and other property
described above. In the event the transactions set forth herein are deemed not
to be a sale, the Transferor hereby grants to the Grantor Trustee a security
interest in all of the Transferor's right, title and interest in, to and under
the Subsequent Loans and other property described above, whether now existing or
hereafter created, to secure all of the Transferor's obligations hereunder; and
this Subsequent Transfer Agreement shall constitute a security agreement under
applicable law.
4. Payment of Purchase Price for the Subsequent Loans.
(a) In consideration of the sale of the Subsequent Loans from the
Transferor to the Grantor Trustee on the Subsequent Transfer Date, the Grantor
Trustee agrees to pay from the Prefunding Account to the Transferor on the
Subsequent Transfer Date by transfer of immediately available funds, an amount
equal to 100% of the aggregate Principal Balances of the Subsequent Loans as of
the Cut-Off Date in accordance with the provisions of the Grantor Trust
Agreement and the Sale and Servicing Agreement.
(b) Within 60 days of the Subsequent Transfer Date, Transferor, at its own
expense, shall record each Assignment of Mortgage in favor of the Grantor
Trustee to the same extent required under Section 2.4 of the Purchase Agreement.
5. Transferor Representations and Warranties. (a) The Transferor hereby
makes the representations and warranties to the Issuer as of the Cut-Off Date
and the Subsequent Transfer Date specified in Section 3.1(a) of the Purchase
Agreement.
(b) The Transferor further represents and warrants to the Grantor Trustee
that with respect to the Subsequent Loans as of the Subsequent Transfer Date
each of the representations and warranties contained in Section 3.04 of the Sale
and Servicing Agreement are true and correct.
It is understood and agreed that the representations and warranties set
forth in this Section 5(b) shall survive delivery of the respective Subsequent
Loan Files to the Grantor Trustee on behalf of the Grantor Trust. In the event
that (a) any of the representations and warranties of the Transferor in Section
3.04 of the Sale and Servicing Agreement are determined to be untrue in a manner
that materially and adversely affects the value of, or the interests of the
Grantor Trust Holder in, any Subsequent Loan with respect to which such
representation or warranty is made and (b) the Transferor shall fail to cure
such breach within the time period specified in Section 3.05 of the Sale and
Servicing Agreement, the Transferor shall be obligated to repurchase or
substitute the affected Subsequent Loan(s) in accordance with the provisions of
Section 3.05 of the Sale and Servicing Agreement.
With respect to representations and warranties made by the Transferor
pursuant to this Section 5(b) that are made to the Transferor's best knowledge,
if it is discovered by any of the Transferor or the Grantor Trustee that the
substance of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Subsequent Loan,
notwithstanding the Transferor's lack of knowledge, such inaccuracy shall be
deemed a breach of the applicable representation and warranty.
6. Covenants of the Transferor. The Transferor hereby covenants that except
for the transfer hereunder, the Transferor will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any lien on, any Subsequent Loan, or any interest therein; and the Transferor
will defend the right, title and interest of the Grantor Trustee, in, to and
under the Subsequent Loans, against all claims of third parties claiming through
or under the Transferor.
Whenever and so often as requested by the Grantor Trustee, or the
Transferor, the other party promptly will execute and deliver or cause to be
executed and delivered all such other and further instruments, documents, or
assurances, and promptly do or cause to be done all such other things, as may be
necessary and reasonably required to vest more fully in the requesting party all
rights, interests, powers, benefits, privileges and advantages conferred or
intended to be conferred upon it by this Agreement.
7. Termination. The respective obligations and responsibilities of the
Transferor and the Grantor Trustee created hereby shall terminate, except for
the Transferor's indemnity obligations as provided herein and in the Grantor
Trust Agreement, upon the termination of the Grantor Trust and Owner Trust as
provided in Article XI of the Sale and Servicing Agreement.
8. Governing Law.____This Subsequent Transfer Agreement shall be governed
by and construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
9. Intention of the Parties. It is the intention of the parties that the
Grantor Trustee is purchasing, and the Transferor is selling, the Subsequent
Loans rather than pledging the Subsequent Loans to secure a loan by the Grantor
Trustee to the Transferor. The parties hereto each intend to treat the
transaction for accounting purposes as a sale by the Transferor, and a purchase
by the Grantor Trustee, of the Subsequent Loans. For federal income tax
purposes, the parties hereto each intend to treat the transaction as a transfer
to secure the indebtedness represented by the Notes. The Grantor Trustee will
have the right to review the Subsequent Loans and the related Subsequent Loan
Files to determine the characteristics of the Subsequent Loans which will affect
the federal income tax consequences of owning the Subsequent Loans and the
Transferor will cooperate with all reasonable requests made by the Grantor
Trustee in the course of such review.
10. The representations and warranties set forth in Article III shall
survive the purchase of the Subsequent Loans hereunder.
11. This Subsequent Transfer Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Section 11 no other Person shall
have the right or obligation hereunder.
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IN WITNESS WHEREOF, the Transferor, the Indenture Trustee and the Grantor
Trustee have caused this Subsequent Transfer Agreement to be duly executed on
their behalf by their respective officers thereunto duly authorized as of the
day and year first above written.
MASTER FINANCIAL, INC.,
as Transferor
By: ____________________________
Name:
Title:
THE BANK OF NEW YORK, as Grantor Trustee
and Indenture Trustee
By: ____________________________
Name:
Title:
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SCHEDULE I
Subsequent Loan Schedule
