<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 13, 1998
REGISTRATION NO. 333-[ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MID-STATE HOMES, INC.
(Exact name of registrant as specified in its governing instruments)
<TABLE>
<S> <C>
FLORIDA 59-0945134
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S EMPLOYER IDENTIFICATION NO.)
</TABLE>
------------------------
MID-STATE HOMES, INC.
1500 NORTH DALE MABRY HIGHWAY
TAMPA, FLORIDA 33607
(813) 871-4811
(Address of principal executive offices)
------------------------------
EDWARD A. PORTER
MID-STATE HOMES, INC.
1500 NORTH DALE MABRY HIGHWAY
TAMPA, FLORIDA 33607
(813) 871-4811
(Name and address of agent for service)
------------------------------
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
EDWARD A. PORTER, ESQ. JORDAN M. SCHWARTZ, ESQ.
MID-STATE HOMES, INC. PATRICK T. QUINN, ESQ.
1500 NORTH DALE MABRY HIGHWAY CADWALADER, WICKERSHAM & TAFT
TAMPA, FLORIDA 33607 100 MAIDEN LANE,
(813) 871-4811 NEW YORK, NEW YORK 10038
(212) 504-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this Registration
Statement. If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
plans, please check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTRATION
BEING REGISTERED REGISTERED UNIT(1) PRICE FEE
<S> <C> <C> <C> <C>
Asset Backed Notes $1,000,000.00 100% $1,000,000.00 $295
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE OR SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION JULY 13, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED )
$
MID-STATE TRUST 199
$ % Asset-Backed Notes, Class A-1
$ % Asset-Backed Notes, Class A-2
$ % Asset-Backed Notes, Class A-3
$ % Asset-Backed Notes, Class A-4
-------------------
MID-STATE HOMES, INC.
SERVICER
-----------------
Mid-State Trust 199 (the "Issuer" or the "Trust"), a business trust formed
pursuant to a trust agreement dated as of , 199 , (the "Trust
Agreement") between Mid-State Homes, Inc. ("Mid-State," the "Depositor" or the
"Servicer") and , as owner trustee (the "Owner Trustee"), is
offering $ aggregate principal amount of Asset Backed Notes (the
"Notes"). The Trust will issue four classes (each, a "Class") of Notes,
designated as the Class A-1, Class A-2, Class A-3 and Class A-4 Notes. Interest
on the Notes will be payable quarterly on each January 1, April 1, July 1 and
October 1 (each, a "Payment Date"), commencing , 199 . The amount of
interest payable on each Payment Date will equal the interest accrued during the
three-month period ending on the day prior to such Payment Date (each such
period, an "Interest Accrual Period"). On each Payment Date, subject to the
availability of funds, a payment of principal of the Notes, in the amount
described herein, will be applied to the Notes. See "DESCRIPTION OF THE
NOTES--Interest and Principal Payments" herein.
The Notes will be secured by (i) certain building and installment sale
contracts, promissory notes, related mortgages and other security agreements
(the "Accounts") owned directly or indirectly by the Depositor (collectively,
the "Mortgage Collateral") on , 199 (the "Cut-Off Date"), which will
be transferred to the Trust on the Closing Date (as defined under "Transaction
Summary" herein), and (ii) the Collection Account described under
"SECURITY--Collection Account" in the Prospectus.
The rights of holders of each Class of Notes other than the Class A-1 Notes
to receive payments will, in each case, be subordinated to the rights of holders
of each Class with a higher numerical Class designation.
The Notes may be redeemed on any Payment Date at the option of the Issuer if
the aggregate principal amount of each Class of Notes outstanding is less than
or equal to 10% of the original aggregate principal amount of such Class of
Notes. See "DESCRIPTION OF THE NOTES--Redemption of the Notes" herein.
There is currently no secondary market for the Notes. The underwriters named
herein under "Plan of Distribution" (the "Underwriters") intend to make a
secondary market in the Notes, but have no obligation to do so. There can be no
assurance that a secondary market for the Notes will develop or, if it does
develop, that it will continue. Further, no application will be made to list the
Notes on any securities exchange. Accordingly, the liquidity of the Notes may be
limited.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER "RISK
FACTORS" COMMENCING ON PAGE S- [ ] HEREIN AND COMMENCING ON PAGE [ ] IN THE
PROSPECTUS.
Capitalized terms used in this Prospectus Supplement are defined at the
locations identified in the "Index of Principal Defined Terms" beginning on page
[ ].
It is a condition of issuance that the Class A-1 Notes be rated ["Aaa" by
Moody's Investors Service, Inc. ("Moody's")]["AAA" by Standard & Poor's Ratings
Services ("Standard & Poor's")] ["AAA" by Fitch IBCA, Inc. ("Fitch")] ["AAA" by
Duff & Phelps Credit Rating Co. ("DCR")] the Class A-2 Notes be rated at least
["Aa2" by Moody's] ["AA+" by Standard & Poor's] ["AA" by Fitch] ["AA" by DCR];
the Class A-3 Notes be rated at least ["A2" by Moody's]["AA" by Standard &
Poor's] ["A" by Fitch] ["A" by DCR]; and the Class A-4 Notes be rated at least
["Baa2" by Moody's] ["BBB" by Standard & Poor's] ["BBB" by Fitch] ["BBB" by
DCR].
------------------------
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR OR ANY AFFILIATE THEREOF. NEITHER
THE NOTES NOR THE ACCOUNTS WILL BE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR ANY OTHER ENTITY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT DEPOSITOR (1)(2)
<S> <C> <C> <C>
Per Class A-1 Note....................................... % % %
Per Class A-2 Note....................................... % % %
Per Class A-3 Note....................................... % % %
Per Class A-4 Note....................................... % % %
Total.................................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from 1, 199 .
(2) Before deducting expenses, estimated to be $ .
------------------------
The Notes are offered by the Underwriters subject to prior sale, when, as
and if issued to and accepted by them and subject to the Underwriters' right to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in book-entry form only through the Same Day Funds Settlement
System of The Depository Trust Company on or about , 199 .
[UNDERWRITER]
The date of this Prospectus Supplement is , 199 .
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES INCLUDING
OVER-ALLOTMENT, AND STABILIZING TRANSACTIONS IN SUCH SECURITIES, DURING AND
AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION" HEREIN AND IN THE PROSPECTUS.
For a description of certain tax consequences of owning the Notes,
including, without limitation, original issue discount, see "Federal Income Tax
Considerations" herein and "Material Federal Income Tax Consequences" in the
Prospectus.
This Prospectus Supplement may be used by, to the extent required, in
connection with market making transactions in the Notes. may act as
principal or agent in such transactions.
This Prospectus Supplement does not contain complete information about the
offering of the Notes. Additional information is contained in the Prospectus
dated , 199 (the "Prospectus") of which this Prospectus Supplement is
part and which accompanies this Prospectus Supplement. Purchasers are urged to
read both this Prospectus Supplement and the Prospectus in full. Sales of the
Offered Securities may not be consummated unless the purchaser has received both
this Prospectus Supplement and the Prospectus.
Unless and until Definitive Notes are issued, quarterly unaudited reports as
to the payments made on the Notes will be prepared by the Indenture Trustee and
sent on behalf of the Issuer only to Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and registered holder of the Notes. Because the
beneficial owners of Notes issued in book-entry form will not be Noteholders, as
that term is used in the Indenture, unless Definitive Notes are issued such
reports will not be made available to such owners. See "Description of the
Notes--Registration of Notes" herein.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF TERMS....................................................................... S-4
RISK FACTORS........................................................................... S-11
Limited Rights of Subordinate Noteholders............................................ S-11
Limited Overcollateralization........................................................ S-11
Risks of Subordination............................................................... S-11
No Advance Obligation................................................................ S-12
Mortgage Collateral Includes Delinquent Accounts..................................... S-12
Effect of Prepayments on Yield and Weighted Average Life............................. S-12
THE ISSUER............................................................................. S-13
USE OF PROCEEDS........................................................................ S-13
THE ACCOUNTS........................................................................... S-13
Underwriting and Credit Policies..................................................... S-13
Homebuilding Activities.............................................................. S-14
Servicing............................................................................ S-15
Repossessions........................................................................ S-16
Recoveries........................................................................... S-17
Time to Recovery..................................................................... S-17
THE MORTGAGE COLLATERAL................................................................ S-18
Effective Financing Rate............................................................. S-18
Total Accounts Comprising the Mortgage Collateral.................................... S-18
DESCRIPTION OF THE NOTES............................................................... S-23
Available Funds...................................................................... S-23
Interest and Principal Payments...................................................... S-23
Allocation of Losses................................................................. S-27
Redemption of the Notes.............................................................. S-28
Weighted Average Life of the Notes................................................... S-28
Registration of Notes................................................................ S-31
LEGAL INVESTMENT CONSIDERATIONS........................................................ S-33
ERISA CONSIDERATIONS................................................................... S-33
FEDERAL INCOME TAX CONSIDERATIONS...................................................... S-34
General.............................................................................. S-34
Original Issue Discount.............................................................. S-35
THE INDENTURE.......................................................................... S-35
Events of Default.................................................................... S-35
Rights upon Event of Default......................................................... S-35
Trigger Events....................................................................... S-36
Limitations on Suits................................................................. S-37
Reports to Noteholders............................................................... S-37
The Indenture Trustee................................................................ S-37
THE SERVICING AGREEMENT................................................................ S-38
Collection of Payments............................................................... S-38
Servicing Fee........................................................................ S-38
Annual Accountants' Report........................................................... S-38
THE TRUST AGREEMENT.................................................................... S-38
THE PURCHASE AND SALE AGREEMENT........................................................ S-38
PLAN OF DISTRIBUTION................................................................... S-39
LEGAL MATTERS.......................................................................... S-39
FINANCIAL INFORMATION.................................................................. S-40
NOTE RATINGS........................................................................... S-40
INDEX OF PRINCIPAL DEFINED TERMS....................................................... S-41
</TABLE>
S-3
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT AND IN THE PROSPECTUS. TERMS NOT DEFINED IN THIS SUMMARY ARE USED AS
DEFINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS. SEE "INDEX
OF PRINCIPAL DEFINED TERMS" BEGINNING ON PAGE .
<TABLE>
<S> <C>
Securities Offered........... The Class A-1, Class A-2, Class A-3 and Class A-4 Notes will
be issued pursuant to an indenture (the "Indenture") dated
the Closing Date between Mid-State Trust 199 , a business
trust, and , as trustee (the "Indenture
Trustee") for the benefit of the holders of the Notes. See
"DESCRIPTION OF THE NOTES" herein. The Notes will be offered
for purchase in denominations of $1,000 and integral
multiples thereof in book-entry form only. On or about
, 199 (the "Closing Date"), Mid-State will
transfer the Accounts to the Issuer, and the Issuer will
issue the Notes, which will initially be overcollateralized
as described under "RISK FACTORS--Limited
Overcollateralization" herein. The Issuer's sole source of
funds to make payments on the Notes will be collections on
the Accounts. The Notes will have the characteristics set
forth under "DESCRIPTION OF THE NOTES" herein and in the
following table.
</TABLE>
SUMMARY OF NOTES
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3
--------------- --------------- ---------------
<S> <C> <C> <C>
Size................................................................. $ $ $
Payment Window (in months)*..........................................
Initial Weighted Average Life (in years)*............................
Expected Maturity*...................................................
Stated Maturity Date**...............................................
Maturity Date........................................................
Initial Subordination................................................ $ $ $
<CAPTION>
CLASS A-4
---------------
<S> <C>
Size................................................................. $
Payment Window (in months)*..........................................
Initial Weighted Average Life (in years)*............................
Expected Maturity*...................................................
Stated Maturity Date**...............................................
Maturity Date........................................................
Initial Subordination................................................ $
</TABLE>
The Payment Dates for each Class of Notes are January 1, April 1, July 1 and
October 1 commencing , 199 .
- ------------------------
* Assumes % CPR; computed on the basis of the assumptions under
"DESCRIPTION OF THE NOTES--Weighted Average Life of the Notes" herein and in
the Prospectus.
** Assumes % CPR; computed on the basis of the assumptions under
"DESCRIPTION OF THE NOTES--Weighted Average Life of the Notes" herein and in
the Prospectus.
<TABLE>
<S> <C>
Issuer....................... The Issuer is a business trust (the "Trust") established
under the laws of by a trust agreement dated as of
, 199 (the "Trust Agreement") between the
Depositor and , not in its individual
capacity but solely as owner trustee (the "Owner Trustee").
The settlor and sole beneficiary of the Issuer is the
Depositor, an indirect wholly-owned subsidiary of Walter
Industries, Inc. ("Walter Industries"). The Owner Trustee
will act as trustee of the Trust. See "THE ISSUER" herein
and in the Prospectus. The Notes will be obligations solely
of the Issuer.
Cut-Off Date................. , 199 (the "Cut-Off Date").
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
Closing Date................. On or about , 199 (the "Closing Date").
Interest and Principal
Payments on the Notes........ Interest on each Class of the Notes will be payable from
Available Funds on each Payment Date in an amount equal to
interest accrued during the three-month period ending on the
day prior to the Payment Date (each such period, an
"Interest Accrual Period"), with respect to (i) the Class
A-1 Notes at the Class A-1 Note Rate, (ii) the Class A-2
Notes at the Class A-2 Note Rate, (iii) the Class A-3 Notes
at the Class A-3 Note Rate and (iv) the Class A-4 Notes at
the Class A-4 Note Rate, in each such case on the unpaid
principal balance of the applicable Class of Notes. The
"Note Rate" of the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes is %, %, % and %, respectively.
Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. See "DESCRIPTION OF THE
NOTES--Interest and Principal Payments" herein.
"Available Funds" for a Payment Date are the funds in the
Collection Account representing (i) collections on the
Accounts during the three-month period (each such period, a
"Collection Period") ending on the close of business on the
last business day of the second month preceding the month in
which such Payment Date occurs plus (ii) any net
reinvestment income earned on funds described in clause (i)
above, from the date two business days prior to the
preceding Payment Date through the date two business days
prior to such Payment Date (each such period, a
"Reinvestment Period"). Available Funds will be net of
Issuer Expenses paid to the time of calculation thereof. On
each Payment Date, Available Funds will be paid first to the
Classes of Notes in the order of their numerical Class
designations until each has received a full payment of
interest together with any unpaid interest which was due in
respect of a previous Payment Date and then to the Classes
of Notes in the order of their numerical Class designations
until each receives the payment in respect of unreimbursed
losses, together with interest thereon, and principal
described herein under "DESCRIPTION OF THE NOTES--Interest
and Principal Payments" herein.
Following the Target Overcollateralization Date, unless
there exists an uncured Trigger Event, the portion, if any,
of the funds remaining on any Payment Date after the
allocation of Available Funds described in the preceding
paragraph will be released to the Issuer on that Payment
Date, free of the lien of the Indenture, and will no longer
be available to make payments on the Notes. Such funds will
then be distributed to the owner of the beneficial interest
in the Issuer, which will initially be Mid-State. See
"DESCRIPTION OF THE NOTES-- Interest and Principal Payments"
herein.
Record Date.................. The record date for each Payment Date is the fifteenth day
of the month preceding the month of such Payment Date (the
"Record Date").
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Subordination................ The rights of holders of each Class of Notes other than the
Class A-1 Notes (each, a "Subordinated Class") to receive
payments will, in each case, be subordinated to the extent
described herein, to the rights of holders of each Class
with a prior numerical Class designation. See "RISK
FACTORS--Risks of Subordination" herein and in the
Prospectus. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Class A-1
Notes of the full amount of interest and principal to which
such Class is entitled. Similarly, but to decreasing
degrees, this subordination is also intended to enhance the
likelihood of timely receipt by the holders of the Class A-2
and Class A-3 Notes of the full amount of interest and
principal to which such Class is entitled on each Payment
Date. The protection afforded to the holders of the Class
A-1, Class A-2 and Class A-3 Notes by means of subordination
will be accomplished by (i) the allocation of losses on the
Accounts to the respective Classes of Notes in reverse
numerical order of their Class designations and (ii) with
respect to interest, the application of the Available Funds
on each Payment Date in the sequential order provided by the
Available Funds Allocation. See "DESCRIPTION OF THE
NOTES--Interest and Principal Payments" herein.
Optional Redemption of All (but not less than all) Classes of Notes may be redeemed
Notes........................ on any Payment Date at the option of the Issuer, at 100% of
the unpaid principal amount of each Class of Notes plus
accrued interest, if, after giving effect to the payment of
principal that would be made on such Payment Date absent
such redemption, the aggregate principal amount of each
Class of Notes outstanding (prior to allocations of any
Realized Loss Amounts) is less than or equal to 10% of the
original aggregate principal amount of such Class of Notes.
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Events of Default............ An Event of Default with respect to the Notes is defined in
the Indenture to include one or more of the following
events: (i) a default in the payment of any amount due under
the Notes by the Maturity Date; (ii) a failure to apply
funds in the Collection Account in accordance with the
Indenture and such failure continues for a period of two
days; (iii) a default in the payment when due of interest on
any Class of Notes and the expiration of a 30-day grace
period (provided that neither the reimbursement of any
Realized Loss Amounts nor interest on any Realized Loss
Amounts in respect of any Class of Notes will be deemed due
unless there exist Available Funds sufficient to pay such
amount and all prior amounts under the Available Funds
Allocation); (iv) the failure to pay the Outstanding
Principal Balance of each class of Notes on the Maturity
Date; (v) a default in the observance of certain negative
covenants in the Indenture, (vi) a default in the observance
of any other covenant in the Indenture, and the continuation
of any such default for a period of thirty days after notice
or (vii) certain events of bankruptcy or insolvency with
respect to the Issuer. Notwithstanding the foregoing, prior
to the Maturity Date, any of the events described in the
preceding sentence will not be an Event of Default (i) in
respect of the Class A-2 Notes until the Class A-1 Notes
have been paid in full, (ii) in respect of the Class A-3
Notes until the ClassnbA-1 Notes and Class A-2 Notes have
been paid in full and (iii) in respect of the ClassnbA-4
Notes until the Class A-1 Notes, Class A-2 Notes and Class
A-3 Notes have been paid in full. See "THE INDENTURE--Events
of Default" herein and in the Prospectus.
Prior to the Maturity Date, upon the occurrence of an Event
of Default, the Indenture Trustee or the holders entitled to
at least 66 2/3% of the Voting Rights of the Class of Notes
with the lowest numerical Class designation then outstanding
may declare the principal of the Notes to be immediately due
and payable; provided, however, that such Class of Notes or
the Indenture Trustee may make such declaration only if the
Event of Default affects, and in the case of a default in
the payment of the Notes such payment default relates to,
the Class of Notes with the lowest numerical Class
designation then outstanding. On or after the Maturity Date,
if an Event of Default occurs or shall have occurred, the
Indenture Trustee shall declare the principal of the Notes
to be immediately due and payable. See "THE
INDENTURE--Rights Upon Event of Default" herein and in the
Prospectus.
Security..................... Payments of amounts due on the Notes will be secured by the
following (collectively, the "Collateral"):
A. Mortgage Collateral..... Accounts, having on , 199 an aggregate Economic
Balance of approximately $ , will secure the Notes.
Such Accounts will have, as of the Cut-Off Date, a weighted
average finance charge of approximately % and a weighted
average remaining term to maturity of approximately years.
See "THE MORTGAGE COLLATERAL" herein and in the Prospectus
and "SECURITY" in the Prospectus.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
SERVICER; SERVICING AGREEMENT; SUBSERVICING. Mid-State or
any successor servicer will service the Accounts pursuant to
a servicing agreement dated the Closing Date among the
Issuer, the Servicer and the Indenture Trustee (the
"Servicing Agreement") either directly or through one or
more subservicers. The Servicing Agreement will provide for
the payment of a servicing fee of $ per month for
each Account outstanding from the Issuer to the Servicer.
Jim Walter Homes, Inc. ("Jim Walter Homes"), an affiliate of
the Depositor or unaffiliated third parties will perform
certain servicing functions with respect to the Accounts
pursuant to a subservicing agreement (the "Subservicing
Agreement"). See "THE SERVICING AGREEMENT" herein and in the
Prospectus.
B. Collection Account...... Prior to the Closing Date, a collection account relating to
the Collateral (the "Collection Account") will be
established with and in the name of the Indenture Trustee.
On the Closing Date, the Issuer will deposit into the
Collection Account cash in an amount equal to all payments
(including prepayments) received in respect of the Accounts
since the Cut-Off Date and up to the date that is five
business days prior to the Closing Date. Thereafter, as long
as any Note remains outstanding, all payments received in
respect of the Accounts and required to be so deposited will
be deposited in the Collection Account. The foregoing
amounts deposited into the Collection Account, less Issuer
Expenses, will be available to make payments of principal
of, and interest on, the Notes. Amounts on deposit in the
Collection Account will be invested in Eligible Investments.
See "SECURITY--Collection Account" in the Prospectus.
Representations and
Warranties Concerning the
Mortgage Collateral.......... The Issuer will represent and warrant, among other things,
that (i) the information delivered to the Indenture Trustee
with respect to the Mortgage Collateral is true and correct
as of the date such information was given; (ii) at the
Closing Date, each mortgage, deed of trust or other security
agreement that constitutes the Mortgage Collateral shall
constitute a valid first priority lien upon and secure title
to the property (the "Mortgaged Property") described therein
and such security agreement and the promissory note secured
thereby are enforceable in accordance with their terms; and
(iii) at the Closing Date, the Issuer is the sole owner of
each Account, has good title to such Account and has full
right and authority to transfer such Account and to grant a
security interest in such Account to the Indenture Trustee.
See "THE INDENTURE--Representations and Warranties" in the
Prospectus.
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
Within 90 days of the earlier of discovery by or notice to
the Issuer of any breach of a representation or warranty
which materially and adversely affects the interests of the
Noteholders in an Account, the Issuer is required to use its
best efforts to cure such breach in all material respects.
If such breach is not or cannot be cured within such 90-day
period or, with the prior written consent of the Indenture
Trustee, such longer period as specified in such consent,
the Issuer is required to either (i) deposit in the
Collection Account an amount equal to 100% of the current
Economic Balance of the affected Account, at which time such
affected Account will be released from the lien of the
Indenture or (ii) remove such Account from the lien of the
Indenture and substitute one or more qualified substitute
accounts. See "THE INDENTURE--Representations and
Warranties" in the Prospectus.
The obligation of the Issuer to cure any such breach or to
repurchase or substitute for the affected Account will be
the sole remedy available to the Trustee or Noteholders in
respect of the related breach.
Origination of Accounts...... All of the Accounts were originated by Jim Walter Homes. See
"THE DEPOSITOR" in the Prospectus.
Purchase and Sale The Purchase and Sale Agreement dated as of the Closing Date
Agreement.................... between the Depositor and the Issuer (the "Purchase and Sale
Agreement"). See "THE PURCHASE AND SALE AGREEMENT" herein
and in the Prospectus.
Servicer..................... Mid-State Homes, Inc. will act as the Servicer under the
Servicing Agreement. See "THE SERVICING AGREEMENT" herein
and in the Prospectus.
Indenture Trustee............ will act as the Indenture Trustee. See "THE INDENTURE--The
Indenture Trustee" herein and in the Prospectus.
Owner Trustee................ will be the Owner Trustee pursuant to the Trust Agreement.
The Owner Trustee will be obligated to (i) execute and
deliver the Indenture, the Notes, the Servicing Agreement,
the Purchase and Sale Agreement and all other documents and
instruments related thereto, (ii) acquire the Collateral and
to pledge the Collateral as security for the Notes, (iii)
issue the Notes pursuant to the Indenture and (iv) take
whatever action shall be required to be taken by the Owner
Trustee by, and subject to, the terms of the Trust
Agreement. The liability of the Owner Trustee in connection
with the issuance and sale of the Notes and in respect of
the Issuer's obligations under the Notes is limited solely
to the express obligations of the Owner Trustee set forth in
the Trust Agreement and the Indenture. See "THE TRUST
AGREEMENT" herein and in the Prospectus.
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
Risk Factors................. Various risk factors related to the purchase of Notes are
discussed herein and in the Prospectus, including, among
others, (i) the factors (including the effect of changes in
mortgage market interest rates) affecting the weighted
average life of the Notes and the reinvestment risk borne by
investors and (ii) the risks related to the subordination of
each Class of Notes (other than the Class A-1 Notes) to the
Classes of Notes having prior numerical Class designations.
See "Risk Factors" herein and in the Prospectus.
Legal Investment The Notes will not constitute "mortgage related securities"
Considerations............... for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended. See "LEGAL INVESTMENT
CONSIDERATIONS" herein and in the Prospectus.
ERISA Considerations......... Under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the Internal Revenue Code of 1986,
as amended (the "Code"), a pension or other employee benefit
plan covered by ERISA or retirement arrangements which are
subject to ERISA or Section 4975 of the Code (collectively,
"Plans") with respect to which the Depositor or any
affiliate is a service provider, may acquire the Notes only
under certain limited circumstances. ,
counsel for the Underwriters and special counsel for the
Issuer as to ERISA matters, is of the opinion that the Notes
will be considered debt instruments rather than equity
interests of the Issuer for ERISA purposes. See "ERISA
CONSIDERATIONS" herein and in the Prospectus.
Tax Status of the Notes...... The Notes will be treated as debt for federal income tax
purposes. If the Notes are issued with original issue
discount, Noteholders generally will be required to include
the original issue discount in gross income over the life of
the Notes. The Notes will not constitute "loans secured by
an interest in real property" for "domestic building and
loan associations" or "real estate assets" for "real estate
investment trusts." See "FEDERAL INCOME TAX CONSIDERATIONS"
herein and "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in the
Prospectus.
Ratings...................... It is a condition of issuance that the Class A-1 Notes be
rated ["Aaa" by Moody's Investors Service, Inc.
("Moody's")]["AAA" by Standard & Poor's Ratings Services
("Standard & Poor's")] ["AAA" by Fitch IBCA, Inc. ("Fitch")]
["AAA" by Duff & Phelps Credit Rating Co. ("DCR")] the Class
A-2 Notes be rated at least ["Aa2" by Moody's] ["AA+" by
Standard & Poor's] ["AA" by Fitch] ["AA" by DCR]; the Class
A-3 Notes be rated at least ["A2" by Moody's]["AA" by
Standard & Poor's] ["A" by Fitch] ["A" by DCR]; and the
Class A-4 Notes be rated at least ["Baa2" by Moody's] ["BBB"
by Standard & Poor's] ["BBB" by Fitch] ["BBB" by DCR]. [The
rating of each Class of Notes by Standard & Poor's addresses
the likelihood of timely payment of interest and the
ultimate payment of principal on the Notes.][The rating of
each Class of Notes by Moody's addresses the likelihood of
the ultimate payment of principal and interest on the
Notes.] A security rating is not a recommendation to buy,
sell or hold the Notes. See "NOTE RATINGS" herein and in the
Prospectus.
</TABLE>
S-10
<PAGE>
RISK FACTORS
Prospective investors should consider, among other things, the matters
discussed under "Risk Factors" in the Prospectus and the following risk factors
in connection with the purchase of Notes.
LIMITED RIGHTS OF SUBORDINATE NOTEHOLDERS
Prior to the Maturity Date, no holder of any Class of Notes will have the
right to declare the principal of the Notes to be immediately due and payable
other than (i) on or prior to the Maturity Date, the holders entitled to 66 2/3%
of the Voting Rights of the Class of Notes with the lowest numerical Class
designation then outstanding and (ii) after the Maturity Date, the holders
entitled to 66 2/3% of the Voting Rights of any Class of Notes (provided that
the holders entitled to 66 2/3% of each Class of Notes with a lower numerical
Class designation consent). See "THE INDENTURE--Rights Upon Event of Default"
herein and in the Prospectus. In addition, no holder of any Class of Notes will
have the right to petition or otherwise invoke any court or government
proceeding for the purpose of commencing or sustaining a case against the Issuer
under any Federal or state bankruptcy, insolvency or similar law other than (i)
on or prior to the Maturity Date, the holders entitled to 66 2/3% of the Voting
Rights of the Class of Notes with the lowest numerical Class designation then
outstanding and (ii) after the Maturity Date, the holders entitled to 100% of
the Voting Rights of any Class of Notes (provided that the holders entitled to
100% of each Class of Notes with a lower numerical designation consent).
LIMITED OVERCOLLATERALIZATION
As of the Cut-Off Date, the aggregate Economic Balance of the Accounts (the
"Aggregate Economic Balance") was approximately $ . On each Payment Date
prior to the Target Overcollateralization Date, unless there exists an uncured
Trigger Event, Available Funds (which are net of Issuer Expenses), if any, in
excess of the amount of interest due on the Notes on such Payment Date
("Remaining Available Funds") will be applied to pay principal of the Notes in
accordance with the Available Funds Allocation as set forth under "DESCRIPTION
OF THE NOTES--Interest and Principal Payments" herein which, in the absence of
losses or delinquencies on the Accounts, will have the effect of increasing the
level of overcollateralization from the original level. The Notes will be
overcollateralized by the Accounts to the extent, if any, by which (a) the
aggregate Economic Balance of the Accounts exceeds (b) the outstanding principal
amount of the Notes. The amount of such overcollateralization will be reduced or
eliminated to the extent that losses incurred in respect of defaulted Accounts,
together with payments on the Accounts, cause the Economic Balance of the
Accounts to decline more than the principal amount of the Notes declines on
account of payments of principal thereon. If the protection afforded to the
Notes by such overcollateralization were to be exhausted, and the Accounts
incurred further losses, such losses would be allocated first to the Class A-4
Notes, then to the Class A-3 Notes, then to the Class A-2 Notes and finally to
the Class A-1 Notes, in each case until the principal balance of such Class of
Notes has been reduced to zero. See "THE ACCOUNTS" herein and in the Prospectus
and "DESCRIPTION OF THE NOTES--Interest and Principal Payments" herein.
RISKS OF SUBORDINATION
The protection afforded to the holders of the Class A-1, Class A-2 and Class
A-3 Notes by means of subordination will be accomplished by (i) the allocation
of losses on the Accounts to the Classes of Notes in reverse order of their
numerical Class designations and (ii) with respect to interest, the application
of the Available Funds on each Payment Date in the sequential order provided by
the Available Funds Allocation. The rights of the holders of the Class A-2 Notes
to receive payments of interest on the Class A-2 Notes will be subordinated to
such rights of the holders of the Class A-1 Notes; the rights of the holders of
the Class A-3 Notes to receive payments of interest will be subordinated to such
rights of the holders of the Class A-1 and Class A-2 Notes; and the rights of
the holders of the Class A-4 Notes to receive payments of interest will be
subordinated to such rights of the holders of the Class A-1, Class A-2
S-11
<PAGE>
and Class A-3 Notes, all to the extent described herein under "DESCRIPTION OF
THE NOTES-- Interest and Principal Payments" herein. Accordingly, on any Payment
Date any deficiency in the availability of funds to pay interest or principal on
the Notes will result in shortfalls in the payment of the Notes first to the
Class A-4 Notes, then to the Class A-3 Notes, then to the Class A-2 Notes and
then to the Class A-1 Notes. Further, in the event that the
overcollateralization described above is exhausted, any losses on the Accounts
will be similarly allocated to the Classes of Notes in reverse numerical order.
NO ADVANCE OBLIGATION
Since neither the Servicer nor any other party is required to advance
delinquent payments on the Accounts, significant delinquencies (especially if
combined with substantial losses on the Accounts) may result in the inability to
make full payments of interest to all Classes of Notes on a Payment Date.
Because Available Funds are allocated on each Payment Date to the Classes of
Notes in the order of their numerical Class designations, the more subordinate
Classes of Notes are more likely to suffer any such shortfalls in interest than
the more senior Classes of Notes.
MORTGAGE COLLATERAL INCLUDES DELINQUENT ACCOUNTS
As of the Cut-Off Date, approximately %, % and % of the Accounts as
a percentage of total Accounts had payments which were past due 31-60 days,
61-90 days and 91 or more days, respectively. % of the Accounts were in
foreclosure. Accounts which are in foreclosure or bankruptcy continue to be
included in the delinquency category described in the preceding sentence. See
"THE ACCOUNTS-- Servicing" herein and in the Prospectus and "--Repossessions"
herein. Investors should consider the risk that any of the Accounts may become
defaulted Accounts and subsequently the properties securing such Accounts may
become repossessed properties. See "--Losses on Accounts" in the Prospectus.
Defaults by homeowners on the Accounts may result in the failure of the
Noteholders on a given Payment Date to receive payments in full in respect of
interest or principal. The allocation of losses on the Accounts to the Classes
of Notes in reverse order of their numerical designations may more likely result
in a reduction of the principal balance of the more subordinate Classes of Notes
than of the more senior Classes of Notes without a corresponding payment of
principal thereon. See "--Risks of Subordination" herein and in the Prospectus.
Such events may cause a significant delay in the receipt of principal by the
holders of the more subordinate Classes of Notes, or may cause such Classes of
Notes to fail to receive any payment in respect of principal, and to a lesser
extent, interest, on a given Payment Date.
EFFECT OF PREPAYMENTS ON YIELD AND WEIGHTED AVERAGE LIFE
The weighted average life and the maturity of each Class of the Notes will
be affected by the prepayment experience on the Accounts and the rate and
frequency of delinquencies of payments due on the Accounts. Prepayments on the
Accounts may be influenced by a variety of economic, geographic, social and
other factors, including national and local economic conditions, repossessions,
aging, seasonality and interest rates. Other factors affecting prepayments on
the Accounts include changes in housing needs, job transfers and unemployment.
Liquidations of defaulted Accounts are generally expected to result in resale of
the repossessed properties and the subsequent origination of new Accounts rather
than cash. In general, if prevailing interest rates fall significantly below the
effective financing rates on the Accounts, the rate of prepayments on the
Accounts is likely to be higher than if prevailing interest rates remain close
to or above the effective financing rates borne by such Accounts. Conversely, if
prevailing interest rates rise above the effective financing rates on such
Accounts, the rate of prepayment would be expected to decrease. As noted above,
no party is required to advance delinquent payments on the Accounts. Even if
Available Funds are sufficient to make full payments of interest on all Classes
of Notes, any such delinquencies will reduce the amount of Remaining Available
Funds available to make payments of principal in respect of the Notes.
Delinquencies occurring on or prior to the Target Overcollateralization Date or
during the existence of an uncured Trigger Event will have the effect of
extending the weighted average lives of all
S-12
<PAGE>
Classes of Notes. Following the Target Overcollateralization Date, any such
delinquencies may have the effect of extending the weighted average lives of all
Classes of Notes to the extent that such delinquencies exceed the amount
otherwise distributable to the owner of the beneficial interest in the Issuer.
See "DESCRIPTION OF THE NOTES--Weighted Average Life of the Notes" herein and in
the Prospectus.
THE ISSUER
The Issuer has been created pursuant to the Trust Agreement between the
Depositor and the Owner Trustee. The Trust Agreement provides that the Trust
will terminate in no event later than , 20 . For a further
discussion of the Issuer, see "THE ISSUER" in the Prospectus.
USE OF PROCEEDS
The proceeds from the sale of the Notes will be used by the Issuer to
purchase the Accounts and to pay the expenses of the offering. The Depositor
will use a portion of the net proceeds from its sale of the Accounts to purchase
the Accounts from Mid-State Trust V and the remainder for general corporate
purposes. Mid-State Trust V is a Delaware business trust organized on February
27, 1995 for which Mid-State is the depositor. The Accounts have been owned and
will be owned by Mid-State Trust V until the Closing Date. The price the Issuer
pays for the Accounts will represent the net proceeds from the sale of the
Notes.
THE ACCOUNTS
UNDERWRITING AND CREDIT POLICIES
In April 1988 the Depositor sold accounts having an aggregate Economic
Balance of approximately $1.75 billion to Mid-State Trust II; in July 1992 the
Depositor sold accounts having an aggregate Economic Balance of approximately
$301 million to Mid-State Trust III; in March 1995 the Depositor sold accounts
having an aggregate Economic Balance of approximately $827 million to Mid-State
Trust IV and; in June , 1997 the Depositor sold accounts having an aggregate
Economic Balance of approximately $ million to Mid-State Trust VI. Each of
Mid-State Trust II, Mid-State Trust III, Mid-State Trust IV and Mid-State Trust
VI securitized their accounts in registered public offerings under the federal
securities laws. As of the Cut-Off Date, there were 9,220 accounts (the "Trust V
Accounts") owned by Mid-State Trust V, with an aggregate Economic Balance of
approximately $462,287,289. The Trust V Accounts were sold by the Depositor to
Mid-State Trust V. Mid-State Trust V is party to a warehouse financing with
Enterprise Funding Corporation ("Enterprise") whereby Enterprise is obligated to
provide up to $500,000,000 of financing, from time to time (as of April 30,
1997, approximately $355,000,000 was outstanding), to Mid-State Trust V. The
amounts outstanding under such facility are currently secured by the Trust V
Accounts. At the Closing Date, all of the Trust V Accounts will be released from
the warehouse facility and Mid-State Trust V will transfer such accounts to the
Depositor which accounts will, in turn, be sold to the Issuer and will
thereafter constitute the Accounts. The Enterprise warehouse facility will
continue to remain available to Mid-State Trust V after the transfer of Trust V
Accounts to the Depositor. The Issuer does not intend to enter into any
comparable warehouse financing facility.
Each of Mid-State Trust II, Mid-State Trust III, Mid-State Trust IV,
Mid-State Trust V and Mid-State Trust VI is a Delaware business trust for which
Mid-State is the depositor. The Depositor continues to service those accounts,
and Jim Walter Homes continues to act as subservicer. (The accounts owned by
Mid-State Trust II, Mid-State Trust III, Mid- State Trust IV and Mid-State Trust
VI are reflected in some of the tables in this section but are not security for
the Notes and will not benefit the Noteholders in any way). As used herein, the
term "account" includes building and installment sale contracts, related
mortgages, mechanic's lien contracts and other security agreements and
promissory notes originated by Jim Walter Homes, including the accounts sold to
Mid-State Trust II, Mid-State Trust III, Mid-State Trust
S-13
<PAGE>
IV, Mid-State Trust V and Mid-State Trust VI. For additional information
regarding underwriting and credit policies, See "THE ACCOUNTS--Underwriting and
Credit Policies" in the Prospectus.
The following table summarizes certain aggregate characteristics of the
portfolio of the accounts during the last 19 fiscal years. The amounts presented
are the gross receivable amounts which consist of the amount financed and the
total dollar amount of finance charges to be paid over the duration of the
related accounts ("Gross Receivable Amount"). Although account production has
declined in recent years, the table shows that the aggregate balance of the
portfolio and scheduled payments thereon have generally increased due to higher
average sales prices resulting from the sale of larger models and a greater
percentage of 90% complete homes sold. The table also shows that repossessions
increased during the early 1990's due to unfavorable economic conditions,
including the real estate market, but since 1992 have generally declined. The
information presented summarizes the aggregate characteristics of such accounts
at the times indicated and is not intended to reflect characteristics of the
Mortgage Collateral.
CERTAIN ACCOUNT CHARACTERISTICS
<TABLE>
<CAPTION>
ACCOUNT AGGREGATE
PRODUCTION ANNUAL
-------------------- SCHEDULED ACCOUNT SALES
NEW RESALES PAYMENTS REPOSSESSIONS PREPAYMENTS (REPURCHASES) ENDING BALANCE
--------- --------- ----------- ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Nine Months Ended February
28, 1998..................... $ $ -- $
FISCAL YEAR ENDED MAY 31,
1997.........................
1996......................... 506,604 116,314 318,201 119,790 233,541 -- 4,208,252
1995......................... 527,230 130,687 285,780 128,897 162,414 -- 4,256,866
1994......................... 516,822 118,703 292,117 123,882 230,802 -- 4,176,040
1993......................... 538,172 128,088 290,548 127,468 125,368 (11,810) 4,187,316
1992......................... 551,894 123,715 272,149 131,635 84,988 (7,981) 4,052,630
1991......................... 514,849 109,762 262,908 118,954 58,952 -- 3,857,812
1990......................... 470,725 104,913 248,901 110,971 57,140 (10,616) 3,674,015
1989......................... 420,170 105,846 231,651 127,080 59,163 -- 3,504,773
1988 (nine months)........... 329,526 67,433 168,430 88,553 39,984 -- 3,396,651
FISCAL YEAR ENDED AUGUST 31
1987......................... 461,181 100,104 210,058 121,110 64,382 -- 3,296,659
1986......................... 473,599 90,215 194,142 102,951 49,058 -- 3,130,924
1985......................... 522,706 76,093 176,449 84,018 35,602 -- 2,913,261
1984......................... 545,715 69,817 165,105 76,496 33,113 136,738 2,610,531
1983......................... 591,928 65,443 148,352 69,212 25,109 156,631 2,406,451
1982......................... 669,757 46,656 148,373 45,552 18,879 214,759 2,148,384
1981......................... 501,329 42,974 136,242 39,841 28,101 -- 1,859,534
1980......................... 428,515 32,999 115,047 34,585 28,657 -- 1,519,415
1979......................... 341,512 31,043 97,405 34,296 39,342 -- 1,236,190
1978......................... 282,170 30,868 95,843 33,592 45,727 -- 1,034,678
</TABLE>
HOMEBUILDING ACTIVITIES
For a more complete review of homebuilding activities see the discussion in
the Prospectus under the heading "THE ACCOUNTS--Homebuilding Activities." The
following chart shows the sales volume of Jim Walter Homes and the percent of
homes sold in three stages of completion for fiscal years 1978 to 1997 and for
the nine months ended , 1998:
S-14
<PAGE>
HOMEBUILDING ACTIVITIES
<TABLE>
<CAPTION>
PERCENT OF UNIT SALES
-----------------------------------------
<S> <C> <C> <C> <C>
UNITS VARIOUS 90%
SOLD SHELL STAGES COMPLETE
--------- ----- ------------- -------------
Nine Months Ended , 1998........................................ % % %
FISCAL YEAR ENDED MAY 31
1997........................................................................
1996........................................................................ 3,760 18 4 78
1995........................................................................ 4,126 25 9 66
1994........................................................................ 4,331 23 10 67
1993........................................................................ 4,784 26 12 62
1992........................................................................ 5,305 29 13 58
1991........................................................................ 5,229 30 13 57
1990........................................................................ 5,213 30 11 59
1989........................................................................ 5,126 27 9 64
1988 (nine months).......................................................... 4,240 28 7 65
FISCAL YEAR ENDED AUGUST 31
1987........................................................................ 6,100 30 10 60
1986........................................................................ 6,403 28 12 60
1985........................................................................ 7,203 43 25 32
1984........................................................................ 7,809 37 25 38
1983........................................................................ 8,706 27 33 40
1982........................................................................ 10,267 26 34 40
1981........................................................................ 9,226 27 37 36
1980........................................................................ 10,095 27 36 37
1979........................................................................ 9,358 21 38 41
1978........................................................................ 8,952 20 38 42
</TABLE>
Jim Walter Homes' business has tended to be countercyclical to national home
construction activity when interest rates are high. In times of high interest
rates and limited availability of mortgage funds that result in limited new home
construction, Jim Walter Homes' volume of home sales tends to increase due to
the favorable financing it offers. During the period from 1982 through 1998
mortgage rates have generally declined substantially, creating greater
competition for Jim Walter Homes. For additional information regarding the
Accounts, See "THE ACCOUNTS--Homebuilding Activities" in the Prospectus.
SERVICING
In the ordinary course of its business, Mid-State keeps historical
delinquency, repossession and real estate owned information according to
separate portfolios of accounts within the total portfolio. Mid-State, however,
believes that the total portfolio information shows the average performance of
its accounts over time, rather than a performance that might be affected by the
relative seasoning of a separate portfolio. In the case of the delinquency and
repossession experience, information as of the Cut-Off Date is given below for
the Accounts separately. As of , 199 , Mid-State's mortgage
portfolio (including mortgage indebtedness sold to others and serviced by
Mid-State) had an aggregate economic balance of approximately $ . No
assurance can be given, however, that the future experience of the Accounts will
be comparable to the historical information set forth below. See the "SERVICING
AGREEMENT" and "THE ACCOUNTS--Servicing" in the Prospectus.
The following table summarizes the delinquency characteristics for all
accounts owned or serviced by Mid-State (including, without limitation, the
accounts owned by Mid-State Trust II, Mid-State Trust III, Mid-State Trust IV,
Mid-State Trust V and Mid-State Trust VI) at the end of each of the past six
fiscal years
S-15
<PAGE>
and at , 1998. As of each such date, the table presents the number
of delinquent accounts and the dollar amount (in millions) in Gross Receivable
Amounts.
<TABLE>
<CAPTION>
DELINQUENCIES AT MAY 31,
------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
-------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accounts/Gross
Receivable Amount
(Dollars in
Millions).......... 85,418 $ 3,858 88,751 $ 4,053 88,977 $ 4,187 83,945 $ 4,176 80,182 $ 4,257
Delinquencies(1) as a
Percent of
Accounts/ Gross
Receivable Amount:
31-60 Days......... 1.30% 1.04% 1.36% 1.07% 1.30% 0.96% 1.30% 1.09% 1.66% 1.59%
61-90 Days......... 0.62 0.55 0.57 0.52 0.51 0.45 0.61 0.55 0.54 0.53
91 Days or more.... 4.32 3.04 4.47 3.31 3.99 3.12 4.16 3.23 4.22 3.17
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total (31 days or
more).............. 6.24% 4.63% 6.40% 4.90% 5.80% 4.53% 6.07% 4.87% 6.42% 5.29%
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
DELINQUENCIES
AT
FEBRUARY 28,
1996 1997 1998
-------------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts/Gross
Receivable Amount
(Dollars in
Millions).......... 76,112 $ 4,208
Delinquencies(1) as a
Percent of
Accounts/ Gross
Receivable Amount:
31-60 Days......... 1.28% 1.10% %%
61-90 Days......... 0.63 0.62
91 Days or more.... 4.10 3.14
--------- --------- --------- --------- ----------- ---------
Total (31 days or
more).............. 6.01% 4.86% %%
--------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- ----------- ---------
</TABLE>
- ------------------------
(1) Based on number of days elapsed since the contractual due date.
As of the Cut-Off Date, the delinquency characteristics for the Accounts as
a percentage of total Accounts and as a percentage of Gross Receivable Amounts
of the Accounts, were, respectively, % and % for Accounts 31-60 days past
due, % and % for Accounts 61-90 days past due, % and % for Accounts
91 days or more past due and % and % for all delinquent Accounts.
REPOSSESSIONS
Repossessed property is rehabilitated, if necessary, and resold. The
following table sets forth certain information concerning the repossession
experience of accounts in the Depositor's servicing portfolio (including,
without limitation, the accounts owned by Mid-State Trust II, Mid-State Trust
III, Mid-State Trust IV, Mid-State Trust V and Mid-State Trust VI), for each of
the past six fiscal years.
REPOSSESSIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
Total accounts outstanding.............................. 85,418 88,751 88,977 83,945 80,182 76,112
Accounts repossessed.................................... 2,224 2,379 2,180 1,963 1,914 1,676
Accounts repossessed as a percent of total number of
accounts.............................................. 2.6% 2.7% 2.5% 2.3% 2.4% 2.2%
<CAPTION>
<S> <C>
1997
---------
Total accounts outstanding..............................
Accounts repossessed....................................
Accounts repossessed as a percent of total number of
accounts..............................................
</TABLE>
The Mortgage Collateral does not include any real estate which the Servicer
had repossessed as of the Cut-Off Date. As of the Cut-Off Date, Accounts with an
Economic Balance of $ , representing approximately % of the Aggregate
Economic Balance were in foreclosure. Additionally, as of the Cut-Off Date, the
obligors on Accounts with an Economic Balance of $ , representing
approximately % of the Aggregate Economic Balance, were in bankruptcy or
similar proceedings. Certain of these obligors nevertheless are making payments
on the Accounts. As of the Cut-Off Date, the obligors on Accounts with an
Economic Balance of $ , representing approximately % of the Aggregate
Economic Balance, were not in foreclosure or bankruptcy, but were over 120 days
delinquent.
S-16
<PAGE>
RECOVERIES
The number of homes held as real estate owned is set forth in the following
aging summary (which includes, without limitation, the homes held as real estate
owned by Mid-State Trust II, Mid-State Trust III, Mid-State Trust IV, Mid-State
Trust V and Mid-State Trust VI) for the past six fiscal years and the nine
months ended , 1998.
REAL ESTATE OWNED
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- --------- ---------
Real Estate Owned as a Percent of Accounts Outstanding
0-3 Months............................................. 0.11% 0.12% 0.06% 0.07% 0.05% 0.09%
4-6 Months............................................. 0.04 0.03 0.01 0.01 0.01 0.02
More than 6 Months..................................... 0.09 0.05 0.02 0.02 0.01 0.01
--- --- --- --- --- --- ---
Total Real Estate Owned................................ 0.24% 0.20% 0.09% 0.10% 0.07% 0.12%
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
<CAPTION>
<S> <C>
1998
---------
Real Estate Owned as a Percent of Accounts Outstanding
0-3 Months.............................................%
4-6 Months.............................................
More than 6 Months.....................................
---
Total Real Estate Owned................................%
---
---
</TABLE>
TIME TO RECOVERY
Since no party is required to advance required payments on delinquent
Accounts, any such delinquencies that exist at the end of a Collection Period
immediately preceding any Payment Date will reduce the amount of Available Funds
for the related Payment Date. See "RISK FACTORS--Limited Assets of the Issuer,"
in the Prospectus and "--Limited Overcollateralization," "--Risks of
Subordination," and
"--Effect of Prepayments on Yield and Weighted Average Life" herein and in the
Prospectus.
S-17
<PAGE>
THE MORTGAGE COLLATERAL
The Mortgage Collateral which will secure the Notes consists of Accounts,
which comprise % of the accounts owned directly or indirectly by the Depositor
on the Cut-Off Date. The Mortgage Collateral had an aggregate Economic Balance
of approximately $ as of the Cut-Off Date.
Set forth below is a description of additional characteristics of the
Accounts as of the Cut-Off Date. Such information does not reflect changes that
may have occurred to the Accounts subsequent to the Cut-Off Date.
REMAINING YEARS TO MATURITY OF ACCOUNTS COMPRISING THE MORTGAGE COLLATERAL
% ACCOUNTS
<TABLE>
<CAPTION>
0-15 16-20 21-25 26-30 TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Number of Accounts............................................
Average Economic Balance...................................... $ $ $ $ $
Weighted Average Remaining Term (months)(1)...................
Weighted Average Effective Financing Rate.....................%%%%%
Current Economic Balance...................................... $ $ $ $ $
Original Economic Balance(2).................................. $ $ $ $ $
</TABLE>
% ACCOUNTS
<TABLE>
<CAPTION>
0-15 16-20 21-25 26-30 TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Number of Accounts............................................
Average Economic Balance...................................... $ $ $ $ $
Weighted Average Remaining Term (months)(1)...................
Weighted Average Effective Financing Rate.....................%%%%%
Current Economic Balance...................................... $ $ $ $ $
Original Economic Balance(2).................................. $ $ $ $ $
</TABLE>
- ------------------------
(1) The remaining term of an Account is based on the original term of the
Account less the number of months elapsed between the first payment due date
and the Cut-Off Date.
(2) The original Economic Balance for an Account is equal to the original Gross
Receivable Amount less total original finance charges.
EFFECTIVE FINANCING RATE
The Effective Financing Rates borne by 99.99% of the Accounts range from %
to 10.00%. The weighted average Effective Financing Rate for the Accounts as of
the Cut-Off Date is %.
TOTAL ACCOUNTS COMPRISING THE MORTGAGE COLLATERAL
As of the Cut-Off Date, Accounts having an Economic Balance of $ are
secured by homes representing new sales, and Accounts having an Economic Balance
of $ are secured by homes that have been repossessed and resold.
S-18
<PAGE>
The following table sets forth at the Cut-Off Date the years of calculated
scheduled final payment for the Accounts comprising the Mortgage Collateral:
CALCULATED SCHEDULED FINAL PAYMENT(1)
<TABLE>
<CAPTION>
NUMBER OF ACCOUNTS ECONOMIC BALANCE
---------------------- --------------------
<S> <C> <C> <C> <C>
NUMBER PERCENT AMOUNT PERCENT
----------- --------- --------- ---------
Calendar Year of Calculated Scheduled Final Payment:
1997-1998............................................................% $ *
1999-2000............................................................%
2001-2002............................................................
2003-2004............................................................
2005-2006............................................................
2007-2008............................................................
2009-2010............................................................
2011-2012............................................................
2013-2014............................................................
2015-2016............................................................
2017-2018............................................................
2019-2020............................................................
2021-2022............................................................
2023-2024............................................................
2025-2026............................................................
2027-2028............................................................
----------- --------- --------- ---------
Total(2)........................................................... 100.00% $ 100.00%
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
Weighted Average Period to Calculated Scheduled Final Payment: years.
- ------------------------
* Indicates an amount greater than zero but less than 0.005% of the Aggregate
Economic Balance.
(1) Calculated Scheduled Final Payment is determined by adding the original term
of an Account to the first payment due date and subtracting one month.
(2) Percentages may not add to 100% due to rounding.
S-19
<PAGE>
The following three tables set forth the outstanding Economic Balance, the
original Economic Balance and the years of origination of the Accounts
comprising the Mortgage Collateral at the Cut-Off Date:
OUTSTANDING ECONOMIC BALANCE
<TABLE>
<CAPTION>
OUTSTANDING ECONOMIC
NUMBER OF ACCOUNTS BALANCE
-------------------- --------------------
<S> <C> <C> <C> <C>
NUMBER PERCENT AMOUNT PERCENT
--------- --------- --------- ---------
Outstanding Economic Balance:
$10,000 and less.....................................................% $%
$10,001 to $20,000...................................................
$20,001 to $30,000...................................................
$30,001 to $40,000...................................................
$40,001 to $50,000...................................................
$50,001 to $60,000...................................................
above $60,000........................................................
--------- --------- --------- ---------
Total(1)........................................................... 100.00% $ 100.00%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Average outstanding Economic Balance: $ .
- ------------------------
(1) Percentages may not add to 100% due to rounding.
S-20
<PAGE>
ORIGINAL ECONOMIC BALANCE
<TABLE>
<CAPTION>
ORIGINAL ECONOMIC
NUMBER OF ACCOUNTS BALANCE
-------------------- --------------------
<S> <C> <C> <C> <C>
NUMBER PERCENT AMOUNT PERCENT
--------- --------- --------- ---------
Original Economic Balance(1):
$10,000 and less....................................................% $%
$10,001 to $20,000..................................................
$20,001 to $30,000..................................................
$30,001 to $40,000..................................................
$40,001 to $50,000..................................................
$50,001 to $60,000..................................................
above $60,000.......................................................
--------- --------- --------- ---------
Total(2)(3)....................................................... 100.00% $ 100.00%
--------- --------- --------- ---------
--------- --------- --------- ---------
Average Original Economic Balance: $ .
</TABLE>
- ------------------------
(1) With respect to Accounts, representing % of the Aggregate Economic Balance
as of the Cut-Off Date, the original Economic Balances stated above are as
of the date the Economic Balances of such Accounts were reduced in
connection with the settlement of the class action litigation in South
Carolina in 1995 that is described under "RISK FACTORS--Consumer Protection
Laws and Risk of Consumer Litigation" in the Prospectus.
(2) The original Economic Balance for an Account is equal to the original Gross
Receivable Amount less total original finance charges.
(3) Percentages may not add to 100% due to rounding.
YEARS OF ORIGINATION
<TABLE>
<CAPTION>
AGGREGATE ECONOMIC
BALANCE AS OF
NUMBER OF ACCOUNTS CUT-OFF DATE
-------------------- --------------------
<S> <C> <C> <C> <C>
YEAR OF ORIGINATION (1) NUMBER PERCENT AMOUNT PERCENT
- ---------------------------------------------------------------------- --------- --------- --------- ---------
1990..................................................................% $%
1991..................................................................
1992..................................................................
1993..................................................................
1994..................................................................
1995..................................................................
1996..................................................................
1997..................................................................
--------- --------- --------- ---------
1998..................................................................
--------- --------- --------- ---------
Total(2).......................................................... 100.00% $ 100.00%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Calendar year in which the first payment on the Accounts became due.
(2) Percentages may not add to 100% due to rounding.
S-21
<PAGE>
The following table sets forth the geographical distribution of the Accounts
comprising the Mortgage Collateral by state at the Cut-Off Date.
GEOGRAPHICAL DISTRIBUTION
<TABLE>
<CAPTION>
% OF AGGREGATE
% OF TOTAL AGGREGATE ECONOMIC
NUMBER OF NUMBER OF ECONOMIC BALANCE OF ALL
STATE ACCOUNTS ACCOUNTS BALANCE ACCOUNTS
- -------------------------------------------------------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Alabama....................................................... % $ %
Arizona.......................................................
Arkansas......................................................
Florida.......................................................
Georgia.......................................................
Illinois......................................................
Indiana.......................................................
Kentucky......................................................
Louisiana.....................................................
Maryland......................................................
Mississippi...................................................
Missouri......................................................
New Mexico....................................................
North Carolina................................................
Ohio..........................................................
Oklahoma......................................................
South Carolina................................................
Tennessee.....................................................
Texas.........................................................
Virginia......................................................
West Virginia.................................................
Total(1).................................................. 100.00% $ 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100% due to rounding.
S-22
<PAGE>
DESCRIPTION OF THE NOTES
The following are summaries of the material provisions of the Notes. The
following summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the Indenture.
AVAILABLE FUNDS
"Available Funds" in respect of a Payment Date are funds equal to the sum of
(i) collections on the Accounts during the Collection Period immediately
preceding such Payment Date that are on deposit in the Collection Account as of
the close of business on the last business day of such Collection Period and
(ii) any net reinvestment income earned on funds described in clause (i) above,
during the Reinvestment Period. Available Funds will be net of Issuer Expenses
paid. "Issuer Expenses" are all of the Issuer's expenses (other than amounts due
on the Notes), including, without limitation, the fees and expenses of the Owner
Trustee, the Indenture Trustee and the fee of the Servicer. See "THE TRUST
AGREEMENT," THE INDENTURE--The Indenture Trustee" and "THE SERVICING
AGREEMENT--Servicing Fee" herein and in the Prospectus. The "Remaining Available
Funds" for a Payment Date are the Available Funds for such Payment Date reduced
by the amount of interest due on the Notes on such Payment Date.
INTEREST AND PRINCIPAL PAYMENTS
Interest on each Class of the Notes will be payable from Available Funds on
each Payment Date in an amount up to the Interest Accrual Amount of such Class.
The "Interest Accrual Amount" of any Class for any Payment Date is equal to
interest accrued on the Outstanding Principal Balance of such Class (after
giving effect to payments and allocations of losses on the preceding Payment
Date, if any) during the Interest Accrual Period ending on the day prior to the
Payment Date, at the Note Rate for such Class; provided, however, that such
amount shall not include interest due and payable with respect to unreimbursed
Realized Loss Amounts. The "Note Rate" of the Class A-1, Class A-2, Class A-3
and Class A-4 Notes is %, %, % and %, respectively. On or prior to
the Maturity Date, an event which would otherwise be an Event of Default under
the Indenture will not be an Event of Default (i) in respect of the Class A-2
Notes until the Class A-1 Notes have been paid in full, (ii) in respect of the
Class A-3 Notes until the Class A-1 Notes and Class A-2 Notes have been paid in
full and (iii) in respect of the Class A-4 Notes until the Class A-1 Notes,
Class A-2 Notes and Class A-3 Notes have been paid in full.
The "Class A-1 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-1 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-1 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-1 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-1 Initial Principal Balance" is equal to
$ .
The "Class A-2 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-2 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-2 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-2 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-2 Initial Principal Balance" is equal to
$ .
The "Class A-3 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-3 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-3 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-3 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-3 Initial Principal Balance" is equal to
$ .
The "Class A-4 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-4 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-4 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-4 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-4 Initial Principal Balance" is equal to
$ .
The Class A-1 Outstanding Principal Balance, the Class A-2 Outstanding
Principal Balance, the Class A-3 Outstanding Principal Balance and the Class A-4
Outstanding Principal Balance, are each
S-23
<PAGE>
referred to herein generally as an "Outstanding Principal Balance." The
"Aggregate Outstanding Principal Balance" as of any Payment Date is equal to the
sum of the Outstanding Principal Balances as of such Payment Date.
On any Payment Date, if Available Funds (less any interest paid to the prior
Classes of Notes, on such Payment Date) are less than the Interest Accrual
Amount for a Class of Notes, there will exist a shortfall in interest paid to
such Class of Notes; provided, however, that such amount shall not include
interest due and payable with respect to unreimbursed Realized Loss Amounts (as
to each Class of Notes, a "Class Interest Shortfall"). Class Interest Shortfalls
will be added to the amount of interest payable to the holders of such Class on
subsequent Payment Dates, subject to the availability of funds, and interest
will accrue on the amount of any Class Interest Shortfalls.
Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
On each Payment Date, interest and principal payments on the Notes will be
made from Available Funds in the following order of priority (the "Available
Funds Allocation"):
FIRST, to the holders of the Class A-1 Notes, in an amount up to the
Interest Accrual Amount thereof;
SECOND, to the holders of the Class A-1 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with
accrued interest thereon;
THIRD, to the holders of the Class A-2 Notes, in an amount up to the
Interest Accrual Amount thereof;
FOURTH, to the holders of the Class A-2 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with
accrued interest thereon;
FIFTH, to the holders of the Class A-3 Notes, in an amount up to the
Interest Accrual Amount thereof;
SIXTH, to the holders of the Class A-3 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with
accrued interest thereon;
SEVENTH, to the holders of the Class A-4 Notes, in an amount up to the
Interest Accrual Amount thereof;
EIGHTH, to the holders of the Class A-4 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with
accrued interest thereon;
NINTH, to the holders of the Class A-1 Notes, in an amount up to the
Class A-1 Optimal Principal Amount;
TENTH, to the holders of the Class A-1 Notes, accrued and unpaid
interest at the related Note Rate on the amount of any unreimbursed Class
A-1 Realized Loss Amounts previously allocated thereto (provided that any
such amount will not be due and payable unless there exist Available Funds
sufficient to pay such amount and all not prior amounts under this Available
Funds Allocation);
ELEVENTH, to the holders of the Class A-1 Notes, in an amount up to the
amount of any unreimbursed Class A-1 Realized Loss Amounts previously
allocated thereto (provided that any such amount will not be due and payable
unless there exist Available Funds sufficient to pay such amount and all
prior amounts under this Available Funds Allocation);
TWELFTH, to the holders of the Class A-2 Notes, in an amount up to the
Class A-2 Optimal Principal Amount;
THIRTEENTH, to the holders of the Class A-2 Notes, accrued and unpaid
interest at the related Note Rate on the amount of any unreimbursed Class
A-2 Realized Loss Amounts previously allocated
S-24
<PAGE>
thereto (provided that any such amount will not be due and payable unless
there exist Available Funds sufficient to pay such amount and all prior
amounts under this Available Funds Allocation);
FOURTEENTH, to the holders of the Class A-2 Notes, in an amount up to
the amount of any unreimbursed Class A-2 Realized Loss Amounts previously
allocated thereto (provided that any such amount will not be due and payable
unless there exist Available Funds sufficient to pay such amount and all
prior amounts under this Available Funds Allocation);
FIFTEENTH, to the holders of the Class A-3 Notes, in an amount up to the
Class A-3 Optimal Principal Amount;
SIXTEENTH, to the holders of the Class A-3 Notes, accrued and unpaid
interest at the related Note Rate on the amount of any unreimbursed Class
A-3 Realized Loss Amounts previously allocated thereto (provided that any
such amount will not be due and payable unless there exist Available Funds
sufficient to pay such amount and all prior amounts under this Available
Funds Allocation);
SEVENTEENTH, to the holders of the Class A-3 Notes, in an amount up to
the amount of any unreimbursed Class A-3 Realized Loss Amounts previously
allocated thereto (provided that any such amount will not be due and payable
unless there exist Available Funds sufficient to pay such amount and all
prior amounts under this Available Funds Allocation);
EIGHTEENTH, to the holders of the Class A-4 Notes, in an amount up to
the Class A-4 Optimal Principal Amount;
NINETEENTH, to the holders of the Class A-4 Notes, accrued and unpaid
interest at the related Note Rate on the amount of any unreimbursed Class
A-4 Realized Loss Amounts previously allocated thereto (provided that any
such amount will not be due and payable unless there exist Available Funds
sufficient to pay such amount and all prior amounts under this Available
Funds Allocation); and
TWENTIETH, to the holders of the Class A-4 Notes, in an amount up to the
amount of any unreimbursed Class A-4 Realized Loss Amounts previously
allocated thereto (provided that any such amount will not be due and payable
unless there exist Available Funds sufficient to pay such amount and all
prior amounts under this Available Funds Allocation).
The "Class A-1 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-1 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-1 Outstanding Principal Balance.
The "Class A-2 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-2 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-2 Outstanding Principal Balance.
The "Class A-3 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-3 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-3 Outstanding Principal Balance.
The "Class A-4 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-4 Outstanding Principal Balance
for such Payment Date and the denominator of which is the
S-25
<PAGE>
Aggregate Outstanding Principal Balance for such Payment Date; such product not
to exceed the Class A-4 Outstanding Principal Balance.
A "Class Optimal Principal Amount" is any of the Class A-1, Class A-2, Class
A-3 or Class A-4 Optimal Principal Amounts, as applicable.
The "Optimal Principal Amount" is equal to (A) on any Payment Date (i) on or
prior to the Target Overcollateralization Date or (ii) after the Target
Overcollateralization Date and on which there exists an uncured Trigger Event,
the Remaining Available Funds; and (B) on any Payment Date after the Target
Overcollateralization Date on which there does not exist an uncured Trigger
Event, the amount which, when paid as principal on the Notes, will result in
achieving or maintaining the Target Overcollateralization Level. In no event
will the Optimal Principal Amount for any Payment Date exceed the Remaining
Available Funds for such Payment Date or the Aggregate Outstanding Principal
Balance of the Notes.
An Event of Default may be cured only if the Indenture Trustee has not
accelerated the Notes.
The "Target Overcollateralization Date" is the Payment Date occurring in
.
The "Target Overcollateralization Level" as of any Payment Date, is the
level of overcollateralization that would exist if the Overcollateralization
Amount were equal to the greater of (i) the product of (x) the
Overcollateralization Percentage and (y) the Aggregate Economic Balance of the
Accounts as of the first day of the month preceding the month of such Payment
Date and (ii) the Minimum Target Overcollateralization Amount.
The "Overcollateralization Amount" as of any Payment Date, is an amount
equal to (i) the Aggregate Economic Balance of the Accounts as of the first day
of the month preceding the month of such Payment Date, less (ii) the Aggregate
Outstanding Principal Balance and all unreimbursed Realized Loss Amounts, after
giving effect to payments, but prior to the allocation of losses thereon on such
Payment Date.
The "Minimum Target Overcollateralization Amount" for any Payment Date, is
(a) an amount equal to the greater of (i) the product of (x) 10% and (y) the
Aggregate Economic Balance of the Accounts as of the first day of the month
preceding the month of such Payment Date and (ii) $ or (b) in the event
that (i) Mid-State is no longer the Servicer, (ii) the cumulative losses on the
Accounts exceed %, %, %, % and % of the Aggregate
Economic Balance as of the Cut-Off Date, at the end of four, five, six, seven
and eight years after the Cut-Off Date, respectively, or exceed %
thereafter, or (iii) the average 60 day delinquency ratio test as defined in the
Indenture as of any Payment Date, exceeds %, and such event is continuing,
an amount equal to the greater of (x) the Aggregate Outstanding Principal
Balance of the Notes and (y) the Aggregate Economic Balance of the Accounts as
of the month preceding the month of such Payment Date.
The "Overcollateralization Percentage" will be a fraction, expressed as a
percentage, the numerator of which is equal to the excess of (i) the Aggregate
Economic Balance of the Accounts as of the first day of the month preceding the
month in which the Target Overcollateralization Date occurs over (ii) the
Aggregate Outstanding Principal Balance of all Classes of Notes and all
unreimbursed Realized Loss Amounts with respect to all Classes of Notes on the
Target Overcollateralization Date (following payments and allocations of losses
on the Target Overcollateralization Date) and the denominator of which is the
Aggregate Economic Balance of the Accounts as of the first day of the month
preceding the month in which the Target Overcollateralization Date occurs.
Following the Target Overcollateralization Date, unless there exists an
uncured Trigger Event, the portion, if any, of the Available Funds remaining
after the Available Funds Allocation, will be released to the Issuer, free of
the lien of the Indenture, and will no longer be available to make payments on
the Notes. Such funds will then be distributed to the owner of the beneficial
interest in the Issuer, which will initially be Mid-State.
S-26
<PAGE>
ALLOCATION OF LOSSES
As of each Payment Date, the Indenture Trustee will calculate the Class A-1
Realized Loss Amount, the Class A-2 Realized Loss Amount, the Class A-3 Realized
Loss Amount and the Class A-4 Realized Loss Amount.
The "Class A-1 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the Class A-1 Outstanding Principal Balance as of such Payment
Date (after application of the Class A-1 Optimal Principal Amount, but prior to
the application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date, not to exceed the Class A-1 Outstanding Principal Balance.
The "Class A-2 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the sum of (a) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date) and (b) the
Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date, not to exceed the Class A-2 Outstanding Principal Balance.
The "Class A-3 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the sum of (a) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date), (b) the
Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) and (c) the Class A-3 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-3
Optimal Principal Amount, but prior to the application of losses on such Payment
Date) over (ii) the Aggregate Economic Balance of the Accounts immediately
following the Collection Period related to such Payment Date, not to exceed the
Class A-3 Outstanding Principal Balance.
The "Class A-4 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the sum of (a) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date), (b) the
Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount but prior to the
application of losses on such Payment Date), (c) the Class A-3 Outstanding
Principal Amount, but prior to the application of losses on such Payment Date)
and (d) the Class A-4 Outstanding Principal Balance as of such Payment Date
(after application of the Class A-4 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date, not to exceed the Class A-4 Outstanding Principal Balance.
The Class A-1 Realized Loss Amount, the Class A-2 Realized Loss Amount, the
Class A-3 Realized Loss Amount and the Class A-4 Realized Loss Amount are
referred to herein generally as the "Realized Loss Amounts."
On each Payment Date, any Class A-1 Realized Loss Amount will be applied in
reduction of the Class A-1 Outstanding Principal Balance; any Class A-2 Realized
Loss Amount will be applied in reduction of the Class A-2 Outstanding Principal
Balance; any Class A-3 Realized Loss Amount will be applied in reduction of the
Class A-3 Outstanding Principal Balance; and any Class A-4 Realized Loss Amount
will be applied in reduction of the Class A-4 Outstanding Principal Balance; in
each case, until the Outstanding Principal Balance of such Class has been
reduced to zero.
Any reimbursement of Realized Loss Amounts with respect to a Class of Notes
will not result in a reduction of the Outstanding Principal Balance of such
Class of Notes.
S-27
<PAGE>
REDEMPTION OF THE NOTES
All (but not less than all) of the outstanding Notes may be redeemed on any
Payment Date at the option of the Issuer, at 100% of the unpaid principal amount
of the Notes plus accrued interest, if, after giving effect to the payment of
principal to be made on such Payment Date absent such redemption, the aggregate
principal amount of each Class of Notes outstanding (prior to allocations of any
Realized Loss Amounts) is less than or equal to 10% of the original aggregate
principal amount of such Class of Notes.
WEIGHTED AVERAGE LIFE OF THE NOTES
The following information is given solely to illustrate the effect of
prepayments in respect of the Accounts on the weighted average life of each
Class of Notes and is not a prediction of the prepayment rate, the repossession
rate or the effects of repossessions that might actually be experienced in
respect of the Accounts.
The weighted average life of each Class of Notes refers to the average
amount of time that will elapse from the date of its issuance until each dollar
of principal of such Class of Notes will be repaid to the investor. The weighted
average life of the Notes will be influenced by, among other factors, the rate
at which collections are made on the Accounts. Payments on the Accounts may be
in the form of scheduled payments or prepayments (for this purpose, the term
"prepayments" includes prepayments in full and receipt of proceeds from
Insurance Policies that are not applied to the restoration of the home). It is
expected that, consistent with Mid-State's current servicing procedures,
repossessed homes will, in general, be sold in exchange for a new Account
together with a small amount of cash. Consequently, liquidations of Accounts due
to repossessions are not expected to generate much, if any, cash proceeds.
Because of the initial overcollateralization, the likelihood of prepayments
on the Accounts and the application of the Remaining Available Funds to pay
principal of the Notes in accordance with the Available Funds Allocation, it is
expected that each Class of Notes could be fully paid significantly earlier than
the Maturity Date. On the other hand, because no party is required to advance
delinquent payments on the accounts, there will be no cash flow in respect of
Accounts secured by repossessed properties until a new Account is generated upon
the sale, if any, of the related repossessed property; and such cash flow would
normally be in a lesser amount. There can be no assurance that any of the
foregoing events will occur or as to the timing of the occurrence of such
events.
The weighted average life of each Class of Notes as computed herein and the
other information in the tables below assume that: (i) all of the Accounts
constitute eight fully-amortizing fixed-rate accounts: (a) one of which has the
characteristics as set forth under the column "0-15" in the table entitled
"Remaining Years to Maturity of Accounts Comprising the Mortgage
Collateral-- % Accounts" (the " % Accounts Table") set forth under "THE
MORTGAGE COLLATERAL" herein; (b) one of which has the characteristics as set
forth under the column "16-20" in the % Accounts Table; (c) one of which has
the characteristics as set forth under the column "21-25" in the % Accounts
Table; (d) one of which has the characteristics as set forth under the column
"26-30" in the % Accounts Table; (e) one of which has the characteristics as
set forth under the column "0-15" in the table entitled "Remaining Years to
Maturity of Accounts Comprising the Mortgage Collateral-- % Accounts (the
" % Accounts Table") set forth under "THE MORTGAGE COLLATERAL" herein; (f) one
of which has the characteristics as set forth under the column "16-20" in the
% Accounts Table; (g) one of which has the characteristics as set forth under
the column "21-25" in the % Accounts Table; and (h) one of which has the
characteristics as set forth under the column "26-30" in the % Accounts
Table; (ii) Issuer Expenses consist only of the servicing fees; the servicing
fees and losses total % of the current Aggregate Economic Balance; (iii) no
Event of Default under the Indenture occurs and no Trigger Event occurs; (iv)
there are no delinquent monthly payments; (v) the Issuer does not redeem the
Notes as provided under "Redemption of Notes" above; and (vi) the Notes are
issued on , 19 and the Class A-1, Class A-2, Class A-3, and Class A-4
Notes are assumed to bear interest at an interest rate equal
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<PAGE>
to %, %, % and %, respectively. No representation is made that the
Accounts will not experience delinquencies or losses or that resales of
repossessed houses will not occur and new Accounts will not be generated.
Prepayments on Accounts that are not due to repossessions are commonly
measured relative to a prepayment standard or model. The model used in this
Prospectus, the conditional prepayment rate ("CPR"), represents an assumed
annual rate of prepayments relative to the outstanding Economic Balance of the
Accounts at the beginning of an Interest Accrual Period. The CPR is expressed as
an annual rate, which is applied monthly as a percentage of the Accounts
outstanding at the beginning of each month reduced by scheduled payments due on
the Accounts. As used in the tables below, " % CPR" assumes prepayments at an
annual rate of %; " % CPR" assumes prepayments at an annual rate of %;
and so on.
Since the tables below were prepared on the basis of the assumptions
specified above, there are discrepancies between the characteristics of the
actual Accounts and the characteristics of the Accounts assumed in preparing the
tables, and discrepancies between the actual Issuer Expenses and the Issuer
Expenses assumed in preparing the tables. Any such discrepancy may have an
effect upon the percentages of the remaining principal amount of each Class of
Notes outstanding and weighted average lives of such Notes set forth in each
table. In addition, since the actual Accounts have characteristics which differ
from those assumed in preparing the tables, the payments of principal on each
Class of Notes may be made earlier or later than as indicated in the tables. The
tables below were also prepared on the basis of the assumptions that there are
no delinquencies in respect of the Accounts. In the actual servicing of the
Accounts, it is expected that there will be delinquencies, losses, resales of
repossessed houses and new Accounts generated that can vary from the assumptions
used in the calculation of the tables on the following pages. In general,
repossessed houses will be sold for a new Account with little or no cash
downpayment, and there will be some period of time between the repossession of
the house and the origination of the new Account (which may have a lower
Economic Balance), during which period no collections are received in respect of
the repossessed house. Such discrepancies may have an effect on the weighted
average life of each Class of Notes and the percentages of the remaining
principal amount of such Notes set forth in each table.
It is not likely that the Accounts will prepay at any constant level of CPR
to maturity or that all the Accounts will prepay at the same rate. In addition,
the diverse remaining terms to maturity of the Accounts (which include recently
originated Accounts) could produce slower or faster payments of principal than
indicated in the table at the various levels of CPR specified even if the
weighted average remaining term to scheduled maturity of the Accounts is
years.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated repayment rates, repossession
rates and principal amounts of new Accounts assumed to be generated in respect
of repossessions under a variety of their own assumptions as to the matters set
forth above.
There is no assurance that prepayments of the Accounts will conform to any
level of CPR set forth above in this section or any other level of CPR. The
rates of prepayments on the Accounts are influenced by a variety of economic,
geographic, social and other factors. In general, however, if prevailing
interest rates fall, and particularly if they fall significantly below the
Effective Financing Rates of the Accounts, the rate of repayment on such
Accounts is likely to increase. Conversely, if interest rates rise, and
particularly if they rise significantly above the Effective Financing Rates of
the Accounts, the rate of repayment would be expected to decrease. Other factors
affecting prepayment of Accounts include changes in the homeowner's housing
needs, job transfers, unemployment and the homeowner's net equity in the
properties. The CPR does not purport to be either an historical description of
the voluntary prepayment experience of the Accounts or a prediction of the
anticipated amount of prepayments of the Accounts.
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<PAGE>
Based on the assumptions described above, the following tables indicate the
resulting weighted average life of each Class of Notes and set forth the
percentage of the original principal amount of each Class of Notes that would be
outstanding immediately prior to giving effect to the payment due on each of the
dates shown at the indicated percentages of CPR.
PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
THE CLASS A-1 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
<TABLE>
<CAPTION>
PAYMENT DATE % CPR % CPR % CPR % CPR
- -------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Closing Date........................................................ 100% 100% 100% 100%
% % % %
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
<CAPTION>
PAYMENT DATE % CPR
- -------------------------------------------------------------------- -----------
<S> <C>
Closing Date........................................................ 100%
%
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
</TABLE>
- ------------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment by the number of years from the date of
issuance to the related principal payment date, (ii) summing the results and
(iii) dividing the sum by the total principal paid on the Note.
(2) Modified Duration assuming an example yield of %.
(3) The number of months from and including the first payment date to the month
in which the final payment of principal would be made.
* Indicates an amount greater than zero but less than 0.5% of the original
principal amount.
The Stated Maturity Date of the Class A-1 Notes is , 20 and the
weighted average life of the Class A-1 Notes is years, in each case assuming
a prepayment speed of 0% CPR.
PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
THE CLASS A-2 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
<TABLE>
<CAPTION>
PAYMENT DATE % CPR % CPR % CPR % CPR
- -------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Closing Date........................................................ 100% 100% 100% 100%
% % % %
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
<CAPTION>
PAYMENT DATE % CPR
- -------------------------------------------------------------------- -----------
<S> <C>
Closing Date........................................................ 100%
%
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
</TABLE>
- ------------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment by the number of years from the date of
issuance to the related principal payment date, (ii) summing the results and
(iii) dividing the sum by the total principal paid on the Note.
(2) Modified Duration assuming an example yield of %.
(3) The number of months from and including the first payment date to the month
in which the final payment of principal would be made.
* Indicates an amount greater than zero but less than 0.5% of the original
principal amount.
The Stated Maturity Date of the Class A-2 Notes is , 20 and the
weighted average life of the Class A-2 Notes is years, in each case assuming a
prepayment speed of 0% CPR.
S-30
<PAGE>
PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
THE CLASS A-3 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
<TABLE>
<CAPTION>
PAYMENT DATE % CPR % CPR % CPR % CPR
- -------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Closing Date........................................................ 100% 100% 100% 100%
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
<CAPTION>
PAYMENT DATE % CPR
- -------------------------------------------------------------------- -----------
<S> <C>
Closing Date........................................................ 100%
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
</TABLE>
- ------------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment by the number of years from the date of
issuance to the related principal payment date, (ii) summing the results and
(iii) dividing the sum by the total principal paid on the Note.
(2) Modified Duration assuming an example yield of %.
(3) The number of months from and including the first payment date to the month
in which the final payment of principal would be made.
* Indicates an amount greater than zero but less than 0.5% of the original
principal amount.
The Stated Maturity Date of the Class A-3 Notes is , 20 and the
weighted average life of the Class A-3 Notes is years, in each case assuming a
prepayment speed of 0% CPR.
PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
THE CLASS A-4 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
<TABLE>
<CAPTION>
PAYMENT DATE % CPR % CPR % CPR % CPR
- -------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Closing Date........................................................ 100% 100% 100% 100%
% % % %
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
<CAPTION>
PAYMENT DATE % CPR
- -------------------------------------------------------------------- -----------
<S> <C>
Closing Date........................................................ 100%
%
Weighted Average Life (Years) (1)...................................
Duration (Years) (2)................................................
Principal Payment Window (Months) (3)...............................
Expected Final Maturity.............................................
</TABLE>
- ------------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment by the number of years from the date of
issuance to the related principal payment date, (ii) summing the results and
(iii) dividing the sum by the total principal paid on the Note.
(2) Modified Duration assuming an example yield of %.
(3) The number of months from and including the first payment date to the month
in which the final payment of principal would be made.
* Indicates an amount greater than zero but less than 0.5% of the original
principal amount.
The Stated Maturity Date of the Class A-4 Notes is , 20 and the
weighted average life of the Class A-4 Notes is years, in each case assuming a
prepayment speed of 0% CPR.
REGISTRATION OF NOTES
The Notes will initially be registered in the name of Cede & Co. ("Cede"),
the nominee of the Depository Trust Company ("DTC"). DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the
S-31
<PAGE>
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 1934 Act. DTC
accepts securities for deposit from its participating organizations
("Participants") and facilitates the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of Participants, thereby eliminating the need for
physical movement of Notes. Participants include securities brokers and dealers,
banks and trust companies and clearing corporations and may include certain
other organizations. Indirect access to the DTC system is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants").
Note owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of the Notes may do so only through Participants
and indirect participants (unless and until Definitive Notes, as defined below,
are issued). In addition, Note owners will receive all payments of principal of
and interest on the Notes from the Indenture Trustee through DTC and
Participants. Note owners will not receive or be entitled to receive Notes
representing their respective interests in the Notes, except under the limited
circumstances described below.
Unless and until Definitive Notes (as defined below) are issued, it is
anticipated that the only "Noteholder" of the Notes will be Cede, as nominee of
DTC. Note owners will not be Noteholders as that term is used in the Indenture.
Note owners are only permitted to exercise the rights of Noteholders indirectly
through Participants and DTC.
While the Notes are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Notes and is
required to receive and transmit payments of principal of, and interest on, the
Notes. Unless and until Definitive Notes are issued, Note owners who are not
Participants may transfer ownership of Notes only through Participants by
instructing such Participants to transfer Notes, by book-entry transfer, through
DTC for the account of the purchasers of such Notes, which account is maintained
with their respective Participants. Under the Rules and in accordance with DTC's
normal procedures, transfers of ownership of Notes will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited.
The Notes will be issued in registered form to Note owners, or their
nominees, rather than to DTC (such Notes being referred to herein as "Definitive
Notes"), only if (i) DTC or the Issuer advises the Indenture Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as nominee and depository with respect to the Notes and the Issuer or the
Trustee is unable to locate a qualified successor, (ii) the Issuer, at its sole
option elects to terminate the book-entry system through DTC, or (iii) after the
occurrence of an Event of Default, DTC, at the direction of Note owners having a
majority in percentage interests of the Note owners together, advises the
Indenture Trustee in writing that the continuation of a book-entry system
through DTC (or a successor thereto) to the exclusion of any physical notes
being issued to Note owners is no longer in the best interest of Note owners.
Upon issuance of Definitive Notes to Note owners, such Notes will be
transferable directly (and not exclusively on a book-entry basis) and registered
holders will deal directly with the Indenture Trustee with respect to transfers,
notices and payments.
DTC has advised the Issuer and the Indenture Trustee that, unless and until
Definitive Notes are issued, DTC will take any action permitted to be taken by a
Noteholder under the Notes only at the direction of one or more Participants to
whose DTC account the Notes are credited. DTC has advised the Issuer that DTC
will take such action with respect to the Notes only at the direction of and on
behalf of the related Participants, with respect to such Notes. DTC may take
actions, at the direction of the related Participants, with respect to some
Notes which conflict with the actions taken with respect to other Notes.
S-32
<PAGE>
Because DTC can only act on behalf of Participants, who in turn act on
behalf of indirect participants, the ability of a Note owner to pledge its Notes
to persons or entities that do not participate in the DTC system, or to
otherwise act with respect to such Notes, may be limited due to the lack of a
physical certificate for such Notes. In addition, under a book-entry format,
Note owners may experience delays in their receipt of payments, since payments
will be made by the Indenture Trustee, to Cede, as nominee for DTC.
Neither the Issuer, the Depositor nor the Indenture Trustee will have any
responsibility for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests of the Notes held by Cede, as nominee
for DTC, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. In the event of the insolvency of DTC, a
Participant or an indirect participant in whose name Notes are registered, the
ability of the owners of such Notes to obtain timely payment and, if the limits
of applicable insurance coverage by the Securities Investor Protection
Corporation are exceeded or if such coverage is otherwise unavailable, ultimate
payment of amounts paid on such Notes may be impaired.
LEGAL INVESTMENT CONSIDERATIONS
The Notes will not constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as amended. As a result,
the appropriate characterization of the Notes under various legal investment
restrictions, and thus the ability of investors subject to these restrictions to
purchase the Notes, is subject to significant interpretive uncertainties.
No representation is made as to the proper characterization of any Class of
Notes for legal investment or other purposes, or as to the ability of particular
investors to purchase the Notes under applicable legal investment or other
restrictions. All institutions whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Notes constitute legal investments
for them or are subject to investment, capital or other restrictions.
ERISA CONSIDERATIONS
The Issuer, the Depositor and Walter Industries, an affiliate of the
Depositor, may each be considered a "party in interest" within the meaning of
ERISA, or a "disqualified person" within the meaning of the Code, with respect
to many employee benefit plans or retirement arrangements which are subject to
ERISA or Section 4975 of the Code (collectively, the "Plans"). While Mid-State
has no present intention to transfer the beneficial interest in the Issuer to
any person other than an affiliate of Mid-State (including a trust beneficially
owned by Mid-State or an affiliate), any transferee of such beneficial interest
(including a transferee that is not such an affiliate) may be such a "party in
interest" or "disqualified person." Prohibited transactions within the meaning
of ERISA and the Code may arise if the Notes are acquired by a Plan with respect
to which Walter Industries is a service provider or other category of "party in
interest" or "disqualified person," unless such Notes are acquired pursuant to
an exemption for transactions effected on behalf of such Plan by a "qualified
professional asset manager" or pursuant to any other available exemption.
A possible violation of the prohibited transaction rules also could occur if
a Plan purchased Notes pursuant to this offering if the Issuer, any Underwriter,
or any of their employees, affiliates or financial consultants (i) manage any
part of the Plan's investment portfolio on a discretionary basis, or (ii)
regularly provide advice pursuant to an agreement or understanding, written or
unwritten, with the individual, employer or trustee with discretion over the
assets of such Plan that such advice concerning investment matters will be used
as a primary basis for the Plan's investment decisions. Accordingly, the Issuer,
any Underwriter, Mid-State and their respective affiliates will not, and no Plan
should, allow the purchase of Notes with assets of any Plan if the Issuer, any
Underwriter, Mid-State or any of their respective
S-33
<PAGE>
employees, affiliates or financial consultants provide with respect to the
assets to be used to acquire such Notes the management services or advice
described in the previous sentence.
On November 13, 1986, the Department of Labor issued a final regulation
concerning the definition of what constitutes the assets of an ERISA-Covered
Plan (Reg. Section 2510.3-101, 51 Fed. Reg. 41262) (the "Final Regulation").
Under the Final Regulation, which became effective on March 13, 1987, the assets
and properties of corporations, trusts, and certain other entities in which a
Plan makes an equity investment could be deemed to be assets of the investing
plan in certain circumstances. Cadwalader, Wickersham & Taft, counsel for the
Underwriters and special counsel for the Issuer as to ERISA matters, is of the
opinion that the Notes will be considered debt instruments rather than equity
interests of the Issuer for ERISA purposes. Counsel's opinion on this issue is
not binding on the Department of Labor or a court reviewing such issue.
If the underlying assets of the Trust (as opposed to the Notes alone) were
to be deemed to be "plan assets" under ERISA, (a) the prudence and other
fiduciary responsibility standards of Part 4 of Subtitle B of Title I of ERISA,
applicable to investments made by Plans and their fiduciaries, would extend to
investments made by the Trust; and (b) certain transactions in which the Trust
might seek to engage could constitute "prohibited transactions" under ERISA and
the Code.
Any Plan fiduciary considering whether to purchase any Notes on behalf of a
Plan should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code to such investment. See "ERISA CONSIDERATIONS" in the Prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of the Notes is
based on the advice of Cadwalader, Wickersham & Taft, special federal income tax
counsel to the Issuer and counsel to the Underwriters, in reliance on laws,
regulations, rulings and decisions now in effect or (with respect to
regulations) proposed, all of which are subject to change either prospectively
or retroactively. This summary does not address the federal income tax
consequences of an investment in the Notes applicable to all categories of
investors, some of which may be subject to special rules. Prospective investors
should consult their own tax advisors regarding the federal, state, local and
any other tax consequences to them of the purchase, ownership and disposition of
the Notes. Unless stated otherwise, for purposes of the following summary,
references to "Noteholder" and "holder" mean the beneficial owner of a Note.
This summary must be read in conjunction with the disclosure in the
Prospectus under the heading "MATERIAL FEDERAL INCOME TAX CONSEQUENCES," which
disclosure is incorporated herein by reference.
GENERAL
Cadwalader, Wickersham & Taft, counsel for the Underwriters and special
federal income tax counsel to the Issuer, has advised the Issuer that in its
opinion the Notes will be treated for federal income tax purposes as
indebtedness and not as an ownership interest in the Accounts nor as an equity
interest in the Issuer or a separate association taxable as a corporation.
Cadwalader, Wickersham & Taft has further advised the Issuer that in its
opinion, under current law, the Trust will not be treated as a taxable mortgage
pool ("TMP") as defined in Code Section 7701(i).
Based on the foregoing, for federal income tax purposes, (i) Notes held by a
thrift institution taxed as a domestic building and loan association will not
constitute "loans . . . secured by an interest in real property" within the
meaning of Code Section 7701(a)(19)(C)(v); (ii) interest on Notes held by a real
estate investment trust will not be treated as "interest on obligations secured
by mortgages on real property or on interests in real property" within the
meaning of Code Section 856(c)(3)(B); (iii) Notes
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<PAGE>
held by a real estate investment trust will not constitute "real estate assets"
or "Government securities" within the meaning of Code Section 856(c)(4)(A); and
(iv) Notes held by a regulated investment company will not constitute
"Government securities" within the meaning of Code Section 851(b)(3)(A)(i).
ORIGINAL ISSUE DISCOUNT
It is anticipated that the Class [ ] Notes will be issued with "original
issue discount" within the meaning of Section 1273(a) of the Code in an amount
equal to the difference between the "stated redemption price at maturity" of
[each] such Class of Notes and their "issue price." Holders of any Notes issued
with original issue discount generally must include such original issue discount
in gross income for federal income tax purposes as it accrues, in accordance
with a constant interest method based on the compounding of interest, in advance
of receipt of the cash attributable to such income. See "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES--Original Issue Discount and Premium" in the Prospectus.
PREMIUM
It is anticipated that the Class [ ] Certificates will be issued at a
premium for federal income tax purposes. A purchaser of a Note who purchases the
Note at a premium may elect to amortize such premium under a constant yield
method. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Original Issue Discount
and Premium" in the Prospectus.
THE INDENTURE
The following summaries of certain provisions of the Indenture do not
purport to be complete and are qualified in their entirety by reference to the
provisions of the Indenture and the discussion contained in the Prospectus under
the heading "THE INDENTURE."
EVENTS OF DEFAULT
Prior to the Maturity Date, any of the events described in the Prospectus
under "THE INDENTURE--Events of Default" will not be an Event of Default (i) in
respect of the Class A-2 Notes until the Class A-1 Notes have been paid in full,
(ii) in respect of the Class A-3 Notes until the Class A-1 Notes and Class A-2
Notes have been paid in full and (iii) in respect of the Class A-4 Notes until
the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been paid in full.
RIGHTS UPON EVENT OF DEFAULT
The Indenture provides that the Indenture Trustee may exercise remedies on
behalf of the Noteholders only if an Event of Default has occurred and is
continuing. The Indenture Trustee shall proceed, in its own name, subject to the
Indenture, to protect and enforce its rights and the rights of the Noteholders
by such remedies provided for in the Indenture as the Indenture Trustee shall
deem most effectual to protect and enforce such rights.
Prior to the Maturity Date, upon the occurrence of an Event of Default, the
Indenture Trustee or the holders entitled to at least 66 2/3% of the Voting
Rights of the Class of Notes with the lowest numerical Class designation then
outstanding may declare the principal of the Notes to be immediately due and
payable; provided, however, that such Class of Notes or the Indenture Trustee
may make such declaration only if the Event of Default affects, and in the case
of a default in the payment of the Notes such payment default relates to, the
Class of Notes with the lowest numerical Class designation then outstanding.
Upon such declaration, the Indenture Trustee may, or at the direction of the
holders entitled to at least 66 2/3% of the Voting Rights of the Class of Notes
with the lowest numerical Class designation then outstanding shall, pursue one
or more remedies subject to, and in accordance with the terms of the Indenture,
including without limitation, selling the Accounts at one or more public or
private sales. Notwithstanding the
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<PAGE>
acceleration of the maturity of the Notes, the Indenture Trustee shall refrain
from selling the Accounts and continue to apply all amounts received on the
Accounts to payments due on the Notes in accordance with their terms if, among
other conditions specified in the Indenture, (i) the Indenture Trustee
determines that anticipated collections on the Accounts would be sufficient to
pay the Class of Notes with the lowest numerical Class designation then
outstanding and (ii) the Indenture Trustee has not been otherwise directed by
the holders of all the Notes. On or prior to the Maturity Date, a Class of Notes
which does not have the lowest numerical Class designation then outstanding will
not have any right to direct the Indenture Trustee to pursue any remedies or
actions under the Indenture.
On or after the Maturity Date, if an Event of Default occurs or shall have
occurred, the Indenture Trustee shall declare the principal of the Notes to be
immediately due and payable. Upon such declaration, the Indenture Trustee may,
or at the direction or with the consent of the holders entitled to at least a
majority of the aggregate Voting Rights of all Classes of Notes voting together
as a single Class shall, pursue one or more remedies subject to and in
accordance with the terms of the Indenture, including without limitation selling
the Accounts at one or more public or private sales. Notwithstanding the
acceleration of the maturity of the Notes, the Indenture Trustee shall refrain
from selling the Accounts and continue to apply all amounts received on the
Accounts to payments due on the Notes in accordance with their terms if, among
other conditions specified in the Indenture, (i) the Indenture Trustee
determines that anticipated collections on the Accounts would be sufficient to
pay all the Classes of Notes then outstanding and (ii) the Indenture Trustee has
not been otherwise directed by the holders of all the Notes.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default shall occur and be continuing, the
Indenture Trustee shall be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the holders of
Notes, unless such holders have offered to the Indenture Trustee security or
indemnity satisfactory to it against loss, liability or expense incurred in
compliance with such request. Subject to such provisions for indemnification and
certain limitations contained in the Indenture, the holders of a majority in
principal amount of the then outstanding Notes (or in the case of any action
described in the immediately preceding two paragraphs, the holders of Notes
otherwise required to take such action) shall have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
Indenture Trustee or exercising any trust or power conferred on the Indenture
Trustee, and the holders of a majority in principal amount of the Notes then
outstanding may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal or interest or a default in respect
of a covenant or provision of the Indenture that cannot be modified without the
waiver or consent of the holder of each outstanding Note affected thereby. See
"DESCRIPTION OF THE NOTES--Registration of the Notes" herein.
TRIGGER EVENTS
A "Trigger Event" under the Indenture includes the occurrence of any of the
following events:
(i) the Issuer fails to make a payment due under the Indenture and such
failure continues for two business days;
(ii) the Servicer fails to make a required payment or deposit due under the
Servicing Agreement and such failure continues for four business days;
(iii) an Event of Default (as defined in the Servicing Agreement) occurring
by reason of (i) the Servicer's failure to perform any covenants or
agreements of the Servicer contained in the Servicing Agreement; (ii)
certain events of insolvency in respect of the Servicer; or (iii) any
representation or warranty made by the Servicer pursuant to the
Servicing Agreement proves to be incorrect;
S-36
<PAGE>
(iv) a breach of any covenant of the Servicer in the Servicing Agreement
which may have a materially adverse effect on the Servicer or its
performance under the Servicing Agreement that is not cured within 60
days after the Servicer becomes aware thereof or after notice thereof
from any Person;
(v) any representation or warranty by Mid-State in the Purchase and Sale
Agreement, or any representation or warranty by the Issuer in the
Indenture, is incorrect and such breach may have a materially adverse
effect on the Issuer or the Noteholders and is not cured, or the
related Account is not substituted for or repurchased by Mid-State and
in either case released from the lien of the Indenture, within 90 days
after notice thereof from the Indenture Trustee;
(vi) certain events of insolvency in respect of the Issuer;
(vii) the Purchase and Sale Agreement, the Servicing Agreement or the
Indenture ceases to be in full force and effect or;
(viii) the lien of the Indenture ceases to be effective or ceases to be of a
first priority.
LIMITATIONS ON SUITS
No holder of any Note will have the right to institute any proceedings,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver or trustee, or for any other remedy under the Indenture, unless (a)
such holder previously has given to the Indenture Trustee written notice of a
continuing Event of Default, (b) the holders of Notes entitled to not less than
40% of the Voting Rights have made written request of the Indenture Trustee to
institute such proceedings in its own name as Indenture Trustee and have offered
the Indenture Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request, (c) the Indenture
Trustee has for 60 days after its receipt of such notice neglected or refused to
institute any such proceeding and (d) no direction inconsistent with such
written request has been given to the Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of the then outstanding
Notes.
The Indenture will provide that no holder of a Class of Notes will have the
right, either directly or through an affiliate, to petition or otherwise invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against the Issuer under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian sequester or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer, other than (i) on or prior to the Maturity Date, the
holders entitled to at least [66 2/3%] of the Voting Rights of the Class of
Notes with the lowest numerical Class designation then outstanding and (ii)
after the Maturity Date, the holders entitled to at least 100% of the Voting
Rights of any Class of Notes (provided that the holders entitled to at least
100% of the Voting Rights of any Class of Notes (provided that the holders
entitled to at least 100% of the Voting Rights of each Class of Notes with a
lower numerical Class designation then outstanding consent).
REPORTS TO NOTEHOLDERS
On each Payment Date the Indenture Trustee is required to deliver to the
Noteholders a written report setting forth the amount of the quarterly payment
which represents principal and the amount which represents interest (in each
case on a per individual Note basis), and the remaining outstanding principal
amount of an individual Note after giving effect to the payment of principal
made on such Payment Date.
THE INDENTURE TRUSTEE
The Indenture Trustee will be , a .
S-37
<PAGE>
THE SERVICING AGREEMENT
COLLECTION OF PAYMENTS
Generally, all payments received on the Mortgage Collateral will be
deposited on a daily basis in a holding account (the "Holding Account")
established with and in the name of , as custodian for itself as the Indenture
Trustee, prior to the Closing Date. The Servicer will transfer the payments
attributable to the Mortgage Collateral, net of the applicable servicing fee and
other permitted deductions, into the Collection Account.
SERVICING FEE
The servicing fee will be calculated and paid monthly based upon the number
of Accounts being serviced as of the end of the preceding month. No such fee
will be paid, however, on Accounts that have resulted in repossession. The
servicing fee will be calculated at $ per Account outstanding per month.
The servicing fee will be paid to the Servicer out of the Holding Account upon
submission of a withdrawal request in accordance with the Servicing Agreement.
In addition to the servicing fee, the Servicer will receive all assumption fees,
late payment charges, interest on taxes and insurance paid on behalf of the
Accounts and similar charges, to the extent such fees and expenses are collected
from obligors.
Out of its servicing fee, the Servicer is obligated to pay normal expenses
and disbursements incurred in connection with servicing the Accounts, including
the fees and disbursements of its independent accountants and expenses incurred
in connection with reports to the Indenture Trustee. Fees and expenses incurred
in connection with realization upon defaulted Accounts are reimbursable from the
Holding Account.
ANNUAL ACCOUNTANTS' REPORT
The Servicer is required to cause a firm of independent certified public
accountants to furnish to the Issuer and the Indenture Trustee, on or before 120
days after the end of each of its fiscal years beginning with the fiscal year
ending , 199 , a statement to the effect that such firm (a) has
examined the Servicer's financial statements for the preceding fiscal year in
accordance with generally accepted auditing standards and has issued an opinion
thereon, and (b) has examined certain documents and records relating to the
servicing of the Accounts during the preceding fiscal year in accordance with
the Uniform Single Audit Program for Mortgage Bankers, and has found no material
exceptions relating to the Accounts or has set forth such exceptions.
THE TRUST AGREEMENT
The Trust Agreement will provide that the Owner Trustee is entitled to an
annual fee equal to $ . For a further discussion of the provisions of
the Trust Agreement see the discussion contained in the Prospectus under the
heading "THE INDENTURE."
The Trust Agreement will provide that the Trust will in no event terminate
later than , 20 .
THE PURCHASE AND SALE AGREEMENT
Pursuant to the Purchase and Sale Agreement, the Depositor will sell and
assign to the Issuer all its right, title and interest in the Mortgage
Collateral as further described in the Prospectus under "THE PURCHASE AND SALE
AGREEMENT."
S-38
<PAGE>
PLAN OF DISTRIBUTION
The Depositor, as sole beneficial owner of the Issuer, and Walter Industries
have entered into an Underwriting Agreement with , as representative
of the several underwriters named therein ( , collectively with the
other underwriters, the "Underwriters"). Subject to the terms and conditions of
the Underwriting Agreement, the Depositor has agreed to cause the Issuer to sell
to the Underwriters, and the Underwriters have agreed to purchase, the
respective principal amount of each Class of Notes set forth opposite their
names below.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
PRINCIPAL AMOUNT OF AMOUNT OF AMOUNT OF
AMOUNT OF CLASS CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS A-1 NOTES NOTES NOTES NOTES
- ---------------------------------------------------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total................................................. $ $ $ $
--------------- ---------- ---------- ----------
--------------- ---------- ---------- ----------
</TABLE>
Under the terms of the Underwriting Agreement, the Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Notes, if any of the Notes are purchased.
The Underwriters have advised the Depositor and the Issuer that they propose
to offer the Notes to the public at the prices set forth on the cover page
hereof, and to certain dealers at such prices less a concession not in excess of
%, %, % and % of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes, respectively. The Underwriters may allow and such
dealers may reallow a concession to certain other dealers not in excess of %,
%, % and % of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes, respectively. After the initial public offering, the
public offering prices and such concessions may be changed.
During and after the offering, the Underwriters may purchase and sell Notes
in the open market. These transactions may include overallotment and stabilizing
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Notes, which may be higher than the price that might
otherwise prevail in the open market. These transactions may be effected in the
over-the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.
The Depositor and Walter Industries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof. The Issuer has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
LEGAL MATTERS
Certain legal matters will be passed upon for the Owner Trustee in its
individual capacity by ; for the Depositor by Cadwalader, Wickersham
& Taft, New York, New York; for the Indenture Trustee by ; for the
Issuer by Cadwalader, Wickersham & Taft, New York, New York, as to the validity
of the Notes and the enforceability of the Indenture under New York law;
, as to matters of Delaware law; by , Tampa, Florida, as
to matters of Florida law; by , as to matters referred to under
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES" and as to certain ERISA matters
referred to under "ERISA CONSIDERATIONS" and for the Underwriters by
.
S-39
<PAGE>
FINANCIAL INFORMATION
As of the date of this Prospectus, the Issuer has been formed and the
Depositor has made a $100.00 capital contribution to the Issuer. See "THE
ISSUER" herein and in the Prospectus. Because financial information concerning
the Issuer would not be meaningful, no financial information regarding the
Issuer is provided.
NOTE RATINGS
It is a condition of issuance that the Class A-1 Notes be rated ["Aaa" by
Moody's Investors Service, Inc. ("Moody's")]["AAA" by Standard & Poor's Ratings
Services ("Standard & Poor's")] ["AAA" by Fitch IBCA, Inc. ("Fitch")] ["AAA" by
Duff & Phelps Credit Rating Co. ("DCR")] the Class A-2 Notes be rated at least
["Aa2" by Moody's] ["AA+" by Standard & Poor's] ["AA" by Fitch] ["AA" by DCR];
the Class A-3 Notes be rated at least ["A2" by Moody's] ["AA" by Standard &
Poor's] ["A" by Fitch] ["A" by DCR]; and the Class A-4 Notes be rated at least
["Baa2" by Moody's] ["BBB" by Standard & Poor's] ["BBB" by Fitch] ["BBB" by
DCR]. Such ratings will reflect only the views of [Moody's] [Standard &
Poor's][Fitch][DCR]. [The rating of each Class of Notes by Standard & Poor's
addresses the likelihood of timely payment of interest and the ultimate payment
of principal on the Notes.] [The rating of each Class of Notes by Moody's
addresses the likelihood of the ultimate payment of principal and interest on
the Notes.] When rating securities, [Moody's] [Standard &
Poor's][Fitch][DCR]consider the transaction in its entirety and rely on factors
in addition to the amount and performance of the collateral securing the debt.
An explanation of the significance of such ratings may be obtained from [Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004, telephone
(212) 553-0300][Standard & Poor's Ratings Services, 25 Broadway, New York, New
York 10017, telephone (212) 208-8000.][Fitch IBCA, Inc., One State Street Plaza,
New York, New York 10004, telephone (212) 908-0500][Duff & Phelps Credit Rating
Co., 55 East Monroe, Chicago Illinois 60603, telephone (312) 368-3100] There is
no assurance that such ratings will continue for any period of time or that they
will not be revised or withdrawn entirely by either of such rating agencies if,
in its judgment, circumstances so warrant. A revision, withdrawal or
qualification of either of such ratings may have an adverse effect on the market
price of the Notes. A security rating is not a recommendation to buy, sell or
hold securities.
S-40
<PAGE>
INDEX OF PRINCIPAL DEFINED TERMS
<TABLE>
<S> <C>
% Accounts Table.................................................................... S-28
Accounts............................................................................ Cover
Aggregate Economic Balance.......................................................... S-11
Aggregate Outstanding Principal Balance............................................. S-24
Available Funds..................................................................... S-23
Available Funds Allocation.......................................................... S-24
Cede................................................................................ S-2
Class............................................................................... Cover
Class A-1 Initial Principal Balance................................................. S-23
Class A-1 Optimal Principal Balance................................................. S-25
Class A-1 Outstanding Principal Balance............................................. S-23
Class A-1 Realized Loss Amount...................................................... S-27
Class A-2 Initial Principal Balance................................................. S-23
Class A-2 Optimal Principal Amount.................................................. S-25
Class A-2 Outstanding Principal Balance............................................. S-23
Class A-2 Realized Loss Amount...................................................... S-27
Class A-3 Initial Principal Balance................................................. S-23
Class A-3 Optimal Principal Amount.................................................. S-25
Class A-3 Outstanding Principal Balance............................................. S-23
Class A-3 Realized Loss Amount...................................................... S-27
Class A-4 Initial Principal Balance................................................. S-23
Class A-4 Optimal Principal Amount.................................................. S-25
Class A-4 Outstanding Principal Balance............................................. S-23
Class A-4 Realized Loss Amount...................................................... S-27
Class Interest Shortfall............................................................ S-24
Class Optimal Principal Amount...................................................... S-26
Closing Date........................................................................ S-4
Code................................................................................ S-10
Collateral.......................................................................... S-7
Collection Account.................................................................. S-8
Collection Period................................................................... S-5
CPR................................................................................. S-29
Cut-Off Date........................................................................ Cover
DCR................................................................................. Cover
Definitive Notes.................................................................... S-32
Depositor........................................................................... Cover
DTC................................................................................. S-2
Enterprise.......................................................................... S-13
ERISA............................................................................... S-10
Final Regulation.................................................................... S-34
Fitch............................................................................... Cover
Gross Receivable Amount............................................................. S-14
Holding Account..................................................................... S-38
Indenture........................................................................... S-4
Indenture Trustee................................................................... S-4
indirect participants............................................................... S-32
Interest Accrual Amount............................................................. S-23
Interest Accrual Period............................................................. Cover
</TABLE>
S-41
<PAGE>
<TABLE>
<S> <C>
Issuer.............................................................................. Cover
Issuer Expenses..................................................................... S-23
Jim Walter Homes.................................................................... S-8
Mid-State........................................................................... Cover
Minimum Target Overcollateralization Amount......................................... S-26
Moody's............................................................................. Cover
Mortgage Collateral................................................................. Cover
Mortgaged Property.................................................................. S-8
Note Rate........................................................................... S-23
Noteholder.......................................................................... S-34
Notes............................................................................... Cover
Optimal Principal Amount............................................................ S-26
Outstanding Principal Balance....................................................... S-24
Overcollateralization Amount........................................................ S-26
Overcollateralization Percentage.................................................... S-26
Owner Trustee....................................................................... Cover
Participants........................................................................ S-32
Payment Date........................................................................ Cover
Plans............................................................................... S-33
Prospectus.......................................................................... S-2
Purchase and Sale Agreement......................................................... S-9
Realized Loss Amounts............................................................... S-27
Record Date......................................................................... S-5
Reinvestment Period................................................................. S-5
Remaining Available Funds........................................................... S-11
Rules............................................................................... S-32
Servicer............................................................................ Cover
Servicing Agreement................................................................. S-8
Standard & Poor's................................................................... Cover
Subordinated Class.................................................................. S-6
Subservicing Agreement.............................................................. S-8
Target Overcollateralization Date................................................... S-26
Target Overcollateralization Level.................................................. S-26
TMP................................................................................. S-35
Trigger Event....................................................................... S-36
Trust............................................................................... Cover
Trust Agreement..................................................................... Cover
Trust V Accounts.................................................................... S-13
Underwriters........................................................................ Cover
Walter Industries................................................................... S-4
</TABLE>
S-42
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 13, 1998
PROSPECTUS
, 19
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
MID-STATE HOMES, INC.
Depositor
ASSET BACKED NOTES
(Issuable in Series)
Mid-State Homes, Inc. ("Mid-State" or the "Depositor") will act as depositor
in connection with the issuance of Asset Backed Notes (the "Notes") offered
hereby and by Supplements to this Prospectus which may be sold from time to time
in one or more series (each, a "Series") as described in the related Prospectus
Supplement. Each Series of Notes will be issued by a separate trust (each, a
"Trust").
The assets of each Trust will consist primarily of (i) certain building and
installment sale contracts, promissory notes, related mortgages and other
security agreements (the "Accounts") owned directly or indirectly by the
Depositor (collectively, the "Mortgage Collateral") to be transferred to such
Trust by the Depositor, (ii) the Collection Account described herein under
"SECURITY--Collection Account," (iii) the proceeds of any insurance policy
relating to the Notes or the Accounts and (iv) certain other property as
described herein. The Accounts will be serviced by Mid-State (in its capacity as
servicer, the "Servicer"). The Accounts and other assets of each Trust as
described herein and in the related Prospectus Supplement will be held for the
benefit of the holders of the related Series of Notes.
Each Series of Notes will include one or more classes (each, a "Class").
Each Class of Notes of any Series will represent the right, which right may be
senior to the rights of one or more of the other Classes of the Notes, to
receive a specified portion of payments of principal and interest from payments
on the Accounts in the related Trust in the manner described herein and in the
related Prospectus Supplement. The Notes of any Class will represent debt
secured by such Accounts, as described herein and in the related Prospectus
Supplement. A Series may include one or more Classes of Notes entitled to
principal distributions, with disproportionate, nominal or no interest
distributions, and one or more Classes of Notes entitled to interest
distributions, with disproportionate, nominal or no principal distributions. See
"Descriptions of the Notes" herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER "RISK
FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
If so specified in the related Prospectus Supplement, one or more Classes of
Notes of a Series may have the benefit of insurance policies, surety bonds,
guarantees, letters of credit, reserve funds, cash accounts, reinvestment
income, overcollateralization or other types of credit support, or any
combination thereof. In addition to or in lieu of any or all of the foregoing,
credit enhancement with respect to one or more Classes of Notes of a Series may
be provided through subordination. See "Description of the Notes--Description of
Credit Enhancement" herein.
The yield on each Class of Notes of a Series will be affected by, among
other things, the rate of payments on the related Accounts in the related Trust
and the timing of receipt of such payments. A Trust may be subject to early
termination under the circumstances described herein and in the related
Prospectus Supplement.
Offers of the Notes of a Series may be made through one or more different
methods, including offerings through underwriters, as described under "Plan of
Distribution" herein and in the related Prospectus Supplement. There will have
been no secondary market for the Notes of any Series prior to the offering
thereof. There can be no assurance that a secondary market for any Class of
Notes of any Series will develop or, if one does develop, that it will continue.
None of the Notes will be listed on any securities exchange. With respect to
each Series, all of the Notes of each Class offered hereby will be rated in one
of the four highest rating categories by one or more nationally recognized
statistical rating organizations.
------------------------
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR OR ANY AFFILIATE THEREOF. NEITHER
THE NOTES NOR THE ACCOUNTS WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR OR ANY OF ITS AFFILIATES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 19
<PAGE>
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (including any amendments thereto) under
the Securities Act of 1933, as amended, with respect to the Notes. This
Prospectus, which forms part of the Registration Statement, omits certain
information set forth in the Registration Statement pursuant to the Rules and
Regulations of the Commission. The Registration Statement and the exhibits
thereto may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its Regional Offices located as follows: New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048; and Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. The Commission also maintains a site on the World Wide Web at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system.
The Issuer has filed the Registration Statement, including all exhibits thereto,
through the EDGAR system and therefore such materials should be available by
logging onto the Commission's Web site. The Commission maintains computer
terminals providing access to the EDGAR system at each of the offices referred
to above. Copies of such material also can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
The address of the principal executive offices of the Issuer is Mid-State
Homes, Inc., 1500 North Dale Mabry Highway, Tampa, Florida 33607, and the
telephone number of the principal executive offices of the Issuer is (813)
871-4811.
REPORTS TO NOTEHOLDERS
Periodic reports concerning the assets of each Trust are required to be
forwarded to holders of the Notes of the related Series. See "The
Indenture--Reports to Noteholders" herein. Any reports forwarded to holders will
not contain financial information that has been examined and reported upon by,
with an opinion expressed by, an independent public or certified public
accountant.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Depositor pursuant to Section
13(a), Section 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subsequent to the date of this Prospectus and
prior to the termination of the offering of the Notes offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Depositor will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any of or all the documents incorporated herein by reference (other
than exhibits to such documents). Requests for such copies should be directed to
David L. Townsend, Vice President-Administration, Walter Industries, Inc., 1500
N. Dale Mabry Highway, Tampa, Florida 33607.
2
<PAGE>
PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION.................................................................. 2
REPORTS TO NOTEHOLDERS................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................ 2
SUMMARY OF PROSPECTUS.................................................................. 5
RISK FACTORS........................................................................... 12
Limited Liquidity Of Notes........................................................... 12
Limited Assets of the Issuer......................................................... 12
Limited Nature of Ratings............................................................ 12
Lowering of Rating on Notes.......................................................... 12
Risks in the Event of Insolvency of the Depositor.................................... 13
Limited Rights of Noteholders........................................................ 13
Risks of Overcollateralization....................................................... 13
Risks of Subordination............................................................... 14
Credit Enhancement Limitations....................................................... 14
Losses on Accounts................................................................... 14
Mortgage Collateral Includes Delinquent Accounts..................................... 14
Effect of Prepayments on Yield and Weighted Average Life............................. 14
Consumer Protection Laws and Risk of Consumer Litigation............................. 15
Dependence on Servicer............................................................... 16
Grant of Security Interest In Mortgage Collateral; Risks of Defective Security
Interest........................................................................... 16
Risks of Underwriting Practices...................................................... 16
Depositor's Revolving Credit Facility................................................ 16
Pre-Funding Accounts................................................................. 17
THE DEPOSITOR.......................................................................... 17
THE ISSUER............................................................................. 17
DISCUSSION AND ANALYSIS OF ISSUER'S FINANCIAL CONDITION................................ 18
Expenses............................................................................. 18
Capital Resources and Liquidity...................................................... 18
Results of Operations................................................................ 18
Impact of Inflation and Changing Prices.............................................. 18
THE ACCOUNTS........................................................................... 19
Homebuilding Activities.............................................................. 19
Underwriting and Credit Policies..................................................... 19
Description of Accounts.............................................................. 20
Servicing............................................................................ 21
Recoveries........................................................................... 21
Time to Recovery..................................................................... 22
THE MORTGAGE COLLATERAL................................................................ 22
CERTAIN LEGAL ASPECTS OF THE ACCOUNTS AND RELATED MATTERS.............................. 22
Consumer Protection Laws............................................................. 22
Mortgages, Deeds of Trust and Mechanic's Lien Contracts.............................. 23
Foreclosure and Other Remedies....................................................... 23
Rights of Redemption................................................................. 24
Anti-Deficiency Legislation and Other Limitations on Creditors....................... 24
Enforceability of Certain Provisions................................................. 26
Environmental Legislation............................................................ 26
SECURITY............................................................................... 26
Mortgage Collateral.................................................................. 26
Collection Account................................................................... 28
Certain Contractual Rights........................................................... 28
DESCRIPTION OF THE NOTES............................................................... 29
General.............................................................................. 29
Interest............................................................................. 30
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Principal............................................................................ 30
Available Funds...................................................................... 30
Description of Credit Enhancement.................................................... 31
Distributions........................................................................ 33
Redemption of the Notes.............................................................. 34
Weighted Average Life of the Notes................................................... 34
Registration and Transfer of Notes................................................... 34
LEGAL INVESTMENT CONSIDERATIONS........................................................ 38
ERISA CONSIDERATIONS................................................................... 38
MATERIAL FEDERAL INCOME TAX CONSEQUENCES............................................... 40
General.............................................................................. 40
Original Issue Discount and Premium.................................................. 40
Market Discount...................................................................... 43
Sale or Redemption of Notes.......................................................... 44
Foreign Investors.................................................................... 44
Backup Withholding................................................................... 45
Taxable Mortgage Pools............................................................... 45
THE INDENTURE.......................................................................... 46
Negative Covenants................................................................... 46
Review of Account Documents.......................................................... 46
Representations and Warranties....................................................... 46
Modification of Indenture............................................................ 48
Voting............................................................................... 49
Events of Default.................................................................... 49
Rights upon Event of Default......................................................... 50
Limitations on Suits................................................................. 50
Reports to Noteholders............................................................... 50
Issuer's Annual Compliance Statement................................................. 50
Satisfaction and Discharge of Indenture.............................................. 50
The Indenture Trustee................................................................ 51
THE SERVICING AGREEMENT................................................................ 51
General.............................................................................. 51
Collection of Payments............................................................... 51
Servicing Fee........................................................................ 51
Insurance; Taxes..................................................................... 51
Realization upon Defaulted Accounts.................................................. 52
Resignation.......................................................................... 52
Annual Accountants' Report........................................................... 52
Events of Default.................................................................... 53
Rights Upon Event of Default......................................................... 53
Termination and Replacement of Servicer.............................................. 53
Amendments........................................................................... 54
THE TRUST AGREEMENT.................................................................... 54
THE PURCHASE AND SALE AGREEMENT........................................................ 55
PRE-FUNDING ACCOUNT.................................................................... 56
USE OF PROCEEDS........................................................................ 56
PLAN OF DISTRIBUTION................................................................... 56
LEGAL MATTERS.......................................................................... 57
NOTE RATINGS........................................................................... 57
INDEX OF PRINCIPAL DEFINED TERMS....................................................... 58
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SUMMARY OF PROSPECTUS
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS
AND BY REFERENCE TO THE INFORMATION WITH RESPECT TO EACH SERIES OF NOTES
CONTAINED IN THE RELATED PROSPECTUS SUPPLEMENT. TERMS NOT DEFINED IN THIS
SUMMARY ARE USED AS DEFINED ELSEWHERE IN THIS PROSPECTUS. SEE "INDEX OF
PRINCIPAL DEFINED TERMS" BEGINNING ON PAGE 58.
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Notes Offered................ Asset backed notes (the "Notes") issuable in Series.
Depositor.................... Mid-State Homes, Inc., a corporation organized under the
laws of the State of Florida (the "Depositor" or
"Mid-State") which is an indirect wholly-owned subsidiary of
Walter Industries, Inc. ("Walter Industries").
Issuer....................... With respect to each Series of Notes, the issuer (the
"Issuer") will be a trust established by the Depositor for
the purpose of issuing such Series of Notes (each, a
"Trust"). Each Trust will be formed pursuant to a Trust
Agreement between the Depositor and an owner trustee
identified in the related Prospectus Supplement. The settlor
and sole beneficiary of each Trust will be the Depositor.
See "THE ISSUER" herein. Each Series of Notes will represent
indebtedness of the Issuer and will be issued pursuant to an
indenture (the "Indenture") between the Issuer and an
indenture trustee identified in the related Prospectus
Supplement. The Notes will represent nonrecourse obligations
of the Issuer and the assets of the Trust will be the sole
source of payments on the Notes.
Servicer..................... Mid-State in its capacity as servicer (the "Servicer"). See
"THE SERVICING AGREEMENT" herein. Jim Walter Homes, Inc.
("Jim Walter Homes"), an affiliate of the Depositor, or one
or more unaffiliated third parties may perform certain
servicing functions with respect to the Accounts pursuant to
a sub-servicing agreement for each Series of Notes (each, a
"Sub-servicing Agreement").
Indenture Trustee............ The entity or entities named as indenture trustee in the
related Prospectus Supplement. See "THE INDENTURE--The
Indenture Trustee" herein.
Owner Trustee................ The entity or entities named as owner trustee in the related
Prospectus Supplement which will have the obligations set
forth in the related Trust Agreement and described herein
and in the related Prospectus Supplement. See "THE TRUST
AGREEMENT" herein.
Cut-Off Date................. The date specified in the related Prospectus Supplement on
and after which payments due or received on the related
Accounts will be transferred to the related Trust and
available for payment to the holders of the Notes of such
Series (each, a "Cut-Off Date").
Closing Date................. The date on which the Notes of any Series are initially
issued (each, a "Closing Date") as specified in the related
Prospectus Supplement.
Description of Notes......... The Notes of each Series may be issued in one or more
Classes and will represent debt secured by (i) a segregated
pool of certain building and installment sale contracts,
promissory notes, related mortgages and other security
agreements (the "Accounts") owned directly or
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indirectly by the Depositor (collectively, the "Mortgage
Collateral"), (ii) the Collection Account described herein
under "Security-- Collection Account," (iii) the proceeds of
any insurance policy relating to the Notes or the Accounts
and (iv) certain other assets described herein. See
"DESCRIPTION OF THE NOTES" herein.
A Series of Notes may include one or more Classes entitled
to principal distributions, with disproportionate, nominal
or no interest distributions, and one or more Classes of
Notes entitled to interest distributions, with
disproportionate, nominal or no principal distributions. The
principal amount of any Note may be zero or may be a
notional amount as specified in the related Prospectus
Supplement. A Class of Notes of a Series entitled to
payments of interest may receive interest at a specified
rate which may be fixed, variable or adjustable and may
differ from other Classes of the same Series, may receive
interest based on the weighted average interest rate on the
underlying Accounts as otherwise determined, all as
described in the related Prospectus Supplement. One or more
Classes of Notes of a Series may be entitled to receive
principal payments pursuant to a planned amortization
schedule or may be entitled to receive interest payments
based on a notional principal amount which reduces in
accordance with a planned amortization schedule. A Series
may also include one or more Classes of Notes entitled to
payments derived from a specific group or groups of Accounts
held by the related Trust. The rights of one or more of the
other Classes of Notes of a Series may be senior or
subordinate to the rights of one or more of the other
Classes of Notes of such Series. A Series may include two or
more Classes of Notes which differ as to priority of payment
or amount of distribution of principal or interest or both.
Payment Date................. The monthly, quarterly or other periodic date specified in
the related Prospectus Supplement on which payments will be
made to holders of Notes (each, a "Payment Date").
Interest and Principal
Payments on the Notes...... Interest on each Class of Notes of a Series will be payable
from Available Funds on each Payment Date in an amount equal
to interest accrued during a one-month, three-month or
six-month period as specified in the related Prospectus
Supplement (each such period, an "Interest Accrual Period"),
at a rate (the "Note Rate") for such Class specified in the
related Prospectus Supplement. Interest accrued on each
Class of Notes at the applicable Note Rate during each
Interest Accrual Period will be paid, to the extent monies
are available therefor, on each Payment Date, commencing on
the day specified in the related Prospectus Supplement and
will be distributed in the manner specified in such
Prospectus Supplement, except for any Class of Notes
("Accrual Notes") on which interest is to accrue and not be
paid until the principal of certain other Classes has been
paid in full or until the occurrence of certain events as
specified in such Prospectus Supplement. If so described in
the related Prospectus Supplement, interest that has accrued
but is not yet payable on any Accrual Notes will be added to
the principal balance thereof on each Payment Date
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and will thereafter bear interest at the applicable Note
Rate. Payments of interest with respect to any Class of
Notes entitled to receive interest only or a
disproportionate amount of interest and principal will be
paid in the manner set forth in the related Prospectus
Supplement.
Payment of interest (or accruals of interest, in the case of
Accrual Notes) with respect to any Series of Notes or one or
more Classes of Notes of such Series, may be reduced to the
extent of interest shortfalls not covered by any applicable
credit enhancement. Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months. See
"DESCRIPTION OF THE NOTES--Interest-- Principal" herein.
On each Payment Date, commencing with the Payment Date
specified in the related Prospectus Supplement, principal
with respect to each Note of a Series will be paid to
holders of the Notes of such Series (other than a Class of
Notes of such Series entitled to receive interest only) in
the priority, manner and amount specified in such Prospectus
Supplement, to the extent funds are available therefor.
Unless otherwise specified in the related Prospectus
Supplement, with respect to each Series of Notes, "Available
Funds" for a Payment Date are the funds in the related
Collection Account representing (i) collections on the
related Accounts during the period specified in the related
Prospectus Supplement (each such period, a "Collection
Period"), (ii) any net reinvestment income earned on funds
described in clause (i) above, from the date two business
days prior to the preceding Payment Date through the date
two business days prior to such Payment Date (each such
period, a "Reinvestment Period") and (iii) the proceeds of
any insurance policy relating to the Notes or the Accounts.
Available Funds will be net of Issuer Expenses paid to the
time of calculation thereof, as described in the related
Prospectus Supplement. On each Payment Date, Available Funds
for a Series of Notes will be paid to the holders of the
Notes of such Series in the priority, manner and amount
specified in the related Prospectus Supplement. "DESCRIPTION
OF THE NOTES--Interest-- Principal herein."
Record Date.................. The record date for each Payment Date is the day of the
month indicated in the related Prospectus Supplement (the
"Record Date").
Credit Enhancement........... If so specified in the related Prospectus Supplement,
partial or full protection against certain defaults and
losses on Accounts in the related Trust may be provided to
one or more Classes of Notes of the related Series in the
form of credit enhancement, such as an insurance policy,
surety bond, guarantee, letter of credit, reserve fund, cash
account, reinvestment income, overcollateralization or
another type of credit enhancement, or a combination thereof
(any such coverage with respect to the Notes of any Series,
"Credit Enhancement"). The amount and types of coverage, the
identification of the entity providing the coverage (if
applicable) and related information with respect to each
type of Credit Enhancement, if any, will be described
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in the related Prospectus Supplement for a Series of Notes.
See "Risk Factor--Credit Enhancement Limitations" and
"Description of Credit Enhancement" herein.
The rights of holders of a Class of Notes of a Series may be
subordinated to a different Class of Notes of such Series
(each, a "Subordinated Class"). In each such case such Class
of Notes will be subordinated to the extent described in the
related Prospectus Supplement. See "RISK FACTORS--Risks of
Subordination" herein. Subordination is intended to enhance
the likelihood of timely receipt by the holders of certain
Notes of the full amount of interest and principal to which
such Class is entitled. The protection afforded to the
holders of non-subordinated Classes of Notes or Classes of
Notes that are subordinated to a lesser extent within a
Series of Notes by means of subordination will be
accomplished by (i) the allocation of losses on the related
Accounts to the respective Classes of Notes of a Series as
set forth in the related Prospectus Supplement and (ii) the
application of the Available Funds for a Series on each
Payment Date in the sequential order provided in the related
Prospectus Supplement. See "DESCRIPTION OF THE
NOTES--Interest-- Principal" herein.
Optional Redemption
of Notes................... If so specified in the related Prospectus Supplement,
Classes of Notes of a Series may be redeemed on a Payment
Date at the option of the related Issuer or such other
entity as specified in the related Prospectus Supplement, at
a percentage as set forth in the related Prospectus
Supplement of the unpaid principal amount of each Class of
Notes of such Series plus accrued interest, if indicated in
the related Prospectus Supplement, after giving effect to
the payment of principal that would be made on such Payment
Date absent such redemption, the aggregate principal amount
of each Class of Notes of such Series outstanding is at a
level of the original aggregate principal amount of such
Class of Notes as specified in the related Prospectus
Supplement.
Events of Default............ Prior to the maturity date of a Series of Notes, upon the
occurrence of an Event of Default, the related Indenture
Trustee or the holders entitled to a percentage indicated in
the related Prospectus Supplement of the Voting Rights of a
Class of Notes of such Series then outstanding may have the
right to declare the principal of the Notes of such Series
to be immediately due and payable; provided, however, that
such Class of Notes or the related Indenture Trustee may
make such declaration only if provided for in the related
Prospectus Supplement. On or after the applicable maturity
date, if an Event of Default occurs or shall have occurred,
the related Indenture Trustee shall declare the principal of
the Notes of such Series to be immediately due and payable.
See "THE INDENTURE--Events of Default--Rights Upon Event of
Default" herein.
Security..................... Payments of amounts due on the Notes of a Series will be
secured by the following (collectively, the "Collateral"):
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A. Mortgage Collateral..... Accounts having an aggregate Economic Balance as set forth
in the related Prospectus Supplement on the related Cut-Off
Date will secure each Series of Notes. Such Accounts will
have additional characteristics as set forth in the related
Prospectus Supplement. See "THE MORTGAGE COLLATERAL" and
"SECURITY" herein.
SERVICER; SERVICING AGREEMENT; SUB-SERVICING. Mid-State or
any successor servicer will perform all servicing functions
in respect of the Accounts as required by a Servicing
Agreement for each Series dated the applicable Closing Date
among the related Issuer, the Servicer and the Indenture
Trustee for such Series (each, a "Servicing Agreement")
either directly or through one or more sub-servicers. Each
Servicing Agreement will (i) define the Servicer's servicing
obligations; (ii) provide for the payment of a servicing fee
as set forth in the related Prospectus Supplement; (iii)
include certain representations and warranties; (iv) impose
reporting requirements on the Servicer; and (v) include
events of default. See "THE SERVICING AGREEMENT" herein.
CERTAIN CONTRACTUAL RIGHTS. With respect to each Series of
Notes, the related Issuer will assign all of its right,
title and interest (including the right to compel
performance of the sub-servicer) under the Servicing
Agreement and under the Purchase and Sale Agreement for such
Series of Notes to the related Indenture Trustee.
B. Collection Account...... With respect to each Series of Notes, a collection account
relating to the Collateral (each, a "Collection Account")
will be established with, and in the name of, the Indenture
Trustee for such Series and the Issuer for such Series will
deposit into the related Collection Account cash in an
amount as set forth in the related Prospectus Supplement
received in respect of the related Accounts. See "SECURITY--
Collection Account" herein.
C. Pre-Funding Account..... In addition, if the related Prospectus Supplement so
provides, funds on deposit in an account (a "Pre-Funding
Account") will be used to purchase additional Accounts
during the period specified in the related Prospectus
Supplement. See "Pre-Funding Account" herein.
Representations and
Warranties Concerning the
Mortgage Collateral........ With respect to each Series of Notes, the Issuer of such
Series of Notes will make certain representations and
warranties regarding the related Mortgage Collateral and
Accounts. See "THE INDENTURE--Representation and Warranties"
herein.
With respect to each Series of Notes, the related Prospectus
Supplement will specify the procedures to be followed upon
the discovery of a breach of a representation or warranty
which materially and adversely affects the interests of the
Noteholders of such Series in a related Account.
Origination of Accounts...... With respect to each Series of Notes, the Accounts will have
been originated by Jim Walter Homes and/or one or more
affiliates of Jim Walter Homes. In the event any Accounts
not originated by Jim
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Walter Homes or its affiliates are included in a Trust, the
related Prospectus Supplement will provide detailed
information regarding the originator of such Accounts.
Jim Walter Homes is in the business of marketing and
supervising the construction of standardized,
partially-finished, detached, single-family residential
homes. The homes are sold directly to customers through
approximately 117 branch offices, serving approximately 24
states, primarily in the southern region of the United
States. The Accounts related to each Series will have been
acquired by the Depositor from Jim Walter Homes or its
affiliates. See "THE DEPOSITOR" herein.
Purchase and Sale
Agreement.................. With respect to each Series of Notes, the Depositor and the
related Issuer will enter into a Purchase and Sale Agreement
dated as of the Closing Date for such Series of Notes (each,
a "Purchase and Sale Agreement") pursuant to which the
Depositor will sell and assign, and the related Issuer will
purchase, all of the related Accounts for such Series of
Notes. See "THE PURCHASE AND SALE AGREEMENT" herein.
Risk Factors................. Various risk factors related to the purchase of Notes are
discussed under "Risk Factors" herein.
Legal Investment
Considerations............. The Notes will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended. As a result, the appropriate
characterization of the Notes under various legal investment
restrictions, and thus the ability of investors subject to
these restrictions to purchase the Notes, may be subject to
significant interpretative uncertainties. Investors should
consult their legal advisors to determine whether and to
what extent the Notes constitute legal investments for them.
See "LEGAL INVESTMENT CONSIDERATIONS" herein.
ERISA Considerations......... Under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the Internal Revenue Code of 1986,
as amended (the "Code"), a pension or other employee benefit
plan covered by ERISA or retirement arrangements which are
subject to ERISA or Section 4975 of the Code (collectively,
"Plans") with respect to which the Depositor or any
affiliate is a service provider, may acquire the Notes only
under certain limited circumstances.
A fiduciary or other person investing "plan assets" of any
employee benefit or other plan subject to ERISA, or Section
4975 of the Code should carefully review with its legal
advisors whether the purchase or holding of any Class of
Notes could give rise to a transaction prohibited or not
otherwise permissible under ERISA or Section 4975 of the
Code. Certain Classes of Notes may not be permitted to be
acquired by any employee benefit or other plan subject to
ERISA or Section 4975 of the Code, as specified in the
related Prospectus Supplement. See "ERISA Considerations"
herein.
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Tax Status of the Notes...... The Notes will be treated as debt for federal income tax
purposes. If the Notes are issued with original issue
discount, Noteholders generally will be required to include
the original issue discount in gross income over the life of
the Notes. The Notes will not constitute "loans secured by
an interest in real property" for "domestic building and
loan associations" or "real estate assets" for "real estate
investment trusts." See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" herein.
Use of Proceeds.............. Unless otherwise specified in the related Prospectus
Supplement, the net proceeds of the offering of each Series
of Notes will be used by the related Issuer to purchase the
related Mortgage Collateral from the Depositor and to pay
the expenses of the offering. See "USE OF PROCEEDS" herein.
Ratings...................... It will be a condition to the issuance of each Series of
Notes that each Class of the Notes be rated by one or more
of Moody's Investors Service, Inc. ("Moody's"), Duff &
Phelps Credit Rating Co. ("DCR"), Standard & Poor's ("S&P")
and Fitch IBCA, Inc. ("Fitch" and each of Fitch, Moody's,
DCR and S&P, a "Rating Agency") in one of their four highest
rating categories. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to
revision or withdrawal at any time. No person is obligated
to maintain any rating on any Note, and, accordingly, there
can be no assurance that the ratings assigned to any Class
of Notes upon initial issuance thereof will not be lowered
or withdrawn by a Rating Agency at any time thereafter. If a
rating of any Class of Notes of a Series is revised or
withdrawn, the liquidity of such Class of Notes may be
adversely affected. In general, the ratings address credit
risk and do not represent any assessment of the likelihood
or rate of principal prepayments. See "Risk
Factors--Notes--Limited Nature of Ratings," "--Lowering of
Rating on Notes" and "Ratings" herein.
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RISK FACTORS
Prospective investors should consider, among other things, the following
risk factors in connection with the purchase of Notes.
LIMITED LIQUIDITY OF NOTES
At the time of issuance of a Series of Notes there will be no secondary
market for any of the Notes. If so indicated in the related Prospectus
Supplement, the underwriter of a Series may intend to make a market in the Notes
of such Series but will not be obligated to do so. There can be no assurance
that a secondary market for any Series of Notes will develop or, if one does
develop, that it will provide Noteholders with liquidity of investment or will
continue while Notes of such Series remain outstanding. Further, it is not
expected that any application will be made to list the Notes of a Series on any
securities exchange. Accordingly, the liquidity of the Notes may be limited.
LIMITED ASSETS OF THE ISSUER
The Notes of each Series will represent obligations of the related Issuer,
whose assets will consist solely of the Collateral pledged as security under the
related Indenture. No recourse is available with respect to payments on the
Notes of any Series to the Depositor, Jim Walter Homes or any other affiliate of
the Depositor. If the Issuer of a Series of Notes is unable to make the payments
due on the Notes of such Series and an Event of Default under the related
Indenture occurs and the maturity of the Notes of such Series is accelerated, it
is unlikely that such Issuer will be able to pay the accelerated principal
amount due on such Notes at the time of acceleration.
LIMITED NATURE OF RATINGS
It will be a condition to the issuance of the Notes that each Class of Notes
be rated in one of the four highest rating categories by one or more of Moody's
Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR"),
Standard & Poor's ("S&P") or Fitch IBCA, Inc. ("Fitch"; and each of Moody's,
S&P, DCR and Fitch, a "Rating Agency"). See "Ratings" herein. Any rating
assigned by a Rating Agency to a Class of Notes of any Series will reflect such
Rating Agency's assessment solely of the likelihood that holders of Notes of
such Class will receive payments to which such holders are entitled under the
related Indenture. Such rating will not constitute an assessment of the
likelihood that principal prepayments (including those caused by defaults) on
the related Account will be made, the degree to which the rate of such
prepayments might differ from that originally anticipated or the likelihood of
early optional termination or redemption of the Series of Notes. Such rating
will not address the possibility that prepayment at higher or lower rates than
anticipated by an investor may cause such investor to experience a lower than
anticipated yield or that an investor purchasing a Note at a significant premium
might fail to recoup its initial investment under certain prepayment scenarios.
LOWERING OF RATING ON NOTES
The rating of any Series of Notes by any applicable Rating Agency may be
lowered following the initial issuance thereof as a result of the downgrading of
the obligations of any applicable Credit Provider, or as a result of losses on
the related Accounts substantially in excess of the levels contemplated by such
Rating Agency at the time of its initial rating analysis. The lowering of a
rating on a Series or Class of Notes may adversely affect the market value of
such Notes and the liquidity of such Notes. Neither the Depositor nor any of its
affiliates will have any obligation to replace or supplement any credit
enhancement or to take any other action to maintain any rating of any Series of
Notes.
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RISKS IN THE EVENT OF INSOLVENCY OF THE DEPOSITOR
With respect to each Series of Notes, under the related Purchase and Sale
Agreement, the Depositor will represent and warrant that it has validly sold and
assigned to the Issuer of such Series all of its right, title and interest in
the related Accounts. However, if, in a bankruptcy proceeding involving the
Depositor, a bankruptcy trustee, the Depositor as debtor in possession or a
creditor of the Depositor were to take the position that (i) the transfer of the
Accounts of a Series of Notes to the related Issuer should be recharacterized as
a transfer for security rather than a sale or (ii) the assets of such Issuer
(including the related Mortgage Collateral) should be substantively consolidated
into the bankruptcy estate of the Depositor, then delays in payments on the
Notes of such Series could occur and (should the bankruptcy court rule in favor
of such bankruptcy trustee, debtor in possession or creditor) reductions in
payments on such Notes could result. It is possible that the risk of
recharacterizing the sale of the related Accounts as a transfer for security is
increased by the position to be taken by the Depositor that the transfer of the
related Accounts is not a sale under generally accepted accounting principles or
for income and other tax purposes and that the risk of substantive consolidation
is increased by the fact that the Issuer of such Series is a trust of which the
Depositor is the sole beneficiary.
With respect to each Series of Notes, the related Purchase and Sale
Agreement will provide that, if the intended sale is recharacterized as a
transfer for security, then the Depositor thereby grants to the Issuer of such
Series of Notes a security interest in the related Mortgage Collateral. To the
extent that the Depositor is deemed to have granted a security interest in the
related Accounts to the related Issuer and such security interest was validly
perfected (see "Grant of Security Interest In Mortgage Collateral; Risks of
Defective Security Interest" below) more than 90 days prior to any insolvency of
the Depositor, was not granted or taken with the intent to hinder, delay or
defraud the Depositor or its creditors and has been validly assigned to the
related Indenture Trustee, such security interest should not be subject to
avoidance in the event of the insolvency of the Depositor. In such event, while
payments already made to the related Indenture Trustee with respect to the
related Accounts should not be subject to recovery by a bankruptcy trustee of
the Depositor, delays in payments on the Notes of such Series and possible
reductions in the amount of those payments could occur.
LIMITED RIGHTS OF NOTEHOLDERS
With respect to each Series of Notes, prior to the related maturity date, no
holder of any Class of Notes of a Series will have the right to declare the
principal of such Notes to be immediately due and payable other than as set
forth in the related Prospectus Supplement. See "THE INDENTURE--Rights Upon
Event of Default" herein. In addition, no holder of any Class of Notes of a
Series will have the right to petition or otherwise invoke any court or
government proceeding for the purpose of commencing or sustaining a case against
the related Issuer under any Federal or state bankruptcy, insolvency or similar
law other than as provided in the related Prospectus Supplement.
RISKS OF OVERCOLLATERALIZATION
With respect to any Series of Notes which provides for
overcollateralization, the amount of such overcollateralization will be reduced
or eliminated to the extent that losses incurred in respect of defaulted
Accounts of such Series, together with payments on the Accounts, cause the
Economic Balance of the related Accounts to decline more than the principal
amount of the Notes of such Series declines on account of payments of principal
thereon. If the protection afforded to the Notes of such Series by such
overcollateralization were to be exhausted, and the Accounts incurred further
losses, such losses would be allocated as set forth in the related Prospectus
Supplement. See "THE ACCOUNTS" and "DESCRIPTION OF THE
NOTES--Interest--Principal" herein.
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RISKS OF SUBORDINATION
With respect to any Series of Notes which provides for subordination, the
protection afforded to the holders of certain Classes of Notes of such a Series
by means of such subordination will be accomplished by (i) the allocation of
losses on the related Accounts to certain other Classes of Notes of such Series
as set forth in the related Prospectus Supplement and (ii) with respect to
interest, the application of the Available Funds for such Series on each Payment
Date in the sequential order provided in the related Prospectus Supplement. See
"DESCRIPTION OF THE NOTES--Interest--Principal" herein. Accordingly, on any
Payment Date any deficiency in the availability of funds to pay interest or
principal on the Notes of such Series will result in shortfalls in the payment
of such Notes as described in the related Prospectus Supplement.
CREDIT ENHANCEMENT LIMITATIONS
Although credit enhancement is intended to reduce the risk of delinquent
payments or losses to holders of Notes entitled to the benefit thereof, the
amount of such credit enhancement will be limited, as set forth in the related
Prospectus Supplement, and may decline and could be depleted under certain
circumstances prior to the payment in full of the related Series of Notes, and
as a result Noteholders may suffer losses. Moreover, such credit enhancement may
not cover all potential losses or risks. For example, credit enhancement may or
may not cover, or may cover only in part, fraud or negligence by certain
parties. See "Description of Credit Support" herein.
LOSSES ON ACCOUNTS
In most cases, amounts realized upon resale of repossessed properties may be
less than the outstanding Economic Balances (as defined herein) of the Accounts
for the related Series of Notes at the time of repossession. In addition,
certain states have adopted statutes limiting the right of mortgagees to obtain
deficiency judgments against customers following foreclosure. In the event that
the amount realized upon resale is less than the outstanding Economic Balance of
the related Account, the Servicer may be unable to collect the amount of such
deficiency. If losses incurred in connection with repossessing homes are at
levels higher than those historically experienced, the ability of the Issuer of
such Series of Notes to make required payments on such Notes may be adversely
affected and such Noteholders may incur a loss on their investment. See "THE
ACCOUNTS" and "CERTAIN LEGAL ASPECTS OF THE ACCOUNTS AND RELATED
MATTERS--Anti-Deficiency Legislation and Other Limitations on Creditors" herein.
MORTGAGE COLLATERAL INCLUDES DELINQUENT ACCOUNTS
The related Prospectus Supplement will set forth the percentage of the
Accounts for such Series that were delinquent, if any, the length of the
delinquency and the percentage in foreclosure as well as repossession data.
Accounts which are in foreclosure or bankruptcy will be included in the
delinquency category described in the preceding sentence. See "THE
ACCOUNTS--Servicing" herein. Investors should consider the risk that any of the
Accounts may become defaulted Accounts and subsequently the properties securing
such Accounts may become repossessed properties. See "--Losses on Accounts"
herein. Defaults by homeowners on the Accounts may result in the failure of the
Noteholders of a Series on a given Payment Date to receive payments in full in
respect of interest or principal.
EFFECT OF PREPAYMENTS ON YIELD AND WEIGHTED AVERAGE LIFE
The weighted average life and the maturity of each Class of Notes of a
Series will be affected by the prepayment experience on the related Accounts and
the rate and frequency of delinquencies of payments due on the related Accounts.
Prepayments on the Accounts may be influenced by a variety of economic,
geographic, social and other factors, including national and local economic
conditions, repossessions, aging, seasonality and interest rates. Other factors
affecting prepayments on the Accounts include changes
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in housing needs, job transfers and unemployment. Liquidations of defaulted
Accounts are generally expected to result in resale of the repossessed
properties and the subsequent origination of new Accounts rather than cash. In
general, if prevailing interest rates fall significantly below the effective
financing rates on the Accounts, the rate of prepayments on the Accounts is
likely to be higher than if prevailing interest rates remain close to or above
the effective financing rates borne by such Accounts. Conversely, if prevailing
interest rates rise above the effective financing rates on such Accounts, the
rate of prepayment would be expected to decrease. Even if Available Funds are
sufficient to make full payments of interest on all Classes of Notes of a
Series, any such delinquencies, to the extent that they are not covered by
Credit Enhancement or some other mechanism specified in the related Prospectus
Supplement, will reduce the amount of Remaining Available Funds available to
make payments of principal in respect of the Notes of such Series. See
"DESCRIPTION OF THE NOTES--Weighted Average Life of the Notes" herein.
If Notes are purchased at a discount or a premium to their principal balance
and the purchaser calculates its anticipated yield to maturity based upon an
assumed rate of payment of principal that is faster or slower than that actually
experienced, the purchaser's actual yield to maturity will be different from
that initially calculated by the purchaser. Investors bear the risk of not being
able to reinvest payments of principal at a yield at least equal to the interest
rate borne by the Notes.
CONSUMER PROTECTION LAWS AND RISK OF CONSUMER LITIGATION
The Accounts are subject to any claims or defenses that a customer may have
against Jim Walter Homes or Jim Walter Homes affiliates, as applicable, in
connection with the sale, financing and construction of such customer's home.
Accordingly, the Servicer may not be able to recover the amount due on an
Account if a customer successfully asserts such claims or defenses. See "CERTAIN
LEGAL ASPECTS OF THE ACCOUNTS AND RELATED MATTERS--Consumer Protection Laws"
herein.
From time to time, litigation (including group or class action litigation)
is instituted or threatened against Jim Walter Homes or Mid-State. While the
results of any litigation cannot be predicted with certainty, the Depositor
believes, based on its experience in similar litigation and the magnitude of
potential damages that any litigation currently pending or, to the knowledge of
the Depositor, threatened, against Jim Walter Homes or Mid-State would not have
a material adverse effect on the business of Jim Walter Homes or Mid-State or on
the ability of either to perform its obligations with respect to any Accounts or
any Trust. In the event that such actions are brought involving accounts,
possibly including Accounts to be sold to the Issuer for any Series of Notes, it
is possible that the related Trust would be named a party thereto and the costs
associated with such a litigation could adversely affect payments on the Notes
of such Series.
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DEPENDENCE ON SERVICER
The effective servicing of the Accounts requires a significantly greater
local presence and number of employees than does the servicing of traditional
mortgage loans. In addition, although the Servicing Agreement for each Series of
Notes may not allow the Servicer to resign except under limited circumstances,
it may permit the Issuer, the Indenture Trustee or the holders of a majority of
the aggregate principal amount of the Notes for such Series of Notes to remove
the Servicer under certain limited circumstances. If Mid-State were removed as
Servicer, Mid-State's and Jim Walter Homes' system and expertise may be
difficult for a successor servicer to replicate, and collections and recoveries
on the Accounts may be adversely affected. See "THE SERVICING AGREEMENT" herein.
GRANT OF SECURITY INTEREST IN MORTGAGE COLLATERAL; RISKS OF DEFECTIVE SECURITY
INTEREST
With respect to each Series of Notes, the related Issuer will grant to the
related Indenture Trustee, on behalf of the Noteholders of such Series of Notes,
a security interest in the promissory notes, building and installment sale
contracts and other security agreements underlying each related Account
comprising the Mortgage Collateral for such Series. Local counsel in those
jurisdictions where greater than 1% (based on the Aggregate Economic Balance as
of the related Cut-Off Date for such Series of Notes) of all the Mortgaged
Properties of such Series of Notes are located ("Local Counsel") will render
opinions to the effect that, subject to customary exceptions regarding
enforcement of remedies in bankruptcy and the effect of equitable principles,
and assuming that certain procedures described therein related to the execution,
delivery and recordation of the mortgages and other documents relating to the
Accounts of such Series and the collateral assignment of such documents to the
related Indenture Trustee are followed, such Indenture Trustee will have a valid
assignment of the mortgages, deeds of trust and similar security instruments
included in the related Mortgage Collateral that were originated in each of
their respective jurisdictions. After the issuance of the Notes of a Series, the
Indenture Trustee of such Series of Notes and the related Issuer intend to
comply with the procedures set forth in such opinions. In addition, the related
Issuer intends to comply with procedures customarily followed by mortgage
lenders and recommended by Local Counsel with respect to the creation and
perfection in favor of the related Indenture Trustee of a lien on the promissory
notes and building and installment sale contracts and other security agreements
included in the related Mortgage Collateral and collections thereof. However,
there can be no assurance that such procedures will be adequate to create and
perfect a security interest in all items included in the related Mortgage
Collateral and all amounts in the related Collection Account. If the security
interest of the Indenture Trustee of such Series is challenged, delays in
payments on the Notes of such Series and possible reductions in the amount of
payments of principal of, and interest on, the Notes of such Series could occur.
RISKS OF UNDERWRITING PRACTICES
As described herein under "THE ACCOUNTS--Underwriting and Credit Policies,"
Jim Walter Homes does not obtain independent third-party appraisals or title
insurance in connection with the origination of accounts. Any losses resulting
from the inadequacy of the property or failures of title will be borne by the
holders of the Notes of such Series as set forth in the related Prospectus
Supplement.
DEPOSITOR'S REVOLVING CREDIT FACILITY
The Depositor has entered into a revolving credit facility pursuant to which
the Depositor, as borrower, may from time to time request that Kitty Hawk
Funding Corporation, a NationsBank, N.A. asset-backed commercial paper conduit,
as lender, make certain advances to the Depositor which will be secured by (i)
prior to the date upon which Mid-State Trust III terminates, the Certificate of
Beneficial Interest in Mid-State Trust III owned by the Depositor, and all
payments due or to become due thereunder and (ii) upon the termination of
Mid-State Trust III, all of the Depositor's right, title and interest in and to
the assets of Mid-State Trust III. Such advanced amounts are not due upon
termination of Mid-State Trust
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III. The aggregate of such advanced amounts may not exceed $90,000,000 and the
Depositor has borrowed a substantial portion of such maximum advanced amount.
Such revolving credit facility is with full recourse to the Depositor. See "Risk
Factors--Risks in the Event of Insolvency of the Depositor" herein.
PRE-FUNDING ACCOUNTS
If so provided in the related Prospectus Supplement, on the Closing Date an
amount will be deposited (the "Pre-Funded Amount") as specified in such
Prospectus Supplement into a segregated account (the "Pre-Funding Account"). The
Pre-Funded Amount will generally not exceed 25% of the initial aggregate
principal amount of the Notes of the related Series of Notes. The Pre-Funded
Amount will be used by the Issuer to purchase Accounts ("Subsequent Accounts")
from the Depositor during a period from the Closing Date to a date not more than
three months after the Closing Date (such period, the "Funding Period"). To the
extent that the entire Pre-Funded Amount has not been applied to the purchase of
Subsequent Accounts by the end of the related Funding Period, any amounts
remaining in the Pre-Funding Account will be distributed as a prepayment of
principal to Noteholders on the Distribution Date immediately following the end
of the Funding Period, pursuant to the priorities set forth in the related
Prospectus Supplement.
THE DEPOSITOR
The Depositor was established in 1958 to purchase mortgage installment notes
from Jim Walter Homes relating to homes constructed and sold by Jim Walter Homes
and its predecessor and to service such installment notes. Jim Walter Homes
currently is the twelfth largest builder of single-family detached housing in
the nation. Over 90% of the homes sold by Jim Walter Homes and its affiliates
are financed by Jim Walter Homes, which sells the related accounts to Mid-State.
Each of Jim Walter Homes and the Depositor is an indirect wholly-owned
subsidiary of Walter Industries. The offices of the Depositor are located at
1500 North Dale Mabry Highway, Tampa, Florida 33607.
In December 1989, Walter Industries and most of its subsidiaries, including
the Depositor, each filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code with the Bankruptcy Court for the Middle
District of Florida, Tampa Division (the "Bankruptcy Court"). In March 1995,
Walter Industries and its subsidiaries, including the Depositor, emerged from
bankruptcy pursuant to an Amended Joint Plan of Reorganization dated December 9,
1994 as modified on March 1, 1995 (as so modified, the "Consensual Plan").
Despite the confirmation and effectiveness of the Consensual Plan, the
Bankruptcy Court continues to have jurisdiction over, among other things, the
resolution of disputed pre-petition claims against Walter Industries and its
subsidiaries and other matters that may arise in connection with or relate to
the Consensual Plan. Since the Chapter 11 proceedings described above are
completed, the Depositor does not believe that such proceedings will have a
material adverse effect on the ongoing business, operations or financial
condition of Jim Walter Homes or the Depositor.
THE ISSUER
The Issuer for each Series of Notes will be created pursuant to a Trust
Agreement between the Depositor and the Owner Trustee for such Series of Notes.
Under the terms of each Trust Agreement, the Depositor will convey to the
related Owner Trustee a nominal amount of cash to establish the Trust for such
Series of Notes. In exchange, the Depositor will receive certificate(s)
evidencing beneficial ownership of such Trust created under such agreement. With
respect to each Series of Notes, on the related Closing Date, the Issuer of such
Series of Notes will purchase the related Accounts from the Depositor with the
net proceeds from the sale of the Notes from such Series. The Issuer of such
Series of Notes will pledge the related Accounts to the related Indenture
Trustee, for the benefit of the Noteholders of such Series, as security for such
Notes. Subject to certain restrictions, the Depositor may sell or assign
certificates of beneficial ownership in the Issuer of a Series of Notes to
another entity or entities.
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The Trust Agreement for each Series of Notes will provide that the related
Issuer may not conduct any activities other than those related to the issuance
and sale of Notes, the purchase of Accounts, the financing of properties
repossessed by such Issuer, the investment of certain funds in Eligible
Investments, as described under "SECURITY--Mortgage Collateral--Investment of
Funds" herein, and such other limited activities as may be required in
connection with reports and payments to holders of the Notes of such Series and
the beneficial interest of such related Trust. See "SECURITY--Mortgage
Collateral-- Investment of Funds" herein. With respect to each Series of Notes,
neither the related Owner Trustee in its individual capacity nor the holder(s)
of the beneficial interest of the related Trust are liable for payment of
principal of or interest on the Notes of such Series and each holder of Notes of
such Series will be deemed to have released the related Owner Trustee and each
holder of the beneficial interest of the related Trust from any such liability.
With respect to each Series of Notes, the related Trust Agreement will provide
that the Trust of such Series will terminate upon the earlier to occur of (i)
the final sale or disposition of the trust estate and the distribution of all
proceeds thereof to the owners or (ii) 21 years less one day following the death
of the survivor of certain individuals described in the related Trust Agreement,
but in no event later than the date provided in the related Prospectus
Supplement.
It is not contemplated that annual or other regular meetings of the
Noteholders of a Series will be held. Each Indenture, however, permits Holders
of a certain percentage of principal amount of each Class of Notes of a Series
to approve certain amendments to the related Indenture and, in certain
circumstances, to declare the principal of the Notes of such Series due and
payable. See "THE INDENTURE--Modification of Indenture" and "--Rights Upon Event
of Default" herein.
DISCUSSION AND ANALYSIS OF ISSUER'S FINANCIAL CONDITION
EXPENSES
Unless otherwise specified in the related Prospectus Supplement,
substantially all of the anticipated expenses of the Issuer for each Series of
Notes will consist of interest payments due on the Notes of such Series and
amounts payable for such Issuer's operating expenses (including, without
limitation, amounts payable under the related Indenture, the related Trust
Agreement and the related Servicing Agreement that may be payable by the related
Trust). Payments on the Accounts of a Series of Notes are intended to be
sufficient to make timely payments of interest on the Notes of such Series and
to retire such Notes not later than the related maturity date.
CAPITAL RESOURCES AND LIQUIDITY
With respect to each Series of Notes, the primary sources of the related
Issuer's funds will be collections in respect of the related Accounts for such
Series and reinvestment income therefrom. With respect to each Series of Notes,
the related Issuer is expected to have sufficient liquidity and capital
resources to make timely payments of interest on the Notes of such Series and to
retire the Notes of such Series not later than the related maturity date. See
"DESCRIPTION OF THE NOTES--Interest-- Principal" and "SECURITY" herein.
RESULTS OF OPERATIONS
With respect to each Series of Notes, the related Issuer's results of
operations will depend primarily on the rate at which payments are made on the
related Accounts, the level of income from reinvestment of payments on the
related Accounts and the level of the related Issuer's operating expenses.
IMPACT OF INFLATION AND CHANGING PRICES
With respect to each Series of Notes, inflation and increased prices may
result in increases in the level of the related Issuer's operating expenses.
However, such increases may be offset, in whole or in part, by increases in
income from reinvestment of payments on the related Mortgage Collateral for such
Series of Notes. See "SECURITY" herein.
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THE ACCOUNTS
HOMEBUILDING ACTIVITIES
It is expected that all of the Accounts will have been originated by Jim
Walter Homes and/or Jim Walter Homes affiliates. Any Account originated by a Jim
Walter Homes affiliate will have been originated using substantially the same
standards as those used by Jim Walter Homes in underwriting Accounts of the same
type. Jim Walter Homes is in the business of marketing and supervising the
construction of standardized, partially finished, detached, single-family
residential homes. The homes are sold directly to customers through
approximately 117 branch offices, serving approximately 24 states, primarily in
the southern region of the United States. A home is constructed on the
customer's land only after a building contract has been entered into and Jim
Walter Homes is satisfied that the customer has clear title to the land and that
the site is suitable for building. Currently, Jim Walter Homes offers over 30
models of homes in various stages of completion ranging from a "shell" to a "90%
completed" home. A shell is a home completed on the outside with rough floors,
partition studding and closet framing but without interior walls, floor
finishing, plumbing, electrical wiring and fixtures, doors and cabinetry. A 90%
completed home has a completed interior except for interior paint, floor
covering and utility hook-up.
Jim Walter Homes is a contractor rather than a developer, does not own or
sell land to customers except in connection with resales of repossessed homes
and does not maintain its own construction crews. Local independent contractors
construct the homes using their own construction crews. Jim Walter Homes'
employees, however, supervise construction to ensure that it conforms to its
specifications.
UNDERWRITING AND CREDIT POLICIES
Substantially all homes Jim Walter Homes sells are purchased with financing
it arranges. Generally, 100% of the purchase price is financed. To qualify for
financing a potential customer must provide information concerning his or her
monthly income and employment history as well as a legal description of and
evidence that the customer owns the land on which the home is to be built. A
customer's income and employment usually are verified through telephone
conversations with such customer's employer and by examining his or her pay
stubs, W2 forms or, if the customer is self-employed, income tax returns. An
applicant must have a minimum of one year's continuous employment or, if he or
she has changed jobs, the new job must be in the same field of work. Only a
small percentage of secondary income (second jobs or part-time work) is utilized
in qualifying applicants. Ownership of the land is verified by examining the
title record. In addition, Jim Walter Homes' credit department obtains a credit
report. If a favorable report is obtained and the required monthly payment does
not exceed 25% of the customer's monthly gross income, the application usually
is approved and a building or installment sale contract is executed, a title
report is ordered and frequently a survey of the property is made. Surveys are
performed by independent registered surveyors when, in the opinion of Jim Walter
Homes, additional information beyond examination of the title record is needed.
Such additional information is primarily concerned with verification of legal
description, ownership of land and existence of any encroachments. Jim Walter
Homes may also use a point or grade credit scoring system. Particular attention
is paid to the credit information for the most recent three to five years.
Attention is also given to the customer's total indebtedness and total other
monthly payments on a judgmental basis by the credit department. The customer's
credit standing is considered favorable if the employment history, income and
credit report meet the aforementioned criteria. The building and installment
sale contract is subject to (i) except in the State of Texas, executing a
promissory note which is secured by a first lien on the land and the home to be
built, (ii) executing a mortgage, deed of trust, mechanic's lien contract or
other security instrument, (iii) receiving a satisfactory title report, (iv)
inspecting the land to determine that it is suitable for building and (v)
obtaining required permits. Although the mortgages, deeds of trust and similar
security instruments constitute a first lien on the land and the home to be
built, such security instruments are not insured by the Federal Housing
Administration or guaranteed by the Department of Veterans Affairs or otherwise
insured or guaranteed.
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Jim Walter Homes does not obtain appraisals or title insurance. Although
consideration is given to the ratio of the amount financed to the estimated
value of the home and the land securing such amount, there is no explicit
appraisal-based loan-to-value test. However, there is a requirement that the
value of the lot on which the home is to be built, as estimated solely on the
basis of Jim Walter Homes' mortgage servicing division employees' experience and
knowledge, be at least equal to 10% of the cash selling price of the home.
Before occupying a new home, the customer must complete the utility and sewer
hook-ups, and any of the other components not purchased from Jim Walter Homes,
arrange for the building inspection and, if required, obtain a certificate of
occupancy. Upon construction of a new home to the agreed-upon percentage of
completion, Jim Walter Homes conveys the Account represented thereby, including
the underlying documents related thereto, to the Depositor in the ordinary
course of business.
DESCRIPTION OF ACCOUNTS
With respect to sales of new homes, each Account (other than those
originated in the State of Texas) is evidenced by a promissory note (each, a
"Promissory Note"), a building contract (each, a "Building Contract"), a related
mortgage and certain other security agreements and each Account originated in
the State of Texas is evidenced by a retail installment contract (each, a "Texas
Building Contract") and a mechanic's lien contract with power of sale (each, a
"Mechanic's Lien Contract"). With respect to sales of repossessed homes, each
Account (other than those originated in the State of Texas) is evidenced by a
Promissory Note, a sale contract (each, a "Sale Contract," and together with the
Building Contracts, "Retail Contracts"), a related mortgage or certain other
security agreements and each Account originated in the State of Texas is
evidenced by an installment sale contract (each, a "Texas Sales Contract," and
together with the Texas Building Contracts, "Texas Contracts") and a deed with
vendor's lien together with a purchase money deed of trust (collectively, each,
a "Texas Resale Mortgage," and together with the Mechanic's Lien Contracts,
"Texas Mortgages"). Each Account is secured by a first lien on a single-unit
residential home and the real property on which such home is situated.
Each Promissory Note and Texas Contract obligates the homeowner to pay the
Gross Receivable Amount of the related Account. Each Promissory Note and Texas
Contract generally requires equal monthly payments in amounts sufficient to
amortize the Gross Receivable Amount over the term thereof. The "Gross
Receivable Amount" with respect to any Account is equal to the sum of the amount
of the Account financed and the total dollar amount of finance charges to be
paid over the duration of such Account. The terms of the Promissory Notes and
Texas Contracts generally range from 144 to 360 months. The Promissory Notes do
not have a stated interest rate and neither the Promissory Notes nor the Texas
Contracts divide the monthly payments into interest and principal portions.
Each Retail Contract and Texas Contract sets forth (i) the amount that is
being financed by the related customer (generally the purchase price of the
related home), (ii) the total finance charge that such customer will incur
through the maturity date of the Promissory Note or the Texas Contract, as the
case may be, and (iii) the annual percentage rate (the "Effective Financing
Rate") used to calculate the total finance charge. Upon a prepayment in full by
a customer or an acceleration of the amount owed by such customer under the
Promissory Note or the Texas Contract, as the case may be, such customer will be
entitled to receive a credit for any unearned finance charge (i.e., that portion
of the total finance charge which has not yet been earned through the date of
the prepayment or acceleration, calculated using either the actuarial or rule of
78s method, whichever provides for a greater recovery to the customer).
The "Economic Balance" of an Account is the present value of the future
scheduled monthly payments due on the Account. Such present value is calculated
by discounting the remaining future scheduled monthly payments on an Account by
the Effective Financing Rate thereof. The Effective Financing Rate is determined
by calculating the discount rate which, when applied in a present value
calculation, results in the present value of all originally scheduled monthly
payments on such Account being equal to the original amount financed. In effect,
the Economic Balance of an Account is the amount of principal that can be
amortized by the installment payments due over the remaining scheduled term of
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the Account at the Effective Financing Rate. The Economic Balance of any Account
as to which the related home has been repossessed and disposed of will be equal
to $0 and such Account will be removed from the lien of the Indenture. The
Economic Balance of any Account which is substituted (as described under
"--Recoveries" below) for an Account described in the preceding sentence will be
calculated as described in this paragraph.
SERVICING
Mid-State, as the Servicer, has serviced and expects to continue to service
all Accounts from Tampa, Florida. Although the Servicer does not escrow payments
for insurance premiums and real estate taxes, it monitors these payments by
customers. With respect to each Series of Notes, under the terms of the related
Servicing Agreement, the Servicer will be responsible for paying unpaid taxes
and insurance premiums and recovering such amounts from customers or, in certain
circumstances, from liquidation proceeds. See "THE SERVICING
AGREEMENT--Insurance; Taxes" herein.
Jim Walter Homes, pursuant to a sub-servicing agreement, has performed and
will continue to perform substantially all field servicing activities, which
include collecting or foreclosing on delinquent Accounts and reselling
repossessed homes. Mid-State currently intends to continue to use Jim Walter
Homes as a sub-servicer for such field servicing activities and to perform
itself the remaining servicing activities. Any sub-servicer engaged by Mid-State
other than Jim Walter Homes would be expected to have experience in servicing
loans or accounts similar to the Accounts and to have sufficient financial
resources to perform its duties. Each month the Servicer will send a delinquency
list, which includes all Accounts which are past due, to the branch, regional
and home offices of Jim Walter Homes. Representatives of Jim Walter Homes will
contact the customer in person, by phone or by mail. If an Account becomes more
than three months past due, generally, the customer surrenders the property or
the Servicer commences foreclosure proceedings. Mid-State's current policy is to
continue to show an Account as delinquent until it is brought current, the
property is surrendered or foreclosure proceedings are completed.
RECOVERIES
Generally, repossessed homes are remarketed by field collection personnel of
Jim Walter Homes with assistance from its sales network for new homes.
Typically, the homes are resold with little or no rehabilitation of the
properties and, accordingly, cash expenditures are small. The majority of homes,
including the land on which such homes are located, are resold for a down
payment of generally less than $1,000 and a new account. All other repossessed
homes are sold for cash.
With respect to each Series of Notes, the related Sub-servicing Agreement
will require Jim Walter Homes to continue to perform remarketing services as it
has in the past. In certain jurisdictions in which repossessed homes may be
located, local laws require that persons selling real property be licensed real
estate agents or brokers, unless such persons are selling real estate which they
(or their employers) own. The field collection personnel of Jim Walter Homes are
generally not licensed real estate agents or brokers. It is therefore necessary,
with respect to repossessed homes located in such jurisdictions, for title to
such repossessed homes to be taken, in whole or in part, in the name of Jim
Walter Homes (rather than in the name of the Issuer) pending disposition. Upon
disposition, the applicable Trust will receive the related cash proceeds, if
any, and the related new Accounts originated, in connection with resales of
repossessed properties securing defaulted Accounts for such Series. In the event
repossessed property is sold at a loss, such loss will be reflected in the
accounting records of the Issuer of such Series. Depending on the age of the
repossessed Account and other factors, such as the condition and location of the
related repossessed property, the amount of a recovery (i.e., the amount of the
new Account plus cash, if any) as a percentage of the Economic Balance will
vary.
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TIME TO RECOVERY
The elapsed time between the initial delinquency of an account and the date
the related home is resold can be divided into three stages: (i) delinquency as
to monthly payment period, (ii) repossession period and (iii) real estate owned
period. An account generally will be no more than three months delinquent before
the Servicer commences foreclosure proceedings. If the Servicer anticipates that
a payment will not be forthcoming, it may commence foreclosure proceedings when
an account has been delinquent as little as two months. The Servicer estimates
that approximately 20% of all repossessed homes are voluntarily surrendered
during the delinquency period and, accordingly, avoid the repossession period,
and it estimates that, although the time to recovery can vary considerably, the
average time following initial delinquency until recovery is approximately ten
months.
Since no party is required to advance required payments on delinquent
Accounts, any such delinquencies that exist at the end of a Collection Period
immediately preceding any Payment Date will reduce the amount of Available Funds
for the related Payment Date. See "RISK FACTORS--Limited Assets of the Issuer,"
"--Limited Overcollateralization," "--Risks of Subordination," and "--Effect of
Prepayments on Yield and Weighted Average Life" herein.
THE MORTGAGE COLLATERAL
Each Prospectus Supplement will contain information, as of the dates
specified in such Prospectus Supplement and to the extent then applicable and
specifically known to the Depositor, with respect to the related Accounts,
including (A) (i) the aggregate number of Accounts, (ii) the aggregate Economic
Balance of the Accounts, (iii) the Effective Financing Rate of the Accounts,
(iv) the number and aggregate balance of Accounts secured by homes representing
new sales, (v) the number and aggregate balance of Accounts secured by homes
that have been repossessed and resold, (vi) the years of calculated scheduled
final payment of the Accounts, (vii) the outstanding Economic Balance of the
Accounts, (viii) the original Economic Balance of the Accounts, (ix) the years
of origination of the Accounts and (x) the geographical distribution of the
Accounts and (B) with respect to different ranges of remaining years to maturity
of Accounts, (i) the number of Accounts, (ii) the average Economic Balance of
the Accounts (iii) the weighted average remaining term of the Accounts, (iv) the
weighted average effective financing rate of the Accounts, (v) the current
Economic Balance of the Accounts and (vi) the original Economic Balance of the
Accounts.
CERTAIN LEGAL ASPECTS OF THE ACCOUNTS AND RELATED MATTERS
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors providing mortgage financing.
These laws include, without limitation, the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Reserve
Board's Regulations "B" and "Z" and the Uniform Consumer Credit Code (the
"UCCC"). These requirements can impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, such
liabilities may affect the ability of an assignee (such as each Trust and each
Indenture Trustee) to enforce installment contracts and promissory notes such as
the Accounts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the UCCC,
has the effect of subjecting not only a seller (and certain related creditors
and their assignees) in a consumer credit transaction but also any assignee of
the seller, to all claims and defenses which the customer could assert against
the seller. Because liability under the FTC Rule is limited to the amounts paid
by such customer under the contract, the holder of the contract may be unable to
collect any remaining balance due thereunder. The Accounts are subject to the
requirements of the FTC Rule. Accordingly, each Issuer, as holder of Accounts
for a Series of Notes, will
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be subject to any claims or defenses that the obligor of the related Account may
assert against Jim Walter Homes under the building or sale contract related to
such Account in such Series. If a customer successfully asserts any such claim
or defense, the value of such Account could be adversely affected.
The installment contracts utilized by Jim Walter Homes contain provisions
obligating the obligor to pay late charges if payments are not made in a timely
manner. In certain cases, laws of certain states may specifically limit the
amount of late charges that may be collected or prohibit the imposition of late
charges. With respect to each Series of Notes, late charges will be retained by
the Servicer as additional servicing compensation, and the inability of the
Servicer to collect these amounts will not affect payments to Noteholders of
such Series.
MORTGAGES, DEEDS OF TRUST AND MECHANIC'S LIEN CONTRACTS
The following discussion contains summaries of certain legal aspects of the
mortgages, deeds of trust, deeds to secure debt and mechanic's lien contracts
(collectively, "Security Instruments") which are general in nature. Because such
legal aspects are governed by applicable state law (which laws may differ
substantially) the summaries do not purport to be complete or to reflect the
laws of any particular state or to encompass the laws of all states in which the
security for the Accounts is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing such
Accounts.
The Security Instruments generally will be either mortgages or deeds of
trust depending upon the prevailing practice in the state in which the property
securing the related Account is located. A mortgage creates a lien upon the real
property encumbered by the mortgage. There are two parties to a mortgage, the
mortgagor, who is the obligor and homeowner, and the mortgagee, who provides
financing. Generally, the mortgagor delivers to the mortgagee a note and the
mortgage. The lien created by a mortgage is not prior to liens for real estate
taxes and assessments or to certain tax liens (see "--Anti-Deficiency
Legislation and Other Limitations on Creditors"), nor is it prior to certain
other liens which in most jurisdictions are given priority by statute. Priority
between mortgages depends on their terms and generally on the order in which
they are filed with a state or county recording office.
Although a deed of trust is similar to a mortgage, a deed of trust formally
has three parties: the obligor-homeowner called the trustor (similar to a
mortgagor), a creditor (similar to a mortgagee) called the beneficiary, and a
third-party grantee called the trustee. Under a deed of trust, the obligor
grants the property, irrevocably until the debt is paid, in trust, generally
with a power of sale, to the trustee to secure payment of the obligation. The
deed of trust may, by state law, be subordinated to real estate taxes and
assessments and certain other liens which are given priority by statute. It also
may be subordinated to certain tax liens (see "--Anti-Deficiency Legislation and
Other Limitations on Creditors").
In the State of Texas, indebtedness incurred for the purchase of real
property is typically secured by a deed of trust and indebtedness incurred for
the purpose of making improvements on real property is secured by a mechanic's
lien contract, both with power of sale. In all material respects, the mechanic's
lien contract has the same effect as a deed of trust.
FORECLOSURE AND OTHER REMEDIES
The laws of foreclosure vary from state to state. Foreclosure of a mortgage
generally is accomplished by judicial action. The action is initiated by the
service of legal pleadings upon all parties having an interest in the real
property. Delays in completion of the foreclosure may occasionally result from
difficulties experienced in locating necessary party defendants. Judicial
foreclosure proceedings are often not contested by any of the parties defendant.
If a mortgagee's right of foreclosure is contested, the legal proceedings
necessary to resolve the issue can be time consuming. If the court finds for a
mortgagee, it generally issues a judgment of foreclosure and appoints a referee
or other court officer to conduct the sale of the property.
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Foreclosure of either a deed of trust or a mechanic's lien contract
generally is accomplished by a non-judicial trustee's sale under a specific
provision in the deed of trust which authorizes the trustee to sell the property
upon any default by the obligor under the terms of the deed of trust or the note
secured thereby. In some states, the trustee must record a notice of default and
send a copy to the obligor and to any person who has recorded a request for a
copy of notice of default and notice of sale. In addition, the trustee must
provide notice in some states to any other individual having an interest in the
real property, including any junior lienholder. In some states, the obligor has
the right to reinstate the obligation at any time following default until
shortly before the trustee's sale. In general, the obligor, or any other person
having a junior encumbrance on the real estate, may, during a reinstatement
period, cure the default by paying the entire amount in arrears plus the costs
and expenses incurred in enforcing the obligation. Generally, state law controls
the amount of foreclosure expenses and costs, including attorneys' fees, which
may be recovered by a creditor. If the deed of trust or mechanic's lien
contract, as the case may be, is not reinstated, a notice of sale must be posted
in a public place and, in most states, published for a specific period of time
in one or more newspapers. In addition, some state laws require that a copy of
the notice of sale be posted on the property and sent to all parties having an
interest in the real property.
In the case of foreclosure under a mortgage, deed of trust or mechanic's
lien contract, the sale by the referee or other designated officer or by the
trustee is at a public sale. However, because of the difficulty a potential
buyer at the sale would have in determining the exact status of title and
because the physical condition of the property may have deteriorated during the
foreclosure proceedings, it is uncommon for a third party to purchase the
property at the foreclosure sale. Instead, it is common for the creditor, or an
affiliate of the creditor, to purchase the property from the trustee or referee
for an amount equal to the unpaid principal amount of note secured by the
mortgage, deed of trust or mechanic's lien contract, accrued and unpaid interest
and the costs and expenses of foreclosure. Thereafter, subject to the right of
the obligor in some states to remain in possession during the redemption period,
the creditor will assume the burdens of ownership, including obtaining insurance
and making such repairs at its own expense as are necessary to render the
property suitable for resale. Depending upon market conditions, the ultimate
proceeds of the sale of the property may not equal the creditor's investment in
the property.
RIGHTS OF REDEMPTION
In some states, after the sale of real property pursuant to a deed of trust
or foreclosure of a mortgage, the obligor and foreclosed junior liens are given
a statutory period in which to redeem the property from the foreclosure sale. In
some states, redemption may occur only upon payment of the entire unpaid balance
of the cash price, earned finance charges and costs and expenses of foreclosure.
In other states, redemption may be authorized if the former customer pays only a
portion of the sums due. The effect of a statutory right of redemption is to
diminish the ability of the creditor to sell the foreclosed property. The right
of redemption could defeat the title of any purchaser from the creditor
subsequent to foreclosure or sale under a deed of trust. Consequently, the
practical effect of the redemption right is to force the creditor to retain the
property and to pay the expenses of ownership until the redemption period has
run.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON CREDITORS
Certain states have imposed statutory prohibitions which limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the obligor following foreclosure or sale under a
mortgage or a deed of trust. A deficiency judgment is a personal judgment
against the obligor equal in most cases to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
creditor. In some states, statutes require the beneficiary or mortgagee to
exhaust the security afforded under a deed of trust or mortgage by foreclosure
in an attempt to satisfy the full debt before bringing a personal action against
the obligor. Finally, other statutory provisions limit any deficiency judgment
against the obligor following a judicial sale to the excess of the outstanding
debt over the fair
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market value of the property at the time of the sale. The purpose of these
statutes is generally to prevent a beneficiary or mortgagee from obtaining a
large deficiency judgment against the obligor as a result of low or no bids at
the judicial sale.
Numerous other statutory provisions, including the federal bankruptcy laws
and state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage creditor to realize upon collateral and/or
enforce a deficiency judgment. For example, under federal bankruptcy law,
virtually all actions (including foreclosure actions and deficiency judgment
proceedings) are automatically stayed upon the filing of a bankruptcy petition,
and often no mortgage payments are made during the course of the bankruptcy
proceeding. In a case under the bankruptcy laws, the secured creditor is
precluded from foreclosing without authorization from the bankruptcy court. In
addition, with respect to federal bankruptcy laws, a court with federal
bankruptcy jurisdiction may permit an obligor through his or her chapter 11 or
chapter 13 rehabilitative plan to cure a monetary default in respect of a
Security Instrument on such obligor's residence by paying arrearages within a
reasonable time period and reinstating the original Security Instrument payment
schedule even though the creditor accelerated the outstanding indebtedness and a
final judgment of foreclosure had been entered in state court (provided no sale
of the residence had yet occurred) prior to the filing of the obligor's
petition. Some courts with federal bankruptcy jurisdiction have approved plans,
based on the particular facts of the reorganization case, that enabled an
obligor to cure a payment default by paying arrearages over a number of years.
In addition, the laws of various states provide for moratoria on the payment of
principal of, and interest on, outstanding indebtedness by obligors meeting
certain qualifications.
Courts with federal bankruptcy jurisdiction also have indicated that the
terms of a mortgage or a deed of trust secured by property not consisting solely
of the obligor's principal residence may be modified. These courts have
suggested that such modifications may include reducing the amount of each
monthly payment, reducing the rate of interest or finance charge, altering the
repayment schedule and reducing the creditor's security interest to the value of
the residence, thus rendering the creditor a general unsecured creditor for the
difference between the value of the residence and the outstanding balance of the
indebtedness. Some courts have permitted such modifications when the mortgage or
deed of trust is secured both by the obligor's principal residence and by
personal property.
The Code provides priority to certain tax liens over the liens of a Security
Instrument. In addition, substantive requirements are imposed upon creditors in
connection with the origination of Security Instruments by numerous federal and
some state consumer protection laws. These laws include the federal
Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Billing Act,
Fair Credit Reporting Act and related statutes. These federal laws and state
laws impose specific statutory liabilities upon creditors who originate Security
Instruments and who fail to comply with the provisions of such laws. In some
cases, this liability may affect assignees of the Security Instruments,
including the Issuer and the Indenture Trustee. See "--Consumer Protection Laws"
above.
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a homeowner under an Account who enters the military
service after the origination of such homeowner's Account (including a homeowner
who is a member of the National Guard or is in reserve status at the time of the
origination of the Account and is later called to active duty) may not be
charged interest above an annual rate of 6% during the period of such
homeowner's active duty status, unless a court orders otherwise upon application
of the lender. It is possible that similar actions could have an effect, for an
indeterminate period of time, on the ability of the Servicer to collect full
amounts of finance charges on certain of the Accounts. In addition, the Relief
Act imposes limitations which would impair the ability of the Servicer to
foreclose on an affected Account during the homeowner's period of active duty
status. Thus, in the event that such an Account goes into default, there may be
delays and losses occasioned by the inability to realize upon the related
Mortgaged Property in a timely fashion.
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ENFORCEABILITY OF CERTAIN PROVISIONS
Upon foreclosure, courts have imposed general equitable principles. These
equitable principles are generally designed to relieve the obligor from the
legal effect of his defaults under the mortgage or deed of trust. Examples of
judicial remedies that have been fashioned include judicial requirements that
the creditor undertake affirmative and extensive actions to determine the causes
for the obligor's default and the likelihood that the obligor will be able to
cure the default. In some cases, courts have substituted their judgment for the
creditors' judgment and have required that creditors reinstate mortgages or
deeds of trust or recast payment schedules in order to accommodate obligors who
are suffering from temporary financial disability. In other cases, courts have
limited the right of creditors to foreclose if the default under the mortgage
instrument is not a monetary default, such as when the obligor fails adequately
to maintain the property or the obligor executes a second mortgage or deed of
trust affecting the property.
ENVIRONMENTAL LEGISLATION
Certain states impose a statutory lien for associated costs on property that
is the subject of a clean-up action by the state on account of hazardous wastes
or hazardous substances released or disposed of on the property. Such a lien
will generally have priority over all subsequent liens on the property and, in
certain of these states, will have priority over prior recorded liens including
the lien of a mortgage or deed of trust. In addition, under federal
environmental legislation and possibly under state law in a number of states, a
secured party which takes a deed in lieu of foreclosure or acquires a mortgaged
property at a foreclosure sale may, in certain limited circumstances, be liable
as an "owner or operator" for the costs of cleaning up a contaminated site.
Although such costs could be substantial, it is unclear whether they would be
imposed on a secured party (such as the Trust). In the event that title to a
Mortgaged Property securing an Account was acquired by the Issuer of a Series of
Notes and cleanup costs were incurred in respect of the Mortgaged Property, the
Noteholders of such Series would be adversely affected if such costs were
required to be paid by the Issuer of such Series.
However, recent amendments to federal environmental legislation provide for
a "secured creditor exemption" which defines and specifies the range of
permissible actions that may be undertaken by a secured party holding security
in a contaminated facility. In addition, under the amendments, a secured party
continues to be protected from liability as an "owner or operator" after
foreclosure as long as it seeks to divest itself of the facility at the earliest
practicable commercially reasonable time on commercially reasonable terms,
taking into account market conditions and legal and regulatory requirements. The
"secured creditor exemption," however, does not necessarily affect the potential
for liability in actions under other federal or state laws which may impose
liability on "owners or operators" but do not incorporate the "secured creditor
exemption."
SECURITY
MORTGAGE COLLATERAL
GENERAL. With respect to each Series of Notes, the Notes of such Series
will be secured by assignments to the related Indenture Trustee of Collateral
consisting of (i) the Mortgage Collateral for such Series of Notes, (ii) the
payments received thereon after the related Cut-Off Date, (iii) the net
reinvestment income from such payments and (iv) the related Servicing Agreement
and related Purchase and Sale Agreement. See "DESCRIPTION OF THE
NOTES--Interest--Principal Payments" herein.
ACCOUNTS. With respect to each Series, in order to enable the Indenture
Trustee of such Series of Notes to obtain a security interest in the mortgage,
deed of trust or other security instrument, as the case may be, and other
documents and instruments underlying each related Account comprising the
Mortgage Collateral for such Series, upon receipt of such documents and
instruments from the Depositor after the issuance of the Notes for such Series,
the related Indenture requires the Issuer of such Series to:
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(i) endorse each customer's promissory note in blank and deliver such note to be
held by the related Indenture Trustee until such time as such customer's Account
is paid in full or becomes subject to foreclosure proceedings; (ii) prepare
assignments of mortgages, mechanic's lien contracts or deeds of trust, as the
case may be, in recordable form, which collaterally assign the related Issuer's
interest in the mortgages, mechanic's lien contracts or deeds of trust to the
related Indenture Trustee; and (iii) record such assignments in the local real
estate records where the real property is located. See "RISK FACTORS--Grant of
Security Interest in Mortgage Collateral--Risks of Defective Security Interest"
herein.
INSURANCE PROCEEDS. Unless otherwise specified in the related Prospectus
Supplement with respect to each Series of Notes, the Issuer of such Series of
Notes will assign to the related Indenture Trustee, as additional security for
the Notes of such Series, all payments due under the standard hazard insurance
policies (the "Insurance Policies") insuring the relevant Mortgaged Property
with respect to each of the Accounts comprising the Mortgage Collateral for such
Series. Because the Insurance Policies will be underwritten by different issuers
and will cover Mortgaged Properties located in various states, such policies
will not contain identical terms and conditions. The most significant terms
thereof, however, generally will be determined by state law and generally will
be similar. Most such policies typically will not cover any physical damage
resulting from the following: war, governmental actions, floods, earth
movements, nuclear reaction, hazardous wastes or substances, and theft. The
foregoing list is indicative of certain kinds of uninsured risks and is not
all-inclusive. The terms of each Account comprising the Mortgage Collateral for
a Series of Notes will require the customer to maintain an Insurance Policy
covering the related mortgaged property. With respect to each Series of Notes,
the terms of the related Servicing Agreement require the Servicer either to
cause such Insurance Policy to be maintained in full force and effect, or to
obtain an insurance policy against certain losses with respect to each such
Account. All proceeds of any Insurance Policy collected by the Servicer (less
amounts to be applied to the restoration or repair of the mortgaged property)
will be deposited in the Collection Account for the related Series of Notes.
Insurance proceeds designated for repair or restoration of a Mortgaged Property
will be deposited in a servicing account established in accordance with the
terms of each Servicing Agreement. See "THE SERVICING AGREEMENT--Insurance;
Taxes" herein.
At the time of entering into a Retail Contract or Texas Contract, Jim Walter
Homes offers each customer the opportunity to select Best Insurors, Inc.
("Best"), a licensed Florida insurance agency and a wholly-owned subsidiary of
Walter Industries, to provide the Insurance Policy required to be maintained by
such customer under the Retail Contract or Texas Contract. Each Prospectus
Supplement shall set forth the percentage, if any, of the Accounts having
Insurance Policies issued by Best.
Any losses incurred with respect to Accounts comprising the Mortgage
Collateral of any Series of Notes due to uninsured risks (including earthquakes,
mudflows and floods) or insufficient hazard insurance proceeds will result in a
loss which may result in the reduction of the principal balance of one or more
Classes of Notes of such Series without a payment in respect of principal
thereon. See "RISK FACTORS--Risks of Subordination" herein.
INVESTMENT OF FUNDS. Subject to certain limitations set forth in the
Indenture for each Series of Notes, prior to a default or an Event of Default
under the related Indenture, funds in the Collection Account for each Series of
Notes will be invested by the related Indenture Trustee, as directed by the
Issuer of such Series of Notes, in certain eligible investments which may
include, among other investments, obligations of the United States or any agency
thereof backed by the full faith and credit of the United States, certain
obligations issued or fully guaranteed by the Federal Home Loan Mortgage
Corporation ("Freddie Mac") or the Federal National Mortgage Association
("Fannie Mae"), certificates of deposit, time deposits and bankers' acceptances
that are obligations of eligible depository institutions, certain repurchase
agreements entered into with eligible depository institutions, commercial paper
or other debt securities issued by corporations meeting certain credit rating
standards and other investments acceptable to the Rating Agencies or other such
investments as set forth in the related Prospectus Supplement ("Eligible
Investments"). With respect to each Series of Notes, if a default or an Event of
Default under
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the related Indenture occurs and is continuing, the related Issuer shall no
longer have the ability to direct the investment of funds in the Collection
Account for such Series of Notes. See "THE INDENTURE-- Events of Default"
herein.
Unless otherwise provided in the related Prospectus Supplement, funds in a
Collection Account may be invested only in Eligible Investments so that all
investments will mature no later than two Business Days prior to the next
Payment Date. Any income or other gain from Eligible Investments will be
credited to, and any loss resulting from such investments will be charged to,
the Collection Account for such Series of Notes.
COLLECTION ACCOUNT
With respect to each Series of Notes, unless otherwise provided in the
related Prospectus Supplement, prior to the Closing Date, the Collection Account
for such Series will be established with, and in the name of, the related
Indenture Trustee. With respect to each Series of Notes, on the related Closing
Date, the related Issuer will deposit cash in an amount equal to all payments
(including prepayments) received on the related Accounts comprising the Mortgage
Collateral for such Series of Notes since the related Cut-Off Date and up to the
date that is five business days prior to the related Closing Date. Thereafter,
all payments (including payments received since and including the date that is
five business days prior to the related Closing Date) received in respect of the
related Accounts will be deposited in the related Collection Account on a weekly
basis (which will include the deposit on the last business day of each
Collection Period), in accordance with information provided by the Servicer.
With respect to each Series of Notes, the related Indenture Trustee will
transfer amounts in the related Holding Account into the related Collection
Account. Prior to any such deposit, payments received in respect of the related
Accounts will be held by the Indenture Trustee of such Series in the related
Holding Account. See "THE SERVICING AGREEMENT--Collection of Payments" herein.
The foregoing amounts deposited into the Collection Account of a Series of
Notes, together with the reinvestment income thereon and less related Issuer
Expenses, will be available to make payments on the Notes of such Series.
CERTAIN CONTRACTUAL RIGHTS
With respect to each Series of Notes, unless otherwise provided in the
related Prospectus Supplement, the Issuer of such Series of Notes will assign to
the Indenture Trustee of such Series of Notes as security for the Notes of such
Series all of its right, title and interest in, to and under the related
Purchase and Sale Agreement and the related Servicing Agreement and the rights
to certain servicing software. See "THE PURCHASE AND SALE AGREEMENT" herein.
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DESCRIPTION OF THE NOTES
The following are summaries of the material provisions of the Notes. The
following summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the separate Indenture for each
Series of Notes.
GENERAL
The following summary describes certain terms of the Notes, common to any
Indenture and Trust Agreement. Forms of the Indenture, the Trust Agreement and
the Purchase and Sale Agreement providing for the transfer of Accounts from the
Depositor to an Issuer have been filed as exhibits to the Registration Statement
of which this Prospectus forms a part. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the provisions of the Notes and the Purchase and Sale Agreement for each Trust,
any Indenture and Trust Agreement and the related Prospectus Supplement. Where
particular provisions or terms used in any of such documents are referred to,
the actual provisions (including definitions of terms) are incorporated by
reference as part of such summaries.
The Notes will represent debt secured by the assets of the related Trust,
including the Accounts and all proceeds thereof and certain other property, as
described in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, one or more Classes of Notes of a Series may have the
benefit of one or more insurance policies, surety bonds, guarantees, letters of
credit, reserve funds, cash accounts, reinvestment income, overcollateralization
or other form of credit enhancement. In addition to or in lieu of any or all of
the foregoing, credit enhancement may be provided through subordination. Any
such credit enhancement may be included in the assets of the related Trust. See
"Description of Credit Enhancement" herein.
A Series of Notes may include one or more Classes entitled to distributions
of principal and disproportionate, nominal or no interest distributions or
distributions of interest and disproportionate, nominal or no principal
distributions. The principal amount of any Note may be zero or may be a notional
amount as specified in the related Prospectus Supplement. A Class of Notes of a
Series entitled to payments of interest may receive interest at a specified rate
(a "Note Rate") which may be fixed, variable or adjustable and may differ from
other Classes of the same Series, may receive interest as described in the
related Prospectus Supplement. One or more Classes of Notes of a Series may be
entitled to receive principal payments pursuant to a planned amortization
schedule or may be entitled to receive interest payments based on a notional
principal amount which reduces in accordance with a planned amortization
schedule. A Series may also include one or more Classes of Notes entitled to
payments derived from a specified group or groups of Accounts held by the
related Trust. The rights of one or more Classes of Notes may be senior or
subordinate to the rights of one or more of the other Classes of Notes of such
Series. A Series may include two or more Classes of Notes which differ as to the
priority of payment or amount of distributions of principal or interest or both.
Each Class of Notes of a Series will be issued in the denominations
specified in the related Prospectus Supplement. Each Note will represent a
percentage interest (a "Percentage Interest") in the Notes of the respective
Class of the respective Series, determined by dividing the original dollar
amount (or Notional Principal Amount, in the case of certain Notes entitled to
receive interest only) represented by such Note by the original principal
balance of such Class.
One or more Classes of Notes of a Series may be issuable in the form of
fully registered definitive certificates or, if so specified in the related
Prospectus Supplement, one or more Classes of Notes of a Series (the "Book-Entry
Notes") may initially be represented by one or more certificates registered in
the name of Cede & Co. ("Cede"), the nominee of The Depository Trust Company
("DTC"). If so specified in the related Prospectus Supplement, holders of Notes
may hold beneficial interests in Book-Entry Notes through DTC (in the United
States) or CEDEL or Euroclear (in Europe) directly if they are participants of
such systems, or indirectly through organizations which are participants in such
systems. Notes
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representing the Book-Entry Notes will be issued in definitive form only under
the limited circumstances described herein and in the related Prospectus
Supplement. With respect to Book-Entry Notes, all references herein to "holders"
of Notes shall reflect the rights of owners of the Book-Entry Notes, as they may
indirectly exercise such rights through DTC, CEDEL, Euroclear and their
participating organizations, except as otherwise specified herein. See
"--Registration and Transfer of Notes" herein.
Unless otherwise specified in the related Prospectus Supplement, on each
Payment Date, there shall be paid to each person in whose name a Note is
registered on the related Record Date (which in case of the Book-Entry Notes
initially will be only Cede, as nominee of DTC), the portion of the aggregate
payment to be made to holders of such Class to which such holder is entitled, if
any, based on the Percentage Interest held by such holder of such Class.
INTEREST
Unless otherwise specified in the related Prospectus Supplement, interest
will accrue on each Class of Notes of a Series (other than a Class of Notes
entitled to receive only principal) during each period specified in the related
Prospectus Supplement (each, an "Interest Accrual Period") at the Note Rate for
such Class specified in the related Prospectus Supplement. Interest accrued on
each Class of Notes at the applicable Note Rate during each Interest Accrual
Period will be paid, to the extent monies are available therefor, on each
Payment Date, commencing on the day specified in the related Prospectus
Supplement and will be distributed in the manner specified in such Prospectus
Supplement. Payments of interest with respect to any Class of Notes entitled to
receive interest only or a disproportionate amount of interest and principal
will be paid in the manner set forth in the related Prospectus Supplement.
Payments of interest with respect to any Series of Notes or one or more Classes
of Notes of such Series, may be reduced to the extent of interest shortfalls not
covered by any applicable credit enhancement.
PRINCIPAL
On each Payment Date, commencing with the Payment Date specified in the
related Prospectus Supplement, principal with respect to the related Accounts
will be paid to holders of the Notes of the related Series (other than a Class
of Notes of such Series entitled to receive interest only) in the priority,
manner and amount specified in such Prospectus Supplement, to the extent funds
are available therefor.
Payments of Principal with respect to a Series of Notes or one or more
Classes of such Series may be reduced to the extent of delinquencies or losses
not covered by any applicable credit enhancement.
AVAILABLE FUNDS
Unless otherwise provided in the related Prospectus Supplement, "Available
Funds" in respect of a Payment Date are funds equal to the sum of (i)
collections on the related Accounts during the Collection Period immediately
preceding such Payment Date that are on deposit in the Collection Account as of
the close of business on the last business day of such Collection Period (ii)
any net reinvestment income earned on funds described in clause (i) above,
during the Reinvestment Period and (iii) the proceeds of any insurance policy
relating to the Notes or the Accounts. Unless otherwise provided in the related
Prospectus Supplement, Available Funds will be net of Issuer Expenses paid.
"Issuer Expenses" are all of the Issuer's expenses (other than amounts due on
the Notes of such Series), including, without limitation, the fees and expenses
of the related Owner Trustee, the related Indenture Trustee and the fee of the
Servicer for such Series of Notes. See "THE TRUST AGREEMENT," THE INDENTURE--The
Indenture Trustee" and "THE SERVICING AGREEMENT--Servicing Fee" herein. The
"Remaining Available Funds" for a Payment Date are the Available Funds for such
Payment Date reduced by the amount of interest due on the Notes of such Series
on such Payment Date.
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DESCRIPTION OF CREDIT ENHANCEMENT
To the extent specified in the related Prospectus Supplement, credit
enhancement for one or more Classes of a Series of Notes may be provided by one
or more of a letter of credit, financial guaranty insurance policy, reserve
fund, spread account, cash collateral account, mortgage pool insurance policy,
special hazard insurance policy or other type of credit enhancement. Credit
enhancement may also be provided by overcollateralization or by subordination of
one or more Classes of Notes of a Series to one or more other Classes of Notes
of such Series. Any credit enhancement will be limited in amount and scope of
coverage. Unless otherwise specified in the related Prospectus Supplement,
credit enhancement for a Series of Notes will not be available for losses
incurred with respect to any other Series of Notes. To the extent credit
enhancement for any Series of Notes is exhausted, or losses are incurred which
are not covered by such credit enhancement, the holders of the Notes will bear
all further risk of loss.
The amounts and types of credit enhancement, as well as the provider thereof
(the "Credit Provider"), if applicable, with respect to each Series of Notes
will be set forth in the related Prospectus Supplement. To the extent provided
in the applicable Prospectus Supplement and the related Indenture, any credit
enhancement may be periodically modified, reduced or substituted for as the
aggregate principal balance of the related Accounts decrease, upon the
occurrence of certain events or otherwise. Unless otherwise specified in the
related Prospectus Supplement, to the extent permitted by the applicable Rating
Agencies and provided that the then current rating of the affected Notes is not
reduced or withdrawn as a result thereof, any credit enhancement may be
cancelled or reduced in amount or scope of coverage or both.
The descriptions of credit enhancement arrangements included in this
Prospectus or any Prospectus Supplement and the coverage thereunder do not
purport to be complete and are qualified in their entirety by reference to the
actual forms of governing documents, copies of which will be available upon
request.
FINANCIAL GUARANTY INSURANCE POLICY. If so specified in the related
Prospectus Supplement, a financial guaranty insurance policy or surety bond (a
"Notes Insurance Policy") may be obtained and maintained for a Class or Series
of Notes. The issuer of the Notes Insurance Policy (the "Insurer") will be
described in the related Prospectus Supplement and a copy of the form of Notes
Insurance Policy will be filed with the related Current Report on Form 8-K.
Unless otherwise specified in the related Prospectus Supplement, a Notes
Insurance Policy will be unconditional and irrevocable and will guarantee to
holders of the applicable Notes that an amount equal to the full amount of
distributions due to such holders will be received by the Indenture Trustee or
its agents on behalf of such holders for distribution on each Payment Date.
The specific terms of any Notes Insurance Policy will be set forth in the
related Prospectus Supplement. A Notes Insurance Policy may have limitations and
generally will not insure the obligation of the Depositor to purchase or
substitute for a defective Account and will not guarantee any specific rate of
principal prepayments.
Unless otherwise specified in the related Prospectus Supplement, the Insurer
will be subrogated to the rights of each holder to the extent the Insurer makes
payments under the Notes Insurance Policy.
LETTER OF CREDIT. If so specified in the related Prospectus Supplement, all
or a component of credit enhancement for a Class or a Series of Notes may be
provided by a letter of credit (a "Letter of Credit") issued by a bank or other
financial institution (a "Letter of Credit Issuer") identified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, each Letter of Credit will be irrevocable. A Letter of Credit may
provide coverage with respect to one or more Classes of Notes or the underlying
Accounts or, if specified in the related Prospectus Supplement, may support a
specified obligation or be provided in lieu of the funding with cash of a
Reserve Fund or Spread Account (each as defined below). The amount available,
conditions to drawing, if any, and right to reimbursement with respect to a
Letter of Credit will be specified in the related Prospectus Supplement. A
Letter of
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Credit will expire on the date specified in the related Prospectus Supplement,
unless earlier terminated or extended in accordance with its terms.
POOL INSURANCE POLICY. If so specified in the related Prospectus
Supplement, credit enhancement with respect to a Series of Notes may be provided
by a pool insurance policy (a "Pool Insurance Policy") issued by the insurer (a
"Pool Insurer") specified in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, each Pool Insurance Policy will,
subject to limitations described in such Prospectus Supplement, insure against
losses due to defaults in the payment of principal or interest on the underlying
assets up to the amount specified in such Prospectus Supplement (or in a Current
Report on Form 8-K). The Indenture with respect to any Series of Notes for which
a Pool Insurance Policy is provided will require the Servicer or other party
specified therein to use reasonable efforts to maintain the Pool Insurance
Policy and to present claims to the Pool Insurer in the manner required thereby.
No Pool Insurance Policy will be a blanket policy against loss and will be
subject to the limitations and conditions precedent described in the related
Prospectus Supplement.
SPECIAL HAZARD INSURANCE POLICY. If so specified in the related Prospectus
Supplement, credit enhancement with respect to a Series of Notes may be provided
in part by an insurance policy (a "Special Hazard Policy") covering losses due
to physical damage to a Mortgaged Property other than a loss of the type covered
by a standard hazard insurance policy or flood insurance policy or losses
resulting from the application of co-insurance clauses contained in standard
hazard insurance policies. The Prospectus Supplement relating to a Series of
Notes for which a Special Hazard Policy is provided will identify the issuer of
such policy and any limitation on coverage. No Special Hazard Policy will cover
extraordinary losses such as those due to war, civil insurrection, governmental
action, errors in design or workmanship, chemical contamination or similar
causes. Each Special Hazard Policy will contain an aggregate limit on claims
specified in the related Prospectus Supplement. No claims will be paid under any
Special Hazard Policy unless hazard insurance on the Account is in force and
protection and preservation expenses have been paid.
SPREAD ACCOUNT AND RESERVE FUND. If so specified in the related Prospectus
supplement, all or any component of credit enhancement for a Series of Notes may
be provided by a reserve fund (a "Reserve Fund") or a spread account (a "Spread
Account"). A Reserve Fund or Spread Account may be funded by a combination of
cash, one or more letters of credit or otherwise provided by the Depositor or
other party identified in the related Prospectus Supplement, amounts otherwise
distributable to one or more Classes of Notes subordinated to one or more other
Classes of Notes or to the holder of the certificate of beneficial interest in
the related Trust or as otherwise specified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, a Reserve Fund
for a Series of Notes may be funded in whole or in part on the applicable
Closing Date. If so specified in the related Prospectus Supplement, cash
deposited in a Reserve Fund or a Spread Account may be withdrawn and replaced
with one or more letters of credit or Permitted Instruments. A Reserve Fund or
Spread Account may be pledged or otherwise made available to a Credit Provider.
If so specified in the related Prospectus Supplement, a Reserve Fund or Spread
Account may not be deemed part of the assets of the related Trust or may be
deemed to be pledged or provided by the Depositor, the holders of the Class of
Notes otherwise entitled to the amounts deposited in such account or such other
party as is identified in such Prospectus Supplement.
CASH COLLATERAL ACCOUNT. If so specified in the related Prospectus
Supplement, all or any portion of credit enhancement for a Series of Notes may
be provided by the establishment of a cash collateral account (a "Cash
Collateral Account"). A Cash Collateral Account will be similar to a Reserve
Fund or Spread Account except that generally a Cash Collateral Account is funded
initially by a loan from a cash collateral lender (the "Cash Collateral
Lender"), the proceeds of which are invested with the Cash Collateral Lender or
other eligible institution. Unless otherwise specified in the related Prospectus
Supplement, the Cash Collateral Account will be required to be maintained as an
Eligible Investment. The loan from the Cash Collateral Lender will be repaid
from amounts as are specified in the related Prospectus Supplement.
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Amounts on deposit in the Cash Collateral Account will be available in generally
the same manner described above with respect to a Spread Account or Reserve
Fund. As specified in the related Prospectus Supplement, a Cash Collateral
Account may be deemed to be part of the assets of the related Trust, may be
deemed to be part of the assets of a separate cash collateral trust or may be
deemed to be property of the party specified in the related Prospectus
Supplement and pledged for the benefit of the holders of one or more Classes of
Notes of a Series.
SUBORDINATION. If so specified in the related Prospectus Supplement,
distributions of scheduled principal, Principal Prepayments, Curtailments,
interest or any combination thereof otherwise payable to one or more Classes of
Notes of a Series ("Subordinated Notes") may instead be payable to holders of
one or more other Classes of Notes of such Series ("Senior Notes") under the
circumstances and to the extent specified in such Prospectus Supplement. A Class
of Notes may be subordinated to one or more Classes of Notes and senior to one
or more other Classes of Notes of a Series. If so specified in the related
Prospectus Supplement, delays in receipt of scheduled payments on the Accounts
and losses on defaulted Accounts will be borne first by the various Classes of
Subordinated Notes and thereafter by the various Classes of Senior Notes, in
each case under the circumstances and subject to the limitations specified in
such Prospectus Supplement. The aggregate losses in respect of defaulted
Accounts which must be borne by the Subordinated Notes by virtue of
subordination and the amount of the distributions otherwise distributable to the
Subordinated Notes that will be distributable to Senior Notes on any Payment
Date may be limited as specified in the related Prospectus Supplement or the
availability of subordination may otherwise be limited as specified in the
related Prospectus Supplement. If losses or delinquencies were to exceed the
amounts payable and available to holders of Subordinated Notes of a Series or if
such amounts were to exceed any limitation on the amount of subordination
available, holders of Senior Notes of such Series could experience losses.
In addition, if so specified in the related Prospectus Supplement, amounts
otherwise payable to holders of Subordinated Notes on any Payment Date may be
deposited in a Reserve Fund or Spread Account, as described above. Such deposits
may be made on each Payment Date, on each Payment Date for a specified period or
to the extent necessary to cause the balance in such account to reach or
maintain a specified amount, as specified in the related Prospectus Supplement,
and thereafter, amounts may be released from such Reserve Fund or Spread Account
in the amounts and under the circumstances specified in such Prospectus
Supplement.
As between Classes of Subordinated Notes, payments to holders of Senior
Notes on account of delinquencies or losses and deposits to any Reserve Fund or
Spread Account will be allocated as specified in the related Prospectus
Supplement.
CROSS-SUPPORT PROVISIONS. If the Mortgage Collateral for a Series is
divided into separate groups, each supporting a separate Class or Classes of
Notes of a Series, credit enhancement may be provided by cross-support
provisions requiring that distributions be made on Senior Notes evidencing
interests in one group of Accounts prior to distributions on Subordinated Notes
evidencing interests in a different group of Accounts within the Trust. The
Prospectus Supplement for a Series that includes a cross-support provision will
describe the manner and conditions for applying such provisions.
OTHER CREDIT ENHANCEMENT. Credit enhancement may also be provided for a
Series of Notes in the form of overcollateralization, surety bond, insurance
policy or other type of credit enhancement approved by the applicable Rating
Agencies to cover one or more risks with respect to the Accounts or the Notes,
as specified in the related Prospectus Supplement.
DISTRIBUTIONS
Unless otherwise specified in the related Prospectus Supplement, on each
Payment Date, the Indenture Trustee of a Series is required to distribute from
Available Funds the amounts set forth in the
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related Prospectus Supplement, to the extent available, in the priority set
forth therein, which generally will include (in no particular order of
priority):
(i) deposits into any account established for the purpose of paying
credit enhancement fees and premiums;
(ii) if a reserve fund or similar account is established with respect to
a Series of Notes, deposits into such fund or account of amounts required to
be deposited therein;
(iii) payments to holders of Notes on account of interest and principal,
in that order and in the manner set forth in the related Prospectus
Supplement; and
(iv) after the payments and deposits described above and in the related
Prospectus Supplement, the balance, if any, to the persons specified in the
related Prospectus Supplement.
An Event of Default may be cured only if the Indenture Trustee of a Series
has not accelerated the Notes of such Series.
REDEMPTION OF THE NOTES
If so specified in the related Prospectus Supplement, Classes of Notes of a
Series may be redeemed on a Payment Date at the option of the Issuer of such
Series or such other entity as specified in the related Prospectus Supplement,
at a percentage as set forth in the related Prospectus Supplement of the unpaid
principal amount of each Class of Notes of such Series plus accrued interest, if
indicated in the related Prospectus Supplement, after giving effect to the
payment of principal that would be made on such Payment Date absent such
redemption, the aggregate principal amount of each Class of Notes of such Series
outstanding (prior to allocations of any losses on the related Mortgage
Collateral as set forth in the related Prospectus Supplement) is at a level of
the original aggregate principal amount of such Class of Notes as specified in
the related Prospectus Supplement.
WEIGHTED AVERAGE LIFE OF THE NOTES
The weighted average life of each Class of Notes of a Series refers to the
average amount of time that will elapse from the date of its issuance until each
dollar of principal of such Class of Notes will be repaid to the investor. The
weighted average life of the Notes of a Series will be influenced by, among
other factors, the rate at which collections are made on the related Accounts.
Payments on the Accounts may be in the form of scheduled payments or prepayments
(for this purpose, the term "prepayments" includes prepayments in full and
receipt of proceeds from Insurance Policies that are not applied to the
restoration of the home). It is expected that, consistent with Mid-State's
current servicing procedures, repossessed homes will, in general, be sold in
exchange for a new Account together with a small amount of cash. Consequently,
liquidations of Accounts due to repossessions are not expected to generate much,
if any, cash proceeds.
The weighted average life of each Class of Notes of a Series will be
computed in the related Prospectus Supplement based on certain assumptions and
other information as set forth in the related Prospectus Supplement.
REGISTRATION AND TRANSFER OF NOTES
If so specified in the related Prospectus Supplement, one or more Classes of
Notes of a Series will be issued in definitive certificated form and will be
transferable and exchangeable at the office of the registrar identified in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, no service charge will be made for any such registration
or transfer of such Notes, but the owner may be required to pay a sum sufficient
to cover any tax or other governmental charge.
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If so specified in the related Prospectus Supplement, Book-Entry Notes may
be initially represented by one or more certificates registered in the name of
DTC and be available only in the form of book-entries. If specified in the
related Prospectus Supplement, holders of Notes may hold beneficial interests in
Book-Entry Notes through DTC (in the United States) or CEDEL or Euroclear (in
Europe) directly if they are participants of such systems, or indirectly through
organizations which are participants in such systems.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in their respective names on
the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear, on the other, will be effected in DTC in accordance with DTC rules on
behalf of the relevant European international clearing system by its Depositary.
However, each such cross-market transaction will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines. The relevant European international clearing
system will, if the transaction meets its settlement requirements, deliver
instructions to its Depositary to take action to effect final settlement on its
behalf by delivering or receiving securities through DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. CEDEL Participants and Euroclear Participants may
not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of Notes by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participating members ("DTC Participants") and to facilitate
the clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations which may include
underwriters, agents or dealers with respect to the Notes of any Class or
Series. Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
("Indirect DTC Participants"). The rules applicable to DTC and DTC Participants
are on file with the Commission.
Beneficial owners ("Owners") that are not DTC Participants or Indirect DTC
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Book-Entry Notes may do so only through DTC Participants and
Indirect DTC Participants. DTC Participants who are Owners of Book-Entry Notes
will receive a credit for such Notes on DTC's records. The ownership interest of
such holder will in turn be recorded on respective records of the DTC
Participants and Indirect DTC Participants. Such
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holders will not receive written confirmation from DTC of their purchase, but
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the DTC
Participant or Indirect DTC Participant through which the Noteholder entered
into the transaction. Unless and until Definitive Notes (as defined below) are
issued, it is anticipated that the only "holder" of Book-Entry Notes of any
Series will be Cede, as nominee of DTC. Owners will only be permitted to
exercise the rights of holders indirectly through DTC Participants and DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Book-Entry Notes and is
required to receive and transmit distributions of principal of and interest on
the Book-Entry Notes. DTC Participants and Indirect DTC Participants with which
Owners have accounts with respect to the Book-Entry Notes similarly are required
to make book-entry transfers and receive and transmit such payments on behalf of
their respective Noteholders.
DTC has advised the Servicer and the Depositor that, unless and until
Definitive Notes are issued, DTC will take any action permitted to be taken by a
holder only at the direction of one or more DTC Participants to whose DTC
accounts the Notes are credited. DTC has advised the Servicer and the Depositor
that DTC will take such action with respect to any Percentage Interests of the
Book-Entry Notes of a Series only at the direction of and on behalf of such DTC
Participants with respect to such Percentage Interests of the Book-Entry Notes.
DTC may take actions, at the direction of the related DTC Participants, with
respect to some Book-Entry Notes which conflict with actions taken with respect
to other Book-Entry Notes.
Cedel Bank societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to CEDEL Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depository, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL Participants are recognized
financial institutions around the world including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include any underwriters, agents or dealers with
respect to any Class or Series of Notes offered hereby. Indirect access to CEDEL
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C.,
a Belgian cooperative corporation (the Euroclear "Cooperative"). All operations
are conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Euroclear Cooperative establishes policy for the
Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include any underwriters,
agents or dealers with respect to any Class or Series of Notes offered
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hereby. Indirect access to the Euroclear System is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Payments and distributions with respect to Book-Entry Notes held through
CEDEL or Euroclear will be credited to the cash accounts of CEDEL Participants
or Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by Citibank, N.A. or The Chase Manhattan
Bank, the relevant depositary of CEDEL and Euroclear (the "Depositaries"),
respectively. Such payments and distributions will be subject to tax withholding
in accordance with relevant United States tax laws and regulations. See
"Material Federal Income Tax Considerations" herein. CEDEL or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Noteholder on behalf of a CEDEL Participant or Euroclear Participant only
in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
Book-Entry Notes of a Series will be issued in registered form to Owners, or
their nominees, rather than to DTC (such Book-Entry Notes being referred to
herein as "Definitive Notes") only under the circumstances provided in the
related Indenture, which generally will include, except if otherwise provided
therein, if (i) DTC or the Servicer advises an Issuer and any Indenture Trustee
in writing that DTC is no longer willing or able to discharge properly its
responsibilities as nominee and depository with respect to the Book-Entry Notes
of such Series and the Servicer is unable to locate a qualified successor, (ii)
the Servicer, at its sole option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of a servicer termination event, a
majority of the aggregate Percentage Interest of any Class of Notes of such
Series advises DTC in writing that the continuation of a book-entry system
through DTC (or a successor thereto) to the exclusion of any physical notes
being issued to Owners is no longer in the best interests of Owners of such
Class of Notes. Upon issuance of Definitive Notes of a Series to Owners, such
Book-Entry Notes will be transferable directly (and not exclusively on a
book-entry basis) and registered holders will deal directly with the related
Issuer or related Indenture Trustee, as the case may be, with respect to
transfers, notices and distributions.
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LEGAL INVESTMENT CONSIDERATIONS
The Notes will not constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as amended. As a result,
the appropriate characterization of the Notes under various legal investment
restrictions, and thus the ability of investors subject to these restrictions to
purchase the Notes, is subject to significant interpretive uncertainties.
Unless otherwise specified in the related Prospectus Supplement, no
representation is made as to the proper characterization of any Class of Notes
of any Series for legal investment or other purposes, or as to the ability of
particular investors to purchase the Notes under applicable legal investment or
other restrictions. All institutions whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or review
by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Notes constitute legal investments
for them or are subject to investment, capital or other restrictions.
ERISA CONSIDERATIONS
With respect to each Series of Notes, the Issuer, the Depositor and Walter
Industries, an affiliate of the Depositor, may each be considered a "party in
interest" within the meaning of ERISA, or a "disqualified person" within the
meaning of the Code, with respect to many employee benefit plans or retirement
arrangements which are subject to ERISA or Section 4975 of the Code
(collectively, the "Plans"). While Mid-State has no present intention to
transfer the beneficial interest in the Issuer of any Series of Notes to any
person other than an affiliate of Mid-State (including a trust beneficially
owned by Mid-State or an affiliate), any transferee of such beneficial interest
(including a transferee that is not such an affiliate) may be such a "party in
interest" or "disqualified person." Prohibited transactions within the meaning
of ERISA and the Code may arise if the Notes are acquired by a Plan with respect
to which Walter Industries is a service provider or other category of "party in
interest" or "disqualified person," unless such Notes are acquired pursuant to
an exemption for transactions effected on behalf of such Plan by a "qualified
professional asset manager" or pursuant to any other available exemption.
A possible violation of the prohibited transaction rules also could occur if
a Plan purchased Notes pursuant to this offering and the Issuer, any
underwriter, or any of their employees, affiliates or financial consultants (i)
manage any part of the Plan's investment portfolio on a discretionary basis, or
(ii) regularly provide advice pursuant to an agreement or understanding, written
or unwritten, with the individual, employer or trustee with discretion over the
assets of such Plan that such advice concerning investment matters will be used
as a primary basis for the Plan's investment decisions. Accordingly, the Issuer,
any underwriter, Mid-State and their respective affiliates will not, and no Plan
should, allow the purchase of Notes with assets of any Plan if the Issuer, any
underwriter, Mid-State or any of their respective employees, affiliates or
financial consultants provide with respect to the assets to be used to acquire
such Notes the management services or advice described in the previous sentence.
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and the Code impose certain requirements on employee benefit plans and on
certain other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements are invested, that are
subject to Title I of ERISA and Section 4975 of the Code and on persons who are
fiduciaries with respect to such Plans in connection with the investment of Plan
assets. Certain employee benefit plans such as governmental plans (as defined in
ERISA Section 3(32)), and, if no election has been made under Section 410(d) of
the Code, church plans (as defined in Section 3(33) of ERISA) are not subject to
ERISA requirements. Accordingly, assets of such plans may be invested in Notes
without regard to the ERISA considerations described below, subject to the
provisions of other applicable federal, state and local law. Any such plan which
is qualified and exempt from taxation under Sections 401(a) and 501(a) of the
Code, however, is subject to the prohibited transaction rules set forth in
Section 503 of the Code.
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ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, ERISA and the Code prohibit a broad range of
transactions involving assets of a Plan and persons ("Parties in Interest") who
have certain specified relationships to the Plan unless a statutory or
administrative exemption is available. Certain Parties in Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth in
Section 406 and 407 of ERISA and Section 4975 of the Code.
A Plan's investment in Notes may cause the Accounts and other assets
included in a related Trust to be deemed Plan assets. Section 2510.3-101 of the
regulations of the United States Department of Labor ("DOL") provides that when
a Plan acquires an equity interest in an entity, the Plan's assets include both
such equity interest and an undivided interest in each of the underlying assets
of the entity, unless certain exceptions not applicable here apply, or unless
the equity participation in the entity by "benefit plan investors" (i.e., Plans
and certain employee benefit plans not subject to ERISA) is not "significant",
both as defined therein. For this purpose, in general, equity participation by
benefit plan investors will be "significant" on any date if 25% or more of the
value of any class of equity interests in the entity is held by benefit plan
investors. To the extent the Notes are treated as equity interests for purposes
of DOL regulations section 2510.3-101, equity participation in a Trust will be
significant on any date if immediately after the most recent acquisition of any
Security, 25% or more of any class of Notes is held by benefit plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Mortgage Collateral and other assets included in a Trust constitute
Plan assets, then any party exercising management or discretionary control
regarding those assets, such as the Servicer, may be deemed to be a Plan
"fiduciary" and thus subject to the fiduciary responsibility provisions and
prohibited transaction provisions of ERISA and the Code with respect to the
investing Plan. In addition, if the Accounts and other assets included in a
Trust constitute Plan assets, the purchase of Notes by a Plan, as well as the
operation of the Trust, may constitute or involve a prohibited transaction under
ERISA and the Code.
To the extent the Notes are not treated as equity interests for purposes of
DOL regulations section 2510.3-101, a Plan's investment in such Notes
("Non-Equity Notes") would not cause the assets included in a related Trust to
be deemed Plan assets. However, the Depositor, the Servicer, the Indenture
Trustee, or underwriter may be the sponsor of or investment advisor with respect
to one or more Plans. Because such parties may receive certain benefits in
connection with the sale of Non-Equity Notes, the purchase of Non-Equity Notes
using Plan assets over which any such parties have investment authority might be
deemed to be a violation of the prohibited transaction rules of ERISA and the
Code for which no exemption may be available. Accordingly, Non-Equity Notes may
not be purchased using the assets of any Plan if a Depositor, or any of the
Servicer, the Indenture Trustee or the underwriter has investment authority with
respect to such assets.
In addition, certain affiliates of the Depositor might be considered or
might become Parties in Interest with respect to a Plan. Also, any holder of
Notes, because of its activities or the activities of its respective affiliates,
may be deemed to be a Party in Interest with respect to certain Plans, including
but not limited to Plans sponsored by such holder. In either case, the
acquisition or holding of Non-Equity Notes by or on behalf of such a Plan could
be considered to give rise to an indirect prohibited transaction within the
meaning of ERISA and the Code, unless it is subject to one or more statutory or
administrative exemptions such as Prohibited Transaction Class Exemption ("PTE")
84-14, which exempts certain transactions effected on behalf of a Plan by a
"qualified professional asset manager", PTE 90-1, which exempts certain
transactions involving insurance company pooled separate accounts, PTE 91-38,
which exempts certain
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transactions involving bank collective investment funds, PTE 95-60, which
exempts certain transactions involving insurance company general accounts, or
PTE 96-23, which exempts certain transactions effected on behalf of a Plan by
certain "in-house" asset managers. It should be noted, however, that even if the
conditions specified in one or more of these exemptions are met, the scope of
relief provided by these exemptions may not necessarily cover all acts that
might be construed as prohibited transactions.
Any Plan fiduciary which proposes to cause a Plan to purchase Notes should
consult with its counsel with respect to the potential applicability of ERISA
and the Code to such investment and the potential applicability of any
prohibited transaction exemption in connection therewith. The Prospectus
Supplement with respect to a series of Notes may contain additional information
regarding the application of any exemption, with respect to the Notes offered
thereby.
The sale of Notes to a Plan is in no respect a representation by the
Depositor or the underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
ANY PLAN FIDUCIARY OR OTHER INVESTOR CONSIDERING WHETHER TO PURCHASE ANY
NOTES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN SHOULD CONSULT WITH ITS
COUNSEL AND REFER TO THE RELATED PROSPECTUS SUPPLEMENT FOR GUIDANCE REGARDING
THE ERISA CONSIDERATIONS APPLICABLE TO THE NOTES OFFERED THEREBY.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of Notes is drafted
in reliance on laws, regulations, rulings and decisions now in effect or (with
respect to regulations) proposed, all of which are subject to change either
prospectively or retroactively. This summary does not address the federal income
tax consequences of an investment in the Notes applicable to all categories of
investors, some of which may be subject to special rules. Prospective investors
should consult their own tax advisors regarding the federal, state, local and
any other tax consequences to them of the purchase, ownership and disposition of
the Notes. Unless stated otherwise, for purposes of the following summary,
references to "Noteholder" and "holder" mean the beneficial owner of a Note.
GENERAL
Tax counsel will deliver its opinion generally to the effect that the Notes
will be treated for federal income tax purposes as indebtedness and not as an
ownership interest in the Accounts nor as an equity interest in the Issuer or a
separate association taxable as a corporation and further that under current
law, the Trust will not be treated as a taxable mortgage pool ("TMP") as defined
in Code Section 7701(i).
Based on the foregoing, for federal income tax purposes, (i) Notes held by a
thrift institution taxed as a domestic building and loan association will not
constitute "loans . . . secured by an interest in real property" within the
meaning of Code Section 7701(a)(19)(C)(v); (ii) interest on Notes held by a real
estate investment trust will not be treated as "interest on obligations secured
by mortgages on real property or on interests in real property" within the
meaning of Code Section 856(c)(3)(B); (iii) Notes held by a real estate
investment trust will not constitute "real estate assets" or "Government
securities" within the meaning of Code Section 856(c)(4)(A); and (iv) Notes held
by a regulated investment company will not constitute "Government securities"
within the meaning of Code Section 851(b)(4)(A)(i).
ORIGINAL ISSUE DISCOUNT AND PREMIUM
Tax counsel will indicate in the related Prospectus Supplement whether the
Notes may be issued with "original issue discount" within the meaning of Section
1273(a) of the Code. Generally, such original issue discount, if any, will equal
the difference between the "stated redemption price at maturity" of the Notes
and their "issue price." Holders of any Notes issued with original issue
discount generally must include
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such original issue discount in gross income for federal income tax purposes as
it accrues, in accordance with a constant interest method based on the
compounding of interest, in advance of receipt of the cash attributable to such
income.
Based on Code Sections 1271 through 1273 and Section 1275, Treasury
Regulations under such Code Sections issued on January 27, 1994, as amended on
June 14, 1996 (the "OID Regulations") and certain provisions of the Tax Reform
Act of 1986 (the "1986 Act"), the Depositor anticipates that the amount of
original issue discount required to be included in a Noteholder's income in any
taxable year will be computed as described below. The OID Regulations require
that the amount and rate of accrual of original issue discount be calculated
based on a reasonable assumed prepayment rate for the collateral supporting a
debt instrument ("Prepayment Assumption") and prescribes a method for adjusting
the amount and rate of accrual of such discount where the actual prepayment rate
differs from the Prepayment Assumption. The Prepayment Assumption will include a
reasonable assumed prepayment rate for the Accounts. The OID Regulations provide
that the Prepayment Assumption be the prepayment assumption that is used in
determining the initial offering price of such Notes, and which is not an
unreasonable assumption. The Prepayment Assumption determined by the Depositor
for the purposes of determining the amount and rate of accrual of original issue
discount will be set forth in the Prospectus Supplement with respect to a Series
of Notes. No representation is made that the Accounts will prepay at the
Prepayment Assumption or at any other rate. The Prepayment Assumption used to
price the Notes will be based in part on an assumed level of cash recoveries on
repossessed properties and also on an assumed default rate on the Accounts. It
is unclear under the 1986 Act and the OID Regulations whether an assumption as
to cash recoveries on repossessed properties or an assumption as to a default
rate on the Accounts will be acceptable. Moreover, it is not clear whether an
assumption as to the expected timing of payments on an equity interest in a
Trust is permissible. The Depositor intends, however, to use such assumptions
for purposes of computing original issue discount on the Notes unless
regulations are issued that prohibit the use of such assumptions. There can be
no assurance, however, that the Internal Revenue Service (the "IRS") will agree
with the positions taken by the Depositor and any challenge by the IRS could
result in holders being required to include income in different amounts or at
different times from those described below.
In general, each Note will be treated as a single installment obligation
issued with an amount of original issue discount equal to the excess of its
"stated redemption price at maturity" over its "issue price." The "issue price"
of the Notes is the price at which a substantial amount of the Notes are first
sold to the public (excluding bond houses, brokers, underwriters or wholesalers)
regardless of the price paid by subsequent buyers. Generally, the stated
redemption price at maturity of a Note is its stated principal amount. Under a
DE MINIMIS rule contained in the Code, original issue discount will be
considered to be zero, however, if it equals less than 0.25% of the stated
redemption price at maturity of a Note multiplied by its weighted average
maturity. Weighted average maturity is computed, for this purpose, as the sum of
the amounts determined by multiplying (i) the number of full years from the
issue date (rounding down for partial years) until each payment included in the
stated redemption price at maturity is scheduled to be made under the Prepayment
Assumption, by (ii) a fraction, the numerator of which is the amount of each
such payment and the denominator of which is the Note's stated redemption price
at maturity.
Generally, a Noteholder must include in gross income in each taxable year,
the "daily portion," as determined below, of the original issue discount that
accrues on a Note for each day during the taxable year that the Noteholder holds
such Note, including the purchase date but excluding the disposition date. In
the case of an original holder of a Note, a calculation will be made of the
portion of the original issue discount that accrues during each successive
period (an "accrual period") that either begins or ends on the day in the
calendar year corresponding to a Payment Date and begins on the day after the
end of the immediately preceding accrual period (or on the issue date in the
case of the first accrual period). This will be done, in the case of each full
accrual period, by (a) adding (i) the present value at the end of the accrual
period (determined by using as a discount factor the original yield to maturity
of the Note as calculated
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under the Prepayment Assumption), and (ii) any principal payments received
during such accrual period and (b) subtracting from the total the "adjusted
issue price" of the Note at the beginning of such accrual period. The "adjusted
issue price" of a Note at the beginning of the first accrual period is its issue
price; the "adjusted issue price" of a Note at the beginning of a subsequent
accrual period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of original issue discount allocable to
that accrual period and reduced by the amount of any principal payment made at
the end of or during that accrual period. The original issue discount accrued
during an accrual period will then be divided by the number of days in the
period to determine the daily portion of original issue discount for each day in
the accrual period. With respect to an initial accrual period shorter than a
full accrual period, the daily portions of original issue discount must be
determined according to an appropriate allocation under a reasonable method set
forth under the OID Regulations, provided that such method is consistent with
the method used to determine yield on the Notes. The calculation of original
issue discount as described above will cause the accrual of original issue
discount to either increase or decrease (but never below zero) in a given
accrual period to reflect the fact that prepayments are occurring faster or
slower than under the Prepayment Assumption.
A subsequent purchaser of a Note issued with original issue discount who
purchases the Note at a cost less than the remaining stated redemption price at
maturity but more than its adjusted issue price (i.e., at an "acquisition
premium"), also will be required to include in gross income the sum of the daily
portions of original issue discount on the Note. In computing the daily portions
of original issue discount for such a purchaser, however, the daily portion is
reduced by the amount that would be the daily portion for such day (computed in
accordance with the rules set forth above) multiplied by a fraction, the
numerator of which is the amount, if any, by which the price paid by such holder
for that Note exceeds the following amount: (a) the sum of the issue price plus
the aggregate amount of original issue discount that would have been includable
in the gross income of an original Noteholder (who purchased the Note at its
issue price), (b) less any prior payments included in the stated redemption
price at maturity, and the denominator of which is the sum of the daily portions
for that Note for all days beginning on the date after the purchase date and
ending on the maturity date computed under the Prepayment Assumption.
An initial purchaser of a Note who purchases the Note at a cost greater than
its principal amount will be considered to have purchased the Note at a premium.
Moreover, a purchaser who purchases a Note in the secondary market for greater
than its adjusted issue price (in the case of a Note issued with original issue
discount) or its remaining principal amount (in the case of a Note issued
without original issue discount) will be considered to have purchased the Note
at a premium. A Noteholder that holds a Note purchased at a premium as a capital
asset within the meaning of Section 1221 of the Code may elect to amortize such
premium under a constant yield method. The Code provides that amortizable bond
premium will be treated as an offset to interest income rather than as a
deductible interest expense. The election to amortize premium will apply to all
debt instruments acquired by the Noteholder at a premium held in that taxable
year or thereafter, unless revoked with the permission of the IRS. Investors
should consult their own tax advisors regarding the consequences of making such
an election.
The OID Regulations permit a Noteholder to elect to accrue all interest,
discount (including DE MINIMIS market or original issue discount) and premium on
the Notes in income as interest, based on a constant yield method. If such an
election were to be made with respect to a Note with market discount, the
Noteholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Noteholder acquires during the year of the election or
thereafter. Similarly, a Noteholder that makes this election for a Note that is
acquired at a premium will be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Noteholder owns or acquires. The election to accrue interest, discount
and premium on a constant yield method with respect to a Note is irrevocable
without the consent of the IRS.
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MARKET DISCOUNT
A purchaser of a Note also may be subject to the market discount provisions
of Code Sections 1276 through 1278. Under these provisions and the rules set
forth in the OID Regulations with respect to original issue discount, "market
discount" equals the excess, if any, of (i) the Note's stated principal amount
or, in the case of a Note with original issue discount, the adjusted issue price
(determined for this purpose as if the purchaser had purchased such Note from an
original holder) over (ii) the price paid by the purchaser for such Note. Under
a DE MINIMIS rule contained in the Code, market discount with respect to a Note
will be considered to be zero if the amount allocable to the Note is less than
0.25% of the stated redemption price at maturity of such Note multiplied by the
number of complete years to maturity of the Note remaining after the date of
purchase. If market discount on a Note is considered to be zero under this rule,
the actual amount of market discount must be allocated to the remaining
principal payments on the Note and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Investors should
consult their own advisors regarding the application of the market discount
rules and advisability of making any of the elections allowed under Code
Sections 1276 through 1278.
The 1986 Act provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount Note
acquired by the taxpayer after the date of enactment of the Act shall be treated
as ordinary income to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of accrued market discount for
purposes of determining the tax treatment of subsequent principal payments or
dispositions of the Note is to be reduced by the amount so treated as ordinary
income. This rule will not apply, however, if the Noteholder elects to include
market discount in income currently as it accrues on all market discount
obligations acquired by such Noteholder in the taxable year and thereafter.
The 1986 Act also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, certain rules
described in the legislative history accompanying the 1986 Act will apply. Under
those rules, the holder of a market discount Note may elect to accrue market
discount either on the basis of a constant interest rate (taking into account
the Prepayment Assumption) or according to one of the following methods. For
Notes issued with original issue discount, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount, multiplied by (ii) a fraction, the numerator of which is the
original issue discount accruing during the period and the denominator of which
is the total remaining original issue discount at the beginning of the period.
For Notes issued without original issue discount, the amount of market discount
that accrues during a period is equal to the product of (i) the total remaining
market discount, multiplied by (ii) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the period. For purposes of calculating market discount under any
of the methods in the case of instruments (such as the Notes) which provide for
payments which may be accelerated by reason of prepayments of other obligations
securing such instruments, the Prepayment Assumption will apply. Regulations are
to provide similar rules for computing the accrual of amortizable note premium
on instruments payable in more than one principal installment.
A holder of a Note who acquired such Note at a market discount also may be
required to defer, until the maturity date of such Note or its earlier
disposition in a taxable transaction, the deduction of a portion of the amount
of interest that the holder paid or accrued during the taxable year on
indebtedness incurred or maintained to purchase or carry the Note in excess of
the aggregate amount of interest (including original issue discount) includable
in such holder's gross income for the taxable year with respect to such Note.
The amount of such net interest expense deferred in a taxable year may not
exceed the amount of market discount accrued on the Note for the days during the
taxable year on which the holder held the Note and, in general, would be
deductible when such market discount is includable in income. The amount
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of any remaining deferred deduction is to be taken into account in the taxable
year in which the Note matures or is disposed of in a taxable transaction. In
the case of a disposition in which gain or loss is not recognized, in whole or
in part, any remaining deferred deduction will be allowed to the extent gain is
recognized on the disposition. The deferral rule does not apply if the
Noteholder elects to include such market discount in income currently as it
accrues on all market discount obligations acquired by such Noteholder in that
taxable year and thereafter.
SALE OR REDEMPTION OF NOTES
If a Note is sold or redeemed, the seller generally will recognize gain or
loss equal to the difference between the amount realized on the sale or
redemption and the seller's adjusted basis in the Note. Such adjusted basis
generally will equal the cost of the Note to the seller, increased by any
original issue discount and market discount included in the seller's gross
income with respect to the Note, and reduced by payments included in the stated
redemption price at maturity previously received by the seller and by any
amortized premium. Similarly, a holder who receives a payment which is part of
the stated redemption price at maturity of a Note will recognize gain equal to
the excess, if any, of the amount of the payment over such holder's adjusted
basis in the Note. A holder of a Note who receives a final payment which is less
than such holder's adjusted basis in the Note will generally recognize a loss.
In general, such gain or loss will be a capital gain or loss, provided that the
Note is held as a "capital asset" (generally, property held for investment)
within the meaning of Code Section 1221.
FOREIGN INVESTORS
Payments of interest (including any payment with respect to accrued original
issue discount) on the Notes to a Noteholder who is a non-United States person
("foreign person") not engaged in a trade or business within the United States,
will not be subject to Federal income or withholding tax if (i) such Noteholder
does not actually or constructively own 10 percent or more of the combined
voting power of all classes of equity in Mid-State or any parent corporation
thereof, (ii) such Noteholder is not a controlled foreign corporation (within
the meaning of Code Section 957) related to Mid-State or any parent corporation
thereof and (iii) such Noteholder complies with certain identification
requirements (including delivery of a statement, signed by the Noteholder under
penalty of perjury, certifying that such Noteholder is a foreign person and
providing the name and address of such Noteholder). As used herein, the term
"foreign person" means a person that is, for United States Federal income tax
purposes, someone other than (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 of any political subdivision thereof, (iii) an estate
whose income is subject to United States federal income tax 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 the trust and one or more United
States persons have the authority to control all substantial decisions of the
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 United States persons).
Recently issued Treasury regulations (the "New Regulations") provide
alternative methods of satisfying the certification requirement described above.
The New Regulations are effective January 1, 2000, although valid withholding
certificates that are held on December 31, 1999, remain valid until the earlier
of December 31, 2000 or the date of expiration of the certificate under the
rules as currently in effect. The New Regulations require, in the case of Notes
held by a foreign partnership, that (x) the certification described above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. Noteholders who are foreign persons as described above should
consult their own tax advisors concerning the application of the certification
requirements in the New Regulations.
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If a tax is withheld by the withholding agent, the Noteholder would be
entitled to a refund of such tax if such Noteholder can prove it is a foreign
person and it is not a 10 percent shareholder of Mid-State or any parent
corporation thereof, or a controlled foreign corporation related to Mid-State or
any parent corporation thereof. A Noteholder may be required to file a U.S.
Federal income tax return to obtain a refund. Foreign investors should consult
their tax advisors regarding the potential imposition of the 30 percent
withholding tax.
BACKUP WITHHOLDING
Federal income tax laws provide for "backup withholding" of tax at a rate of
31% in certain circumstances on "reportable payments," which include payments of
principal, interest and original issue discount (determined in any case as if
the Noteholder were the original holder of the Note), but not market discount,
on a Note and of the proceeds of the disposition of a Note. Persons subject to
the requirement of backup withholding include, in certain circumstances, the
Depositor, the Issuer, the paying agent of the Issuer, a person who collects a
payment of interest or original issue discount as a custodian or nominee on
behalf of the Noteholder and a "broker" (as defined in applicable Treasury
regulations) through which the Noteholder receives the proceeds of the
retirement or other disposition of a Note. Backup withholding applies only if
the Noteholder, among other things, (1) fails to furnish a social security
number or other taxpayer identification number to the person subject to the
requirement of backup withholding, (2) furnishes an incorrect taxpayer
identification number to such person, (3) fails to report properly interest or
dividends or (4) under certain circumstances, fails to provide to such person a
certified statement, signed under penalty of perjury, that the taxpayer
identification number furnished is the correct number and that such Noteholder
is not subject to backup withholding.
Backup withholding will not apply, however, with respect to certain payments
made to Noteholders, including payments to certain exempt recipients (such as
tax-exempt organizations) and to certain foreign persons (as discussed under
"Foreign Investors" above). Noteholders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
The amount of any "reportable payments" made by the Issuer during each
calendar year and the amount of tax withheld, if any, with respect to payments
on the Notes will be reported to the Noteholders and to the IRS.
TAXABLE MORTGAGE POOLS
Under Code section 7701(i), an entity substantially all the assets of which
consist of mortgage loans and which does not elect REMIC status may be
classified as a taxable mortgage pool only if it is "the obligor under debt
obligations with two or more maturities." On August 4, 1995 the IRS issued
Treasury regulations under Section 7701(i) (the "TMP Regulations"). Because the
Notes will pay principal PRO RATA in the absence of losses on the Accounts and
various Classes of Notes will have the same maturities (within the meaning of
applicable Treasury regulations), the Trust will not be classified as a TMP.
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THE INDENTURE
The following summaries describe the material provisions expected to be in
the Indenture for each Series of Notes not described elsewhere in this
Prospectus. The summaries do not purport to be complete and are qualified in
their entirety by reference to the provisions of the Indenture of the related
Series. Where particular provisions or terms used in the Indenture for a Series
of Notes are referred to, the actual provisions (including definitions of terms)
are incorporated by reference as part of such summaries. The Notes of each
Series will be secured under the related Indenture.
NEGATIVE COVENANTS
With respect to each Series of Notes, the related Issuer will not, among
other things, engage in any business or activity other than in connection with,
or relating to, the issuance of Notes of such Series and the purchase of the
related Accounts or the preservation of the related Trust and the release of
assets therefrom pursuant to the related Indenture and the related Trust
Agreement. See "THE ISSUER" herein.
REVIEW OF ACCOUNT DOCUMENTS
Unless otherwise provided in the related Prospectus Supplement, within 90
days after the Closing Date for a Series of Notes, the related Indenture Trustee
will review the Mortgage Collateral documents with respect to each Account for
such Series of Notes that is part of such Mortgage Collateral to determine that
all documents required to be delivered have been delivered, that they have been
executed as required and that they relate to the Accounts listed on the Schedule
of Accounts attached to the Indenture for such Series of Notes. Upon discovery
that any such Mortgage Collateral document is missing or defective in a
materially adverse manner, the related Indenture Trustee will notify the
Servicer and the Issuer of such Series of Notes.
Unless otherwise provided in the related Prospectus Supplement, within 90
days of the earlier of discovery by or notice to the Issuer of a Series of Notes
that any related Mortgage Collateral document is missing or defective and such
omission or defect materially and adversely affects the interest of the
Noteholders of such Series in a related Account, such Issuer will be required to
use its best efforts to cure such omission or defect. If such omission or defect
is not or cannot be cured within such 90-day period or, with the prior written
consent of the related Indenture Trustee, such longer period as specified in
such consent, such Issuer is required to either (i) deposit in the related
Collection Account an amount equal to 100% of the current Economic Balance of
the affected Account for such Series, at which time such affected Account will
be released from the lien of the related Indenture or (ii) remove such Account
from the lien of such Indenture and substitute one or more qualified substitute
accounts.
In order to be a "qualified substitute account," an account must comply with
the representations and warranties described under "THE
INDENTURE--Representations and Warranties" below, and must have an Economic
Balance not less than the Economic Balance of, and an Effective Financing Rate
not less than the Effective Financing Rate of, the Account for which it is being
substituted, all as more specifically set forth in the related Indenture.
With respect to each Series of Notes, the obligation of the related Issuer
to cure any such omission or defect or to repurchase or substitute for the
affected Account will be the sole remedy available to such Indenture Trustee or
Noteholders for such Series in respect of the related omission or defect.
REPRESENTATIONS AND WARRANTIES
With respect to each Series of Notes in the related Indenture the Issuer of
such Series of Notes will make representations and warranties with respect to
each related Account that constitutes part of the Mortgage Collateral for such
Series to the effect that as of the related Closing Date:
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(a) the information set forth with respect to such Account in the
Schedule of Accounts attached to the Indenture is true and correct as of the
date as of which such information is given;
(b) the related building or installment sale contract, as the case may
be, has been duly executed by the parties thereto and the duties to be
performed thereunder prior to the date the first payment in connection with
such contract is due have been performed;
(c) the Mortgage Collateral documents have been duly executed by the
Account obligor and, to the extent required under local law for recordation
or enforcement, properly acknowledged;
(d) the mortgages have been properly recorded as required by law and
such documents constitute a valid first priority lien upon and secure title
to the property described therein, which in each case, is a single family
detached dwelling, and such Mortgage Collateral documents are enforceable in
accordance with their respective terms except as enforceability thereof may
be limited by bankruptcy, insolvency, moratorium and other laws affecting
creditors' rights generally and by general principles of equity (whether
applied in a proceeding in law or at equity);
(e) the Issuer is the sole owner of each Account that is part of the
Mortgage Collateral and has good title to such Account and full right and
authority to grant a lien or security interest on such Account to the
Indenture Trustee and, upon delivery of the related Mortgage Collateral
documents to the Indenture Trustee, the Indenture Trustee will have a valid
and perfected lien or security interest in such Account;
(f) all costs, fees, intangible, documentary, recording taxes and
expenses incurred in making, closing and recording such Account and the
related mortgage and in connection with the issuance of the Notes, have been
paid;
(g) no part of the property purporting to secure any such Account has
been, or shall have been, released from the lien or security title of the
related mortgage, deed of trust, mechanic's lien contract or other security
agreement except for property securing Accounts which have prepaid in full
between the Cut-Off Date and the date that is five business days prior to
the Closing Date which amounts shall be deposited in the Collection Account
on or before the Closing Date;
(h) except to the extent permitted by the Servicing Agreement, no term
or provision of any Account that is part of the Mortgage Collateral has been
or will be altered, changed or modified in any way by the Servicer or the
Issuer without the consent of the Indenture Trustee;
(i) Mid-State and the Issuer acquired title to the Accounts in good
faith, for value and without notice of any adverse claim;
(j) the promissory note or installment contract with respect to each
Account evidences a homeowner's obligation to pay the Gross Receivable
Amount of the related Account with fully amortizing level monthly payments
and each bears a fixed finance charge rate. Each promissory note or
installment contract has an original term to maturity not in excess of 30
years;
(k) except as disclosed in the Indenture, there is no right of
rescission, setoff, defense or counterclaim to the promissory note,
installment contract, mortgage, mechanic's lien contract or other security
agreement with respect to any Account, including both the obligation of the
Account obligor to pay the unpaid balance of the cash price or finance
charge on such promissory note or installment contract and the defense of
usury; furthermore, neither the operation of any of the terms of the
promissory note, installment contract, mortgage, mechanic's lien contract or
other security agreement with respect to any Account nor the exercise of any
right thereunder will render such promissory note, installment contract,
mortgage, mechanic's lien contract or other security agreement
unenforceable, in whole or in part, or subject such promissory note or
mortgage to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto;
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(l) as of the Closing Date, to the best of the Issuer's knowledge there
are no mechanics' liens or claims for work, labor or material (and to the
best of the Issuer's knowledge, no rights or claims are outstanding that
under law could give rise to such lien) affecting any mortgaged property
which are or may be a lien prior to, or equal with, the lien of the
mortgage, mechanic's lien contract or other security agreement thereon;
(m) except as disclosed in the Indenture, the promissory note or
installment contract with respect to each Account at origination complied in
all material respects with applicable local, state and federal laws,
including, without limitation, usury, equal credit opportunity,
truth-in-lending and disclosure laws, and consummation of the transactions
contemplated hereby will not involve the violation of any such laws;
(n) as of the Closing Date, with respect to each deed of trust with
respect to any Account, a trustee, duly qualified under applicable law to
serve as such, is properly designated, serving and named in such deed of
trust;
(o) there has been no fraud, dishonesty, misrepresentation or negligence
on the part of the originator or Account obligor in connection with the
origination of the promissory note or installment contract with respect to
any Account or in connection with the sale of the related Account; and
(p) to the best knowledge of the Issuer, except for Mortgaged Properties
for which insurance proceeds are available, each Mortgaged Property is free
of damage which materially and adversely affects the value thereof.
Unless otherwise provided in the related Prospectus Supplement, within 90
days of the earlier of discovery by or notice to the related Issuer of any
breach of a representation or warranty which materially and adversely affects
the interest of the Noteholders of such Series in a related Account, the Issuer
of such Series of Notes is required to use its best efforts to cure such breach
in all material respects. If such breach is not or cannot be cured within such
90-day period or, with the prior written consent of the related Indenture
Trustee, such longer period as specified in such consent, the Issuer of such
Series of Notes is required to either (i) deposit in the related Collection
Account an amount equal to 100% of the current Economic Balance of the affected
Account, at which time such affected Account will be released from the lien of
the related Indenture or (ii) remove such Account from the lien of such
Indenture and substitute one or more qualified substitute accounts.
In order to be a "qualified substitute account," an account must comply with
the representations and warranties set forth above and must have an Economic
Balance not less than the Economic Balance of, and an Effective Financing Rate
not less than the Effective Financing Rate of, the Account for which it is being
substituted all as more specifically set forth in the related Indenture.
The obligation of the Issuer of a Series of Notes to cure any such breach or
to repurchase or substitute for the affected Account will be the sole remedy
available to the related Indenture Trustee or Noteholders of the particular
Series of Notes in respect of the related breach.
MODIFICATION OF INDENTURE
Unless otherwise provided in the related Prospectus Supplement, with the
consent of the holders of Notes of a Series evidencing not less than 50% of the
Voting Rights of each Class of Notes of such Series adversely affected, the
related Indenture Trustee and the Issuer of such Series of Notes may execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate provisions of, the related Indenture or modify (except as provided
below) in any manner the rights of the holders of the Notes of such Series.
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Without the consent of the holders of each outstanding Note of a Series
affected thereby, no supplemental indenture shall (a) change the related
maturity date, or the Payment Date for any installment of interest on, any Note
of such Series or reduce the principal amount thereof, the interest rate thereon
or the redemption price with respect thereto, or change the earliest date on
which any Note of such Series may be redeemed or any place of payment where, or
the coin or currency in which, any Note of such Series or any interest thereon
is payable or impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment, (b) reduce the percentage
of the Voting Rights, the consent of the holders of which is required for any
supplemental indenture, or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the related Indenture, or of
certain defaults thereunder and their consequences as provided for in the
related Indenture, (c) modify the provisions of the related Indenture relating
to the sale of property subject to the lien under the related Indenture or
specifying the circumstances under which such a supplemental indenture may not
change the provisions of the related Indenture without the consent of the
holders of each outstanding Note of such Series affected thereby, as applicable,
(d) modify or alter the provisions of the related Indenture regarding the voting
of Notes of such Series held by the related Issuer or an affiliate of such
Issuer, (e) permit the creation of any lien ranking prior to or on a parity with
the lien of the related Indenture with respect to any part of the property
subject to the lien under the related Indenture or terminate the lien of the
related Indenture on any property at any time subject thereto or deprive the
holder of any Note of such Series of the security afforded by the lien of the
related Indenture or (f) modify any of the provisions of the related Indenture
in such manner as to affect the calculation of the principal and interest
payable on any Note of such Series.
VOTING
The voting rights assigned to each Class of Notes of a Series (the "Voting
Rights") will be a fraction, expressed as a percentage, the numerator of which
is equal to the aggregate outstanding principal amount of such Class of Notes of
a Series and the denominator of which is equal to the aggregate outstanding
principal amount of all Classes of Notes of such Series.
EVENTS OF DEFAULT
With respect to each Series of Notes, an event of default (an "Event of
Default") will be defined in the related Indenture as one or more of the
following events: (i) a default in the payment of any amount due under the Notes
of such Series by the related maturity date; (ii) a failure to apply funds in
the Collection Account of such Series in accordance with the related Indenture
and such failure continues for a period of two days; (iii) a default in the
payment when due of any interest on any Class of Notes of a particular Series
and the expiration of a 30-day grace period; (iv) the failure to pay the
outstanding principal balance of each Class of Notes of such Series on the
related maturity date; (v) a default in the observance of certain negative
covenants in the related Indenture; (vi) a default in the observance of any
other covenant in the related Indenture and the continuation of any such default
for a period of thirty days after notice to the Issuer of such Series of Notes
by the related Indenture Trustee or to such Issuer and such Indenture Trustee by
the holders of Notes of such Series entitled to at least 40% of the Voting
Rights, such written notice specifying the Event of Default and stating that
such notice is a "Notice of Default;" or (vii) certain events of bankruptcy or
insolvency with respect to the Issuer of such Series of Notes. Notwithstanding
the foregoing, with respect to a Series of Notes that uses subordination as a
form of Credit Enhancement, prior to the applicable maturity date, any of the
events described in the preceding sentence will not be an Event of Default in
respect of a subordinate Class of Notes until each Class of Notes senior in
priority of payments has been paid in full.
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RIGHTS UPON EVENT OF DEFAULT
With respect to each Series of Notes, the related Indenture provides that
the Indenture Trustee for such Series of Notes may exercise remedies on behalf
of the Noteholders of such Series only if an Event of Default has occurred and
is continuing. The Indenture Trustee for such Series of Notes shall proceed, in
its own name, subject to the related Indenture, to protect and enforce its
rights and the rights of the Noteholders of such Series by such remedies
provided for in the related Indenture as the related Indenture Trustee shall
deem most effectual to protect and enforce such rights.
LIMITATIONS ON SUITS
No holder of any Note of a Series will have the right to institute any
proceedings, judicial or otherwise, with respect to the related Indenture, or
for the appointment of a receiver or trustee, or for any other remedy under the
related Indenture, unless (a) such holder previously has given to the related
Indenture Trustee written notice of a continuing Event of Default, (b) the
holders of Notes of such Series entitled to not less than 40% of the Voting
Rights of such Series have made written request of the related Indenture Trustee
to institute such proceedings in its own name as Indenture Trustee and have
offered such Indenture Trustee reasonable indemnity against the costs, expenses
and liabilities to be incurred in compliance with such request, (c) such
Indenture Trustee has for 60 days after its receipt of such notice neglected or
refused to institute any such proceeding and (d) no direction inconsistent with
such written request has been given to such Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of the then outstanding
Notes of such Series.
The Indenture of a Series of Notes will provide that no holder of a Class of
Notes of such Series will have the right, either directly or through an
affiliate, to petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the related Issuer under any Federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian sequester
or other similar official of such Issuer or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of such
Issuer, other than as provided in the related Prospectus Supplement.
REPORTS TO NOTEHOLDERS
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, on each Payment Date the related Indenture Trustee is
required to deliver to the Noteholders of such Series a written report setting
forth the amount of the quarterly payment which represents principal and the
amount which represents interest (in each case on a per individual Note basis),
and the remaining outstanding principal amount of an individual Note after
giving effect to the payment of principal made on such Payment Date.
ISSUER'S ANNUAL COMPLIANCE STATEMENT
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, the related Issuer will be required to file annually
with the Indenture Trustee for such Series a written statement as to the
fulfillment of its obligations under the related Indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, the related Indenture will be discharged in respect of
the Accounts for such Series upon the delivery to the related Indenture Trustee
for cancellation of all the Notes of such Series or, with certain limitations,
upon deposit with the related Indenture Trustee of funds sufficient for the
payment in full of all the Notes of such Series.
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THE INDENTURE TRUSTEE
The Indenture Trustee will be the entity or entities named in the related
Prospectus Supplement.
THE SERVICING AGREEMENT
GENERAL
With respect to each Series of Notes, the related Accounts will be serviced
by the Servicer under the Servicing Agreement for such Series of Notes between
the Servicer and the related Issuer, which will be assigned to the related
Indenture Trustee as additional security for the Notes of such Series. The
following summaries describe the material provisions of each Servicing Agreement
for each Series of Notes. The summaries do not purport to be complete and are
subject to, and qualified in their entirety by reference to, the provisions of
the related Servicing Agreement and the Indenture for such Series of Notes, and
where particular provisions or terms used in the related Servicing Agreement or
the related Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summaries.
The offices of the Servicer are located at 1500 North Dale Mabry Highway, Tampa,
Florida 33607. The Servicer, as Depositor, will be the settlor and initially the
sole beneficiary of the Issuer. The Servicer will perform the services described
below and set forth in each Servicing Agreement.
COLLECTION OF PAYMENTS
With respect to each Series of Notes, the Servicer will service the Accounts
and will provide certain accounting and reporting services with respect to the
Accounts. The Servicer will be obligated to service the Accounts generally in
accordance with certain specific standards set forth in the related Servicing
Agreement and otherwise in accordance with reasonable and prudent servicing
standards that are employed by a prudent servicer with respect to the servicing
of accounts held in its own portfolio and in accordance with the Servicer's past
practices. Although the Servicer will be responsible for servicing the Accounts,
the Servicer will enter into a sub-servicing agreement with Jim Walter Homes
pursuant to which Jim Walter Homes will perform certain day-to-day servicing
functions, such as following up on delinquent accounts and initiating
foreclosure proceedings, in accordance with the standards and provisions of the
related Servicing Agreement.
Generally, all payments received on the Mortgage Collateral for a Series of
Notes will be deposited on a daily basis in a separate holding account (each, a
"Holding Account") established with and in the name of a custodian as set forth
in the related Prospectus Supplement prior to the related Closing Date. The
Servicer will transfer the payments attributable to the Mortgage Collateral for
a Series of Notes, net of the applicable servicing fee and other permitted
deductions, into the related Collection Account.
With respect to each Series of Notes, the Servicer will perform certain
monitoring and reporting functions for the related Indenture Trustee, including
the preparation and delivery of monthly reports to the related Indenture Trustee
covering the current payments and prepayments in full received with respect to
the Accounts of such Series and reports covering defaulted Accounts.
SERVICING FEE
The servicing fee will be calculated and paid as set forth in the related
Prospectus Supplement. In addition to the servicing fee, the Servicer may
receive other fees as set forth in the related Prospectus Supplement.
INSURANCE; TAXES
Unless otherwise provided in the related Prospectus Supplement, the Servicer
will not be required to maintain escrow accounts for collection of taxes or
premiums on Insurance Policies on the Accounts. The terms of each Account
require the obligor to maintain a standard Insurance Policy covering the
property
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underlying such Account. The standard Insurance Policy is generally in the form
of the fire insurance policy with extended coverage that is customary in the
state in which the Mortgaged Property is located. Such standard forms vary from
state to state but generally cover damage by fire, lightning and windstorm,
subject to certain conditions and exclusions. Other causes of damage (including
without limitation floods and earth movements) are not covered. With respect to
each Series of Notes, the Servicing Agreement requires the Servicer to cause
such a policy to be maintained in full force and effect or to maintain a blanket
insurance policy insuring against hazard and certain other losses with respect
to each such Account. The Servicer or Jim Walter Homes, as sub-servicer, will be
required to monitor the customer's payment of insurance and taxes. If such
payments are not made, the Servicer will be required to make such payments and
will not be reimbursed for such payments except to the extent such amounts are
collected from the obligor, from a sub-servicer or to the extent recoverable as
liquidation expenses.
If the Servicer obtains an Insurance Policy on behalf of an obligor, it
normally does so through an insurance agency that is an affiliate of the
Servicer, and the reinsurer, if any, of such Insurance Policy is an affiliate of
the Servicer.
REALIZATION UPON DEFAULTED ACCOUNTS
The Servicer will foreclose upon or otherwise comparably convert the
ownership of the property securing any Account that comes into default and as to
which no satisfactory arrangements can be made for collection of delinquent
amounts. In connection with such foreclosure or other conversion, the Servicer
will follow such practices and procedures specified in the Servicing Agreement
for such Series of Notes as are consistent with its customary servicing
procedures. In this regard, the Servicer may sell the property at a foreclosure
or a trustee's sale. Generally, however, it is expected that the property will
be resold primarily in exchange for a new account and such account will be an
Account securing the Notes of such Series.
If any property securing a defaulted Account is damaged and the proceeds, if
any, from the related Insurance Policy maintained by the customer or from any
temporary insurance policy obtained by the Servicer are insufficient to restore
the damaged property completely, the Servicer will not be required to expend its
own funds to restore the damaged property unless it determines (i) that such
restoration is likely to increase the liquidation proceeds of the related
Account and (ii) that it will recover such expenses through liquidation or
insurance proceeds.
RESIGNATION
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, the Servicer may not resign from its obligations and
duties under the related Servicing Agreement unless it determines that its
duties thereunder are no longer permissible by reason of a change in applicable
law. No such resignation will be effective until a successor servicer has
assumed the Servicer's obligations and duties under the related Servicing
Agreement. Such a successor servicer must be satisfactory to the Issuer of such
Series of Notes and the related Indenture Trustee in the exercise of their
reasonable discretion. The Servicer may, however, enter into sub-servicing
agreements with any person similar to the one to be entered into with Jim Walter
Homes to perform any of its obligations under the Servicing Agreement for a
Series of Notes, but the Servicer will remain fully liable for performance of
all obligations under the related Servicing Agreement.
ANNUAL ACCOUNTANTS' REPORT
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, the Servicer will be required to cause a firm of
independent certified public accountants to furnish to the Issuer of each Series
of Notes and the related Indenture Trustees, at such times as set forth in the
related Prospectus Supplement, a statement to the effect that such firm (a) has
examined the Servicer's financial statements for the preceding fiscal year in
accordance with generally accepted auditing standards and has
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issued an opinion thereon, and (b) has examined certain documents and records
relating to the servicing of the Accounts during the preceding fiscal year in
accordance with the Uniform Single Audit Program for Mortgage Bankers, and has
found no material exceptions relating to the Accounts for such Series or has set
forth such exceptions.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, Events of Default under each Servicing Agreement will
include: (a) any failure to deposit into the Holding Account of a Series of
Notes any required payment within two Business Days after it is required to be
deposited; (b) any failure by the Servicer duly to observe or perform any other
of its covenants or agreements in the related Servicing Agreement which
continues unremedied for 30 days after the giving of written notice of such
failure by the related Indenture Trustee or the holders of Notes of such Series
representing a majority in principal amount of the then outstanding Notes of
such Series; (c) certain events of bankruptcy, insolvency, receivership or
reorganization of the Servicer, any sub-servicer or any affiliate of either; (d)
any representation, warranty or statement of the Servicer made in the related
Servicing Agreement or any other certificate delivered in connection with the
issuance of the Notes of such Series being materially incorrect as of the time
such representation, warranty or statement was made, which defect has not been
cured within 30 days after the Servicer received notice of the defect; and (e)
any failure of the Servicer to deliver to the related Indenture Trustee a weekly
report covering transfers from the related Holding Account to the related
Collection Account in the absence of force majeure.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under the Servicing Agreement remains
unremedied, the Issuer or the Indenture Trustee of such Series of Notes (in each
case subject to the provisions of the related Indenture) or, with the consent of
the related Indenture Trustee, holders of Notes of such Series entitled to more
than 50% of the Voting Rights of each Class of Notes of such Series may
terminate all of the rights and obligations of the Servicer under the related
Servicing Agreement. Upon such termination, the Issuer of such Series of Notes
will be obligated to obtain a substitute servicer satisfactory to the related
Indenture Trustee. If the Issuer of such Series of Notes fails to appoint a
servicer satisfactory to the related Indenture Trustee, such Indenture Trustee
may appoint or petition, in a court of competent jurisdiction, for the
appointment of a servicer to act as successor to the Servicer under the related
Servicing Agreement. Pending the appointment of a successor Servicer, the
Indenture Trustee of such Series of Notes will be obligated to act as Servicer.
The Indenture Trustee of a Series of Notes and such successor may agree upon the
servicing compensation to be paid, which in no event may be greater than the
compensation to the Servicer under the related Servicing Agreement. No
termination of the Servicer shall be effective until the new servicer enters
into a servicing agreement with the Issuer of such Series of Notes and the
related Indenture Trustee.
TERMINATION AND REPLACEMENT OF SERVICER
Upon the occurrence of certain events as set forth in the related Prospectus
Supplement, the Indenture Trustee of such Series of Notes will have the option
to, but is not obligated to: (i) terminate the rights of the Servicer under the
related Servicing Agreement and appoint a new Servicer thereunder; (ii) compel
the transfer of the software used by the Servicer to service the related
Accounts; (iii) direct the homeowners under the Accounts of such Series of Notes
to make payments directly to the successor Servicer; and/or (iv) avail itself of
any other remedies under the related Servicing Agreement or the related
Indenture.
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AMENDMENTS
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Series of Notes, the related Servicing Agreement may be amended by the
related Issuer and Mid-State with the consent of the related Indenture Trustee
and the holders of Notes of such Series entitled to more than 50% of the Voting
Rights of each Class of affected Notes of such Series, for the purpose of adding
any provisions to, or modifying or eliminating any provisions of, the related
Servicing Agreement. However, amendments affecting amounts to be deposited in
the related Holding Account or the related Collection Account, altering the
priorities with which any allocation of funds shall be made under the related
Servicing Agreement, creating liens on the collateral securing the payment of
principal and interest on the Notes of such Series or modifying certain
specified provisions of the related Servicing Agreement may be approved only
with the consent of the related Indenture Trustee and all holders of the Notes
of such Series. The Servicing Agreement for a Series of Notes may also be
amended without the consent of the related Indenture Trustee or any Noteholder
of such Series if such amendment does not adversely affect in any material
respect the interests of any Noteholder of such Series.
THE TRUST AGREEMENT
With respect to each Series of Notes, under the terms of the related Trust
Agreement, the Depositor will have conveyed to the related Owner Trustee a
nominal amount of cash to establish the related Trust, which will act as Issuer
for such Series of Notes. In exchange, the Depositor will have received
certificates evidencing beneficial ownership of the Issuer of such Series of
Notes created under such agreement. Subject to certain restrictions, the
Depositor may sell or assign certificates of beneficial ownership of the Issuer
of a Series of Notes to another entity or entities.
With respect to each Series of Notes, the related Trust Agreement will
provide that the related Owner Trustee will be obligated to (i) execute and
deliver the Indenture, the Notes, the Servicing Agreement, the Purchase and Sale
Agreement and all other documents, agreements and instruments related thereto
for such Series of Notes, (ii) acquire the related Collateral and to pledge such
Collateral as security for the Notes of such Series, (iii) issue the Notes of
such Series pursuant to the related Indenture and (iv) take whatever action
shall be required to be taken by the Owner Trustee of such Series of Notes by,
and subject to, the terms of the related Trust Agreement. With respect to each
Series of Notes, the related Trust Agreement will provide that the Issuer of
such Series of Notes may not conduct any activities other than those related to
the issuance and sale of Notes of such Series, the investment of certain funds
in Eligible Investments, as defined in the related Indenture, and such other
limited activities as may be required in connection with reports and payments to
holders of the Notes of such Series and the beneficial interest of the related
Trust. With respect to each Series of Notes, neither the related Owner Trustee
in its individual capacity nor the holders of the beneficial interest of the
related Trust (the "Owners") are liable for payment of principal of or interest
on the Notes of such Series and each holder of Notes of such Series will be
deemed to have released the related Owner Trustee and the Owners of such Series
from any such liability. Upon the payment in full of all outstanding Notes of a
Series and the satisfaction and discharge of the related Indenture, the related
Owner Trustee will succeed to all the rights of the related Indenture Trustee,
and the Owners of such Series of Notes will succeed to all the rights of the
Noteholders of such Series, under the related Servicing Agreement, except as
otherwise provided therein.
With respect to each Series of Notes, the related Trust Agreement will
provide that the related Owner Trustee does not have the power to commence a
voluntary proceeding in bankruptcy with respect to the related Trust until at
least 367 days after payment in full of all the Notes of such Series and the
Owners of such Series of Notes shall not direct the related Owner Trustee to
take any action that would violate such provision.
The related Prospectus Supplement will set forth the fee the related Owner
Trustee is entitled to pursuant to the related The Trust Agreement.
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With respect to each Series of Notes, the related Trust Agreement may, at
the unanimous written request of the Owners of such Series of Notes, be
supplemented and amended by a written instrument signed by the related Owner
Trustee and the Owners of such Series of Notes, with the written consent of the
related Indenture Trustee.
With respect to each Series of Notes, the related Trust Agreement will
provide that the related Trust will terminate upon the earlier to occur of (i)
the final sale or disposition of the trust estate and the distribution of all
proceeds thereof to the Owners of such Series of Notes or (ii) 21 years less one
day following the death of the survivor of certain individuals described in the
Trust Agreement, but in no event later than the date set forth in the related
Prospectus Supplement.
THE PURCHASE AND SALE AGREEMENT
The Depositor will sell and assign to the Issuer of a Series of Notes all
its right, title and interest in the Mortgage Collateral for such Series
pursuant to the related Purchase and Sale Agreement. Simultaneously, the Issuer
of such Series of Notes will collaterally assign such Mortgage Collateral to the
related Indenture Trustee as security for the Notes of such Series pursuant to
the related Indenture.
The Depositor will represent and warrant to the Issuer of each Series of
Notes, with respect to the Accounts sold pursuant to the related Purchase and
Sale Agreement, that as of the date of execution thereof: (i) the related
building or installment sale contract, as the case may be, has been duly
executed by the parties thereto and the duties to be performed thereunder prior
to the date the first payment in connection with such contract is due shall have
been performed by both parties thereto; (ii) the promissory note shall have been
duly executed by the customer with respect thereto and, to the extent required
under local law for recordation or enforcement, the mortgage, mechanic's lien
contract or other security agreement has been duly executed and properly
acknowledged; (iii) the Mortgage Collateral documents, other than the
assignments thereof, shall have been properly recorded as required by law; (iv)
the mortgage, deed of trust, mechanic's contract or other security agreement
shall constitute a valid first-priority lien upon and secure title to the
property described therein, and such mortgage, deed of trust, mechanic's lien
contract or other security agreement and the promissory note or installment sale
contract secured thereby shall be fully enforceable in accordance with their
respective terms; (v) all costs, fees, intangible and documentary recording
taxes and expenses incurred in making, closing, and recording each Account shall
have been paid; and (vi) no part of the mortgaged property securing any
promissory note or installment sale contract shall have been released from the
lien or security title of the mortgage, deed of trust, mechanic's lien contract
or other security agreement securing such promissory note or installment sale
contract except for Account notes which have been prepaid in full since the
related Cut-Off Date, which amounts will be deposited in the related Collection
Account.
Within 90 days of the earlier of discovery by or notice to the Depositor of
any breach of a representation or warranty which materially and adversely
affects the interests of the Issuer of a Series of Notes in a related Account,
the Depositor is required to use its best efforts to cure such breach in all
material respects. If such breach is not or cannot be cured within such 90-day
period or, with the prior written consent of the related Indenture Trustee, such
longer period as specified in such consent, the Depositor is required to either
(i) repurchase such Account from the related Issuer for an amount equal to 100%
of the current Economic Balance of the affected Account or (ii) substitute for
such affected Account one or more qualified substitute accounts.
In order to be a "qualified substitute account," an account must comply with
the representations and warranties set forth above and must have an Economic
Balance not less than the Economic Balance of, and an Effective Financing Rate
not less than the Effective Financing Rate of, the Account for which it is being
substituted, all as more specifically set forth in the related Purchase and Sale
Agreement.
The obligation of the Depositor to cure any such breach or to repurchase or
substitute for the affected Account will be the sole remedy available to the
Issuer of a Series of Notes in respect of the related breach.
55
<PAGE>
PRE-FUNDING ACCOUNT
If so provided in the related Prospectus Supplement, the Servicer will
establish and maintain a Pre-Funding Account, in the name of the related
Indenture Trustee on behalf of the related Noteholders, into which the Depositor
will deposit the Pre-Funded Amount on the related Closing Date. The Pre-Funded
Amount will generally not exceed 25% of the initial aggregate principal amount
of the Notes of the related Series of Notes. The Pre-Funded Amount will be used
by the related Issuer upon satisfaction of the conditions precedent thereto
specified in the related Indenture to purchase Subsequent Accounts from the
Depositor from time to time during the Funding Period. The Funding Period, if
any, for a Trust Fund will begin on the related Closing Date and will end on the
date specified in the related Prospectus Supplement, which in no event will be
later than the date that is three months after the Closing Date. Any amounts
remaining in the Pre-Funding Account at the end of the Funding Period will be
distributed to the related Noteholders in the manner and priority specified in
the related Prospectus Supplement, as a prepayment of principal of the related
Notes.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement,
substantially all of the proceeds from the sale of the Notes of a Series will be
used by the Issuer to purchase the Accounts for such Series and to pay the
expenses of the offering of such Series.
PLAN OF DISTRIBUTION
The Notes are being offered hereby in Series through one or more of the
methods described below. The related Prospectus Supplement for each Series will
describe the method of offering being utilized for that Series and will state
the public offering or purchase price of each Class of Notes of such Series, or
the method by which such price is to be determined, and the net proceeds to the
Seller from such sale.
The Notes will be offered through the following methods from time to time
and offerings may be made concurrently through more than one of these methods or
an offering of a particular Series of Notes may be made through a combination of
two or more of these methods:
1. By negotiated firm commitment underwriting and public re-offering by
underwriters specified in the related Prospectus Supplement;
2. By placements by the Issuer with investors through dealers; and
3. By direct placements by the Issuer with investors.
If underwriters are used in a sale of any Notes, such Notes will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices to be determined at the time of sale or at
the time of commitment therefor. Firm commitment underwriting and public
reoffering by underwriters may be done through underwriting syndicates or
through one or more firms acting alone. The specific managing underwriter or
underwriters, if any, with respect to the offer and sale of a particular Series
of Notes will be set forth on the cover of the Prospectus Supplement applicable
to such Series and the members of the underwriting syndicate, if any, will be
named in such Prospectus Supplement. The related Prospectus Supplement will
describe any discounts and commissions to be allowed or paid by the Issuer to
the underwriters, any other items constituting underwriting compensation and any
discounts and commissions to be allowed or paid to the dealers. The obligations
of the underwriters will be subject to certain conditions precedent. The
underwriters with respect to a sale of any Class of Notes will be obligated to
purchase all such Notes if any are purchased. The Issuer will indemnify the
applicable underwriters against certain civil liabilities, including liabilities
under the Securities Act.
56
<PAGE>
The Prospectus Supplement with respect to any Series of Notes offered other
than through underwriters will contain information regarding the nature of such
offering and any agreements to be entered into between the Issuer and dealers
and/or the Issuer and purchasers of Notes of such Series.
Purchasers of Notes, including dealers, may, depending on the facts and
circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Notes. Noteholders should consult with their legal advisors in this regard prior
to any such reoffer or sale.
If specified in the Prospectus Supplement relating to a Series of Notes, the
Issuer or any affiliate thereof may purchase some or all of one or more Classes
of Notes of such Series from the underwriter or underwriters at a price
specified or described in such Prospectus Supplement. Such purchaser may
thereafter from time to time offer and sell, pursuant to this Prospectus, some
or all of such Notes so purchased directly, through one or more underwriters to
be designated at the time of the offering of such Notes or through dealers
acting as agent and/or principal. Such offering may be restricted in the matter
specified in such Prospectus Supplement. Such transactions may be effected at
market prices prevailing at the time of sale, at negotiated prices or at fixed
prices. The underwriters and dealers participating in such purchaser's offering
of such Notes may receive compensation in the form of underwriting discounts or
commissions from such purchaser and such dealers may receive commissions from
the investors purchasing such Notes for whom they may act as agent (which
discounts or commissions will not exceed those customary in those types of
transactions involved). Any dealer that participates in the distribution of such
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any commissions and discounts received by such dealer and any profit on
the resale of such Notes by such dealer might be deemed to be underwriting
discounts and commissions under the Securities Act.
During and after the offering, the underwriters may purchase and sell Notes
in the open market. These transactions may include overallotment and stabilizing
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Notes, which may be higher than the price that might
otherwise prevail in the open market. These transactions may be effected in the
over-the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.
The Depositor has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments the underwriters may be required to make in respect
thereof. The Issuer has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
LEGAL MATTERS
Certain legal matters relating to the Notes, including the federal income
tax consequences to holders of Notes of an investment in the Notes of a Series
will be passed upon for the Depositor by Cadwalader, Wickersham & Taft, New
York, New York.
NOTE RATINGS
It will be a condition to the issuance of each Series of Notes that each
Class of the Notes be rated by one or more of Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR"), Standard & Poor's ("S&P")
and Fitch IBCA, Inc. ("Fitch" and each of Fitch, Moody's, DCR and S&P, a "Rating
Agency") in one of their four highest rating categories. A security rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time. No person is obligated to maintain any
rating on any Note, and, accordingly, there can be no assurance that the ratings
assigned to any Class of Notes upon initial issuance thereof will not be lowered
or withdrawn by a Rating Agency at any time thereafter. If a rating of any Class
of Notes of a Series is revised or withdrawn, the liquidity of such Class of
Notes may be adversely affected. In general, the ratings address credit risk and
do not represent any assessment of the likelihood or rate of principal
prepayments.
57
<PAGE>
INDEX OF PRINCIPAL DEFINED TERMS
<TABLE>
<S> <C>
1986 Act.............................................................................. 41
Accounts.............................................................................. Cvr
Accrual Notes......................................................................... 6
Available Funds....................................................................... 30
Bankruptcy Court...................................................................... 17
Best.................................................................................. 27
Book-Entry Notes...................................................................... 29
Building Contract..................................................................... 20
Cash Collateral Account............................................................... 32
Cash Collateral Lender................................................................ 32
Cede.................................................................................. 29
CEDEL................................................................................. 36
CEDEL Participants.................................................................... 36
Class................................................................................. Cvr
Closing Date.......................................................................... 5
Code.................................................................................. 10
Collateral............................................................................ 8
Collection Account.................................................................... 7
Commission............................................................................ 2
Consensual Plan....................................................................... 17
Cooperative........................................................................... 36
Credit Enhancement.................................................................... 7
Credit Provider....................................................................... 31
Cut-Off Date.......................................................................... 5
DCR................................................................................... 12
Definitive Notes...................................................................... 37
Depositor............................................................................. Cvr
Depositaries.......................................................................... 37
DOL................................................................................... 39
DTC................................................................................... 29
DTC Participants...................................................................... 35
Economic Balance...................................................................... 20
EDGAR................................................................................. 2
Effective Financing Rate.............................................................. 20
Eligible Investments.................................................................. 27
ERISA................................................................................. 38
Euroclear............................................................................. 36
Euroclear Operator.................................................................... 36
Euroclear Participant................................................................. 36
Event of Default...................................................................... 49
Exchange Act.......................................................................... 2
Fannie Mae............................................................................ 27
Fitch................................................................................. 12
Freddie Mac........................................................................... 27
FTC Rule.............................................................................. 22
</TABLE>
58
<PAGE>
INDEX OF PRINCIPAL DEFINED TERMS (CONTINUED)
<TABLE>
<S> <C>
Funding Period........................................................................ 17
Gross Receivable Amount............................................................... 20
Holding Account....................................................................... 51
Indenture............................................................................. 5
Indenture Trustee..................................................................... 51
Indirect DTC Participants............................................................. 35
Insurance Policies.................................................................... 27
Insurer............................................................................... 31
Interest Accrual Period............................................................... 30
IRS................................................................................... 41
Issuer................................................................................ 5
Issuer Expenses....................................................................... 30
Jim Walter Homes...................................................................... 5
Letter of Credit...................................................................... 31
Letter of Credit Issuer............................................................... 31
Local Counsel......................................................................... 16
Mechanic's Lien Contract.............................................................. 20
Mid-State............................................................................. Cvr
Moody's............................................................................... 12
Mortgage Collateral................................................................... Cvr
New Regulations....................................................................... 44
Non-Equity Notes...................................................................... 39
Note Rate............................................................................. 29
Noteholder............................................................................ 40
Notes................................................................................. Cvr
Notes Insurance Policy................................................................ 31
Notice of Default..................................................................... 49
OID Regulations....................................................................... 41
Owners................................................................................ 35
Parties in Interest................................................................... 39
Payment Date.......................................................................... 6
Percentage Interest................................................................... 29
Plans................................................................................. 38
Pool Insurance Policy................................................................. 32
Pool Insurer.......................................................................... 32
Pre-Funded Amount..................................................................... 17
Pre-Funding Account................................................................... 17
Prepayment Assumption................................................................. 41
Promissory Note....................................................................... 20
PTE................................................................................... 39
Purchase and Sale Agreement........................................................... 10
Rating Agency......................................................................... 12
Record Date........................................................................... 7
</TABLE>
59
<PAGE>
INDEX OF PRINCIPAL DEFINED TERMS (CONTINUED)
<TABLE>
<S> <C>
Reinvestment Period................................................................... 7
Relief Act............................................................................ 25
Remaining Available Funds............................................................. 30
Reserve Fund.......................................................................... 32
Retail Contracts...................................................................... 20
S&P................................................................................... 12
Sale Contract......................................................................... 20
Security Instruments.................................................................. 23
Senior Notes.......................................................................... 33
Series................................................................................ Cvr
Servicer.............................................................................. Cvr
Servicing Agreement................................................................... 9
South Carolina Code................................................................... 15
Special Hazard Policy................................................................. 32
Spread Account........................................................................ 32
Subordinated Class.................................................................... 8
Subordinated Notes.................................................................... 33
Subsequent Accounts................................................................... 17
Sub-servicing Agreement............................................................... 5
Terms and Conditions.................................................................. 37
Texas Building Contract............................................................... 20
Texas Contracts....................................................................... 20
Texas Mortgages....................................................................... 20
Texas Resale Mortgage................................................................. 20
Texas Sales Contract.................................................................. 20
TMP................................................................................... 40
TMP Regulations....................................................................... 45
Trust................................................................................. Cvr
UCCC.................................................................................. 22
Voting Rights......................................................................... 49
Walter Industries..................................................................... 5
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON. NEITHER THIS PROSPECTUS SUPPLEMENT NOR
THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY NOR AN
OFFER OF SUCH SECURITIES TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN
WHICH SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of Terms....................................... S-4
Risk Factors........................................... S-11
The Issuer............................................. S-13
Use of Proceeds........................................ S-13
The Accounts........................................... S-13
The Mortgage Collateral................................ S-18
Description of the Notes............................... S-23
Legal Investment Considerations........................ S-33
ERISA Considerations................................... S-33
Federal Income Tax Considerations...................... S-34
The Indenture.......................................... S-35
The Servicing Agreement................................ S-38
The Trust Agreement.................................... S-38
The Purchase and Sale Agreement........................ S-38
Plan of Distribution................................... S-39
Legal Matters.......................................... S-39
Financial Information.................................. S-40
Note Ratings........................................... S-40
Index of Principal Defined Terms....................... S-41
PROSPECTUS
Available Information.................................. 2
Reports to Noteholders................................. 2
Incorporation of Certain Documents by Reference........ 2
Summary of Prospectus.................................. 5
Risk Factors........................................... 12
The Depositor.......................................... 17
The Issuer............................................. 17
Discussion and Analysis of Issuer's Financial
Condition............................................ 18
The Accounts........................................... 19
The Mortgage Collateral................................ 22
Certain Legal Aspects of the Accounts and Related
Matters.............................................. 22
Security............................................... 26
Description of the Notes............................... 29
Legal Investment Considerations........................ 38
ERISA Considerations................................... 38
Material Federal Income Tax Consequences............... 40
The Indenture.......................................... 46
The Servicing Agreement................................ 51
The Trust Agreement.................................... 54
The Purchase and Sale Agreement........................ 55
Pre-Funding Account.................................... 56
Use of Proceeds........................................ 56
Plan of Distribution................................... 56
Legal Matters.......................................... 57
Note Ratings........................................... 57
Index of Principal Defined Terms....................... 58
</TABLE>
------------------------
UNTIL , 199 , ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$
MID-STATE TRUST
$ %
ASSET-BACKED NOTES, CLASS A-1
$ %
ASSET-BACKED NOTES, CLASS A-2
$ %
ASSET-BACKED NOTES, CLASS A-3
$ %
ASSET-BACKED NOTES, CLASS A-4
---------------------
MID-STATE HOMES,
INC.
SERVICER
------------------
PROSPECTUS SUPPLEMENT
, 199
------------------
[UNDERWRITER]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses Of Issuance And Distribution.Set forth below are the
fees and expenses expected to be incurred by Mid-State Homes, Inc. (the
"Registrant") in connection with the issuance and distribution of the securities
being registered (other than underwriting discounts and commissions and costs
represented by the salaries and wages of regular employees and officers of the
Registrant). All such expenses, other than the Filing Fee, are estimated
expenses.
<TABLE>
<S> <C>
SEC Filing Fee..................................................... $ *
Indenture Trustee's Fees........................................... *
Owner Trustee's Fees............................................... *
Legal Fees and Expenses............................................ *
Accounting Fees and Expenses....................................... *
Blue Sky and Legal Investment Fees and Expenses.................... *
Printing Fees and Expenses......................................... *
Rating Agency Fees and Expenses.................................... *
Miscellaneous...................................................... *
---------
Total.............................................................. $ *
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Walter Industries, Inc. ("Walter Industries"), a Delaware
corporation and indirect owner of all of the issued and outstanding shares of
the capital stock of the Registrant, provide that, to the fullest extent
permitted by Delaware law, Walter Industries will indemnify any current or
former director or officer of Walter Industries and may, at the discretion of
the board of directors, indemnify any current or former employee or agent of
Walter Industries, against certain liabilities, including liabilities incurred
by reason of the fact that such person is or was serving, at the request of
Walter Industries, as a director, officer, partner, trustee, employee or agent
of another corporation or partnership, joint venture, trust or other enterprise.
To the extent that directors and officers of the Registrant serve or have
previously served as directors, officers, employees or agents of Walter
Industries, they are eligible for indemnification by Walter Industries against
liabilities in respect of actions taken in their capacities as directors or
officers of the Registrant.
The directors and officers of the Registrant are covered by a directors' and
officers' liability insurance policy maintained by Walter Industries for the
benefit of all of its subsidiaries.
ITEM 16. FINANCIAL STATEMENTS AND EXHIBITS.
A list of exhibits included as part of this Registration Statement is set
forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(A) UNDERTAKING PURSUANT TO RULE 415:
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or event arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement of any
material change in such information in this registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain at the termination of the
offering.
(B) UNDERTAKING IN RESPECT OF DOCUMENTS SUBSEQUENTLY FILED THAT ARE
INCORPORATED BY REFERENCE:
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrants'
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(C) UNDERTAKING IN RESPECT OF INDEMNIFICATION:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of
II-2
<PAGE>
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(D) UNDERTAKING IN RESPECT OF QUALIFICATION OF INDENTURES UNDER THE TRUST
INDENTURE ACT OF 1939:
The Registrant hereby undertakes to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act of 1939 in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act of 1939.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Tampa, Florida on July 13, 1998.
<TABLE>
<S> <C> <C>
MID-STATE HOMES, INC.
By: /s/ DEAN M. FJELSTUL
Name: Dean M. Fjelstul
---------------------------------------------
Title: VICE PRESIDENT
</TABLE>
II-4
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth E. Hyatt, Richard E. Almy, Dean M.
Fjelstul and Joseph H. Kelly, Jr., and each of them, his true and lawful
attorneys-in-fact and agents for him and in his name, place and stead, in any
and all capacities, to sign any and all post-effective amendments to this
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ KENNETH E. HYATT President, Principal
- ------------------------------ Executive Officer and July 13, 1998
Kenneth E. Hyatt Director
/s/ RICHARD E. ALMY
- ------------------------------ Director July 13, 1998
Richard E. Almy
/s/ DEAN M. FJELSTUL Vice President, Principal
- ------------------------------ Financial Officer and July 13, 1998
Dean M. Fjelstul Director
/s/ JOSEPH H. KELLY, JR.
- ------------------------------ Controller (Principal July 13, 1998
Joseph H. Kelly, Jr. Accounting Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement
4.1 -- Form of Indenture (including forms of Notes)
5.1 -- Opinion of Cadwalader, Wickersham & Taft
8.1 -- Opinion of Cadwalader, Wickersham & Taft with respect to certain tax matters
9.1 -- Form of Trust Agreement
10.1 -- Form of Servicing Agreement
10.2 -- Form of Purchase and Sale Agreement
Consents of Cadwalader, Wickersham & Taft (included as part of exhibits 5.1 and
24.1 -- 8.1)
25.1 -- Power of Attorney (contained on page II-5 of this Registration Statement)
</TABLE>
<PAGE>
MID-STATE TRUST 199 -
$ [________] [ ]% Asset Backed Notes, Class A-1
$ [________] [ ]% Asset Backed Notes, Class A-2
$ [________] [ ]% Asset Backed Notes, Class A-3
$ [________] [ ]% Asset Backed Notes, Class A-4
UNDERWRITING AGREEMENT
_________ __, 199
[Underwriter],
[Address]
Ladies and Gentlemen:
Mid-State Homes, Inc. (the "Company"), a Florida corporation and an
indirect, wholly-owned subsidiary of Walter Industries, Inc. ("Walter
Industries"), has entered into a trust agreement dated as of _________, 199_
(the "Trust Agreement") with ______________, a ______________ (not in its
individual capacity, but solely as trustee under the Trust Agreement,
together with its permitted successors and assigns, the "Owner Trustee")
creating Mid-State Trust 199 - , a business trust established under the laws
of the state of Delaware (the "Trust" or the "Issuer"). The Issuer will act
at all times through the Owner Trustee.
The Company proposes to direct the Owner Trustee to issue the [ ]%
Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), [ ]% Asset Backed
Notes, Class A-2 (the "Class A-2 Notes"), [ ]% Asset Backed Notes, Class A-3
(the "Class A-3 Notes") and [ ]% Asset Backed Notes, Class A-4 (the "Class
A-4 Notes"), each in the aggregate principal amount set forth above (the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes
collectively referred to as the "Notes"). The Notes shall be issued under an
indenture (the "Indenture"), dated as of _________, 199_ between the Owner
Trustee, not in its individual capacity, but solely as trustee under the
Trust Agreement, and ________________ (the "Trustee"). Capitalized terms used
but not defined herein shall have the meanings given to them in the
Indenture. The Company also proposes to direct the Owner Trustee to cause the
Notes to be sold to you (the "Underwriter" or "you") with respect to the
public offering by you of the Notes.
The Notes are secured by (i) certain building and installment sale
contracts, promissory notes, related mortgages and other security instruments
("Accounts") owned directly or indirectly by the Company and having an
aggregate outstanding Economic Balance of $[_________] as of _________, 199_
(the "Cut-Off Date"), (ii) the Collection Account established under the
Indenture and (iii) the Trust's rights under the Servicing Agreement (the
"Servicing Agreement") dated as of __________, 199_ among the Issuer, the
Trustee and the
<PAGE>
Company (in its capacity as Servicer under the Servicing Agreement, together
with its successors and assigns, the "Servicer"). The Company will sell the
Accounts to the Issuer pursuant to the Purchase and Sale Agreement dated as
of the Closing Date (the "Purchase Agreement").
This Agreement shall confirm the arrangements with respect to your
purchase of the Notes.
SECTION 1. Representations and Warranties. (a) The Company
represents and warrants to you as follows:
(i) The Company meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement on such Form (file number 333-[______]), which has become
effective, for the registration under the Act of the Notes. Such
registration statement, as amended to the date of this Agreement, meets
the requirements set forth in Rule 415(a)(1) under the Act and complies
in all other material respects with said Rule. The Company proposes to
file with the Commission pursuant to Rule 424 under the Act a supplement
to the form of prospectus included in such registration statement
relating to the Notes and the plan of distribution thereof and has
previously advised the Underwriter of all further information with
respect to the Company and the Notes to be set forth therein. Such
registration statement, including the exhibits thereto, as amended to
the date of this Agreement, is hereinafter called the "Registration
Statement;" such prospectus in the form in which it appears in the
Registration Statement is hereinafter called the "Basic Prospectus;" and
such supplemented form of prospectus, in the form in which it shall be
filed with the Commission pursuant to Rule 424 (including the Basic
Prospectus as so supplemented) is hereinafter called the "Final
Prospectus." Any preliminary form of the Final Prospectus which has
heretofore been filed pursuant to Rule 424 hereinafter is called the
"Preliminary Final Prospectus." Any reference herein to the Registration
Statement, the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which
were filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") other than any information contained in any Current
Report (as defined in Section 3(ii) below) filed pursuant to Section
3(ii) hereof or pursuant to any other underwriting agreement entered
into by the Company, on or before the date of this Agreement, or the
issue date of the Basic Prospectus, any Preliminary Final Prospectus or
the Final Prospectus, as the case may be; and any reference herein to
the terms "amend," "amendment" or "supplement" with respect to the
Registration Statement, the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the date
of this Agreement, or the issue date of the Basic Prospectus, any
Preliminary Final Prospectus or the Final Prospectus, as the case may
be, and deemed to be incorporated therein by reference other than any
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information contained in any Current Report filed pursuant to Section
3(ii) hereof or pursuant to any other underwriting agreement entered
into by the Company.
(ii) As of the date hereof, when the Final Prospectus is first
filed pursuant to Rule 424 under the Act, when, prior to the Closing
Date (as hereinafter defined), any amendment to the Registration
Statement becomes effective (including the filing of any document
incorporated by reference in the Registration Statement), when any
supplement to the Final Prospectus is filed with the Commission and at
the Closing Date (as hereinafter defined), (i) the Registration
Statement, as amended as of any such time, and the Final Prospectus, as
amended or supplemented as of any such time, will comply in all material
respects with the Exchange Act and the respective rules thereunder, (ii)
the Registration Statement, as amended as of any such time, will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading, and (iii) the Final
Prospectus, as amended or supplemented as of any such time, will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the Company
makes no representation or warranty as to (A) the information contained
in or omitted from the Registration Statement or the Final Prospectus or
any amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by or on
behalf of the Underwriter specifically for use in connection with the
preparation of the Registration Statement and the Final Prospectus or
(B) the Current Report (as defined in Section 3(ii) below), or in any
amendment thereof or supplement thereto, incorporated by reference in
the Registration Statement or the Final Prospectus (or any amendment
thereof or supplement thereto).
(iii) As of the date hereof, the Indenture was or will be duly
qualified under, and conformed in all material respects with, the
requirements of the 1939 Act and the rules and regulations thereunder
(the "1939 Act Regulations"), and on the Closing Date, the Indenture
will be so qualified and in conformity.
(iv) Price Waterhouse LLP are independent public accountants with
respect to the Company as required by the Act.
(v) The Company has been duly incorporated and is validly existing
as a corporation and is in good standing under the laws of the
jurisdiction of its incorporation, with corporate power to own, lease
and operate its property; and the Company is qualified to do business
and is in good standing in each jurisdiction to the extent necessary to
permit the servicing of each Account in accordance with the terms of the
Servicing Agreement.
(vi) The issuance and sale of the Notes to the Underwriter, the
execution, delivery and performance by the Company of this Agreement,
the Servicing
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Agreement, the Purchase Agreement, the Trust Agreement or any other
agreement or instrument contemplated therein or herein and the
assignment to the Trust of the Accounts and the authorization by the
Company of the execution, delivery and performance by the Owner Trustee
of the Indenture and the issuance of the Notes are within the corporate
power and authority of the Company and have been duly authorized by all
necessary corporate action on the part of the Company; and neither the
issuance and sale of the Notes to the Underwriter nor the execution,
delivery and performance of this Agreement, the Servicing Agreement,
the Purchase Agreement, the Trust Agreement or any other agreement or
instrument contemplated herein or therein nor the consummation of the
transactions contemplated herein or therein nor compliance by the
Company with the provisions hereof or thereof, nor the assignment to
the Owner Trustee of the Accounts, nor the execution, delivery and
performance by the Owner Trustee of the Indenture and the issuance of
the Notes, nor compliance by the Owner Trustee with the provisions
thereof conflicts with or results in a material breach or violation of
any of the terms or provisions of or (with or without notice, lapse of
time or both) constitutes a default under any statute, indenture,
mortgage, deed of trust, note or other agreement or instrument to which
the Company is a party or by which it or any of its property is bound,
the Company's certificate of incorporation or by-laws or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties or results in
the creation or imposition of any lien, charge or encumbrance upon any
of its property pursuant to the terms or provisions of any statute,
indenture, mortgage, deed of trust, note or other agreement or
instrument, except for the liens created or contemplated by the
Indenture.
(vii) This Agreement has been and on or prior to the Closing Date,
the Servicing Agreement, the Trust Agreement, and the Purchase Agreement
will have each been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by the
other parties hereto and thereto, this Agreement, the Servicing
Agreement, the Trust Agreement, and the Purchase Agreement each
constitutes or will constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(viii) The Notes and the Indenture will conform in all material
respects to all statements relating thereto in the related Final
Prospectus, and are duly and validly authorized and, when the related
Notes have been executed, authenticated and delivered in accordance with
the Indenture, and delivered to and paid for by the Underwriter as
provided herein, the related Notes will be entitled to the benefits and
security afforded by the Indenture, and will constitute legal, valid and
binding obligations of the Issuer enforceable in accordance with their
terms and the terms of the Indenture.
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(ix) The Company is not in violation of its certificate of
incorporation or any applicable administrative or court order or decree.
(x) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company, which is required to be disclosed in the Registration Statement
(other than as disclosed therein); all pending legal or governmental
proceedings to which the Company is a party or of which any of their
properties or assets are the subject which are not described in the
Registration Statement including ordinary routine litigation incidental
to the business, are, considered in the aggregate, not material;
(xi) The Company possesses such licenses, certificates, authorities
or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now
conducted by it and to perform the servicing obligations under the
Servicing Agreement, and the Company has not received notice of
proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which, singly or in the
aggregate, if the subject of any unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial
or otherwise, or the earnings, business affairs or business prospects of
the Company.
(xii) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Notes, or the consummation by the
Company of the other transactions contemplated by this Agreement, the
Indenture, the Trust Agreement or any other agreement or instrument
contemplated therein or herein, except filings required to perfect the
liens of the Indenture and except such as may be required under the Act
or state securities laws and such as have been obtained and are in
effect.
(xiii) Upon the payment by the Issuer for the Accounts in
accordance with the Purchase Agreement, the Company will have duly and
validly sold and assigned all right, title and interest in the Accounts
to the Issuer; the Issuer will have good and valid title to the Accounts
free and clear of all liens, encumbrances, and other interests of others
except to the extent permitted in the Indenture; and the Company will be
the sole beneficial owner of the Issuer.
(xiv) The Trust Agreement is effective to establish the Trust under
and pursuant to the laws of the State of Delaware.
(xv) The Company and the Issuer are not, and will not be required
as a result of the offer and sale of the Notes to register as, an
"investment company" under the Investment Company Act of 1940, as
amended (the "1940 Act") and neither the Company nor the Issuer is
"controlled" by an "investment company" as defined in the 1940 Act.
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(xvi) The Accounts conform in all material respects to the
statements and description thereof contained in the Final Prospectus.
(b) Any certificate signed by any officer of the Company and
delivered to you or your counsel shall be deemed a representation and
warranty by the Company as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriter: Closing. (a) On the
basis of the representations and warranties herein contained and subject to
the terms and conditions herein set forth, the Company agrees to direct the
Owner Trustee to sell on behalf of the Issuer to the Underwriter, and the
Underwriter agrees to purchase from the Owner Trustee acting on behalf of the
respective Issuer, the principal amounts of Notes set forth opposite the name
of such Underwriter at a price equal to _________% of the principal amount
thereof plus accrued interest, if any, from _________, 199_ to but not
including the Closing Date.
(b) Payment of the purchase price for, and delivery of, the Notes
shall be made at the offices of Cadwalader, Wickersham & Taft, 100 Maiden
Lane, New York, New York 10038, or at such other place as shall be agreed
upon by the Underwriter and the Company at 10:00 A.M. on [_________] or such
other time not later than ten business days after such date as shall be
agreed upon by the Underwriter and the Company (such time and date of
delivery being herein called the "Closing Date"). Payment shall be made to
the Owner Trustee in same day funds against delivery of the Notes to, or at
the direction of, the Underwriter. The Notes to be so delivered will be
initially represented by one or more Notes registered in the name of Cede &
Co., the nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Notes will be represented by book entries on the
records of DTC and participating members thereof. The Notes will be made
available for examination by the Underwriter not later than 10:00 A.M. on the
last business day prior to the Closing Date. The Notes will be delivered to
The Depository Trust Company in New York, New York on the business day prior
to the Closing Date, to be released upon the purchase thereof and payment
therefor in accordance herewith.
SECTION 3. Covenants. The Company covenants with you as follows:
(i) Prior to the termination of the offering of the Notes, the
Company will not file any amendment of the Registration Statement or
supplement (including the Final Prospectus) to the Basic Prospectus
unless the Company has furnished the Underwriter a copy for its review
prior to filing and will not file any such proposed amendment or
supplement to which the Underwriter reasonably objects. Subject to the
foregoing sentence, the Company will cause the Final Prospectus to be
filed with the Commission pursuant to Rule 424. The Company will advise
the Underwriter promptly (i) when the Final Prospectus shall have been
filed with the Commission pursuant to Rule 424, (ii) when any amendment
to the Registration Statement relating to the Notes shall have become
effective, (iii) of any request by the Commission for any amendment of
the Registration Statement or amendment of or supplement to the Final
Prospectus or for any additional information, (iv) of the issuance by
the Commission of any stop order
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suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (v) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(ii) The Company will use its best efforts to cause any
Computational Materials, Collateral Term Sheets and ABS Term Sheets
(each as defined in Section 10 below) with respect to the Notes which
are delivered by the Underwriter to the Company pursuant to Section 10
to be filed with the Commission on a Current Report on Form 8-K (the
"Current Report") pursuant to Rule 13a-11 under the Exchange Act not
later than the business day immediately following the day on which such
Computational Materials, Collateral Term Sheets or ABS Term Sheets are
delivered to counsel for the Company by the Underwriter as provided in
Section 10, and will promptly advise the Underwriter when such Current
Report has been so filed. Such Current Report shall be incorporated by
reference in the Final Prospectus and the Registration Statement.
Notwithstanding the two preceding sentences, the Company shall have no
obligation to file materials provided by the Underwriter pursuant to
Section 10 which, in the reasonable determination of the Company after
making reasonable efforts to consult with the Underwriter, are not
required to be filed pursuant to the No-Action Letters (as defined in
Section 10 below), or which contain erroneous information or contain any
untrue statement of a material fact or, which, when read in conjunction
with the Final Prospectus, omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; it being understood, however, that the Company shall have no
obligation to review or pass upon the accuracy or adequacy of, or to
correct, any Computational Materials, Collateral Term Sheets or ABS Term
Sheets provided by the Underwriter to the Company pursuant to Section 10
hereof.
(iii) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act, any event occurs as a result of
which the Final Prospectus as then amended or supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it shall
be necessary to amend or supplement the Final Prospectus to comply with
the Act or the Exchange Act or the respective rules thereunder, the
Company promptly will prepare and file with the Commission, subject to
the first sentence of paragraph (i) of this Section 3, an amendment or
supplement which will correct such statement or omission or an amendment
which will effect such compliance and will use its best efforts to cause
any required post-effective amendment to the Registration Statement
containing such amendment to be made effective as soon as possible;
provided, however, that the Company will not be required to file any
such amendment or supplement with respect to any Computational Materials
incorporated by reference in the Final Prospectus other than any
amendments or supplements of such Computational Materials that are
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furnished to the Company pursuant to Section 10(d) hereof which the
Company determine to file in accordance therewith.
(iv) The Company will furnish to the Underwriter and counsel for
the Underwriter, without charge, executed copies of the Registration
Statement (including exhibits thereto) and each amendment thereto which
shall become effective on or prior to the Closing Date and, so long as
delivery of a prospectus by the Underwriter or dealer may be required by
the Act, as many copies of any Preliminary Final Prospectus and the
Final Prospectus and any amendments thereof and supplements thereto
(other than exhibits to the related Current Report) as the Underwriter
may reasonably request. The Company will pay the expenses of printing
all documents relating to the initial offering, provided that any
additional expenses incurred in connection with the requirement of
delivery of a market-making prospectus will be borne by the Underwriter.
(v) To use its best efforts, in cooperation with the Underwriter,
to qualify the Notes for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as the Underwriter may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be required
for the distribution of the Notes. The Company will file or cause the
filing of such statements and reports as may be required by the laws of
each jurisdiction in which the Notes have been so qualified.
(vi) The Issuer will use the net proceeds received by it from the
sale of the Notes in the manner specified in the related Prospectus
under "Use of Proceeds."
(vii) So long as any of the Notes shall be outstanding, the Company
will deliver to you each annual statement as to compliance delivered to
the Trustee pursuant to Section 3.09 of the Indenture, and each
statement of a firm of independent public accountants furnished to the
Trustee pursuant to Section 8.08 of the Indenture, as soon as such
statements are furnished to the Trustee, and will furnish to you monthly
a copy of the magnetic tape containing the Schedule of Accounts
information.
SECTION 4. Payment of Expenses. The Company agrees to pay: (a) the
costs incident to the authorization, issuance, sale and delivery of the Notes
and any taxes payable in connection therewith; (b) the costs incident to the
preparation, printing and filing under the Act of the Registration Statement
and any amendments and exhibits thereto; (c) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Final Prospectus or Final Prospectus and any amendment to the
Final Prospectus or any document incorporated by reference therein, all as
provided in this Agreement; (d) the costs of reproducing and distributing
this Agreement; (e) the fees and expenses of qualifying the Notes under the
securities laws of the several jurisdictions and of preparing, printing and
distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Underwriter); (f) any fees charged by securities rating
services for rating the Notes; (g) all costs and
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expenses related to the issuance and delivery of "True Sale" and tax opinions
by [___________]; and (h) all other costs and expenses incident to the
performance of the obligations of the Underwriter (including half of the
costs and expenses of your counsel); provided that, except as provided in
this Section 4, the Underwriter shall pay any transfer taxes on the Notes
which they may sell and the expenses of advertising any offering of the Notes
made by the Underwriter and half the costs and expenses of their counsel.
If this Agreement is terminated by the Underwriter in accordance
with the provisions of Section 5 or Section 9, the Company shall reimburse
the Underwriter for all reasonable out-of-pocket expenses, including fees and
disbursements of counsel for the Underwriter.
SECTION 5. Conditions of Underwriter's Obligations. The obligations
of the Underwriter hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) All actions required to be taken and all filings required to be
made by the Company under the Act prior to the sale of the Notes shall have
been duly taken or made. At and prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or, to
the knowledge of the Company or the Underwriter, shall be contemplated by the
Commission.
(b) The Underwriter shall not have discovered and disclosed to the
Company on or prior to the Closing Date that the Registration Statement or
the Final Prospectus or any amendment or supplement thereto contained or
contains an untrue statement of a fact or omitted or omits to state a fact
which, in the opinion of [___________], counsel for the Underwriter, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) All corporate proceedings and other legal matters relating to
the authorization, form and validity of this Agreement, the Indenture, the
Trust Agreement, the Purchase Agreement, the Servicing Agreement, the
Registration Statement and the Final Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
satisfactory in all respects to counsel for the Underwriter, and the Company
shall have furnished to such counsel all documents and information that they
may reasonably request to enable them to pass upon such matters.
(d) On the Closing Date, the Underwriter shall have received:
(1) The opinion, dated the Closing Date, of Cadwalader, Wickersham
& Taft, counsel for the Issuer, substantially in the form attached hereto as
Exhibit A.
(2) The opinion, dated the Closing Date, of Carlton Fields, counsel
for the Company, substantially in the form attached hereto as Exhibit B.
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(3) The favorable opinion, dated as of the Closing Date of
_________________, counsel for the Owner Trustee, substantially in the form
attached hereto as Exhibit C.
(4) The favorable opinions of local counsel to the Company in those
jurisdictions determined by the Underwriter, dated the Closing Date, in form
and substance acceptable to the Underwriter and its counsel.
(5) The favorable opinion, dated the Closing Date, of
________________, counsel for the Trustee, in form and substance satisfactory
to counsel for the Underwriter, to the effect that:
(i) The Trustee, at the time of its execution and delivery of the
Indenture, had full power and authority to execute and deliver the
Indenture and has full power and authority to perform its obligations
thereunder.
(ii) The Indenture has been duly and validly authorized, executed
and delivered by the Trustee and, assuming due authorization, execution
and delivery thereof by the Issuer, constitutes the valid and binding
agreement of the Trustee enforceable against the Trustee in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other laws relating to or affecting creditors'
rights or by general principles of equity.
(iii) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of
the United States of America or any state thereof was or is required for
the execution, delivery or performance by the Trustee of the Indenture.
(6) The favorable opinion, dated the Closing Date, of [___________]
, counsel for the Underwriter, with respect to the issue and sale of the
Notes, the Registration Statement, this Agreement, the Final Prospectus and
such other related matters as the Underwriter may require.
(e) On the Closing Date, there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, any material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company, and the Underwriter shall have
received a certificate of the Chairman of the Board, the President or any
Vice President of Walter Industries, on behalf of the Company, dated as of
the Closing Date, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1 are true
and correct with the same force and effect as though expressly made at and as
of the Closing Date, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to the Closing Date and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission.
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(f) At the Closing Date, Price Waterhouse LLP shall have furnished
to you a letter of such firm (I) to the effect that (i) they have made a
statistical sample of the Accounts, compared certain attributes from the
files relating to such Accounts to a magnetic tape prepared by the Issuer,
(ii) as a result of such comparison they are [95]% confident that the
information in Account files for the attributes so tested will not vary from
the corresponding information on such magnetic tape by more than [3]% and
(iii) based on certain assumptions supplied to them by the Issuer, the
amounts in the Collection Account on each Payment Date will be sufficient to
make the payment of interest and principal on the Notes issued by the Issuer
due on such Payment Date and to pay the final installment of principal of
such Notes on or before the Maturity Date for such Notes and (II) to the
effect of the letter furnished by them to the Trustee pursuant to Section
2.12(g) of the Indenture in connection with the issuance of the Notes. (Such
letter may consist of a copy of the letter furnished to the Trustee
accompanied by a letter addressed to you indicating that you may rely on such
letter as if it were addressed to you directly.)
(g) On the Closing Date, Price Waterhouse LLP shall have furnished
to you a letter or letters, dated as of the Closing Date, addressed to you,
to such effect as you reasonably may request in respect of the Final
Prospectus.
(h) On the Closing Date, you shall have received from the Trustee a
certificate signed by one or more duly authorized officers of the Trustee,
dated as of the Closing Date, as to the due acceptance of the Indenture by
the Trustee and the due execution and delivery of the Notes delivered by the
Trustee thereunder and such other matters as you shall request.
(i) By the Closing Date, the Class A-1 Notes shall be rated
["Aaa" by Moody's Investors Service, Inc. ("Moody's")]["AAA" by Standard &
Poor's Ratings Services ("Standard & Poor's")] ["AAA" by Duff & Phelps Credit
Rating Co. ("DCR")] ["AAA" by Fitch IBCA, Inc. ("Fitch")] the Class A-2 Notes
be rated at least ["Aa2" by Moody's] ["AA+" by Standard & Poor's] ["AA" by
Fitch]["AA" by DCR]; the Class A-3 Notes be rated at least ["A2" by Moody's]
["AA" by Standard & Poor's] ["A" by Fitch] ["A" by DCR]; and the Class A-4
Notes be rated at least ["Baa2" by Moody's] ["BBB" by Standard & Poor's] ["BBB"
by Fitch]["BBB" by DCR].
(j) The Holding Account Agreement shall have been duly authorized,
executed and delivered by all parties thereto.
(k) The Purchase Agreement shall have been duly authorized,
executed and delivered by all parties thereto.
(l) Form UCC-1 financing statements with respect to the Trust
Estate shall have been filed in the appropriate offices in (i) the State of
Florida naming the Issuer as seller/debtor and the Trustee as buyer/secured
party and the Company as debtor and the Issuer as secured party and (ii) the
State of Delaware naming the Issuer as debtor and the Trustee as secured
party.
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(m) On the Closing Date, counsel for the Underwriter shall have
been furnished with such documents and opinions as they may require for the
purpose of enabling them to pass upon the issuance and sale of the Notes as
herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Notes as herein
contemplated shall be satisfactory in form and substance to the Underwriter
and counsel for the Underwriter.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Underwriter by notice to the Company at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except as provided in Section 4.
SECTION 6. Indemnification.
A. The Company agrees to indemnify and hold harmless the
Underwriter and each person if any, who controls the Underwriter within the
meaning of the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement for the registration
of the Notes as originally filed or in any amendment thereof, or in the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based
upon omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and agree to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i)
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein (A) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Underwriter specifically for
use in connection with the preparation thereof or (B) in any Current Report
or any amendment or supplement thereof, except to the extent that any untrue
statement or alleged untrue statement therein results (or is alleged to have
resulted) directly from an error (a "Collateral Error") in the information
concerning the Accounts furnished by the Company to the Underwriter in
writing or by electronic transmission that was used in the preparation of any
Computational Materials, Collateral Term Sheets or ABS Term Sheets included
in such Current Report (or amendment or supplement thereof), (ii) such
indemnity with respect to the Basic Prospectus or any Preliminary Final
Prospectus shall not inure to the benefit of the Underwriter (or any person
controlling the Underwriter) from whom the person asserting any such loss,
claim, damage or liability purchased the Notes which are the subject thereof
if such person did not receive a copy of the Final Prospectus (or the Final
Prospectus as amended or supplemented) excluding
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documents incorporated therein by reference at or prior to the confirmation
of the sale of such Notes to such person in any case where such delivery is
required by the Act and the untrue statement or omission of a material fact
contained in the Basic Prospectus or any Preliminary Final Prospectus was
corrected in the Final Prospectus (or the Final Prospectus as amended or
supplemented), and (iii) such indemnity with respect to any Collateral Error
shall not inure to the benefit or the Underwriter (or any person controlling
the Underwriter) from whom the person asserting any loss, claim, damage or
liability received any Computational Materials, Collateral Term Sheets or ABS
Term Sheets that were prepared on the basis of such Collateral Error, if,
prior to the time of confirmation of the sale of the Notes to such person,
the Company notified the Underwriter in writing of the Collateral Error or
provided in written or electronic form information superseding or correcting
such Collateral Error (in any such case, a "Corrected Collateral Error"), and
the Underwriter failed to notify such person thereof or to deliver such
person corrected Computational Materials, Collateral Term Sheets and/or ABS
Term Sheets, as applicable. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
B. The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter, but only with
reference to (A) written information relating to the Underwriter furnished to
the Company by or on behalf of the Underwriter specifically for use in the
preparation of the documents referred to in the foregoing indemnity, or (B)
any Computational Materials, Collateral Term Sheets or ABS Term Sheets
furnished to the Company by the Underwriter pursuant to Section 10 and
incorporated by reference in the Registration Statement or the Final
Prospectus (except that no such indemnity shall be available for any losses,
claims, damages or liabilities, or actions in respect thereof resulting from
any Collateral Error, other than a Corrected Collateral Error). This
indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
C. Promptly after receipt by any indemnified party under this
Section 6 of notice of any claim or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
any indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify an indemnifying party shall not relieve it from
any liability which it may have under this Section 6 except to the extent it
has been materially prejudiced by such failure and, provided further, that
the failure to notify any indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under
this Section 6.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its
13
<PAGE>
election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this Section 6 for
any legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless: (i) the employment thereof has been specifically authorized by
the indemnifying party in writing; (ii) such indemnified party shall have
been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to local counsel) at any time for all such indemnified
parties, which firm shall be designated in writing by the Underwriter, if the
indemnified parties under this Section 6 consist of the Underwriter or any of
its controlling persons, or by the Company, if the indemnified parties under
this Section 6 consists of the Company or any of the Company's directors,
officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 6(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
30 days after receipt by such indemnifying party of the aforesaid request and
(ii) such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party
14
<PAGE>
under Section 6(A) or (B) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to
the amount paid or payable by such indemnified party as a result of such
loss, claim, damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriter on the other from the
offering of the Notes or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriter on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations.
The relative benefits of the Underwriter and the Company shall be
deemed to be in such proportion so that the Underwriter is responsible for
that portion represented by the percentage that the underwriting discount
appearing on the cover page of the Final Prospectus bears to the public
offering price appearing on the final cover page of the Final Prospectus.
The relative fault of the Underwriter and the Company shall be
determined by reference to whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriter, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission and other
equitable considerations.
The Company and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this Section 7 were to be determined
by pro rata allocation or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 7 shall be deemed to include, for purposes of this Section 7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
In no case shall the Underwriter be responsible for any amount in
excess of the underwriting discount applicable to the Notes purchased by the
Underwriter hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 8. Representations Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or
controlling person thereof, or by or on behalf of the Company and shall
survive delivery of the Notes to the Underwriter.
15
<PAGE>
SECTION 9. Termination of Agreement. (a) The Underwriter may
terminate this Agreement, by notice to the Company at any time at or prior to
the Closing Date (i) if there has occurred any material adverse change in the
financial markets in the United States or any outbreak of hostilities or
other calamity or crisis, the effect of which is such as to make it, in the
judgment of the Underwriter, impracticable to market the Notes or to enforce
contracts for the sale of the Notes, or (ii) if trading generally on either
the American Stock Exchange or the New York Stock Exchange has been
suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of
said Exchanges or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either Federal or
New York authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except
as provided in Section 4 hereof.
SECTION 10. Computational Materials and ABS Term Sheets.
(a) Not later than 10:30 a.m., New York City time, on a date no
later than four business days before delivery of the Final Prospectus to the
Underwriter, the Underwriter shall deliver to the Company five complete
copies of all materials provided by the Underwriter to prospective investors
in the Notes which constitute either (i) "Computational Materials" within the
meaning of the no-action letter dated May 20, 1994 issued by the Division of
Corporation Finance of the Commission to Kidder, Peabody Acceptance
Corporation I, Kidder, Peabody & Co. Incorporated, and Kidder Structured
Asset Corporation and the no-action letter dated May 27, 1994 issued by the
Division of Corporation Finance of the Commission to the Public Securities
Association (together, the "Kidder Letters") or (ii) "ABS Term Sheets" within
the meaning of the no-action letter dated February 17, 1995 issued by the
Division of Corporation Finance of the Commission to the Public Securities
Association (the "PSA Letter" and together with the Kidder Letters, the
"No-Action Letters"), if the filing of such materials with the Commission is
a condition of the relief granted in such letters. In the case of any such
materials that constitute "Collateral Term Sheets" within the meaning of the
PSA Letter, if such Collateral Term Sheets have not previously been delivered
to the Company as contemplated by Section 10(b)(i) below, five complete
copies of such Collateral Term Sheets shall be delivered by the Underwriter
to the Company no later than 10:30 a.m., New York City time, on the first
business day following the date on which such Collateral Term Sheets were
initially provided to a potential investor. Each delivery of Computational
Materials, Collateral Term Sheets and/or ABS Term Sheets to the Company
pursuant to this paragraph (a) shall be effected by delivering four copies of
such materials to counsel for the Company on behalf of the Company at the
address specified in Section 11 hereof and one copy of such materials to the
Company.
(b) The Underwriter represents and warrants to and agree with the
Company, as of the date hereof and as of the Closing Date, that:
16
<PAGE>
(i) if the Underwriter has provided any Collateral Term
Sheets to potential investors in the Notes prior to the date
hereof and if the filing of such materials with the Commission
is a condition of the relief granted in the PSA Letter, then
in each such case the Underwriter delivered four copies of
such materials to counsel for the Company on behalf of the
Company at the address specified in Section 11 hereof and one
copy of such materials to the Company no later than 10:30
a.m., New York City time, on the first business day following
the date on which such materials were initially provided to a
potential investor;
(ii) the Computational Materials (either in original,
aggregated or consolidated form), Collateral Term Sheets and
ABS Term Sheets furnished to the Company pursuant to Section
10(a) or as contemplated in Section 10(b)(i) constitute all of
the materials furnished to prospective investors by the
Underwriter (whether in written, electronic or other format)
prior to the time of delivery thereof to the Company with
respect to the Notes in accordance with the No-Action Letters,
and such Computational Materials, Collateral Term Sheets and
ABS Term Sheets comply with the requirements of the No-Action
Letters;
(iii) except as resulting directly from any Collateral
Error, on the respective dates any such Computational
Materials, Collateral Term Sheets and/or ABS Term Sheets with
respect to the Notes were last furnished to each prospective
investor and on the date of delivery thereof to the Company
pursuant to this Section 10 and on the Closing Date, such
Computational Materials, Collateral Term Sheets and/or ABS
Term Sheets did not and will not include any untrue statement
of a material fact, or, when read in conjunction with the
Final Prospectus, omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(iv) all Computational Materials, Collateral Term Sheets
and ABS Term Sheets contained and will contain a legend,
prominently displayed on the first page thereof, to the effect
that the Company has not prepared, reviewed or participated in
the preparation of such Computational Materials, Collateral
Term Sheets or ABS Term Sheets, is not responsible for the
accuracy thereof and has not authorized the dissemination
thereof;
(v) all Collateral Term Sheets with respect to the Notes
furnished to potential investors contained and will contain a
legend, prominently displayed on the first page thereof,
indicating that the information contained therein will be
superseded by the description of the Accounts contained in the
Final Prospectus and, except in the case of
17
<PAGE>
the initial Collateral Term Sheet, that such information
supersedes the information in all prior Collateral Term
Sheets; and
(vi) on and after the date hereof, the Underwriter shall
not deliver or authorize the delivery of any Computational
Materials, Collateral Term Sheets, ABS Term Sheets or other
materials relating to the Notes (whether in written,
electronic or other format) to any potential investor unless
such potential investor has received a Final Prospectus prior
to or at the same time as the delivery of such Computational
Materials, Collateral Term Sheets, ABS Term Sheets or other
materials.
Notwithstanding the foregoing, the Underwriter makes no
representation or warranty as to whether any Computational Materials,
Collateral Term Sheets or ABS Term Sheets included or will include any untrue
statement resulting directly from any Collateral Error (except any Corrected
Collateral Error, with respect to materials prepared after the receipt by the
Underwriter from the Company of notice of such Corrected Collateral Error or
materials superseding or correcting such Corrected Collateral Error).
(c) The Underwriter acknowledges and agrees that the Company has
not authorized and will not authorize the distribution of any Computational
Materials, Collateral Term Sheets or ABS Term Sheets to any prospective
investor, and agrees that any Computational Materials, Collateral Term Sheets
or ABS Term Sheets with respect to the Notes furnished to prospective
investors shall include a disclaimer in the form set forth in paragraph
(b)(v) above. The Underwriter agrees that it will not represent to investors
that any Computational Materials, Collateral Term Sheets and/or ABS Term
Sheets were prepared or disseminated on behalf of the Company.
(d) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act, it shall be necessary to amend or
supplement the Final Prospectus as a result of an untrue statement of a
material fact contained in any Computational Materials, Collateral Term
Sheets or ABS Term Sheets provided by the Underwriter pursuant to this
Section 10 or the omission to state therein a material fact required, when
considered in conjunction with the Final Prospectus, to be stated therein or
necessary to make the statements therein, when read in conjunction with the
Final Prospectus, not misleading, or if it shall be necessary to amend or
supplement any Current Report to comply with the Act or the rules thereunder,
the Underwriter, at its expense, promptly will prepare and furnish to the
Company for filing with the Commission an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. The Underwriter represents and warrants to the Company, as of the
date of delivery of such amendment or supplement to the Company, that such
amendment or supplement will not include any untrue statement of a material
fact or, when read in conjunction with the Final Prospectus, omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Company shall have no obligation to
file such amendment or supplement if the Company determines that (i) such
amendment or supplement contains any untrue statement of a material
18
<PAGE>
fact or, when read in conjunction with the Final Prospectus, omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; it being understood, however, that the
Company shall have no obligation to review or pass upon the accuracy or
adequacy of, or to correct, any such amendment or supplement provided by the
Underwriter to the Company pursuant to this paragraph (d) or (ii) such filing
is not required under the Act.
(e) The Underwriter (at its own expense) further agrees to provide
to the Company any accountants' letters obtained relating to the
Computational Materials, Collateral Term Sheets and/or ABS Term Sheets, which
accountants' letters shall be addressed to the Company or shall state that
the Company may rely thereon; provided that the Underwriter shall have no
obligation to procure such letter.
SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
you shall be directed to you at _______________________________________,
Attention:_________; notices to the Company shall be directed to the Company
at 1500 North Dale Mabry Highway, Tampa, Florida 33607, Attention: Dean M.
Fjelstul.
SECTION 12. Parties. This Agreement shall each inure to the benefit
of and be binding upon the Underwriter, the Company, and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
parties hereto or thereto and their respective successors and the controlling
persons and officers and directors referred to in Section 6 and their heirs
and legal representatives, any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision herein or therein
contained. This Agreement and all conditions and provisions hereof and
thereof are intended to be for the sole and exclusive benefit of the parties
and their respective successors and said controlling persons and officers and
directors and their heirs and legal representatives and for the benefit of no
other person, firm or corporation. No purchaser of a Note from the
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. Governing Law and Time. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed in said State.
Specified times of day refer to New York City time.
19
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company counterparts hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the Underwriter and the Company in accordance with its terms.
Very truly yours,
MID-STATE HOMES, INC.
By:
-----------------------
Name:
---------------------
Title:--------------------
CONFIRMED AND ACCEPTED, as of the date first above written:
[UNDERWRITER]
By:
-------------------------
Name:
-----------------------
Title:
----------------------
20
<PAGE>
Schedule I
<TABLE>
<CAPTION>
- --------------------------- -------------------------- -------------------------- -------------------------- ----------------------
Principal Amount of Principal Amount of Principal Amount of Principal Amount of
Underwriter Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
- --------------------------- -------------------------- -------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C>
- --------------------------- -------------------------- -------------------------- -------------------------- -----------------------
$ $ $ $
- --------------------------- -------------------------- -------------------------- -------------------------- -----------------------
$ $ $ $
- --------------------------- -------------------------- -------------------------- -------------------------- -----------------------
$ $ $ $
- --------------------------- -------------------------- -------------------------- -------------------------- -----------------------
$ $ $ $
- --------------------------- -------------------------- -------------------------- -------------------------- -----------------------
$ $ $ $
- --------------------------- -------------------------- -------------------------- -------------------------- -----------------------
</TABLE>
<PAGE>
EXHIBIT A
[Form of New York Counsel Opinion]
A-1
<PAGE>
EXHIBIT B-l
[Form of Florida Counsel Opinion]
B-1-1
<PAGE>
EXHIBIT B-2
[Form of Florida Counsel Opinion]
B-2-1
<PAGE>
EXHIBIT C
[Form of Owner Trustee Opinion]
C-1
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MID-STATE TRUST 199 - ,
Issuer
and
--------------------------
Trustee
INDENTURE
Dated as of _________, 199_
Relating to
$_____________ [ ]% Asset Backed Notes, Class A-1
$_____________ [ ]% Asset Backed Notes, Class A-2
$_____________ [ ]% Asset Backed Notes, Class A-3
$_____________ [ ]% Asset Backed Notes, Class A-4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
SECTION 1.01. General Definitions.................................................................................2
ARTICLE II
THE NOTES
SECTION 2.01. Forms Generally....................................................................................21
SECTION 2.02. Forms of Notes and Certificate of Authentication...................................................22
SECTION 2.03. Notes; General Provisions with Respect to Principal and Interest Payments; Allocation
of Realized Loss Amounts............................................................22
SECTION 2.04. Denominations......................................................................................23
SECTION 2.05. Execution, Authentication, Delivery and Dating.....................................................23
SECTION 2.06. Temporary Notes....................................................................................24
SECTION 2.07. Registration, Registration of Transfer and Exchange................................................24
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Notes.........................................................26
SECTION 2.09. Payments of Principal and Interest.................................................................26
SECTION 2.10. Persons Deemed Owners..............................................................................29
SECTION 2.11. Cancellation.......................................................................................29
SECTION 2.12. Authentication and Delivery of Notes...............................................................29
SECTION 2.13. Non-Petition.......................................................................................32
ARTICLE III
COVENANTS; REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Payment of Notes...................................................................................32
SECTION 3.02. Maintenance of Office or Agency....................................................................32
SECTION 3.03. Money for Note Payments to Be Held in Trust........................................................33
SECTION 3.04. Existence of Issuer................................................................................35
SECTION 3.05. Protection of Trust Estate.........................................................................35
SECTION 3.06. Opinions as to Trust Estate........................................................................36
SECTION 3.07. Performance of Obligations; Servicing Agreement....................................................36
SECTION 3.08. Negative Covenants.................................................................................38
SECTION 3.09. Annual Statement as to Compliance..................................................................39
SECTION 3.10. Recording of Assignments...........................................................................39
SECTION 3.11. Representations and Warranties Concerning the Accounts.............................................39
SECTION 3.12. Trustee's Review of Account Documents..............................................................42
SECTION 3.13. Trust Estate; Account Documents....................................................................44
SECTION 3.14. Amendments to Servicing Agreement..................................................................45
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.15. Servicer as Agent and Bailee of Trustee............................................................45
SECTION 3.16. Investment Company Act.............................................................................46
SECTION 3.17. Business Activity..................................................................................46
SECTION 3.18. Liability of Owner Trustee.........................................................................46
SECTION 3.19. Exculpation of the Trustee.........................................................................47
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture............................................................47
SECTION 4.02. Application of Trust Money.........................................................................48
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. Event of Default...................................................................................49
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.................................................50
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee....................................50
SECTION 5.04. Remedies...........................................................................................52
SECTION 5.05. Optional Preservation of Trust Estate..............................................................53
SECTION 5.06. Trustee May File Proofs of Claim...................................................................55
SECTION 5.07. Trustee May Enforce Claims Without Possession of Notes.............................................56
SECTION 5.08. Application of Money Collected.....................................................................56
SECTION 5.09. Limitation on Suits................................................................................58
SECTION 5.10. Unconditional Rights of Noteholders to Receive Principal and Interest..............................58
SECTION 5.11. Restoration of Rights and Remedies.................................................................59
SECTION 5.12. Rights and Remedies Cumulative.....................................................................59
SECTION 5.13. Delay or Omission Not Waiver.......................................................................59
SECTION 5.14. Control by the Noteholders.........................................................................59
SECTION 5.15. Waiver of Past Defaults............................................................................60
SECTION 5.16. Undertaking for Costs..............................................................................60
SECTION 5.17. Waiver of Stay or Extension Laws...................................................................60
SECTION 5.18. Sale of Trust Estate...............................................................................61
SECTION 5.19. Action on Notes....................................................................................62
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Duties of Trustee..................................................................................62
SECTION 6.02. Notice of Default..................................................................................64
SECTION 6.03. Rights of Trustee..................................................................................64
SECTION 6.04. Not Responsible for Recitals or Issuance of Notes..................................................65
SECTION 6.05. May Hold Notes.....................................................................................65
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.06. Money Held in Trust................................................................................65
SECTION 6.07. Compensation and Reimbursement.....................................................................65
SECTION 6.08. Eligibility; Disqualification......................................................................66
SECTION 6.09. Trustee's Capital and Surplus......................................................................67
SECTION 6.10. Resignation and Removal; Appointment of Successor..................................................67
SECTION 6.11. Acceptance of Appointment by Successor.............................................................68
SECTION 6.12. Merger; Conversion, Consolidation or Succession to Business of Trustee.............................68
SECTION 6.13. Preferential Collection of Claims Against Issuer...................................................69
SECTION 6.14. Co-trustees and Separate Trustees..................................................................69
SECTION 6.15. Authenticating Agents..............................................................................70
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer to Furnish Trustee Names and Addresses of Noteholders.......................................71
SECTION 7.02. Preservation of Information; Communications to Noteholders.........................................72
SECTION 7.03. Reports by Trustee.................................................................................72
SECTION 7.04. Reports by Issuer..................................................................................72
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.01. Collection of Moneys...............................................................................73
SECTION 8.02. Collection Account.................................................................................73
SECTION 8.03. General Provisions Regarding the Collection Account................................................76
SECTION 8.04. Reports by Trustee to Noteholders..................................................................78
SECTION 8.05. Reports by Trustee.................................................................................78
SECTION 8.06. Reports by Independent Accountants.................................................................78
SECTION 8.07. Reports by the Servicer............................................................................79
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of Noteholders.............................................79
SECTION 9.02. Supplemental Indentures with Consent of Noteholders................................................80
SECTION 9.03. Execution of Supplemental Indentures...............................................................81
SECTION 9.04. Effect of Supplemental Indentures..................................................................82
SECTION 9.05. Conformity with Trust Indenture Act................................................................82
SECTION 9.06. Reference in Notes to Supplemental Indentures......................................................82
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE X
REDEMPTION OF NOTES
<S> <C>
SECTION 10.01. Optional Redemption of Notes......................................................................82
SECTION 10.02. Form of Redemption Notice.........................................................................82
SECTION 10.03. Notes Payable on Redemption Date..................................................................83
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions..............................................................83
SECTION 11.02. Form of Documents Delivered to Trustee............................................................84
SECTION 11.03. Acts of Noteholders...............................................................................85
SECTION 11.04. Notices, etc., to Trustee and Issuer..............................................................86
SECTION 11.05. Notices and Reports to Noteholders; Waiver of Notices.............................................86
SECTION 11.06. Rules by Trustee and Agents.......................................................................87
SECTION 11.07. Conflict with Trust Indenture Act.................................................................87
SECTION 11.08. Effect of Headings and Table of Contents..........................................................87
SECTION 11.09. Successors and Assigns............................................................................87
SECTION 11.10. Separability......................................................................................87
SECTION 11.11. Benefits of Indenture.............................................................................87
SECTION 11.12. Legal Holidays....................................................................................88
SECTION 11.13. Governing Law.....................................................................................88
SECTION 11.14. Counterparts......................................................................................88
SECTION 11.15. Recording of Indenture............................................................................88
SECTION 11.16. Issuer Obligations................................................................................88
SECTION 11.17. Inspection........................................................................................88
</TABLE>
iv
<PAGE>
INDENTURE, dated as of ____________, 199_ (herein, as amended or
supplemented from time to time as permitted hereby, called this "Indenture"),
between MID-STATE TRUST 199 - (the "Issuer"), a Delaware business trust and
_______________________, a _________________, as trustee (herein, together with
its permitted successors in the trusts hereunder, called the "Trustee").
PRELIMINARY STATEMENT
The Issuer is a business trust created by a Trust Agreement dated
_________, 199_ between _____________ (in its capacity as Trustee thereunder,
the "Owner Trustee"), and Mid-State Homes, Inc., as Grantor. The Issuer will act
at all times through the Owner Trustee. The Issuer has duly authorized the
execution and delivery of this Indenture to provide for the issuance of its [ ]%
Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), [ ]% Asset Backed Notes,
Class A-2 (the "Class A-2 Notes"), [ ]%, Asset Backed Notes, Class A-3 (the
"Class A-3 Notes") and [ ]% Asset Backed Notes, Class A-4 (the "Class A-4
Notes", and together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Notes") issuable as provided in this Indenture. All covenants and
agreements made by the Issuer herein are for the benefit and security of the
Holders of the Notes and for the benefit and security of the Trustee, in its
individual capacity, to the extent of its interest. The Issuer is entering into
this Indenture, and the Trustee is accepting the trusts created hereby, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
GRANTING CLAUSES
The Issuer hereby Grants to the Trustee, for the exclusive benefit of
the Holders of the Notes, all of the Issuer's right, title and interest in and
to (a) the Accounts listed in the Schedule of Accounts delivered to the Trustee
pursuant to this Indenture and property acquired in respect thereof, including
the related Account Documents and all Monthly Payments that have not been
received prior to the Cut-Off Date hereof regardless of the Due Date for such
Monthly Payment, (b) the Servicing Agreement (including the right to compel
performance by the Subservicer), (c) the Purchase and Sale Agreement, (d) all
cash, instruments or other property held or required to be deposited in the
Collection Account and the Holding Account, including all investments made with
funds in the Collection Account and the Holding Account and all income from
investments made with funds in the Collection Account and the Holding Account,
(e) the Software Rights and (f) all proceeds in any way derived from any of the
foregoing, including all proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or other assets, including, without
limitation, all new Accounts originated in connection with the sale of property
acquired in respect of Accounts, all insurance proceeds and condemnation awards.
Such Grants are made, however, in trust to secure the Notes equally and ratably
without priority or discrimination between any Note and any other Note by reason
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of difference in time of issuance or otherwise, and to secure (i) the payment of
all amounts due on the Notes in accordance with their terms, (ii) the payment of
all other sums payable under this Indenture and (iii) compliance with the
provisions of this Indenture, all as provided in this Indenture. (All terms used
in the foregoing Granting Clauses that are defined in Section 1.01 are used with
the meanings given in said Section.)
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions of this Indenture and agrees to perform the
duties herein required to the end that the interests of the Holders of the Notes
may be adequately and effectively protected.
ARTICLE I
DEFINITIONS
SECTION 1.01. General Definitions.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Indenture, and the definitions of such terms are applicable to
the singular as well as to the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms. The term
"including" shall mean "including without limitation". All other terms used
herein that are defined in the Trust Indenture Act (as hereinafter defined),
either directly or by reference herein, have the meanings assigned to them
therein.
"Account": (i) a building contract or installment sale contract
together with the related Account Note and Mortgage and (ii) any new Account
with a related Account Note and Mortgage entered into in connection with the
liquidation of the items specified in (i) and the sale of property acquired in
respect thereof. The term "Outstanding Accounts" as of any date means the
Accounts other than those which, as of or prior to such date as indicated in any
report of the Servicer delivered to the Trustee pursuant to Section 3.01 of the
Servicing Agreement, have been the subject of a Full Prepayment or as to which
the Servicer has determined that no further amounts can be recovered.
"Account Documents": With respect to each Account (i) the building or
installment sale contract relating to such Account, (ii) the Account Note,
endorsed to the order of the Issuer, without recourse, and endorsed by the
Issuer in blank or to the order of the Trustee, without recourse, (iii) the
original of the recorded Mortgage and the originals of all other documents, if
any, securing said Account Note, (iv) unrecorded Assignments in recordable form
to the Trustee, together with originals or certified copies (to the extent
provided below) of any recorded assignment(s) from the originator of such
Account to the Grantor and from the Grantor to the Issuer, (v) the originals of
any assumption agreement, written assurance or substitution agreement required
to be delivered to the Trustee pursuant to Section 2.10 of the Servicing
Agreement, (vi) all insurance policies, including without limitation fire and
extended hazard insurance policies, related to the Accounts, naming the
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Issuer, the Trustee, the Servicer or the Subservicer as the loss payee of such
policies, and (vii) any and all other documents or instruments in the possession
of the Grantor relating to the Accounts, which evidence, or were created in
connection with the origination of, or necessary for the administration of the
Accounts, including without limitation any credit reports, copies of deeds,
completion certificates, title search reports and loan applications; if the
original copy of any document described in clause (iii), (iv) or (v) has been
retained by the recording office in which such document was recorded, then a
copy thereof certified as true and correct by a duly authorized representative
of such recording office shall be included as part of the Account Documents for
the related Account. Notwithstanding any provision contained herein, the Trustee
shall have no duty to review, maintain custody of or take any action with
respect to the documents set forth in clauses (vi) and (vii) above.
"Account Note": The original note, building or installment sale
contract or other evidence of indebtedness executed by an Obligor that evidences
the indebtedness of such Obligor under an Account.
"Account Number": With respect to any Account, the number assigned to
such Account by the Issuer.
"Accountant": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"Accrual Date": The date upon which interest begins accruing on the
Notes, which date is _________, 199_.
"Act": With respect to any Noteholder, as defined in Section 11.03.
"Affiliate": With respect to any Person, any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent": Any Note Registrar, Paying Agent or Authenticating Agent.
"Aggregate Current Principal Amount": With respect to the Notes, the
aggregate of the Current Principal Amounts of all Notes Outstanding at the time
of determination.
"Aggregate Economic Balance": With respect to the Accounts, the
aggregate of the Economic Balances of all such Accounts at the time of
determination.
"Aggregate Outstanding Principal Balance": As of any Payment Date, an
amount equal to the sum of the Outstanding Principal Balances as of such Payment
Date.
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"Assignments": Collectively, (i) the original instrument of assignment
of such Mortgage, Account Note and other documents made by the Grantor to the
Issuer and (ii) the original instrument of assignment of such Mortgage, Account
Note and other documents made by the Issuer to the Trustee (which in either case
may to the extent permitted by the laws of the state in which the related
Mortgaged Property is located be a blanket instrument of assignment covering
other Mortgages and Account Notes as well and which may also, to the extent
permitted by the laws of the state in which the related Mortgaged Property is
located, be an instrument of assignment running directly from the mortgagee of
record under the related Mortgage to the Trustee).
"Authenticating Agent": The Person, if any, appointed as Authenticating
Agent by the Trustee at the request of the Issuer pursuant to Section 6.15,
until any successor Authenticating Agent is named, and thereafter
"Authenticating Agent" shall mean such successor.
"Authorized Officer": In the case of the Owner Trustee, the President,
any Vice-President, Financial Services Officer or Trust Officer or any other
officer of the Owner Trustee who is authorized to act for the Owner Trustee in
respect of the Issuer.
"Available Funds": With respect to any Payment Date, the sum of (i) the
amount of collections on the Accounts on deposit in the Collection Account at
the close of business on the last Business Day of the related Due Period, plus
(ii) net reinvestment income earned on funds in the Collection Account from the
date two Business Days prior to the preceding Payment Date to the date two
Business Days prior to such Payment Date.
Available Funds will be net of any Issuer Expenses.
"Available Funds Allocation": The allocation of Available Funds
pursuant to Section 8.02(c)(ii) hereof.
"Bank": _____________, a __________________, in its individual capacity
and not as Owner Trustee pursuant to the Trust Agreement, or any successor in
its individual capacity.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the City of New York or in the city in
which the Corporate Trust Office is located are authorized or obligated by law
or executive order to be closed.
"Class" Any one of the classes of Notes issued pursuant to this
Indenture.
"Class A-1 Initial Principal Balance": An amount equal to $___________.
"Class A-1 Optimal Principal Amount": An amount equal to ___________%
of the Optimal Principal Amount, not to exceed the unpaid principal balance of
the Class A-1 Notes.
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"Class A-1 Outstanding Principal Balance": As of any Payment Date, an
amount equal to the Class A-1 Initial Principal Balance reduced by (i) all
payments, if any, made on the Class A-1 Notes, in reduction of principal balance
made on all prior Payment Dates and (ii) all Class A-1 Realized Loss Amounts
with respect to prior Payment Dates.
"Class A-1 Realized Loss Amount": As of any Payment Date, an amount
equal to the excess of (i) the Class A-1 Outstanding Principal Balance as of
such Payment Date (after application of the Class A-1 Optimal Principal Amount,
but prior to the application of losses on such Payment Date) over (ii) the
Aggregate Economic Balance of the Accounts immediately following the Collection
Period related to such Payment Date.
"Class A-2 Initial Principal Balance": An amount equal to $___________.
"Class A-2 Optimal Principal Amount": An amount equal to __________% of
the Optimal Principal Amount, not to exceed the unpaid principal balance of the
Class A-2 Notes.
"Class A-2 Outstanding Principal Balance": As of any Payment Date, an
amount equal to Class A-2 Initial Principal Balance reduced by (i) all payments,
if any, made on the Class A-2 Notes, in reduction of principal balance made on
all prior Payment Dates and (ii) all Class A-2 Realized Loss Amounts with
respect to prior Payment Dates.
"Class A-2 Realized Loss Amount": As of any Payment Date, an amount
equal to the excess of (i) the sum of (a) the Class A-1 Outstanding Principal
Balance as of such Payment Date (after application of the Class A-1 Optimal
Principal Amount, but prior to the application of losses on such Payment Date)
and (b) Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date.
"Class A-3 Initial Principal Balance": An amount equal to
$_____________.
"Class A-3 Optimal Principal Amount": An amount equal to ___________%
of the Optimal Principal Amount, not to exceed the unpaid principal balance of
the Class A-3 Notes.
"Class A-3 Outstanding Principal Balance": As of any Payment Date, an
amount equal to Class A-3 Initial Principal Balance reduced by (i) all payments,
if any, made on the Class A-3 Notes, in reduction of principal balance made on
all prior Payment Dates and (ii) all Class A-3 Realized Loss Amounts with
respect to prior Payment Dates.
"Class A-3 Realized Loss Amount": As of any Payment Date, an amount
equal to the excess of (i) the sum of (a) the Class A-1 Outstanding Principal
Balance as of such Payment Date (after application of the Class A-1 Optimal
Principal Amount, but prior to the application of losses on such Payment Date),
(b) the Class A-2 Outstanding Principal Balance
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as of such Payment Date (after application of the Class A-2 Optimal Principal
Amount, but prior to the application of losses on such Payment Date) and (c) the
Class A-3 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-3 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date.
"Class A-4 Initial Principal Balance": An amount equal to
$____________.
"Class A-4 Optimal Principal Amount": An amount equal to ___________%
of the Optimal Principal Amount, not to exceed the unpaid principal balance of
the Class A-4 Notes.
"Class A-4 Outstanding Principal Balance": As of any Payment Date, an
amount equal to Class A-4 Initial Principal Balance reduced by (i) all payments,
if any, made on the Class A-4 Notes, in reduction of principal balance made on
all prior Payment Dates and (ii) all Class A-4 Realized Loss Amounts with
respect to prior Payment Dates.
"Class A-4 Realized Loss Amount": As of any Payment Date, an amount
equal to the excess of (i) the sum of (a) the Class A-1 Outstanding Principal
Balance as of such Payment Date (after application of the Class A-1 Optimal
Principal Amount, but prior to the application of losses on such Payment Date),
(b) the Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date), (c) the Class A-3 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-3
Optimal Principal Amount, but prior to the application of losses on such Payment
Date) and (d) the Class A-4 Outstanding Principal Balance as of such Payment
Date (after application of the Class A-4 Optional Principal Amount, but prior to
the application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date.
"Class Interest Shortfall": With respect to a Class of Notes on any
Payment Date, an amount equal to the excess, if any, of the Interest Accrual
Amount for such Class of Notes over Available Funds (less any interest paid on
such Payment Date on each Class of Notes senior to such Class of Notes);
provided, however, that such amount shall not include interest due and payable
with respect to unreimbursed Realized Loss Amounts.
"Class Optimal Principal Amount": With respect to a Class of Notes on
any Payment Date, the Class A-1 Optimal Principal Amount, the Class A-2 Optimal
Principal Amount, the Class A-3 Optimal Principal Amount and the Class A-4
Optimal Principal Amount, as applicable.
"Closing Date": The date on which the Notes are first executed,
authenticated and delivered pursuant to Section 2.12.
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"Collateral Deficiency Amount": With respect to a Payment Date, the
amount, if any, by which the Aggregate Current Principal Amount of the Notes
(after giving effect to the principal payment, if any, funded out of Remaining
Available Funds on such Payment Date) exceeds the Aggregate Economic Balance of
the Accounts as of the first day of the month preceding the month of such
Payment Date.
"Collection Account": The trust account or accounts created and
maintained pursuant to Section 8.02.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or if at any time such Commission is not existing and performing the duties now
assigned under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.
"Corporate Trust Office": The designated corporate trust office of the
Trustee located at _______________________________________ or at such other
address as the Trustee may designate from time to time by notice to the
Noteholders and the Issuer, or the principal corporate trust office of any
successor Trustee.
"Cumulative Actual Net Economic Losses": With respect to any Payment
Date, the cumulative excess as of the end of the related Due Period of (A) the
Economic Balance of all Accounts that have been repossessed or that have been
charged off, written off or otherwise reduced, in whole or in part, without any
repossession over (B) the Net Liquidation Proceeds, if any, of such Accounts,
any new Account that is part of such Net Liquidation Proceeds being valued for
this purpose at its Economic Balance, and the remaining Outstanding Economic
Balance of any Account that has been charged-off, written-off or reduced for any
reason, in part but not in whole.
"Current Principal Amount": With respect to any Note as of any date of
determination, the original principal amount of such Note reduced by (i) all
prior payments, if any, made with respect to principal of such Note and (ii) all
Realized Loss Amounts previously allocated to such Note. Reimbursements of
Realized Loss Amounts to a Note pursuant to Section 8.02(c)(ii) shall not reduce
its Current Principal Amount.
"Cut-Off Date": _________, 199_.
"Debt Service Requirement Determination Date": The date prior to each
Payment Date as of which the Trustee is required to compute the amount due and
payable on the Notes on such Payment Date; such date is the fifth Business Day
prior to a Payment Date.
"Default": Any occurrence which is, or with notice or the lapse of time
or both would become, an Event of Default.
"Defective Account": The meaning specified in Section 3.11(b) and
Section 3.12(b).
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"Deleted Account": The meaning specified in Section 3.11(b) and Section
3.12(b).
"Due Date": With respect to any Account, the date each month on which
the Monthly Payment is -------- payable.
"Due Period": With respect to a Payment Date, the three-month period
beginning immediately following the end of the preceding Due Period (or, in the
case of the Due Period which is applicable to the first Payment Date, beginning
on the day after the Cut-Off Date) and ending at the close of business on the
last Business Day in the second month prior to the month in which such Payment
Date occurs.
["DCR": Duff & Phelps Credit Rating Co., and its successors.]
"Economic Balance": With respect to any Account, the present value of
all remaining Monthly Payments from the date of determination discounted monthly
at a rate equal to the Effective Financing Rate; provided, however, that
Accounts with any of the following characteristics on the Cut-Off Date shall be
deemed to have an Economic Balance of zero:
(i) the sum of all Monthly Payments and all other amounts due under such
Account is $____ or less.
(ii) an Economic Balance determined in the manner provided above of zero or
less than zero.
(iii) an Effective Financing Rate of below __% per annum or above _____%
per annum.
(iv) a total number of Monthly Payments greater than 360.
(v) secured by Mortgaged Properties that are not located in Alabama,
Arizona, Arkansas, Florida, Georgia, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Maryland, Mississippi, Missouri, New Mexico, North
Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee,
Texas, Virginia or West Virginia.
"Effective Financing Rate": A discount rate which, when applied in a
present value calculation with respect to any Account using monthly compounding,
results in the present value of all originally scheduled Monthly Payments on
such Account being equal to the amount financed stated on the related building
or installment sale contract or other applicable instrument prior to any Monthly
Payments having been made on such Account.
"Eligible Account" (a) A segregated account or accounts maintained with
a depository institution or trust company whose long-term unsecured debt
obligations are rated by S&P and Moody's at the time of any deposit therein in
one of the three highest rating
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categories (or, if such obligations are, at the time of such deposit, not rated
by S&P or Moody's, then such rating shall be from any of S&P or Moody's) or (b)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution subject to regulations regarding fiduciary
funds on deposit substantially similar to 12 C.F.R. Section 9.10(b).
"Eligible Investments": Any one or more of the following obligations or
securities:
(a) (i) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America or any agency or
instrumentality of the United States of America, the obligations of
which are backed by the full faith and credit of the United States of
America and (ii) direct obligations of, and obligations guaranteed as
to timely payment by, Fannie Mae or Federal Home Loan Mortgage
Corporation only if, at the time of investment, they are assigned the
Highest Credit Rating by the Rating Agencies;
(b) demand and time deposits in, certificates of deposit of, or banker's
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America (including
the Trustee or any agent of the Trustee acting in their respective
commercial capacities) or any State and subject to supervision and
examination by federal and/or State banking authorities; provided that
(1) the commercial paper and/or the debt obligations of such depository
institution (or, in the case of the principal depository institution in
a holding company system, the commercial paper or debt obligations of
such holding company) at the time of such investment or contractual
commitment providing for such investment is assigned the Highest Credit
Rating by the Rating Agencies or (2) the long-term debt securities of
such depository institutions are rated "AAA" and "Aa2" or better by S&P
and Moody's respectively;
(c) repurchase obligations pursuant to a written agreement with respect to
(i) any security described in clause (a) above or (ii) any other
security issued or guaranteed by an agency or instrumentality of the
United States of America, in either case entered into with an entity
whose debt obligations are assigned the Highest Credit Rating by the
Rating Agencies (including, if applicable, the Trustee or any agent of
the Trustee acting in their respective commercial capacities) and in
each case where the Trustee has taken delivery of such security;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America
or any State whose debt obligations are assigned the Highest Credit
Rating by the Rating Agencies at the time of such investment or
contractual commitment providing for such investment; provided,
however, that securities issued by any particular
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corporation will not be Eligible Investments to the extent that such an
investment therein will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the Trust
Estate for the Notes to exceed 10% of the Trust Estate for the Notes;
(e) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance
thereof) which have been assigned the Highest Credit Rating by the
Rating Agencies at the time of such investment;
(f) certificates or receipts representing ownership interests in future
interest or principal payments on obligations described in clause (a)
above which are held by a custodian on behalf of the holders of such
certificates or receipts;
(g) any other demand or time deposit, obligation, security or investment
provided that the Issuer shall have given prior written notice of such
other investment to the Rating Agencies, and the Trustee shall have
received written confirmation from each of the Rating Agencies that no
reduction, withdrawal or qualification in the rating on the Notes by
either such Rating Agency will result from the addition of such
Eligible Investment; and
(h) Eurodollar denominated certificates of deposit or time deposits issued
by a foreign depository institution or a depository institution
organized under the laws of the United States or any state thereof so
long as at the time of such investment or contractual commitment
providing for such investment (1) the commercial paper or other
short-term debt obligations of such depository institution (or, in the
case of a depository institution which is the principal subsidiary of a
holding company, the commercial paper or other short-term debt
obligations of such holding company) have the Highest Credit Ratings
available from the Rating Agencies; or (2) the long-term debt
securities of such depository institution are rated "AAA" and "Aa2" or
better by S&P and Moody's, respectively.
"Eligible Moneys": Any moneys on deposit in trust with the Trustee for
the benefit of the Noteholders with respect to which the Trustee has received an
unqualified opinion of counsel nationally recognized as expert in bankruptcy
acceptable to the Trustee that payment of such amounts to the Noteholders would
not constitute avoidable preferences under Section 547 of the United States
Bankruptcy Code or similar state laws with avoidable preference provisions in
the event of the filing of a petition for relief under the United States
Bankruptcy Code or similar state laws with avoidable preference provisions by or
against the Issuer or any borrower or the person from whom the money is
received, if other than the Issuer or the borrower.
"Event of Default": The meaning specified in Section 5.01.
"Stated Maturity Date": _________, 20__.
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"Final Scheduled Payment Date": The Payment Date on ________, __.
["Fitch": Fitch IBCA, Inc., and its successors.]
"FHLMC": Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
"FNMA": Fannie Mae, a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act, or any successor thereto.
"Full Prepayment": Payment to the Servicer, whether by the Obligor or
through Insurance Proceeds, of an amount with respect to an Account such that
the full amount due with respect to such Account has been paid.
"Grant": To mortgage, pledge, assign and grant a security interest in.
A Grant of an Account and the related Account Documents, an Eligible Investment,
a Servicing Agreement or any other instrument shall include all rights, powers
and options (but none of the obligations) of the Granting party thereunder,
including without limitation the immediate and continuing right to claim,
collect, receive and receipt for payments in respect of the Account or Eligible
Investment, insurance proceeds, condemnation awards, purchase prices and all
other moneys payable thereunder and all proceeds thereof, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Grantor": Mid-State Homes, Inc., a Florida corporation, in its
capacity as grantor of the Trust, and as otherwise defined in the Trust
Agreement.
"Hazard Insurance Policy": With respect to each Account, the policy of
fire and extended coverage insurance required to be maintained for the related
Mortgaged Property, as provided in Section 2.13 of the Servicing Agreement, and
which, as provided in said Section 2.13, may be a blanket mortgage impairment
policy maintained by the Servicer in accordance with the terms and conditions of
said Section 2.13.
"Hazard Insurer": The named insurer in any Hazard Insurance Policy.
"Highest Credit Rating": With respect to Moody's, P-1 or Aaa and with
respect to S&P, A1+ or AAA.
"Holding Account": The account created and maintained pursuant to the
Holding Account Agreement.
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"Holding Account Agreement": The Holding Account Agreement dated as of
_______, 199_ among ______________________, as custodian for the Trustee, the
Servicer and the Issuer.
"Indenture" or "this Indenture": This instrument as originally executed
and, if from time to time supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
as so supplemented or amended. All references in this instrument to designated
"Articles", "Sections", "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of this
instrument as originally executed. The words "herein", "hereof", "hereunder" and
other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section, Subsection or other subdivision.
"Independent": When used with respect to any specified Person means
such a Person who (1) is in fact independent of the Issuer, any Affiliate of the
Issuer, any other obligor upon the Notes and any Affiliate of any such other
obligor, (2) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (3) is not connected with the
Issuer, any Affiliate of the Issuer, any such other obligor or any Affiliate of
any such other obligor as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions. Whenever it is herein
provided that any Independent Person's opinion or certificate shall be furnished
to the Trustee, such Person shall be appointed by an Issuer Order and approved
by the Trustee in the exercise of reasonable care and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning thereof.
"Individual Note": A Note of an initial principal amount of $1,000; a
Note of an original principal amount in excess of $1,000 shall be deemed to be a
number of Individual Notes equal to the quotient obtained by dividing such
initial principal amount by $1,000.
"Insurance Proceeds": Amounts paid by a Hazard Insurer with respect to
a particular Mortgaged Property pursuant to any related Hazard Insurance Policy
or paid by any other insurer with respect to a particular Mortgaged Property
pursuant to any other related insurance policy.
"Insured Expenses": Expenses incurred by the Servicer in connection
with an Account under which the mortgagor is in default which are covered by any
related Hazard Insurance Policy and are paid by the Hazard Insurer under any
such policy.
"Interest Accrual Amount": As to any Class of Notes for any Payment
Date, an amount equal to the interest accrued on the Outstanding Principal
Balance of such Class of Notes (after giving effect to payments and allocations
of losses on the preceding Payment Date) during the Interest Accrual Period
ending on the day prior to the Payment Date at the applicable Note Interest Rate
for such Class of Notes; provided, however, that such amount shall not include
interest due and payable with respect to unreimbursed Realized Loss Amounts.
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"Interest Accrual Period": The three-month period ending on the day
prior to such Payment Date.
"Interest Payment Date": Each January 1, April 1, July 1 and October 1
commencing __________, 199_.
"Issuer": Mid-State Trust 199 - , a Delaware business trust created
pursuant to the Trust Agreement, until a successor Person shall have become the
Issuer pursuant to the applicable provisions of this Indenture, and thereafter
"Issuer" shall mean such successor Person.
"Issuer Expenses": All operating expenses of the Issuer (exclusive of
interest on the Notes, but including the fees and expenses of the Owner Trustee,
the Trustee, the Successor Servicer and the Servicing Fee).
"Issuer Order" and "Issuer Request": A written order or request signed
in the name of the Issuer by an Authorized Officer, and delivered to the
Trustee.
"Liquidation Expenses": Expenses incurred by the Servicer in connection
with the liquidation of any Account which is in default and the sale of any
property acquired in respect thereof which are not recoverable as Insured
Expenses and are otherwise reimbursable to the Servicer in accordance with
Sections 2.07(c), 2.11 and 2.15 of the Servicing Agreement.
"Liquidation Proceeds": Cash and new Account Notes with related
security instruments received by the Servicer (before reimbursement of the
Servicer for Liquidation Expenses) in connection with the liquidation of any
Account which is in default and the sale of any property acquired in respect
thereof, whether as Insurance Proceeds or through trustee's sale, foreclosure
sale or otherwise.
"Maturity": With respect to the Notes, the date on which the entire
unpaid principal amount of the Notes becomes due and payable as therein or
herein provided, whether at the date specified therefor in the Notes or by
declaration of acceleration, call for redemption or otherwise.
"Maturity Date": With respect to any Account, the date on which the
last payment of principal of such Account shall be due and payable.
"Minimum Target Overcollateralization Amount": For any Payment Date,
(a) an amount equal to the greater of (i) the product of (x) 10% and (y) the
Aggregate Economic Balance of the Accounts as of the first day of the month
preceding the month of such Payment Date and (ii) $_________ or (b) in the event
that(i) Mid-State Homes, Inc. is no longer the Servicer, (ii) the cumulative
losses on the Accounts exceed _____%, _____%, _____%, _____% and _____% of the
Aggregate Economic Balance as of the Cut-Off Date at the end of four, five, six,
seven, and eight years after the Cut-Off Date, respectively, or exceed _____%
thereafter, or (iii) the Average 60 Day Delinquency Ratio Test as of any Payment
Date
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<PAGE>
exceeds _____%, and such event is continuing, an amount equal to the greater of
(a) the Aggregate Outstanding Principal Balance of the Notes and (b) the
Aggregate Economic Balance of the Accounts as of the month preceding the month
of such Payment Date.
"Month of Closing": The month in which the Closing Date occurs.
"Monthly Cut-Off Date": As defined in the Servicing Agreement.
"Monthly Payment": With respect to any Account, the scheduled monthly
payment payable to the holder of such Account in accordance with the terms of
the related Account Note.
"Moody's": Moody's Investors Service, Inc. and its successors.
"Mortgage": With respect to an Account, the original mortgage, deed of
trust, mechanic's lien contract or other security instrument executed by an
Obligor which creates a lien on real property and improvements thereon securing
an Account Note, or any Trust Mortgage.
"Mortgaged Property": The real property and improvements thereon that
are subject to a Mortgage.
"Net Liquidation Proceeds": With respect to any Account, the amount
derived by subtracting from the Liquidation Proceeds of such Account the related
Liquidation Expenses.
"Note Interest Rate": With respect to each Class, the annual rate at
which interest accrues on such Class of Notes, as specified in such Class of
Notes and in Section 2.03.
"Note Register" and "Note Registrar": As defined in Section 2.07.
"Notes": Any notes authorized by, and authenticated and delivered
under, this Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is registered
in the Note Register.
"Obligor": Each Person who is indebted under an Account Note or who has
acquired real property subject to the Mortgage securing an Account Note.
"Officers' Certificate": A Certificate signed by two Authorized
Officers.
"Opinion of Counsel": A written opinion of counsel who may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer and
who shall be satisfactory to the Trustee.
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<PAGE>
"Optimal Principal Amount": An amount equal to (A) on any Payment Date
(i) on or prior to the Target Overcollateralization Date or (ii) after the
Target Overcollateralization Date and on which there exists an uncured Trigger
Event, the Remaining Available Funds; and (B) on any Payment Date after the
Target Overcollateralization Date on which there does not exist an uncured
Trigger Event, the amount which, when paid as principal on the Notes, will
result in achieving or maintaining the Target Overcollateralization Level;
provided that in no event will the Optimal Principal Amount for any Payment Date
exceed the Remaining Available Funds for such Payment Date or the Aggregate
Outstanding Principal Balance of the Notes.
"Outstanding": As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except: (i) Notes theretofore
cancelled by the Note Registrar or delivered to the Note Registrar for
cancellation; (ii) Notes or portions thereof for whose payment or redemption
money (complying with Section 4.01) in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Issuer) in trust
for the Holders of such Notes; provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Trustee, has been made; and
(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 Trustee is presented that any such Notes are held by a Holder in due
course; provided, however, that in determining whether the Holders of the
requisite percentage of the Aggregate Current Principal Amount of the
Outstanding Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Notes owned by the Issuer, any other
obligor upon the Notes or any Affiliate of the Issuer or such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, or waiver, only
Notes which the Trustee knows to be so owned shall be so disregarded. Notes so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Issuer, any
other obligor upon the Notes or any Affiliate of the Issuer or such other
obligor.
"Outstanding Principal Balance": Any of the Class A-1 Outstanding
Principal Balance, Class A-2 Outstanding Principal Balance, Class A-3
Outstanding Principal Balance, and Class A-4 Outstanding Principal Balance.
"Overcollateralization Amount": With respect to a Payment Date, the
amount equal to (a) the Aggregate Economic Balance of the Accounts on the first
day of the month preceding the month of such Payment Date less (b) the sum of
the Aggregate Outstanding Principal Balance and all unreimbursed Realized Loss
Amounts, in each case after giving effect to the payments made; but prior to the
allocation of losses thereon on such Payment Date.
"Overcollateralization Percentage": A fraction expressed as a
percentage the numerator of which is equal to the excess of (i) the Aggregate
Economic Balance of the
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<PAGE>
Accounts as of the first day of the month preceding the month in which the
Target Overcollateralization Date occurs over (ii) the Aggregate Outstanding
Principal Balance of all Classes of Notes and all unreinbursed Realized Loss
Amounts with respect to all Classes of Notes on the Target Overcollateralization
Date (after giving effect to payments and allocations of losses on the Target
Overcollateralization Date) and the denominator of which is the Aggregate
Economic Balance of the Accounts as of the first day of the month preceding the
month in which the Target Overcollateralization Date occurs.
"Owner Trustee": ________________, acting not in its individual
capacity but solely as Owner Trustee with respect to the Issuer, or such
successor person as shall become Owner Trustee pursuant to applicable provisions
of this Indenture and shall be Owner Trustee under, or become Owner Trustee
pursuant to applicable provisions of the Trust Agreement.
"Paying Agent": The Trustee or any other depository institution or
trust company that is authorized by the Issuer pursuant to Section 3.03 to pay
the principal of, or interest on, any Notes on behalf of the Issuer.
"Payment Date": Any date which is an Interest Payment Date or Principal
Payment Date for the Notes.
"Payment Date Statement": As defined in Section 2.09(e).
"Person": Any individual, corporation, partnership, limited liability
company, joint venture, association, joint stockcompany, trust (including any
beneficiary thereof), unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Notes": With respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.08 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note.
"Principal Payment Date": One of the fixed dates on which an
installment of principal is due and payable on the Notes; such dates are each
January 1, April 1, July 1 and October 1 beginning _________, 199_.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative Proceeding.
"Purchase and Sale Agreement": The Purchase and Sale Agreement, dated
as of ____________, 199_, between Mid-State Homes, Inc. and Mid-State Trust 199
- - which provides for, among other things, the purchase by Mid-State Trust 199 -
of all interest of Mid-State Homes, Inc. in the Accounts.
"Qualified Substitute Account" means an account substituted by the
Issuer for a Deleted Account which must, on the date of such substitution, (i)
have an outstanding
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<PAGE>
Economic Balance, after deduction of all scheduled payments due in the month of
substitution, not less than the Economic Balance of the Deleted Account (the
amount of any shortfall will be deposited into the Collection Account by the
Issuer, pursuant to Section 3.11(b), for distribution to Noteholders in the
month following the month of substitution), (ii) have an Effective Financing
Rate not less than (and not more than one percentage point greater than) the
Effective Financing Rate of the Deleted Account, and (iii) comply with each
representation and warranty set forth in Section 3.11(a). In the event that
either one account is substituted for more than one Deleted Account, or more
than one account is substituted for one or more Deleted Accounts, then the
amount described in clause (i) hereof shall be determined on the basis of
aggregate Economic Balances.
"Rating Agencies": Each of [S&P][Moody's][Fitch][DCR].
"Realized Loss Amounts": Any of the Class A-1 Realized Loss Amount,
Class A-2 Realized Loss Amount, Class A-3 Realized Loss Amount and Class A-4
Realized Loss Amount.
"Record Date": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Notes
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the 15th day of the month preceding the
month of such Payment Date.
"Redemption Date": Any Principal Payment Date on which Notes are to be
redeemed at the option of the Issuer pursuant to Article X.
"Redemption Price": With respect to any Note to be redeemed pursuant to
Article X hereof, an amount equal to 100% of the Current Principal Amount of the
Note to be so redeemed (prior to allocations of any Realized Loss Allocation
Amounts), together with interest on such amount at the applicable Note Interest
Rate from the latest date to which interest has been paid to the applicable
Redemption Date.
"Remaining Available Funds": With respect to any Payment Date, an
amount (which shall not be less than zero) equal to (i) the Available Funds for
such Payment Date reduced by (ii) the amount of interest due and payable on the
unpaid principal Balance of the Notes on such Payment Date (excluding interest
on any Realized Loss Amounts).
"Remittance": With respect to any one or more Accounts for any
particular date or period, the net amount with respect to collections or
receipts on such Account or Accounts for such date or period that is required to
be remitted by the Servicer to the Trustee for deposit in the Collection
Account.
"Remittance Date": The first Business Day of each week, beginning with
the week after the Closing Date and the first Business Day following the end of
each Due Period.
"Responsible Officer": With respect to the Trustee, the chairman or
vice-chairman of the board of directors, the chairman or vice-chairman of the
executive committee
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<PAGE>
of the board of directors, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any trust officer or assistant trust officer, the
controller, any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Sale": As defined in Section 5.18.
"Schedule of Accounts": Collectively, the list of Accounts being
Granted to the Trustee as part of the Trust Estate on the Closing Date appearing
on a magnetic tape delivered to the Trustee on the Closing Date which list shall
set forth the following information as of the Cut-Off Date with respect to each
such Account in numbered columns:
<TABLE>
<CAPTION>
Column Number Information
------------- -----------
<S> <C>
1 Account Number
2 Zip Code
3 First Payment Date
4 Total number of payments to be made
5 Monthly Payment
6 Original amount of the note
7 Total finance charge over the term of the note
8 Paid-through date
9 Status code
10 Resale or original
11 Amount of late charges due
12 Date of last payment received
13 Account balance
14 Taxes due
15 Insurance due
16 Late charges due
17 Other charges due
18 Rebate method
</TABLE>
"Servicer": Mid-State Homes, Inc., a Florida corporation, as servicer
under the Servicing Agreement, and its permitted successors and assigns
thereunder, including any successor servicer appointed pursuant to Section
3.07(d).
"Servicer Reporting Date": The date each month on which the Servicer is
required pursuant to Section 3.01 of the Servicing Agreement to report to the
Issuer, the Successor Servicer, the Accountants and the Trustee information
concerning the Accounts,
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<PAGE>
including all collections on the Accounts received by it during the related
Remittance Period (as defined in the Servicing Agreement), which date shall be
the 20th day of each month following such Remittance Period or, if such day is
not a Business Day, the next preceding Business Day.
"Servicing Account": As defined in Section 2.08(b) of the Servicing
Agreement.
"Servicing Agreement": The Servicing Agreement, dated as of the date of
this Indenture, among the Issuer, the Servicer and the Trustee, providing, among
other things, for the servicing of the Accounts, as said agreement may be
amended or supplemented from time to time as permitted hereby and thereby. Such
term shall also include any servicing agreement entered into with a successor
servicer pursuant to Section 3.07(d) hereof.
"Servicing Default": Any default by the Servicer under the Servicing
Agreement that is an "Event of Default" under the Servicing Agreement, as
specified in Section 5.01 thereof.
"Servicing Fee": With respect to any Account, other than an Account
with respect to which (i) the related Mortgaged Property has been repossessed or
(ii) the related Economic Balance is zero pursuant to the proviso of the
definition of "Economic Balance", the fee payable to the Servicer under the
Servicing Agreement, which fee shall be $____ annually, payable in equal monthly
installments.
"Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Accounts whose name
appears on a list of servicing officers furnished to the Issuer and the Trustee
by the Servicer, as such list may be amended or supplemented from time to time.
"Software Rights": All rights and interests in various software
programs, any equipment or other property necessary or appropriate to service
the Accounts whether such rights and interests are now owned, held, or after
acquired by Mid-State as contemplated by the License and Assignment of Rights in
Servicing Property attached as Exhibit E to the Servicing Agreement.
"Sub-Servicer": As defined in the Servicing Agreement.
"Successor Servicer": The Person appointed, or required to act as,
Successor Servicer pursuant to Section 3.07 hereof.
"Target Overcollateralization Date": The Payment Date occurring in
___________.
"Target Overcollateralization Level": As of any Payment Date, the level
of overcollateralization that would exist if the Overcollateralization Amount
were equal to the greater of (i) the product of (x) the Overcollateralization
Percentage and (y) the Aggregate
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<PAGE>
Economic Balance of the Accounts as of the first day of the month preceding the
month of such Payment Date and (ii) the Minimum Target Overcollateralization
Amount.
"Trigger Event": Any one of the following events:
(a) the Issuer fails to make a payment due hereunder and such
failure continues for two Business Days;
(b) the Servicer fails to make a required payment or deposit due
under the Servicing Agreement and such failure continues for four Business Days;
(c) An Event of Default (as defined in the Servicing Agreement) occurs
under Section 5.01(a)(iii), (iv), (v), (vi) or (vii) of the Servicing Agreement;
(d) a breach of any covenant of the Servicer in the Servicing
Agreement which may have a materially adverse effect on the Servicer or its
performance under the Servicing Agreement is not cured within 60 days after the
Servicer becomes aware thereof or after notice thereof from any Person;
(e) any representation or warranty by Mid-State Homes, Inc. in the
Purchase and Sale Agreement, or any representation or warranty by the Issuer
herein, is incorrect and such breach may have a material adverse effect on the
Issuer or the Noteholders and is not cured, or the related Account is not
substituted for or repurchased by Mid-State and in either case released from the
lien of the Indenture, within 90 days after notice thereof from the Trustee;
(f) there shall occur the entry of a decree or order for relief by a
court having jurisdiction in respect of the Issuer in an involuntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any other present
or future federal or state bankruptcy, insolvency or similar law, or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days;
(g) there shall occur the commencement by the Issuer of a voluntary
case under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or similar law,
or the consent by the Issuer to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property or the
making by the Issuer of an assignment for the benefit of creditors or the
failure by the Issuer generally to pay its debts as such debts become due or the
taking of corporate action by the Issuer in furtherance of any of the foregoing;
(h) the Purchase and Sale Agreement, the Servicing Agreement or this
Indenture cease to be in full force and effect; or
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<PAGE>
(i) the lien of the Indenture ceases to be effective or ceases to be of
a first priority.
"Trust": The trust established by the Trust Agreement.
"Trust Agreement": The trust agreement, dated as of ________, 199_
between the Bank and the Grantor.
"Trust Estate": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Holders of the Notes as of any particular time (including all property and
interests Granted to the Trustee in the Granting Clauses of this Indenture),
including all proceeds thereof, and all right, title and interest of the Trustee
in, to and under the Servicing Agreement and all money and property received by
the Trustee pursuant thereto in respect of the Accounts.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939, as
amended, as in force at the Closing Date, unless otherwise specifically
provided.
"Trust Mortgage": Any mortgage, deed of trust or similar security
instrument from the Issuer to the Trustee encumbering a Mortgaged Property owned
by the Issuer whether as part of an Account transferred on the Closing Date or
pursuant to a foreclosure or repossession of Mortgaged Property.
"Trustee": _________________, a ___________________, until a successor
Person shall have become the Trustee pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean such successor Person.
"Vice President": With respect to the Trustee, any vice president,
whether or not designated by a number or a word or words added before or after
the title "vice president".
"Voting Rights": With respect to a Class of Notes, a fraction,
expressed as a percentage, the numerator of which is equal to the Aggregate
Current Principal Amount of such Class of Notes and the denominator of which is
equal to the Aggregate Current Principal Amount of all Classes of Notes.
ARTICLE II
THE NOTES
SECTION 2.01. Forms Generally.
The Notes and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, 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
21
<PAGE>
as may be required to comply with the rules of any securities exchange on which
the Notes may be listed, or as may, consistently herewith, be determined by the
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 on the face of the Notes.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution thereof.
SECTION 2.02. Forms of Notes and Certificate of Authentication.
(a) The form of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes and the Class A-4 Notes shall be as set forth respectively as
Exhibits A, B, C and D hereto.
SECTION 2.03. Notes; General Provisions with Respect to Principal and
Interest Payments; Allocation of Realized Loss Amounts.
(a) The aggregate principal amount of Notes that may be authenticated
and delivered under the Indenture is limited to $___________, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, 2.08 or 9.06 of
this Indenture.
The Notes shall be divided into four Classes having designations,
original principal amounts, Note Interest Rates and Maturity Dates as follows:
<TABLE>
<CAPTION>
Original
Designation Principal Amount Note Interest Rate Maturity Date
- ----------- ---------------- ------------------ -------------
<S> <C> <C> <C>
Class A-1 Notes $ [ ] [ ]
Class A-2 Notes $ [ ] [ ]
Class A-3 Notes $ [ ] [ ]
Class A-4 Notes $ [ ] [ ]
</TABLE>
The principal of each Note shall be payable in installments ending no
later than the Maturity of the final installment of the principal thereof unless
the unpaid principal of such Note becomes due and payable at an earlier date by
declaration of acceleration or call for redemption or otherwise.
Interest on the Notes of each Class shall be payable on each Interest
Payment Date in the amount of the sum of (i) the Interest Accrual Amount for
such Class of Notes and (ii) all Class Interest Shortfalls for such Class of
Notes that have not previously been paid, together with accrued interest on such
Class Interest Shortfalls at the related Note Interest Rate to the extent
permitted by law. All payments made with respect to any Note shall be applied
first to the interest then due and payable on the current principal amount
outstanding on such
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<PAGE>
Note and then to the principal thereof. All computations of interest accrued on
any Note shall be made as if each year consisted of twelve months of thirty days
each.
On each Payment Date, any Class A-1 Realized Loss Amount will be
applied in reduction of the Class A-1 Outstanding Principal Balance; any Class
A-2 Realized Loss Amount will be applied in reduction of the Class A-2
Outstanding Principal Balance; any Class A-3 Realized Loss Amount will be
applied in reduction of the Class A-3 Outstanding Principal Balance; any Class
A-4 Realized Loss Amount will be applied in reduction of the Class A-4
Outstanding Principal Balance; in each case, until the Outstanding Principal
Balance of such Class has been reduced to zero.
All payments of principal of and interest on any Note shall be made in
the manner specified in Section 2.09 and the amounts prescribed in Section 5.08.
Notwithstanding any of the foregoing provisions with respect to
payments of principal of and interest on the Notes, if the Notes have become or
been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled and the provisions of Section 5.05(a) are not applicable, then payments
of principal of and interest on the Notes shall be made in accordance with
Section 5.08.
All Notes of the same Class shall be identical in all respects except
for the denominations, Note numbers and dates thereof. All Notes of the same
class issued under this Indenture shall be in all respects equally and ratably
entitled to the benefits hereof without preference, priority or distinction on
account of the actual time or times of authentication and delivery, all in
accordance with the terms and provisions of this Indenture.
SECTION 2.04. Denominations.
The Notes shall be issuable only as registered Notes in minimum
denominations of $1,000.
SECTION 2.05. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Issuer by its Authorized
Officer. The signature of any of these officers on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers shall bind the Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Notes or did not hold such offices at the
date of such Notes.
The Notes which are authenticated and delivered by the Trustee to or
upon the order of the Issuer on the Closing Date shall be dated the Accrual
Date. All other Notes which are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
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<PAGE>
The Notes may be authenticated by the Trustee either at the Corporate
Trust Office or at the Trustee's office or agency in the Borough of Manhattan,
City and State of New York.
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 in the
related exhibit hereto executed by the Trustee or by any Authenticating Agent by
the manual signature of one of its authorized officers, employees or
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 2.06. Temporary Notes.
Pending the preparation of definitive Notes, the Issuer may execute,
and upon Issuer Order the Trustee shall authenticate and deliver, temporary
Notes which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they may be so issued and with such variations
as the officers executing such Notes may determine, as evidenced by their
execution of such Notes.
If temporary Notes are issued, the Issuer will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender or cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver and exchange therefor a
like principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
SECTION 2.07. 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 Trustee is hereby initially appointed "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar appointed by the Issuer, the Issuer shall
promptly appoint a successor or, in the absence of such appointment, shall
assume the duties of Note Registrar.
At any time at which the Trustee is not also the Note Registrar, the
Trustee shall be a co-Note Registrar. The Trustee, if it shall ever be serving
as co-Note Registrar, shall furnish the Note Registrar promptly after each
authentication of a Note by the Trustee appropriate information with respect
thereto for entry by the Note Registrar into the Note Register. If the Trustee
shall at any time not be authorized to keep and maintain the Note Register, the
Trustee shall have the right to inspect such Note Register at all reasonable
times
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<PAGE>
and to rely conclusively upon a certificate of the Person in charge of the Note
Register as to the names and addresses of the holders of the Notes and the
principal amounts and numbers of such Notes so held.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denominations, and of the same Class and a like aggregate principal
amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class of any authorized denominations and of a like aggregate initial
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver, 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, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge as may be imposed in connection with
any registration of transfer or exchange of Notes, other than exchanges pursuant
to Section 2.08 not involving any transfer.
The Notes will initially be represented by certificated Notes
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"). No person acquiring a beneficial interest in a Note will be entitled to
receive a certificated Note, except as described in the next paragraph of this
Section 2.07.
The Notes will be issued to and registered in the Note Register in the
name of a person acquiring a beneficial interest in such Notes only if (i) the
Trustee receives a written notice from the Issuer that DTC is no longer willing
or able to discharge properly its responsibilities as depository with respect to
the Notes and the Issuer is unable to locate a qualified successor or (ii) the
Issuer, at its option, elects to terminate the book-entry system through DTC.
Upon the occurrence of either event described in clauses (i) and (ii) above, the
Trustee shall notify DTC of the occurrence of either such event. Upon surrender
by DTC of the certificated Notes and satisfaction of the conditions set forth in
this Section 2.07 of the Indenture for the registration of transfer and receipt
by the Trustee of a list of the names and addresses of the beneficial owners of
the Notes in whose name the Notes are to be registered, new Notes shall be
delivered pursuant to this Section 2.07.
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SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Notes.
If (1) any mutilated Note is surrendered to the Trustee or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (2) there is delivered to the Trustee such security or indemnity as
may be required by the Trustee to save each of the Trustee and the Issuer
harmless, then, in the absence of notice to the Issuer or the Trustee that such
Note has been acquired by a bona fide purchaser, the Issuer shall execute and
upon its direction the Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note or
Notes of the same Class, tenor and aggregate initial principal amount bearing a
number not contemporaneously outstanding; provided, however, that if any such
mutilated, destroyed, lost or stolen Note shall have become or shall be about to
become due and payable, or shall have become subject to redemption in full,
instead of issuing a new Note, the Issuer may pay such Note without surrender
thereof, except that any mutilated Note shall be surrendered. If, after the
delivery of such new 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 new Note was issued presents for payment
such original Note, the Issuer and the Trustee shall be entitled to recover such
new Note (or such payment) from the Person to whom it was delivered or any
Person taking such new Note from 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
Trustee in connection therewith.
Upon the issuance of any new Note under this Section, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Except to the extent provided in the first paragraph of this Section
2.08, every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately, to the extent provided
herein, with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.09. Payments of Principal and Interest.
(a) Any installment of interest or principal payable on any Note which
is punctually paid or duly provided for by the Issuer on the applicable Payment
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered at the close of business on the Record Date for
such Payment Date by check mailed to such Person's address as it appears in the
Note Register on such Record Date, except that with respect to a Note registered
in the name of the nominee of a clearing agency (initially, such
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nominee to be Cede & Co.) payments will be made by wire transfer in immediately
available funds to the account designated by such nominee in writing at least
two Business Days prior to such Payment Date and except for the final
installment of principal payable with respect to such Note (or the Redemption
Price for any Note called for redemption), which shall be payable as provided in
subsection (b) of this Section 2.09. Any installment of interest or principal
not punctually paid or duly provided for shall be payable in the manner and to
the Persons specified in subsection (c) of this Section 2.09.
(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by means of an allocation of the Realized Loss
Allocation Amount or by payments of installments of principal made on any
Payment Date shall be binding upon all Holders of such Note and of any Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, whether or not such payment is noted on such Note. The final
installment of principal of each Note (including the Redemption Price of any
Note called for redemption pursuant to Section 10.01) shall be payable only upon
presentation and surrender thereof on or after the Payment Date or Redemption
Date therefor at the Corporate Trust Office or at the office or agency of the
Issuer maintained by it for such purpose set forth in Section 3.02.
Whenever, on the basis of Remittances on the Accounts received and
expected to be received during the related Due Periods or on the related Payment
Date, as applicable, the Issuer expects that the entire remaining unpaid
principal amount of the Notes will become due and payable on the next Principal
Payment Date, it shall, no later than ten days prior to such Principal Payment
Date, mail or cause to be mailed to each Person in whose name a Note to be so
retired is registered at the close of business on the Record Date that would
otherwise be applicable to such Principal Payment Date a notice to the effect
that:
(i) the Issuer expects that funds sufficient to pay such final
installment will be available in the Collection Account on such Principal
Payment Date, and
(ii) if such funds are available, (A) such final installment will be
payable on such Payment Date, but only upon presentation and surrender of
such Note at the Corporate Trust Office or at the office or agency of the
Issuer maintained for such purpose pursuant to Section 3.02 (the addresses
of which shall be set forth in such notice), and (B) no interest shall
accrue on such Note after such Principal Payment Date. Notices in
connection with redemptions of Notes shall contain the information set
forth in, and be mailed in accordance with, Section 10.02.
(c) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to unpaid principal and
interest that were carried by such other Note. Any checks mailed pursuant to
subsection (a) of this Section 2.09 and returned undelivered shall be held in
accordance with Section 3.03.
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(d) Not later than each Debt Service Requirement Determination Date,
the Trustee shall prepare and deliver to the Issuer a statement with respect to
the following Payment Date (a "Payment Date Statement") setting forth:
(i) the amount of Issuer Expenses paid or due to be paid in respect of
the related Due Period;
(ii) the amount of the Available Funds for such Payment Date;
(iii) the amount of interest then due and payable on the Notes then
Outstanding (stated separately as to each Class);
(iv) the Optimal Principal Amount for each Class;
(v) whether the Available Funds for such Payment Date will be
sufficient to pay on such Payment Date all amounts specified in clause
(iii) and, if not, the percentages of such amount which may be paid in
accordance with the priorities set forth in Section 8.02(c) from the
amounts expected to be available in the Collection Account;
(vi) the Class Interest Shortfall (stated separately as to each Class);
(vii) the Collateral Deficiency Amount, if any;
(viii) the amounts included in such statement pursuant to clauses (iii)
and (iv), expressed in each case per Individual Note, to be paid on such
Payment Date;
(ix) the amount, if any, to be released to the Issuer pursuant to
clause twenty-first of Section 8.02(c)(ii);
(x) the total Realized Loss Amounts and amount allocated to each Class
of Notes and interest thereon;
(xi) the unpaid principal amount of each Class of Notes which will
remain after giving effect to the payments to be made on such Payment Date
expressed both on an aggregate basis and per Individual Note;
(xii) the Cumulative Actual Net Economic Losses as of the end of the
related Due Period;
(xiii) the Economic Balance as of the end of the related Due Period of
Accounts with respect to which there is a material breach of any
representation or warranty made in Section 3.11 or as to which there is a
material defect in the related Account Documents in accordance with Section
3.12(b);
(xiv) the Minimum Target Overcollateralization Amount; and
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(xv) cumulative unreimbursed Realized Loss Amounts
Each Payment Date Statement shall be delivered by the Trustee to the
Issuer, each designee of the Issuer specified in writing to the Trustee, S&P,
the firm of Independent Accountants appointed by the Issuer pursuant to Section
8.06(a) and, upon request, to the beneficial owners of the Notes.
SECTION 2.10. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Trustee, any Agent and any other agent of the Issuer or the Trustee
may treat the Person in whose name any Note is registered as the absolute owner
of such Note for all purposes whatsoever, whether or not such Note is overdue,
and neither the Issuer, the Trustee, any Agent nor any other agent of the Issuer
or the Trustee shall be affected by notice to the contrary.
SECTION 2.11. Cancellation.
All Notes surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and such Notes, together with all such Notes so
surrendered directly to the Trustee, shall be promptly cancelled by it. The
Issuer may at any time deliver to the Trustee for cancellation any Note
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Notes held by the Trustee
shall be held by the Trustee in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.
SECTION 2.12. Authentication and Delivery of Notes.
The Notes may be executed by the Issuer and delivered to the Trustee
for authentication, and thereupon the same shall be authenticated and delivered
by the Trustee, upon Issuer Request and upon receipt by the Trustee of the
following items required to be delivered to the Trustee in connection with the
initial authentication and delivery of the Notes on the Closing Date:
(a) an Issuer Order authorizing the authentication and delivery of the
Notes;
(b) an Officers' Certificate of the Issuer, complying with the
requirements of Section 11.01, stating that:
(i) the Issuer is not in Default under this Indenture and the issuance
of the Notes will not result in any breach of any of the terms, conditions
or provisions of, or constitute a default under, the Trust Agreement or any
other constituent documents of
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the Issuer, or any indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is bound, or
any order of any court or administrative agency entered in any proceeding
to which the Issuer is a party or by which it may be bound or to which it
may be subject, and all conditions precedent provided in this Indenture
relating to the authentication and delivery of the Notes have been complied
with;
(ii) the Issuer is the owner of and has good title to each Account, has
not assigned any interest or participation in any such Account (or, if any
such interest or participation has been assigned, it has been released) and
has the right to Grant each such Account to the Trustee, and no other
Person has any lien on, security interest in or other rights to any such
Account;
(iii) the Issuer has Granted to the Trustee all of its right, title,
and interest in each Account Granted to the Trustee by it to secure the
Notes;
(iv) the information set forth in the Schedule of Accounts to this
Indenture is correct;
(v) attached thereto are true and correct copies of letters signed by
the Rating Agencies confirming that the Class A-1 Notes have been rated
[AAA by S&P] [Aaa by Moody's][AAA by DCR][AAA by Fitch], the Class A-2
Notes have been rated at least [AA by S&P][Aa2 by Moody's][AA by DCR][AA by
Fitch], the Class A-3 Notes have been rated at least [A by S&P][A2 by
Moody's][A by DCR][A by Fitch] and the Class A-4 Notes have been rated at
least [BBB by S&P][Baa2 by Moody's][BBB by DCR][BBB by Fitch]; and
(vi) each of the Accounts satisfies the requirements of subsection (c)
below;
(c) all of the Accounts (except that (A) in lieu of delivering the
Account Documents for any Account which has been the subject of a Full
Prepayment received by the Servicer after the Cut-Off Date but no later than
five Business Days prior to the Closing Date, the Issuer may deliver, or cause
to be delivered, as indicated in the Officers' Certificate from the Servicer
delivered pursuant to subsection (e) of this Section 2.12, the cash proceeds of
such Full Prepayment, (B) in lieu of delivering the Account Documents for any
Account with respect to which foreclosure proceedings have been commenced and
such Account Documents are required in connection with the prosecution of such
proceedings, the Issuer may deliver a trust receipt pursuant to Section 3.13(c)
of this Indenture and (C) the Trustee's review of such Account Documents
pursuant to Section 3.12 need not be completed until 90 days following the
Closing Date), which Accounts shall have an aggregate Economic Balance at least
equal to $[ ] as of the Cut-Off Date, and shall satisfy each of the
representations and warranties with respect to such Accounts set forth in
Section 3.11 of this Indenture;
(d) an executed counterpart of the Servicing Agreement;
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(e) an Officer's Certificate from the Servicer, dated as of the Closing
Date, certifying that all Monthly Payments (net of the Servicing Fee) on the
Accounts due after the Cut-Off Date and received more than five Business Days
prior to the Closing Date plus the proceeds of each Full Prepayment of any such
Account (including any related payment of interest) received by the Servicer
after the Cut-Off Date but more than five Business Days prior to the Closing
Date have been remitted to the Trustee for deposit in the Collection Account in
accordance with Section 2.08 of the Servicing Agreement and setting forth the
aggregate amount so remitted representing a Full Prepayment received by the
Servicer after the Cut-Off Date but more than five Business Days prior to the
Closing Date;
(f) a letter, addressed to the Trustee and complying with the
requirements of Section 11.01, of a firm of Independent Accountants of
recognized national reputation to the effect that:
(1) they have performed the following procedures (which need
not constitute an examination in accordance with generally accepted
auditing standards):
(A) they have randomly selected a sample of
the Accounts, and compared the Account number, the total
number of Monthly Payments to be made under the Account during
its term, the total finance charge over the term of the
related Account Note, Monthly Payment, amount financed and the
original principal balance set forth in the related Account
Documents to the corresponding item in the Schedule of
Accounts;
(B) they recalculated the Economic Balance
for each Account and compared the Economic Balance calculated
by the Issuer to the Economic Balances calculated by them for
each Account and compared the aggregate Economic Balance for
all Accounts calculated by them to the aggregate initial
principal amount of the Notes proposed to be authenticated and
delivered;
(2) based upon the above-specified procedures, such firm has
determined that:
(A) they are [95%] confident that the
particular attributes of the Accounts tested by them as
described in paragraph (1)(A) above will not vary from the
corresponding information set forth on the Schedule of
Accounts for more than [3%] of all of the Accounts;
(B) the Economic Balance calculated by the
Issuer for the Accounts does not exceed the Economic Balance
for the Accounts as calculated by them in accordance with the
definition of the term "Economic Balance" and the aggregate of
the Economic Balances calculated by them for all Accounts is
not less than [ ]% of the
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aggregate initial principal amount of the Notes proposed to be
authenticated and delivered;
(g) cash in the amount equal to the amount, if any, required to be
remitted to the Trustee pursuant to Section 2.08 of the Servicing Agreement (as
indicated by the Officers' Certificate from the Servicer delivered pursuant to
subsection (e) of this Section 2.12) and deposited in the Collection Account and
held by the Trustee and applied in accordance with Section 8.02;
(h) an executed copy of the Purchase and Sale Agreement;
(i) an executed copy of the Trust Agreement;
(j) an executed copy of the Holding Account Agreement; and
(k) a copy of the fidelity bond required pursuant to Section 4.05 of
the Servicing Agreement; and
(l) an opinion of Counsel in the form required by the underwriting
agreement among Mid-State Homes, Inc., Walter Industries, Inc. and the
underwriter[s] named therein.
SECTION 2.13. Non-Petition.
Each Holder of any Note by his acceptance thereof shall be deemed to
have agreed not to petition or cause or permit any Affiliate to petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequester or other similar official of
the Issuer or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Issuer.
ARTICLE III
COVENANTS; REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Payment of Notes.
The Issuer will pay or cause to be duly and punctually paid the
principal of and interest on the Notes in accordance with the terms of the Notes
and this Indenture.
SECTION 3.02. Maintenance of Office or Agency.
The Issuer will maintain in the Borough of Manhattan, the City of New
York, the State of New York and in the city where the Corporate Trust Office is
located an office or agency where Notes may be presented or surrendered for
payment or may be surrendered for
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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
will give prompt written notice to the Trustee of the location and any change in
the location of such office or agency. Until written notice of any change in the
location of such office or agency is delivered to the Trustee or if at any time
the Issuer shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, Notes may be so presented
or surrendered, and such notices and demands may be made or served, at the
office of _______________________________ at ____________________________, and
at the Corporate Trust Office.
The Issuer may also from time to time designate one or more other
offices or agencies (in or outside the City of New York or the city where the
Corporate Trust Office is located) where the Notes may be presented or
surrendered for any or all such purposes and where notices and demands may be
served and may from time to time rescind such designations; provided, however,
that (i) no such designation or rescission shall in any manner relieve the
Issuer of its obligation to maintain an office or agency in the City of New
York, for the purposes set forth in the preceding paragraph and (ii) any
designation of an office or agency for payment of Notes shall be subject to
Section 3.03. The Issuer will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 3.03. Money for Note Payments to Be Held in Trust.
All payments of amounts due and payable with respect to any Notes which
are to be made from amounts withdrawn from the Collection Account pursuant to
Section 8.02(c) or Section 5.08 shall be made on behalf of the Issuer by the
Trustee or by another Paying Agent, and no amounts so withdrawn from the
Collection Account for payments of Notes shall be paid over to the Issuer under
any circumstances except as provided in this Section 3.03 or in Section 5.08.
If the Issuer shall have a Paying Agent that is not also the Note
Registrar, it shall furnish, or cause the Note Registrar to furnish no later
than the fifth Business Day after each Record Date, a list, in such form as such
Paying Agent may reasonably require, of the names and addresses of the Holders
of Notes and of the number of Individual Notes held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Trustee,
it will, on or before the Business Day next preceding each Payment Date, direct
the Trustee to deposit with such Paying Agent an aggregate sum sufficient to pay
all amounts then becoming due (to the extent funds are then available for such
purpose in the Collection Account), such sum to be held in trust for the benefit
of the Persons entitled thereto. Any moneys deposited with a Paying Agent in
excess of an amount sufficient to pay the amounts then becoming due on the Notes
with respect to which such deposit was made shall, upon Issuer Order, be paid
over by such Paying Agent to the Trustee for application in accordance with
Article VIII.
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Any Paying Agent shall be appointed by Issuer Order. The Issuer shall
not appoint any Paying Agent which is not, at the time of such appointment, a
depository institution or trust company. The Issuer will cause each Paying Agent
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee (and if the Trustee acts as
Paying Agent, it hereby so agrees), subject to the provisions of this Section,
that such Paying Agent will:
(1) allocate all sums received for payment to the Holders of Notes on
each Payment Date among such Holders in the proportion specified in the
Payment Date Statement, to the extent permitted by applicable law;
(2) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(3) if such Paying Agent is not the Trustee, immediately resign as a
Paying Agent and forthwith pay to the Trustee all sums held by it in trust
for the payment of Notes if at any time it ceases to meet the standards set
forth above required to be met by a Paying Agent at the time of its
appointment;
(4) if such Paying Agent is not the Trustee, give the Trustee notice of
any Default by the Issuer (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to any Notes;
(5) if such Paying Agent is not the Trustee, at any time during the
continuance of any such Default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust by such Paying
Agent; and
(6) comply with all requirements of the Internal Revenue Code of 1986,
as amended (or any successor or amendatory statutes), and all regulations
thereunder, 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 has provided the calculations pertaining thereto to the 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, if other than the Trustee, to pay to the Trustee
all sums held in trust by such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money held by the 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
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amount has become due and payable to the Holder of such Note shall be discharged
from such trust and paid to the Issuer; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee or such Paying Agent with respect to such trust
money shall cease upon such payment. The Trustee may adopt and employ, at the
expense of the Issuer, any reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Trustee or any Agent, at the last address
of record for each such Holder).
SECTION 3.04. Existence of Issuer.
The Issuer will keep in full effect its existence, rights and
franchises as a statutory 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, the Trust Estate and each instrument or agreement included
in the Trust Estate.
SECTION 3.05. Protection of Trust Estate.
(a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance, and other
instruments, and will take such other action as may be necessary or advisable to
(i) Grant more effectively all or any portion of the Trust Estate.
(ii) maintain or preserve the lien of this Indenture or carry out more
effectively the purposes hereof,
(iii) perfect, publish notice of, or protect the validity of, any Grant
made or to be made by this Indenture,
(iv) enforce any of the Account Documents,
(v) preserve and defend title to the Trust Estate and the rights of the
Trustee and of the Noteholders in the Account Documents and the other
property held as part of the Trust Estate against the claims of all persons
and parties, or
(vi) pay all taxes or assessments levied or assessed upon the Trust
Estate when due.
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The Issuer hereby designates the Trustee its agent and attorney-in-fact
to execute any financing statement, continuation statement or other instrument
required pursuant to this Section 3.05; provided, however, that such designation
shall not be deemed to create a duty in the Trustee to monitor the compliance of
the Issuer with the foregoing covenants and provided, further, that the duty of
the Trustee to execute any instrument required pursuant to this Section 3.05
shall arise only if the Trustee has knowledge of any failure of the Issuer to
comply with provisions of this Section 3.05. The Issuer shall execute a power of
attorney coupled with an interest which shall be irrevocable, and the Issuer
hereby ratifies and confirms all that the Trustee may do by virtue thereof.
(b) Except as otherwise provided herein and in the Servicing Agreement,
the Trustee shall not remove any portion of the Trust Estate that consists of
money or is evidenced by an instrument, certificate or other writing from the
jurisdiction in which it was held at the date of the most recent Opinion of
Independent Counsel delivered pursuant to Section 3.06 (or from the jurisdiction
in which it was held as described in the Opinion of Counsel delivered at the
Closing Date pursuant to Section 2.12(b), if no Opinion of Independent Counsel
has yet been delivered pursuant to Section 3.06) unless the Trustee shall have
first received an Opinion of Independent Counsel to the effect that the lien and
security interest created by this Indenture with respect to such property will
continue to be maintained after giving effect to such action or actions.
SECTION 3.06. Opinions as to Trust Estate.
On or before May 15 in each calendar year, beginning in 199_, the
Issuer shall furnish to the Trustee an Opinion of Independent Counsel either
stating that, in the opinion of such counsel, such action has been taken as is
necessary to perfect and to maintain the lien and security interest created by
this Indenture with respect to the Trust Estate 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 address any other matter reasonably requested by the Trustee with
respect to the Trust Estate and describe all such action, if any, that will, in
the opinion of such counsel, be required to be taken to maintain the lien and
security interest of this Indenture with respect to the Trust Estate until May
15 in the following calendar year. The Issuer shall be required to take whatever
action set forth in the Opinion of Independent Counsel to perfect or maintain
the lien and security interest in the Trust Estate created by this Indenture.
SECTION 3.07. Performance of Obligations; Servicing Agreement.
(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Servicing Agreement.
(b) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the Account Documents or under any
instrument included in the Trust Estate, or which would result in the amendment,
hypothecation, subordination, termination or discharge
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of, or impair the validity or effectiveness of, any of the Account Documents, or
any such instrument, except for such actions that are expressly provided for in
the Servicing Agreement.
(c) If the Issuer shall have knowledge of the occurrence a Servicing
Default, the Issuer shall promptly notify the Trustee thereof, and shall specify
in such notice the action, if any, the Issuer is taking in respect of such
Servicing Default. If any Servicing Default arises from the failure of the
Servicer to perform any of its duties or obligations under the Servicing
Agreement with respect to the Accounts, the Issuer may remedy such failure,
provided that if any Servicing Default arises from the failure by the Servicer
to comply with requirements imposed upon it under Section 2.12 of the Servicing
Agreement regarding advances for taxes, assessments and other charges against
the Mortgaged Property or under Section 2.13 of the Servicing Agreement with
respect to hazard insurance for the Mortgaged Properties securing the Mortgage
Loans, the Issuer shall promptly pay such taxes, assessments or other charges or
such premiums or obtain substitute insurance coverage meeting the requirements
of said Section 2.13. So long as any Servicing Default shall be continuing, the
Trustee may, and upon the direction of the Holders of Notes entitled to more
than 50% of the Voting Rights the Trustee shall, terminate all of the rights and
powers of the Servicer under the Servicing Agreement pursuant to Section 5.01 of
the Servicing Agreement or take any other action with respect to such Servicing
Default as is permitted under said Section 5.01. Unless granted or permitted by
the Holders of Notes to the extent provided above, the Issuer may not waive any
such Servicing Default or terminate the rights and powers of the Servicer under
the Servicing Agreement.
(d) Upon any termination of the Servicer's rights and powers pursuant
to Section 5.01 of the Servicing Agreement, the Trustee shall appoint, or shall
petition a court of competent jurisdiction to appoint, a successor servicer or
upon the occurrence of a Trigger Event, the Trustee may appoint such successor
servicer (the "Successor Servicer"). The Trustee may appoint itself Successor
Servicer. Pending the appointment of a Successor Servicer as provided above, the
Trustee shall be the Successor Servicer. Upon any termination of the Servicer's
rights and powers pursuant to Section 5.01 of the Servicing Agreement or upon
the occurrence of a Trigger Event, all rights, powers, duties and
responsibilities of the Servicer with respect to the Accounts shall vest in and
be assumed by the Successor Servicer, and the Successor Servicer shall be the
successor in all respects to the Servicer in its capacity as servicer with
respect to the Accounts under the Servicing Agreement. Upon any such
termination, the Successor Servicer, or if the Trustee so elects upon a Trigger
Event, the Trustee, is hereby authorized to mail a notice to each Obligor
directing each such Obligor to mail all Monthly Payments to the Successor
Servicer or its agent at the address specified in such notice. In connection
with any such appointment, the Trustee may make such arrangements for the
compensation of such successor as it and such successor shall agree, and the
Issuer shall enter into an agreement with such successor for the servicing of
the Accounts, such agreement to be substantially similar to the Servicing
Agreement or otherwise acceptable to the Trustee; provided that any such
compensation of the Successor Servicer shall not be in excess of [ ]% of the
Servicing Fee payable to the Servicer under the Servicing Agreement.
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(e) The Issuer may enter into contracts with other Persons for the
performance of the Issuer's obligations hereunder, and performance of such
obligations by such Persons shall be deemed to be performance of such
obligations by the Issuer.
SECTION 3.08. Negative Covenants.
The Issuer will not:
(i) sell, transfer, exchange or otherwise dispose of any portion of the
Trust Estate except as expressly permitted by this Indenture;
(ii) obtain or carry insurance relating to the Accounts separate from
that required by the Servicing Agreement, unless the Trustee shall have the
same rights with respect thereto as it has with respect to the insurance
required by the Servicing Agreement;
(iii) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Notes by reason of the payment of any taxes
levied or assessed upon any portion of the Trust Estate;
(iv) engage in any business or activity other than in connection with,
or relating to, the issuance of the Notes or the preservation of the Trust
Estate and the release of assets therefrom pursuant to this Indenture and
the Trust Agreement;
(v) dissolve or liquidate in whole or in part;
(vi) (1) 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 under this Indenture, except as may be
expressly permitted hereby, (2) permit any lien, charge, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to be
created on or extend to or otherwise arise upon or burden the Trust Estate
or any part thereof or any interest therein or the proceeds thereof, or (3)
except as permitted hereby, permit the lien of this Indenture not to
constitute a valid and perfected first priority security interest in the
Trust Estate;
(vii) cause or permit any Affiliate to petition or otherwise invoke the
process of any court or government authority for the purpose of commencing
or sustaining a case against the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequester or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Issuer; or
(viii) amend the Trust Agreement without the consent of the Trustee.
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SECTION 3.09. Annual Statement as to Compliance.
On or before 120 days after the first anniversary of the Closing Date
and each subsequent anniversary date of the Closing Date, the Issuer shall
deliver to the Trustee a written statement, signed by two Authorized Officers,
stating, as to each signer thereof, that (1) a review of the fulfillment by the
Issuer during such year of its obligations under this Indenture has been made
under such officer's supervision; and (2) to the best of such officer's
knowledge, based on such review, the Issuer has fulfilled all its obligations
under this Indenture 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.
SECTION 3.10. Recording of Assignments.
The Issuer shall use reasonable best efforts to record substantially
all Assignments and Trust Mortgages within 21 days of the Closing Date and in
any event all Assignments and Trust Mortgages shall be duly recorded not later
than 90 days after the date of the Grant of the related Account.
SECTION 3.11. Representations and Warranties Concerning the Accounts.
(a) The Issuer represents and warrants to the Trustee, with respect to
each Account, that as of the Closing Date (and the Issuer shall be deemed to
have made such representations and warranties at the time of the transfer
thereof to the Trustee with respect to each new Account originated in connection
with the sale of property acquired in respect of an Account):
(i) the information set forth with respect to such Account in the
Schedule of Accounts attached hereto is true and correct as of the date as
of which such information is given;
(ii) the related building or installment sale contract, as the case may
be, has been duly executed by the parties thereto and the duties to be
performed thereunder prior to the date the first payment in connection with
such contract is due have been performed;
(iii) the Account Documents have been duly executed by the related
Obligor and the Mortgage has been duly executed by the Obligor and, to the
extent required under local law for recordation or enforcement, properly
acknowledged;
(iv) the Mortgage has been properly recorded as required by law. The
Mortgage constitutes a valid first priority lien upon and secure title to
the real property and improvements thereon described therein, which include
a single family detached dwelling, and such Mortgage and the Account Note
secured thereby are fully enforceable in accordance with their terms except
as enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other laws affecting creditors'
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rights generally and by general principles of equity (whether applied
in a proceeding in law or at equity);
(v) the Issuer is the sole owner of each Account and has good title to
such Account and full right and authority to transfer such Account and to
Grant such Account to the Trustee and, upon delivery of the related Account
Documents to the Trustee, the Trustee will have a valid and perfected lien
or security interest in such Account;
(vi) all costs, fees, intangible, documentary and recording taxes and
expenses incurred in making, closing, and recording each Account and in
connection with the issuance of the Notes have been paid;
(vii) no part of the Mortgaged Property purporting to secure any
Account Note has been, or shall have been, released from the lien or
security title of the Mortgage securing such Account Note except for
Mortgaged Property securing Account Notes which have been prepaid in full
between the Cut-Off Date and the Closing Date, the amount of such
prepayments received more than five days prior to the Closing Date to be
deposited in the Collection Account on or before the Closing Date;
(viii) except to the extent permitted by the Servicing Agreement, no
term or provision of any Account has been or will be altered, changed or
modified in any way by the Servicer or the Issuer without the consent of the
Trustee;
(ix) the Grantor and the Issuer acquired title to the Accounts in good
faith, for value and without notice of any adverse claim;
(x) the Account Notes evidence accounts bearing a fixed rate of finance
charge and fully amortizing level monthly payments due on the 5th or the
15th day of each month. Each Account Note has an original term to maturity
not in excess of 30 years. No less than ___% of the Account Notes with
respect to Accounts that have an Economic Balance greater than zero were
originated from _________ through _______________, with the exception of
Account Notes which represent subsequent resales of repossessed houses that
secured Account Notes originated during such period. Each Account Note bears
a finance charge rate of not less than [ ]% and not more than [ ]% per
annum;
(xi) as of the Closing Date, there is no right of rescission, setoff,
defense or counterclaim to any Account Note or Mortgage, including both the
obligation of the Obligor to pay the unpaid cash price or finance charge on
such Account Note and the defense of usury; furthermore, neither the
operation of any of the terms of the Account Note and the Mortgage nor the
exercise of any right thereunder will render the Account Note or the
Mortgage unenforceable, in whole or in part, or subject such Account Note or
Mortgage to any right of rescission, setoff, counterclaim or defense,
including the
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defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto;
(xii) there are no mechanics' liens or claims for work, labor or
material (and to the best of the Issuer's knowledge, no rights or claims are
outstanding that under law could give rise to such lien) affecting any
Mortgaged Property which are or may be a lien prior to, or equal with, the
lien of such Mortgage;
(xiii) each Account Note at origination complied in all material
respects with applicable local, state and federal laws, including, without
limitation, usury, equal credit opportunity, real estate settlement
procedures, truth-in-lending and disclosure laws, and consummation of the
transactions contemplated by the Purchase and Sale Agreement and hereby will
not involve the violation of any such laws;
(xiv) with respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, is properly
designated, serving and named in such Mortgage;
(xv) there has been no fraud, dishonesty, misrepresentation or
negligence on the part of the originator in connection with the origination
of any Account Note or in connection with the sale of the related Account;
and
(xvi) to the best knowledge of the Issuer, except Mortgaged Property
for which Insurance Proceeds are available, the Mortgaged Property is free
of damage which materially and adversely affects the value thereof.
(b) If any of the representations, warranties or covenants with respect
to any Account set forth in this Section 3.11 are found to be incorrect as of
the time made in any respect which materially and adversely affects the interest
of the Trustee or the Noteholders in the Account, the Issuer or the Servicer
shall notify the Trustee immediately after obtaining knowledge thereof, and the
Issuer shall use its best efforts to eliminate or otherwise cure the
circumstances or conditions in respect of which such representation, warranty or
covenant was incorrect as of the time made within 90 days of such notice to the
Trustee. If such breach is not or cannot be cured within such 90-day period or,
with the prior written consent of a Responsible Officer of the Trustee, such
longer period as specified in such consent, the Issuer shall either (i) deposit
in the Collection Account an amount equal to 100% of the then current Economic
Balance of the affected Account (a "Defective Account"), at which time the
Defective Account shall be released from the lien of the Indenture or (ii)
remove such Account from the Trust Estate and substitute one or more Qualified
Substitute Accounts (in which case the removed Account shall become a "Deleted
Account"). The Issuer shall promptly reimburse the Servicer and the Trustee for
any reasonable expenses (including without limitation reasonable attorney's
fees) incurred by the Servicer and the Trustee, respectively, in respect of any
such breach.
As to any Deleted Account for which the Issuer substitutes a Qualified
Substitute Account or Qualified Substitute Accounts, the Issuer shall effect
such substitution by
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delivery to the Trustee for such Qualified Substitute Account or Qualified
Substitute Accounts the Account Note and such other Account Documents related
thereto, with the Account Note endorsed to the order of the Issuer, without
recourse, and endorsed by the Issuer in blank or to the order of the Trustee,
without recourse.
Monthly Payments due with respect to Qualified Substitute Accounts in
the month of substitution are not part of the Trust Estate and will be retained
by the Issuer. Available Funds will include the Monthly Payment due on any
Deleted Account in the month of substitution, and the Issuer shall deposit such
amount in the Collection Account if received by it subsequent to the month of
substitution. The Issuer shall be entitled to receive all amounts due subsequent
to the month of substitution in respect of such Deleted Account. The Issuer
shall give or cause to be given written notice to the Trustee and the Rating
Agencies that such substitution has taken place. Upon such substitution, such
Qualified Substitute Account or Qualified Substitute Accounts shall be subject
to the terms of this Indenture in all respects, and the Issuer shall be deemed
to have made with respect to such Qualified Substitute Account or Qualified
Substitute Accounts, as of the date of substitution, the representations and
warranties set forth in this Section 3.11. The Trustee shall at the direction of
the Issuer immediately effect the release of the lien of this Indenture with
respect to such Deleted Account, the form of the instruments effecting such
release being specified in such direction.
For any month in which the Issuer substitutes one or more Qualified
Substitute Accounts for one or more Deleted Accounts, the Issuer will determine
the amount (if any) by which the aggregate outstanding Economic Balance of all
such Qualified Substitute Accounts as of the date of substitution is less than
the aggregate outstanding Economic Balance of all such Deleted Accounts. On the
date of such substitution, the Issuer will deposit from its own funds into the
Collection Account an amount equal to the amount of such shortfall, if any,
without reimbursement therefor.
It is understood and agreed that the obligations of the Issuer set
forth in this Section 3.11(b) to cure, substitute for or deposit funds in the
Collection Account in connection with an Account constitute the sole remedies
available to the Noteholders or to the Trustee on their behalf respecting a
breach of the representations and warranties set forth in Section 3.11(a).
SECTION 3.12. Trustee's Review of Account Documents.
(a) The Trustee agrees, for the benefit of the holders of the Notes, to
review within 90 days after the Closing Date, the Account Documents delivered to
it on or prior to the Closing Date in connection with the Grant of the Accounts
listed on the Schedule of Accounts as security for the Notes. Such review shall
be limited to a determination that all documents referred to in the definition
of the term Account Documents have been delivered with respect to each such
Account (other than the documents related to (i) any Account so listed which has
been subject to a Full Prepayment, the proceeds of which have been deposited in
the Collection Account in lieu of delivery of the applicable Account Documents
and (ii) any Account with respect to which the related Mortgaged Property was
foreclosed, repossessed or
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otherwise converted subsequent to the Cut-Off Date and prior to the Closing
Date or with respect to which foreclosure proceedings have been commenced and
the related Account Documents are required in connection with the prosecution of
such foreclosure proceedings and the Issuer has delivered a trust receipt called
for by Section 3.13(c)), that all such documents have been executed, and that
all such documents relate to the Accounts listed on the Schedule of Accounts;
provided, however, that with respect to the review made of the Accounts in
connection with the Closing Date, assumption or substitution agreements shall
not be considered Account Documents. In performing such review, the Trustee may
rely upon the purported genuineness and due execution of any such document and
on the purported genuineness of any signature thereon.
(b) If any Account Document is defective in any material respect which
may materially and adversely affect the value of the related Account, the
priority of the related Mortgage or the interest of the Trustee or the
Noteholders in such Account or if any document required to be delivered to the
Trustee has not been delivered or if any documents so delivered does not relate
to an Account listed on the Schedule of Accounts, the Trustee shall notify the
Issuer and the Servicer immediately after obtaining knowledge thereof. Within 90
days of the earlier of discovery by or notice to the Issuer that any Account
Document is missing or defective and such omission or defect materially and
adversely affects the interest of the Noteholders in an Account, the Issuer is
required to use its best efforts to cure such omission or defect. If such
omission or defect is not or cannot be cured within such 90-day period or, with
the prior written consent of a Responsible Officer of the Trustee, such longer
period as specified in such consent, the Issuer shall either (i) deposit in the
Collection Account an amount equal to 100% of the then current Economic Balance
of the affected Account (a "Defective Account"), at which time the Defective
Account shall be released from the lien of the Indenture or (ii) remove such
Account from the Trust Estate and substitute one or more Qualified Substitute
Accounts (in which case the removed Account shall become a "Deleted Account").
The Issuer shall promptly reimburse the Servicer and the Trustee for any
reasonable expenses (including without limitation reasonable attorney's fees)
incurred by the Servicer and the Trustee, respectively, in respect of any such
defect or omission; provided, however, except for the review by the Trustee
pursuant to Section 3.12(a), the foregoing shall not impose an obligation on the
Trustee to discover defects in the Account Documents or to ascertain the
priority of the related Mortgage.
As to any Deleted Account for which the Issuer substitutes a Qualified
Substitute Account or Qualified Substitute Accounts, the Issuer shall effect
such substitution by delivery to the Trustee for such Qualified Substitute
Account or Qualified Substitute Accounts the Account Note and such other Account
Documents related thereto, with the Account Note endorsed to the order of the
Issuer, without recourse, and endorsed by the Issuer in blank or to the order of
the Trustee, without recourse. Monthly Payments due with respect to Qualified
Substitute Accounts in the month of substitution are not part of the Trust
Estate and will be retained by the Issuer. Available Funds will include the
Monthly Payment due on any Deleted Account in the month of substitution, and the
Issuer shall deposit such amount in the Collection Account if received by it
subsequent to the month of substitution. The Issuer shall be entitled to receive
all amounts due subsequent to the month of substitution in respect of
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such Deleted Account. The Issuer shall give or cause to be given written notice
to the Trustee and the Rating Agencies that such substitution has taken place.
Upon such substitution, such Qualified Substitute Account or Qualified
Substitute Accounts shall be subject to the terms of this Indenture in all
respects, and the Issuer shall be deemed to have made with respect to such
Qualified Substitute Account or Qualified Substitute Accounts, as of the date of
substitution, the representations and warranties set forth in Section 3.11. The
Trustee shall at the direction of the Issuer immediately effect the release of
the lien of this Indenture with respect to such Deleted Account, the form of the
instruments effecting such release being specified in such direction.
For any month in which the Issuer substitutes one or more Qualified
Substitute Accounts for one or more Deleted Accounts, the Issuer will determine
the amount (if any) by which the aggregate outstanding Economic Balance of all
such Qualified Substitute Accounts as of the date of substitution is less than
the aggregate outstanding Economic Balance of all such Deleted Accounts. On the
date of such substitution, the Issuer will deposit from its own funds into the
Collection Account an amount equal to the amount of such shortfall, if any,
without reimbursement therefor.
It is understood and agreed that the obligations of the Issuer set
forth in this Section 3.12(b) to cure, substitute for or deposit funds in the
Collection Account in connection with an Account constitute the sole remedies
available to the Noteholders or to the Trustee on their behalf respecting an
omission or defect set forth in Section 3.12(a).
SECTION 3.13. Trust Estate; Account Documents.
(a) When required by the provisions of this Indenture, the Trustee
shall execute instruments to release property from the lien of this Indenture,
or convey the Trustee's interest in the same, in a manner and under
circumstances which are not inconsistent with the provisions of this Indenture.
No party relying upon an instrument executed by the Trustee as provided in this
Article III shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
moneys.
(b) In order to facilitate the servicing of the Accounts by the
Servicer, the Servicer is hereby authorized in the name and on behalf of the
Trustee and the Issuer, to execute assumption agreements, substitution
agreements, and instruments of satisfaction or cancellation, or of partial or
full release or discharge, and other comparable instruments with respect to the
Accounts and with respect to the Mortgaged Properties subject to the Mortgages
(and the Trustee shall execute any such documents on request of the Servicer),
subject to the obligations of the Servicer under the Servicing Agreement. If
from time to time the Servicer shall deliver to the Trustee copies of any
written assurance, assumption agreement or substitution agreement or other
similar agreement pursuant to Section 2.10 of the Servicing Agreement, the
Trustee shall check that each of such documents purports to be an original
executed copy and, if so, shall file such documents with the related Account
Documents. If any such documents submitted by the Servicer do not meet the above
qualifications, such
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documents shall promptly be returned by the Trustee to the Servicer, with a
direction to the Servicer to forward the correct documentation.
(c) Upon Issuer Request accompanied by an Officers' Certificate of the
Servicer pursuant to Section 2.16 of the Servicing Agreement to the effect that
an Account has been the subject of a Full Prepayment or that all Liquidation
Proceeds which have been determined by the Servicer in its reasonable judgment
to be finally recoverable, have been recovered and upon deposit to the Holding
Account of such final Monthly Payment, an amount that satisfies the definition
of Full Prepayment with respect to such Account or, if applicable, Liquidation
Proceeds, the Trustee shall promptly release the related Account Documents to or
upon the order of the Issuer, along with such documents as the Servicer or the
Obligor may request to evidence satisfaction and discharge of such Account. If
from time to time and as appropriate for the servicing or foreclosure of any
Account, the Servicer requests the Trustee to release the related Account
Documents and delivers to the Trustee a trust receipt reasonably satisfactory to
the Trustee and signed by a Servicing Officer, the Trustee shall release the
related Account Documents to the Servicer. If such Account shall be liquidated
and the Trustee receives a certificate from the Servicer as provided above,
then, upon request of the Issuer, the Trustee shall release the trust receipt to
or upon the order of the Issuer.
(d) The Trustee shall, at such time as there are no Notes Outstanding,
release all of the Trust Estate to the Issuer (other than any cash held for the
payment of the Notes pursuant to Section 3.03 or 4.01), subject, however, to the
rights of the Trustee under Section 6.07.
SECTION 3.14. Amendments to Servicing Agreement.
The Trustee may enter into any amendment or supplement to the Servicing
Agreement only in accordance with Section 7.02 of the Servicing Agreement;
provided, however, at any time, the Trustee may, without the consent of the
Noteholders, enter into an amendment to the Servicing Agreement modifying the
repossession, foreclosure and liquidation procedures if such modifications are
likely to minimize payments in connection with any filing or recording required
in any jurisdiction where any Mortgaged Properties are located. The Trustee may,
in its discretion, decline to enter into or consent to any such supplement or
amendment if its own rights, duties or immunities shall be adversely affected.
SECTION 3.15. Servicer as Agent and Bailee of Trustee.
In order to facilitate the servicing of the Accounts by the Servicer,
the Servicer shall retain, in accordance with the provisions of the Servicing
Agreement and this Indenture, the moneys to be deposited in each Servicing
Account. Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Servicer, the
Trustee hereby acknowledges that the Servicer is acting as agent and bailee of
the Trustee in holding such moneys pursuant to Section 2.09 of the Servicing
Agreement, as well as its agent and bailee in holding any Account Documents
released to the Servicer pursuant to Section 3.13(c), and any other items
constituting a part of the Trust Estate which from time to time come into the
possession of the Servicer. It is intended that, by the
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Servicer's acceptance of such agency pursuant to Section 2.09 of the Servicing
Agreement, the Trustee, as a secured party, will be deemed to have possession of
such Account Documents, such moneys and such other items for purposes of Section
9-305 of the Uniform Commercial Code of the state in which such property is held
by the Servicer.
SECTION 3.16. Investment Company Act.
The Issuer shall not become an "investment company" as defined in the
Investment Company Act of 1940, as amended (or any successor or amendatory
statute), and the rules and regulations thereunder (taking into account not only
the general definition of the term "investment company" but also any available
exceptions to such general definition); provided, however, that the Issuer shall
be in compliance with this Section 3.16 if it shall have obtained an order
exempting it from regulation as an "investment company" so long as it is in
compliance with the conditions imposed in such order.
SECTION 3.17. Business Activity.
(a) The Issuer shall furnish to the Trustee copies of the form of each
proposed amendment to the Trust Agreement at least 60 days prior to the proposed
date of adoption of any such proposed amendment.
(b) The Issuer will at all times hold itself out to the public,
including creditors of any entity owning more than a 50% undivided interest in
the Issuer (hereinafter referred to as a "Majority Owner" of the Issuer), under
the Issuer's own name and as a separate and distinct entity from Walter
Industries, Inc. or any of its Affiliates.
(c) The Issuer will at all times be responsible for the payment of all
its obligations and indebtedness, will at all times maintain a business office,
records, books of account, and funds separate from its Majority Owner and will
observe all customary formalities of independent existence.
(d) To the extent such compliance involves questions of law, the Issuer
shall be deemed in compliance with the requirements of any provision of this
Section 3.17 if it is acting in accordance with an Opinion of Counsel as to such
requirements.
SECTION 3.18. Liability of Owner Trustee.
It is expressly understood and agreed by the parties hereto that (a)
this Indenture is executed and delivered by __________________, not individually
or personally but solely as Owner Trustee under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it as the Owner
Trustee, (b) each of the representations, undertakings and agreements herein
made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by ______________ but is made and
intended for the purpose for binding only the Trust Estate, (c) nothing herein
contained shall be construed as creating any liability on _________________,
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any,
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being expressly waived by the Trustee and the Noteholders and by any Person
claiming by, through or under the Trustee and the Noteholders and (d) under no
circumstances shall ________________ be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Indenture.
SECTION 3.19. Exculpation of the Trustee.
By entering into this Indenture and agreeing to perform the duties of
the Trustee as set forth herein, the Trustee makes no implied or express
representation or warranty to the Noteholders with respect to the sufficiency or
the adequacy in any respect whatsoever of the terms of this Indenture and the
documents executed in connection herewith. Under no circumstances shall the
Trustee have any liability of any kind whatsoever for the failure of any
Noteholder adequately to review and evaluate to the full satisfaction of such
Noteholder the terms and provisions of this Indenture, the Notes, the Servicing
Agreement, the Sub-Servicing Agreement, and the other documents executed in
connection with this Indenture. The Trustee shall in no way be liable for the
decision of any Noteholder to purchase any Notes.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture.
(a) Whenever the following conditions shall have been satisfied:
(1) either (a) all Notes theretofore authenticated and
delivered (other than
(i) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 2.08, and
(ii) Notes for whose payment money has
theretofore been deposited in trust and thereafter repaid to
the Issuer, as provided in Section 3.03) have been delivered
to the Trustee for cancellation; or
(b) all Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Maturity of the final installment of the principal thereof
within one year, or
(iii) are to be called for redemption within
one year under irrevocable arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee
in the name, and at the expense of
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the Issuer, and the Issuer, in the case of clauses (i), (ii)
or (iii) above, has deposited or caused to be deposited with
the Trustee, in trust for such purpose, an amount of cash
(which cash, in the case of clauses (ii) and (iii) above must
constitute Eligible Moneys) sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation, for principal and
interest to the Maturity of their entire unpaid principal
amount or the applicable Redemption Date, as the case may be;
(2) the Issuer has paid or caused to be paid all
other sums payable hereunder by the Issuer; and
(3) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for the satisfaction and discharge of this
Indenture have been complied with and covering such other matters as
the Trustee may reasonably request; then, upon Issuer Request this
Indenture and the lien, rights and interests created hereby and thereby
shall cease to be of further effect, and the Trustee and each
co-trustee and separate trustee, if any, then acting as such hereunder
shall, at the expense of the Issuer, execute and deliver all such
instruments as may be necessary to acknowledge the satisfaction and
discharge of this Indenture and shall pay, or assign or transfer and
deliver, to the Issuer or upon Issuer Order all cash, securities and
other property held by it as part of the Trust Estate remaining after
satisfaction of the conditions set forth in clauses (1) and (2) above.
(b) Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Issuer to the Trustee under Section 6.07, the obligations
of the Trustee to the Issuer and to the Holders of Notes under Section 3.03, the
obligations of the Trustee to the Holders of Notes under Section 4.02 and the
provisions of Article II with respect to lost, stolen, destroyed or mutilated
Notes, registration of transfers of Notes, and rights to receive payments of
principal of and interest on the Notes shall survive and the provisions of
Section 5.06 as they relate to clause (a) of Section 5.06 shall continue for one
year after such satisfaction and discharge.
SECTION 4.02. Application of Trust Money.
All money deposited with the Trustee pursuant to Sections 3.03 and 4.01
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent, as the Trustee may determine, to the Persons entitled thereto, of
the principal and interest for whose payment such money has been deposited with
the Trustee.
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ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. Event of Default.
"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):
(1) (i) there shall occur a default in the payment of any amount due
under the Notes by the Maturity Date or (ii) there shall occur a failure to
apply funds in the Collection Account in accordance with Section 8.02(c) and
such failure shall continue for a period of two days or (iii) there shall
occur a default in the payment when due of interest on any Class of Notes
and such default shall continue for a period of 30 days;
(2) the Issuer shall breach or default in the due observance of any one
or more of the covenants set forth in Section 3.08;
(3) the Issuer shall breach, or default in the due observance or
performance of, any other of its other covenants in this Indenture, such
Default shall continue for a period of 30 days after there shall have been
given, by registered or certified mail, to the Issuer by the Trustee or to
the Issuer and the Trustee by the Holders of Notes entitled to at least 40%
of the Voting Rights, a written notice specifying such Default and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder;
(4) there shall occur the entry of a decree or order for relief by a
court having jurisdiction in respect of the Issuer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or similar
law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any substantial
part of its property, or ordering the winding up or liquidation of the
affairs of the Issuer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(5) there shall occur the commencement by the Issuer of a voluntary
case under the federal bankruptcy laws, as now or hereafter in effect, or
any other present or future federal or state bankruptcy, insolvency or
similar law, or the consent by the Issuer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any substantial
part of its property or the making by the Issuer of an assignment for the
benefit of creditors or the failure by the Issuer generally to pay its debts
as such debts become due or the taking of corporate action by the Issuer in
furtherance of any of the foregoing.
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Notwithstanding the foregoing, prior to the Maturity Date, any of the
events set forth in (1) through (5) above will not be an Event of Default (i) in
respect of the Class A-2 Notes until the Class A-1 Notes have been paid in full,
(ii) in respect of the Class A-3 Notes until the Class A-1 Notes and Class A-2
Notes have been paid in full and (iii) in respect of the Class A-4 Notes until
the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been paid in full.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case, the Trustee or the Holders of Notes entitled to at least 40% of the Voting
Rights may declare all the Notes to be immediately due and payable, by a notice
in writing to the Issuer (and to the Trustee if given by the Noteholders), and
upon any such declaration such Notes, in an amount equal to the Aggregate
Current Principal Amount of such Notes, together with accrued and unpaid
interest thereon to the date of such acceleration, shall become immediately due
and payable. Notwithstanding the foregoing, the Trustee may not declare the
Notes to be due and payable pursuant to this Section 5.02 as a result of an
Event of Default arising solely from the Issuer's failure to perform any of its
agreements set forth in Section 6.07.
At any time after such a declaration of acceleration of Maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of Notes entitled to at least 50% of the Voting Rights, by written
notice to the Issuer and the Trustee, may rescind and annul such declaration and
its consequences if
(1) the Issuer has paid or deposited with the Trustee a sum sufficient
to pay
(a) all payments of principal of and interest on all
Notes and all other amounts which would then be due hereunder or upon
such Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(b) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the principal
of Notes which have become due solely by such acceleration, have been cured
or waived as provided in Section 5.15. No such rescission shall affect any
subsequent Default or impair any right consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Issuer covenants that if an Event of Default shall occur
and be continuing, the Issuer will pay to the Trustee for the benefit of the
Holders of the Notes:
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(1) (a) if the Notes have not been declared due and payable, the whole
amount then due and payable on the Notes in respect of principal; or
(b) if the Notes have been declared due and payable and such
declaration and its consequences have not been rescinded and annulled, the
Aggregate Current Principal Amount of all Outstanding Notes;
(2) (a) if the Notes have not been declared due and payable, the whole
amount then due and payable on the Notes in respect of interest, including
interest on any overdue installments of principal at the applicable Note
Interest Rate, and, to the extent payment of such interest on interest shall
be legally enforceable, interest on any overdue installments of interest at
the applicable Note Interest Rate and interest due and payable with respect
to unreimbursed Realized Loss Allocation Amounts; or
(b) if the Notes have been declared due and payable and such
declaration and its consequences have not been rescinded and annulled, (i)
with respect to the period prior to the date of such declaration, accrued
interest to the date of such declaration, at the applicable Note Interest
Rate, on the Current Principal Amount of each Note and interest to the date
of such declaration at the applicable Note Interest Rate, on any installment
of interest on each Note that was not paid when due, but only to the extent
that payment of such interest on interest shall be legally enforceable and
interest to the date of such declaration at the applicable Note Interest
Rate, on any previously unreimbursed Realized Loss Allocation Amounts and
(ii) with respect to the period from and including the date of such
declaration, interest to the date such payment is made, at the applicable
Note Interest Rate, on the Current Principal Amount of each Note and on any
installment of interest on such Note that was not paid when due, but V-3
only to the extent that payment of such interest on interest shall be
legally enforceable and on any previously unreimbursed Realized Loss
Allocation Amounts; and
(3) in addition thereto, such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent
and counsel.
If the Issuer fails to pay such amounts forthwith upon such demand, or
in any event if an Event of Default under clause (2) of Section 5.01 shall have
occurred, the Trustee, in its own name and as trustee of an express trust, may
institute a Proceeding for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the same
against the Issuer or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law; provided,
however, in the case of a default under Section 5.01 on the Class A-2 Notes, the
Trustee shall not institute such Proceeding unless the Current Principal Amount
of the Class A-1 Notes has been reduced to zero; in the case of a default under
Section 5.01 on the Class A-3 Notes, the Trustee shall not institute such
Proceeding unless the Current Principal Amount of the Class A-1 and Class A-2
Notes has been reduced to zero; in the case of a default under
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Section 5.01 on the Class A-4 Notes, the Trustee shall not institute such
Proceeding unless the Current Principal Amount of the Class A-1, Class A-2 and
Class A-3 Notes have been reduced to zero.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the 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 enforce any other proper remedy,
including, without limitation, instituting a Proceeding prior to any declaration
of acceleration of the Maturity of the Notes for the collection of all amounts
then due and unpaid on the Notes, prosecuting such Proceeding to final judgment
or decree, enforcing the same against the Trust Estate and collecting out of the
property, wherever situated, of the Issuer the moneys adjudged or decreed to be
payable in the manner provided by law, provided, however, that neither the Bank
nor any owner of any equity interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for any amounts payable under the Notes or
this Indenture.
SECTION 5.04. Remedies.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Trustee may (subject to
Sections 5.05 and 5.18, to the extent applicable) do one or more of the
following:
(a) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture in respect of Notes, whether
such amounts have become due and payable by declaration of acceleration or
otherwise and all amounts payable under the Servicing Agreement, enforce any
judgment obtained, and collect from the Issuer moneys adjudged due;
(b) sell the Trust Estate or any portion thereof or rights or interest
therein, at one or more public or private Sales called and conducted in any
manner permitted by law;
(c) file or record all Assignments that have not previously been
recorded;
(d) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture; and
(e) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce
the rights and remedies of the Trustee or the Holders of the Notes
hereunder.
In the event the Trustee takes any of the foregoing actions to
protect the Noteholder's rights or interests under the Indenture, the Trustee
shall be indemnified from the
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Trust Estate against any loss, liability or expense arising out of or in
connection with any such actions.
SECTION 5.05. Optional Preservation of Trust Estate.
(a) If the Notes have been declared due and payable following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Trustee may apply all Remittances and other amounts receivable
with respect to the Trust Estate, first, to the Issuer Expenses and then to the
payment of the principal of and interest on the Notes as and when such principal
and interest would have become due pursuant to the terms hereof and of the Notes
and to such other purposes as are specified in this Indenture, with all such
Remittances and other amounts being applied as if there had not been a
declaration of acceleration of the Maturity of the Notes, provided that:
(i) the Trustee shall have determined that the Remittances and other
amounts receivable with respect to the Trust Estate are sufficient to
provide the funds required to pay the principal of and interest on such
Notes as and when such principal and interest would have become due pursuant
to the terms hereof and of the Notes if there had not been a declaration of
acceleration of the Maturity of the Notes;
(ii) the Holders of the Notes shall not have directed the Trustee in
accordance with Section 5.14 (subject, however, to Section 5.18(b)) to sell
the Trust Estate securing such Notes;
(iii) there shall have been delivered to the Trustee an Opinion of
Counsel to the effect that notwithstanding the acceleration of the Maturity
of the Notes, but after giving effect to the provisions of this Section
5.05:
(a) in accordance with the provisions of this Section 5.05,
the Issuer is legally obligated to make payments of principal of and
interest on the Notes and perform its obligations hereunder in the same
manner and amounts as it was legally obligated to make such payments
prior to the acceleration of the Maturity of the Notes; and
(b) such obligation is legally enforceable under
applicable law, subject to bankruptcy, reorganization, insolvency and
other laws affecting the enforcement of creditors' rights generally and
to general principles of equity (regardless whether such enforceability
is considered in a proceeding in equity or at law);
(iv) unless the Trust Estate has already been acquired by the Trustee
in a Sale conducted pursuant to Section 5.18 or the lien of this Indenture
has been otherwise foreclosed and all rights of the Issuer in the Trust
Estate have been terminated by such foreclosure, the Issuer shall not have
exercised the Issuer's rights, if any, under applicable law to compel the
Sale of the Trust Estate;
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(v) there shall be no uncured Event of Default of the type described in
Section 5.01(2) or (3); and
(vi) if the Trustee shall have acquired the entire Trust Estate by
purchasing it at any public or private Sale conducted pursuant to Section
5.18, or the lien of this Indenture shall have been otherwise foreclosed and
all rights of the Issuer in the Trust Estate have been terminated by such
foreclosure, there shall have been delivered to the Trustee an Opinion of
Counsel to the effect that:
(a) the Trust Estate will not as a result of such
action be deemed an association taxable as a corporation under the
Internal Revenue Code of 1986 (or any successor federal income tax
statute) and
(b) notwithstanding the acquisition of the Trust
Estate by the Trustee, the rights, powers and duties of the Trustee
with respect to the Trust Estate (or the proceeds thereof) and the
Noteholders and the rights of the Noteholders shall continue to be
governed by the terms of this Indenture.
(c) The Trustee may in its sole discretion rely upon
an opinion of an Independent investment banking firm of national
reputation as to the feasibility of any action proposed to be taken in
accordance with subsection (a) of this Section 5.05 and as to the
sufficiency of the Remittances and other amounts receivable with
respect to the Trust Estate to make the required payments of principal
of and interest on the Notes, which opinion shall be conclusive
evidence as to such feasibility or sufficiency. Such an opinion may,
but need not, be obtained by the Trustee in its sole discretion or may
be delivered to the Trustee by an Independent investment banking firm
of national reputation engaged by the Issuer to prepare and deliver
such opinion.
(c) Pending determination by the Trustee as to whether the criteria set
forth in subsection (a) of this Section 5.05 are satisfied, all Remittances and
other amounts receivable with respect to the Trust Estate shall be applied in
accordance with Section 5.05(a) first to payment of Issuer Expenses and then to
the payment of the principal of and interest on the Notes as and when such
principal and interest would have become due pursuant to the terms hereof and of
the Notes if there had not been a declaration of acceleration of the Maturity of
the Notes. The Trustee shall make its determination whether the criteria set
forth in subsection (a) of this Section 5.05 can be satisfied as promptly as
practicable following any declaration of acceleration of the Maturity of the
Notes.
(d) If the Trustee determines that the criteria set forth in subsection
(a) of this Section 5.05 are not or cannot be satisfied, then all amounts
collected by the Trustee pursuant to this Section 5.05 or otherwise shall be
applied in accordance with Section 5.08.
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SECTION 5.06. Trustee May File Proofs of Claim.
(a) The Trustee shall promptly notify the Noteholders of (i) the
commencement of any of the events or proceedings (individually, an "Insolvency
Proceeding") described in Section 5.01(5) or (6) hereof with respect to the
Issuer and (ii) the making of any claim in connection with any Insolvency
Proceeding seeking the avoidance as a preferential transfer (a "Preference
Claim") of any payment of principal of, or interest on, the Notes. The
obligation of the Trustee to notify the Noteholders of any Insolvency Proceeding
or Preference Claims is expressly limited to such matters of which the Trustee
has actual knowledge. The Trustee, on its behalf and on behalf of the Holders,
may, at any time during the continuation of an Insolvency Proceeding, direct all
matters relating to such Insolvency Proceeding, including, without limitation,
(i) all matters relating to any Preference Claim, (ii) the direction of any
appeal of any order relating to any Preference Claim and (iii) the posting of
any surety, supersedeas or performance bond pending any such appeal, and the
Trustee on its behalf and on behalf of each Holder shall delegate and assign, to
the fullest extent permitted by law, the rights of the Trustee (exclusive of the
Trustee's rights under Section 6.07) and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Insolvency Proceeding; provided, however, that nothing
in this Section 5.06(a) shall be deemed to in any way limit the Trustee's rights
under Section 5.06(b)(i);
(b) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, composition or other
judicial Proceeding relative to the Issuer or any other obligor upon any of the
Notes or the property of the Issuer or of such other obligor or their creditors,
the Trustee (irrespective of whether the Notes shall then be due and payable as
therein expressed or by declaration or otherwise) shall be entitled and
empowered, by intervention in such Proceeding or otherwise, to (i) file and
prove a claim for the whole amount of principal and interest owing and unpaid in
respect of the Notes and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and of the Noteholders allowed in such
Proceeding, and (ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same, and any receiver,
assignee, trustee, liquidator, or sequestrator (or other similar official) in
any such Proceeding is hereby authorized by each Noteholder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment, or composition affecting any of the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Noteholder in any such Proceeding.
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SECTION 5.07. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or any of the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any Proceeding relating thereto,
and any such Proceeding instituted by the Trustee in accordance with Section
5.03 shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Notes. Any surplus shall be available, in accordance with Section 5.08, for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION 5.08. Application of Money Collected.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to the Notes pursuant
to this Article or otherwise and any moneys which may then be held or thereafter
received by the Trustee as security for the Notes shall (unless such money is
being applied in accordance with Section 5.05(a)) be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of the entire amount due on account of principal of and interest on
any Notes, upon presentation and surrender thereof:
First: To the payment of Issuer Expenses;
Second: To the holders of the Class A-1 Notes, in an amount up to the
Interest Accrual Amount thereof;
Third: To the holders of the Class A-1 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
Fourth: To the holders of the Class A-2 Notes, in an amount up to the
Interest Accrual Amount thereof ;
Fifth: To the holders of the Class A-2 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
Sixth: To the holders of the Class A-3 Notes, in an amount up to the
Interest Accrual Amount thereof;
Seventh: To the holders of the Class A-3 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
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Eighth: To the holders of the Class A-4 Notes, in an amount up to the
Interest Accrual Amount thereof;
Ninth: To the holders of the Class A-4 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
Tenth: To the holders of the Class A-1 Notes, in an amount up to the
aggregate Current Principal Amount of the Class A-1 Notes, based upon their
respective Current Principal Amounts, ratably, without preference or priority of
any kind;
Eleventh: To the holders of the Class A-1 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-1 Realized Loss Amounts previously allocated to the Class A-1 Notes;
Twelfth: To the holders of the Class A-1 Notes, in an amount up to the
amount of any unreimbursed Class A-1 Realized Loss Amounts previously allocated
thereto (including any Class A-1 Realized Loss Amount allocated thereto on such
Payment Date);
Thirteenth: To the holders of the Class A-2 Notes, in an amount up to
the aggregate Current Principal Amount of the Class A-2 Notes, based upon their
respective Current Principal Amounts, ratably, without preference or priority of
any kind;
Fourteenth: To the holders of the Class A-2 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-2 Realized Loss Amounts previously allocated to the Class A-2 Notes;
Fifteenth: To the holders of the Class A-2 Notes, in an amount up to
the amount of any unreimbursed Class A-2 Realized Loss Amounts previously
allocated thereto (including any Class A-2 Realized Loss Amount allocated
thereto on such Payment Date);
Sixteenth: To the holders of the Class A-3 Notes, in an amount up to
the aggregate Current Principal Amount of the Class A-3 Notes, based upon their
respective Current Principal Amounts, ratably, without preference or priority of
any kind;
Seventeenth: To the holders of the Class A-3 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-3 Realized Loss Amounts previously allocated to the Class A-3 Notes;
Eighteenth: To the holders of the Class A-3 Notes, in an amount up to
the amount of any unreimbursed Class A-3 Realized Loss Amounts previously
allocated thereto (including any Class A-3 Realized Loss Amount allocated
thereto on such Payment Date);
Nineteenth: To the holders of the Class A-4 Notes, in an amount up to
the aggregate Current Principal Amount of the Class A-4 Notes, based upon their
respective Current Principal Amounts, ratably, without preference or priority of
any kind;
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Twentieth: To the holders of the Class A-4 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Realized Loss Amounts previously allocated to the Class A-4 Notes;
Twenty-First: To the holders of the Class A-4 Notes, in an amount up to
the amount of any unreimbursed Class A-4 Realized Loss Amounts previously
allocated thereto (including any Class A-4 Realized Loss Amount allocated
thereto on such Payment Date); and
Twenty-Second: To the payment of the remainder, if any, to the Issuer
or any other Person legally entitled thereto.
SECTION 5.09. Limitation on Suits.
No Holder of a Note shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder
has previously given written notice to the Trustee of a continuing Event of
Default; (2) the Holders of Notes entitled to at least 40% of the Voting Rights
shall have made written request to the Trustee to institute Proceedings in
respect of such Event of Default in its own name as Trustee hereunder; (3) such
Holder or Holders have offered to the Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such Proceeding; and (5) no direction
inconsistent with such written request has been given to the Trustee during such
60-day period by the Holders of Notes entitled to more than 50% of the Voting
Rights; it being understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all the
Holders of Notes.
SECTION 5.10. Unconditional Rights of Noteholders to Receive Principal
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, to the extent permitted by applicable law, which
right is absolute and unconditional except to the extent restricted by
applicable law, to receive payment of each installment of interest when due and
payable on such Note on the respective Payment Dates of such installments of
interest and to receive payment of each installment of principal of such Note
when Due (or in the case of any Note called for redemption, on the date fixed
for such redemption) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
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SECTION 5.11. Restoration of Rights and Remedies.
If the 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 Trustee or to such Noteholder, then and in every such case the Issuer, the
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 Trustee and the
Noteholders shall continue as though no such Proceeding had been instituted.
SECTION 5.12. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the 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 5.13. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.14. Control by the Noteholders.
The Holders of Notes entitled to more than 50% of the Voting Rights,
shall have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that (1) such direction shall not be in
conflict with any rule of law or with this Indenture, (2) unless Section
5.18(b)(2) is applicable, any direction to the Trustee to undertake a Sale of
the Trust Estate shall be by the Holders of Notes entitled to the percentage of
the Voting Rights specified in Section 5.18(b)(1) or (3), whichever is
applicable, (3) if the conditions to retention of the Trust Estate set forth in
Section 5.05(a) have been satisfied, then any direction by less than all of the
Noteholders to the Trustee to undertake a Sale of the Trust Estate shall be of
no force and effect, and (4) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction; provided, however,
that, subject to Section 6.01, the Trustee need not take action which it
determines might involve it in liability or expense or be unjustly prejudicial
to the Noteholders not consenting.
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SECTION 5.15. WAIVER OF PAST DEFAULTS.
The Holders of Notes entitled to more than 50% of the Voting Rights
may, on behalf of the Holders of all the Notes, waive any past Default hereunder
and its consequences, except a Default (1) in the payment of any installment of
principal of, or interest on, any Note; or (2) in respect of a covenant or
provision hereof which under Section 9.02 cannot be modified or amended without
the consent of the Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 5.16. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate Notes representing more than 10% of the Voting Rights,
or to any suit instituted by any Noteholder for the enforcement of the payment
of any installment of interest on any Note on or after the maturity thereof
expressed in such Note or for the enforcement of the payment of any installment
of principal of any Note when due (or, in the case of a Note called for
redemption, on or after the applicable redemption date) or for the enforcement
of the payment of any installment of principal of any Note when due as indicated
in the Payment Date Statement prepared and delivered by the Trustee pursuant to
Section 2.09(e).
SECTION 5.17. 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, which may affect the covenants in, or the
performance of, this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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SECTION 5.18. SALE OF TRUST ESTATE.
(a) The power to effect any sale or other disposition (a "Sale") of any
portion of the Trust Estate pursuant to Section 5.04 is expressly subject to the
provisions of Section 5.05 and this Section 5.18. The power to effect any such
Sale shall not be exhausted by any one or more Sales as to any portion of the
Trust Estate remaining unsold, but shall continue unimpaired until the entire
Trust Estate shall have been sold or all amounts payable on the Notes and under
this Indenture shall have been paid. The Trustee hereby expressly waives its
right to any amount fixed by law as compensation for any Sale.
(b) The Trustee shall not in any private Sale sell the Trust Estate, or
any portion thereof, unless (1) the Holders of all Outstanding Notes consent to
or direct the Trustee to make, such Sale, or (2) the proceeds of such Sale would
be not less than the entire amount which would be payable to the Holders under
the Notes, in full payment thereof in accordance with Section 5.08 on the
Payment Date next succeeding the date of such Sale, or (3) the Trustee
determines, in its sole discretion, that the conditions for retention of the
Trust Estate set forth in Section 5.05(a)(i), (iii) or (iv) cannot be satisfied
(in making any such determination, the Trustee may rely upon an opinion of an
Independent investment banking firm obtained and delivered as provided in
Section 5.05(b) unless a contrary opinion is delivered by an Independent
investment banking firm engaged by the Issuer pursuant to Section 5.05(b), in
which event the Trustee shall not be protected in relying solely upon either
such opinion but may nevertheless in its discretion make a determination as to
whether the conditions for retention of the Trust Estate set forth in Section
5.05(a)(i) can or cannot be satisfied), and the Holders of Notes entitled to at
least 66 2/3% of the Voting Rights consent to such Sale. The purchase by the
Trustee of all or any portion of the Trust Estate at a private Sale shall not be
deemed a Sale or other disposition thereof for purposes of this Section 5.18(b).
(c) Unless the Holders of all Outstanding Notes have otherwise
consented or directed the Trustee, at any public Sale of all or any portion of
the Trust Estate at which a minimum bid equal to or greater than the amount
described in paragraph (2) of subsection (b) of this Section 5.18 has not been
established by the Trustee and no Person bids an amount equal to or greater than
such amount, the Trustee shall bid an amount at least $1.00 more than the
highest other bid; provided that the payment for such bid will be limited to the
application of the credit as set forth in Section 5.18(d)(2).
(d) In connection with a Sale of all or any portion of the Trust
Estate,
(1) any Holder or Holders of Notes may bid for and purchase the
property offered for sale, and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property, without further
accountability, and may, in paying the purchase money therefor, deliver any
Outstanding Notes or claims for interest thereon in lieu of cash up to the
amount which shall, upon distribution of the net proceeds of such sale, be
payable thereon, and such Notes, in case the amounts so
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payable thereon shall be less than the amount due thereon, shall be returned
to the Holders thereof after being appropriately stamped to show such
partial payment;
(2) the Trustee may bid for and acquire the property offered for Sale
in connection with any Sale thereof, and, subject to any requirements of,
and to the extent permitted by, applicable law in connection therewith, may
purchase all or any portion of the Trust Estate in a private Sale, and, in
lieu of paying cash therefor, may make settlement for the purchase price by
crediting the gross Sale price against the sum of (A) the amount which would
be distributable to the Holders of the Notes as a result of such Sale in
accordance with Section 5.08 on the Payment Date next succeeding the date of
such Sale and (B) the expenses of the Sale and of any Proceedings in
connection therewith which are reimbursable to it, without being required to
produce the Notes in order to complete any such Sale or in order for the net
Sale price to be credited against such Notes, and any property so acquired
by the Trustee shall be held and dealt with by it in accordance with the
provisions of this Indenture;
(3) the Trustee shall execute and deliver an appropriate instrument of
conveyance transferring its interest in any portion of the Trust Estate in
connection with a Sale thereof;
(4) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take
all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
SECTION 5.19. Action on Notes.
The 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 Trustee or the Holders of Notes
shall be impaired by the recovery of any judgment by the Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Estate.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would
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exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations of the Trustee shall be read into this Indenture.
(2) In the absence of bad faith on its part, the 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 Trustee and conforming to the requirements of this Indenture. The
Trustee shall, however, examine such certificates and opinions to determine
whether they conform to the requirements of this Indenture but need not
verify the accuracy of the contents thereof or whether procedures specified
by or pursuant to the provisions of this Indenture have been followed in the
preparation thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of subsection (b) of this
Section.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) The 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 5.14.
(d) For all purposes under this Indenture, the Trustee shall not be
deemed to have notice of any Event of Default described in Section 5.01(1) or
5.01(3) through 5.01(6) or any Default described in Section 5.01(1) or 5.01(3)
through 5.01(6) unless a Responsible Officer assigned to and working in the
Trustee's corporate trust department has actual knowledge thereof or unless
written notice of any event which is in fact such an Event of Default or Default
is received by the Trustee at the Corporate Trust Office, and such notice
references the Notes, the Issuer, the Trust Estate or this Indenture.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it; provided, however, that the Trustee shall not
refuse or fail to perform any of its duties hereunder solely as a result of
non-payment of its normal fees and expenses and, further provided, that nothing
in this Section 6.01(e) shall be construed to limit the exercise by the Trustee
of any right or remedy permitted under this Indenture or otherwise
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in the event of the Issuer's failure to pay the Trustee's fees and expenses
pursuant to Section 6.07. In determining that such repayment or indemnity is not
reasonably assured to it, the 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 Trust Estate pursuant
to Sections 6.07 and 8.02(d).
(f) Every provision of this Indenture that in any way relates to the
Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration of the Maturity of the Notes secured
thereby, whether such extinguishment occurs through a Sale of the Trust Estate
to another Person, the acquisition of the Trust Estate by the Trustee or
otherwise, the rights, powers and duties of the Trustee with respect to the
Trust Estate (or the proceeds thereof) and the Holders of the Notes and the
rights of such Noteholders shall continue to be governed by the terms of this
Indenture.
SECTION 6.02. NOTICE OF DEFAULT.
Upon a Default becoming known to the Trustee, the Trustee shall, within
90 days after the occurrence of such Default becomes known to the Trustee,
transmit notice of such Default by mail to all Holders of Notes as to which such
Default has occurred and to S&P, unless such Default shall have been cured or
waived; provided, however, that except in the case of a Default of the type
described in Section 5.01(2), the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interests of the
Holders of the Notes; and provided, further, that in the case of any Default of
the character specified in Section 5.01(4) or 5.01(5) no such notice to
Noteholders shall be given until at least 30 days after the occurrence thereof.
SECTION 6.03. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel; provided, however, that the
Trustee may not, by relying on an Officer's Certificate or Opinion of Counsel,
refrain from making payments of principal or interest on the Notes or exercise
remedies pursuant to Article V. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on the Certificate or
Opinion.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
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(d) The 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 as provided herein.
(e) The Trustee shall not be liable for any action it takes or omits to
take in good faith pursuant to Section 5.14 hereof at the direction of Holders
of Notes entitled to more than 50% of the Voting Rights, after notice to the
Holders of the Notes of a Default under this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the certificates
of authentication on the Notes, shall be taken as the statements of the Issuer
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations with respect to the Trust Estate or as to the validity
or sufficiency of this Indenture or of the Notes. The Trustee shall not be
accountable for the use or application by the Issuer of Notes or the proceeds
thereof or any money paid to the Issuer or upon Issuer Order pursuant to the
provisions hereof.
SECTION 6.05. May Hold Notes.
The Trustee, any Agent, or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 6.08 and 6.13, may otherwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not
Trustee, Agent, or such other agent.
SECTION 6.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by Section 8.03, by any other
provision of this Indenture or by law. The Trustee shall be under no liability
for interest on any money received by it hereunder except as otherwise agreed
with the Issuer and except to the extent of income or other gain on investments
which are obligations of the Trustee, in its commercial capacity, and income or
other gain actually received by the Trustee on investments which are obligations
of others.
SECTION 6.07. Compensation and Reimbursement.
The Issuer agrees
(1) subject to any separate written agreement with the Trustee, to pay
the Trustee from time to time reasonable compensation for all services
rendered by it hereunder or any documents executed in connection herewith
(which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
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(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in connection with the
administration of the Trust Estate pursuant to the terms of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its agents and counsel incurred in connection with litigation affecting the
Trust Estate or the Trustee), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and its agents for, and to hold them
harmless against, any loss, liability or expense incurred without negligence
or bad faith on their part, arising out of, or in connection with, the
acceptance or administration of this trust, including the costs and expenses
of defending themselves against any claim in connection with the exercise or
performance of any of their powers or duties hereunder, provided that:
(i) with respect to any such claim, the Trustee shall have given
the Issuer written notice thereof promptly after the Trustee shall have
knowledge thereof;
(ii) while maintaining absolute control over its own defense, the
Trustee shall cooperate and consult fully with the Issuer in preparing
such defense; and
(iii) notwithstanding anything to the contrary in this Section
6.07(3), the Issuer shall not be liable for settlement of any such
claim by the Trustee entered into without the prior consent of the
Issuer, which consent shall not be unreasonably withheld. As security
for the performance of the obligations of the Issuer under this
Section, the Trustee shall have a lien ranking junior to the lien of
this Indenture for the benefit of the Holders of the Notes (but senior
to all other liens, if any) upon all property and funds held or
collected as part of the Trust Estate by the Trustee in its capacity as
such. The Trustee shall not institute any Proceeding seeking the
enforcement of such lien against the Trust Estate unless such
Proceeding is in connection with a Proceeding in accordance with
Article V for enforcement of the lien of this Indenture for the benefit
of the Holders of the Notes after the occurrence of an Event of Default
(other than an Event of Default arising solely from the Issuer's
failure to pay amounts due the Trustee under this Section 6.07) and a
resulting declaration of acceleration of Maturity of the Notes which
has not been rescinded and annulled.
SECTION 6.08. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1). The Trustee shall always have a combined
capital and surplus as stated in Section 6.09. The Trustee shall be subject to
TIA ss. 310(b), including the optional provision permitted by the second
sentence of TIA ss. 310(b)(9). The Trustee shall have a place of
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business in the State of Florida. Any successor Trustee shall execute the
Servicing Agreement and this Indenture.
SECTION 6.09. Trustee's Capital and Surplus.
The Trustee or any successor or substitute trustee shall at all times
have a combined capital and surplus of at least $50,000,000. If the Trustee
publishes annual reports of condition of the type described in TIA ss.
310(a)(2), its combined capital and surplus for purposes of this Section 6.09
shall be as set forth in the latest such report.
SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice thereof
to the Issuer. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee. The costs and expenses
incurred in connection with the resignation of the Trustee and any petition
filed for appointment of a Successor Trustee shall be paid by the Issuer.
(c) The Trustee may be removed at any time for reasonable cause by Act
of the Holders of Notes entitled to more than 50% of the Voting Rights delivered
to the Trustee and to the Issuer.
(d) If at any time:
(1) the Trustee shall have a conflicting interest prohibited by Section
6.08 and shall fail to resign or eliminate such conflicting interest in
accordance with Section 6.08 after written request therefor by the Issuer or
by any Noteholder, or
(2) the Trustee shall cease to be eligible under Section 6.09 or shall
become incapable of acting or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Issuer by an Issuer Order may
remove the Trustee, or (ii) subject to Section 5.16, any Noteholder who has
been a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Issuer by an Issuer Order shall promptly appoint a successor Trustee. If
within one year after such resignation,
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removal or incapability or the occurrence of such vacancy, a successor Trustee
has not been appointed by the Issuer, then a successor trustee shall be
appointed by Act of the Holders of Notes entitled to more than 50% of the Voting
Rights delivered to the Issuer and the retiring Trustee. The successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee appointed by the
Issuer. If no successor Trustee shall have been so appointed by the Issuer or
Noteholders or the successor Trustee shall not have accepted appointment in the
manner hereinafter provided, any Noteholder who has been a bona fide Holder of a
Note for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Issuer shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to the Noteholders
and S&P. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee. Notwithstanding the foregoing, on request of the
Issuer or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an Instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder subject nevertheless to its lien,
if any, provided for in Section 6.07. Upon request of any such successor
Trustee, the Issuer shall execute and deliver any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger; Conversion, Consolidation or Succession to
Business of Trustee.
Any entity into which the Trustee may be merged or converted or with
which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any entity
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such entity
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Notes have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or consolidation
to such authenticating Trustee may adopt
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such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had authenticated such Notes.
SECTION 6.13. Preferential Collection of Claims Against Issuer.
The Trustee shall be subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b), and a Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
SECTION 6.14. Co-trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal requirements
of the TIA or of any jurisdiction in which any of the Trust Estate may at the
time be located, the Issuer and the Trustee shall have power to appoint, and,
upon the written request of the Trustee or of the Holders of Notes entitled to
more than 50% of the Voting Rights, the Issuer shall for such purpose join with
the Trustee in the execution, delivery and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons approved by the
Rating Agencies and the Trustee either to act as co-trustee, jointly with the
Trustee, of all or any part of the Trust Estate, or to act as separate trustee
of any such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Issuer does not join in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default has occurred and is continuing, the Trustee alone
shall have power to make such appointment.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any such
instrument shall, on request, be executed, acknowledged and delivered by the
Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Notes shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised, solely
by the Trustee.
(2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by
the Trustee or by the Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee
or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Trustee
shall be incompetent or unqualified to perform such act, in which event such
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rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(3) The Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Issuer evidenced by an Issuer Order, may
accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section, and, in case an Event of Default has occurred
and is continuing, the Trustee shall have power to accept the resignation
of, or remove, any such co-trustee or separate trustee without the
concurrence of the Issuer. Upon the written request of the Trustee, the
Issuer shall join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the manner
provided in this Section.
(4) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee, or any other such
trustee hereunder, and the Trustee shall not be personally liable by reason
of any act or omission of any co-trustee or other such separate trustee
hereunder.
(5) Any Act of Noteholders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION 6.15. Authenticating Agents.
The Trustee may appoint an Authenticating Agent with power to act on
its behalf and subject to its direction in the authentication and delivery of
the Notes designated for such authentication by the Issuer and containing
provisions therein for such authentication (or with respect to which the Issuer
has made other arrangements, satisfactory to the Trustee and such Authenticating
Agent, for notation on the Notes of the authority of an Authenticating Agent
appointed after the initial authentication and delivery of such Notes) in
connection with transfers and exchanges under Sections 2.06 and 2.07 as fully to
all intents and purposes as though the Authenticating Agent had been expressly
authorized by those Sections to authenticate and deliver Notes. For all purposes
of this Indenture (other than in connection with the authentication and delivery
of Notes pursuant to Sections 2.05 and 2.12 in connection with their initial
issuance and for purposes of Section 2.08), the authentication and delivery of
Notes by the Authenticating Agent pursuant to this Section shall be deemed to be
the authentication and delivery of Notes "by the Trustee". Such Authenticating
Agent shall at all times be a Person that both meets the requirements of Section
6.09 for the Trustee hereunder and has its principal office in the City and
State of New York.
Any Authenticating Agent shall also serve as Note Registrar or co-Note
Registrar as provided in Section 2.07. Any Authenticating Agent appointed by the
Trustee pursuant to the terms of this Section 6.15 shall deliver to the Trustee
as a condition precedent to the effectiveness of such appointment an instrument
accepting the trusts, duties and responsibilities of Authenticating Agent and of
Note Registrar or co-Note Registrar and indemnifying the Trustee for and holding
the Trustee harmless against, any loss, liability or
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expense (including reasonable attorneys' fees) incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance,
administration of the trust or exercise of authority by such Authenticating
Agent, Note Registrar or co-Note Registrar.
Any entity into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any entity resulting from any
merger, consolidation or conversion to which any Authenticating Agent shall be a
party, or any entity succeeding to the corporate trust business of any
Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor entity is otherwise eligible under this Section,
without the execution or filing of any further act on the part of the parties
hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and the Issuer. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Issuer. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Issuer and shall mail notice of such
appointment to all Holders of Notes.
The Issuer agrees to pay to any Authenticating Agent from time to time
reasonable compensation for its services. The provisions of Sections 2.10, 6.04
and 6.05 shall be applicable to any Authenticating Agent.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer to Furnish Trustee Names and Addresses of
Noteholders.
(a) The Issuer will furnish or cause to be furnished to the Trustee (i)
semi-annually, not less than 45 days nor more than 60 days after the Record Date
for each April 1 and October 1 Payment Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Notes, and
(ii) at such other times, as the 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 Trustee is the Note Registrar,
no such list shall be required to be furnished to the Trustee.
(b) In addition to furnishing to the Trustee the Noteholder lists, if
any, required under subsection (a), the Issuer shall also furnish all Noteholder
lists, if any, required under Section 3.03 at the times required by said Section
3.03.
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SECTION 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list, if any, furnished to the Trustee as provided in Section 7.01
and the names and addresses of the Holders of Notes received by the Trustee in
its capacity as Note Registrar. The Trustee may destroy any list furnished to it
as provided in Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
SECTION 7.03. Reports by Trustee.
(a) (i) Within 60 days after May 15 of each year (the "reporting
date"), commencing with the year after the issuance of the Notes, the Trustee
shall mail to all Holders (together with all other Persons to whom reports are
to be transmitted under TIA ss. 313(c)) a brief report dated as of such
reporting date that complies with TIA ss. 313(a); (ii) the Trustee shall also
mail to Holders any reports that are required by TIA ss. 313(b)(2) with respect
to any advances made by the Trustee and (iii) the Trustee shall also mail to
Holders of Notes any reports required by TIA ss. 313(a)(5) and ss. 313(b)(1)
with respect to the release and substitution of any Accounts. For purposes of
the information required to be included in any such reports pursuant to TIA ss.
313(a)(2), 313(b)(1) or 313(b)(2), the principal amount of indenture securities
outstanding on the date as of which such information is provided shall be the
Aggregate Current Principal Amount of the then Outstanding Notes at the date as
of which such information is presented.
(b) A copy of each report required under this Section 7.03 shall, at
the time of such transmission to Noteholders, be filed by the Trustee with the
Commission and with each securities exchange upon which the Notes are listed,
provided that the Issuer has previously notified the Trustee of such listing.
The Issuer will notify the Trustee when the Notes are listed on any securities
exchange.
SECTION 7.04. Reports by Issuer.
The Issuer (a) shall file with the Trustee within 15 days after it
files them with the Commission copies of the annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Issuer is required to file with the Commission pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and (b) shall also comply with the
other provisions of TIA ss. 314(a).
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ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND
RELEASES
SECTION 8.01. Collection of Moneys.
Except as otherwise expressly provided herein, the 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 Trustee pursuant to this
Indenture. The Trustee shall hold all such money and property received by it as
part of the Trust Estate, and shall apply it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under the Servicing Agreement, or
any Hazard Insurance Policy or any other related insurance policy, the Trustee
may, and upon the request of the Holders of Notes entitled to more than 50% of
the then Voting Rights, the Trustee shall, take such action as may be
appropriate to enforce such payment or performance including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and to proceed thereafter as provided in Article V.
SECTION 8.02. Collection Account.
(a) Prior to the initial authentication and delivery of the Notes, the
Issuer shall open, at the Corporate Trust Office, a segregated trust account
(the "Collection Account") which such account shall be an Eligible Account. All
payments to be made from time to time to the Holders of Notes out of funds in
the Collection Account pursuant to this Indenture shall be made by the Trustee
as the Paying Agent of the Issuer or, pursuant to Section 3.03, by any other
Paying Agent appointed by the Issuer. All moneys deposited from time to time in
the Collection Account, including the deposits to be made by the Servicer in the
Collection Account pursuant to the Servicing Agreement, and all deposits therein
pursuant to this Indenture, and all investments made with such moneys including
all income or other gain from such investments shall be held by the Trustee as
part of the Trust Estate as herein provided. So long as no Servicing Default
shall have occurred and be continuing, moneys in the Collection Account
representing collections on the Accounts erroneously deposited therein shall be
subject to withdrawals by the Servicer pursuant to Sections 2.07(c)(i) and 2.11
of the Servicing Agreement.
(b) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the Collection Account shall be invested and
reinvested by the Trustee at the Issuer's direction in one or more Eligible
Investments bearing interest or sold at discount. No such investment shall
mature later than two Business Days prior to the next Payment Date (or on such
Payment Date, in the case of obligations referred to in clause (a)(i) of the
definition of Eligible Investments and in the case of Eligible Investments of
which the Trustee is the obligor, so long as at the time of such investment the
long-term unsecured debt securities of the Trustee are rated "AAA" and "Aaa" by
S&P and Moody's, respectively). Notwithstanding the foregoing, any investment
(including repurchase agreements) on which
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the Trustee, in its commercial capacity, is the obligor, may mature on a Payment
Date if, under this Section 8.02, such investment could otherwise mature on the
Business Day immediately preceding such Payment Date.
All income or other gains from investment of moneys deposited in the
Collection Account shall be deposited by the Trustee in the Collection Account
immediately upon receipt, and any loss resulting from such investment shall be
charged to the Collection Account.
(c) Unless the Notes have been declared due and payable pursuant to
Section 5.02 and moneys collected by the Trustee with respect to the Notes are
being applied in accordance with Section 5.08, the amount on deposit in the
Collection Account on any Payment Date shall, after payment of Issuer Expenses
in accordance with Subsection (d), be withdrawn from the Collection Account, in
the amounts required, for application as follows:
On each Payment Date, interest and principal payments on the Notes will
be made from Available Funds in the following amounts and order of priority:
First: To the holders of the Class A-1 Notes, in an amount up to the
Interest Accrual Amount thereof;
Second: To the holders of the Class A-1 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
Third: To the holders of the Class A-2 Notes, in an amount up to the
Interest Accrual Amount thereof;
Fourth: To the holders of the Class A-2 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
Fifth: To the holders of the Class A-3 Notes, in an amount up to the
Interest Accrual Amount thereof;
Sixth: To the holders of the Class A-3 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
Seventh: To the holders of the Class A-4 Notes, in an amount up to the
Interest Accrual Amount thereof;
Eighth: To the holders of the Class A-4 Notes, in an amount up to all
unreimbursed Class Interest Shortfalls related thereto, together with accrued
interest thereon to the extent legally enforceable;
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Ninth: To the holders of the Class A-1 Notes, in an amount up to the
Class A-1 Optimal Principal Amount;
Tenth: To the holders of the Class A-1 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-1 Realized Loss Amounts previously allocated to the Class A-1 Notes;
Eleventh: To the holders of the Class A-1 Notes, in an amount up to the
amount of any unreimbursed Class A-1 Realized Loss Amounts previously allocated
thereto (including any Class A-1 Realized Loss Amount allocated thereto on such
Payment Date);
Twelfth: To the holders of the Class A-2 Notes, in an amount up to the
Class A 2 Optimal Principal Amount;
Thirteenth: To the holders of the Class A-2 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-2 Realized Loss Amounts previously allocated to the Class A-2 Notes;
Fourteenth: To the holders of the Class A-2 Notes, in an amount up to
the amount of any unreimbursed Class A-2 Realized Loss Amounts previously
allocated thereto (including any Class A-2 Realized Loss Amount allocated
thereto on such Payment Date);
Fifteenth: To the holders of the Class A-3 Notes, in an amount up to
the Class A-3 Optimal Principal Amount;
Sixteenth: To the holders of the Class A-3 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-3 Realized Loss Amounts previously allocated to the Class A-3 Notes;
Seventeenth: To the holders of the Class A-3 Notes, in an amount up to
the amount of any unreimbursed Class A-3 Realized Loss Amounts previously
allocated thereto (including any Class A-3 Realized Loss Amount allocated
thereto on such Payment Date);
Eighteenth: To the holders of the Class A-4 Notes, in an amount up to
the Class A-4 Optimal Principal Amount;
Nineteenth: To the holders of the Class A-4 Notes, accrued and unpaid
interest at the related Note Interest Rate on the amount of any unreimbursed
Class A-4 Realized Loss Amounts previously allocated to the Class A-4 Notes;
Twentieth: To the holders of the Class A-4 Notes, in an amount up to
the amount of any unreimbursed Class A-4 Realized Loss previously allocated
thereto (including any Class A-4 Realized Loss Amount allocated thereto on such
Payment Date); and
Twenty-First, to the Issuer, free of the lien of this Indenture, an
amount equal to the excess, if any, of (x) the Available Funds for such Payment
Date over (y) the aggregate of
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the amounts applied pursuant to subclauses first through twentieth in this
clause (ii) for such Payment Date, each such amount being the amount thereof set
forth in the Payment Date Statement. Any funds remaining in the Collection
Account shall be invested in accordance with Section 8.02(b).
(d) Funds on deposit in the Collection Account shall be withdrawn
therefrom and applied on each Payment Date to the payment of Issuer Expenses;
provided that (i) funds shall not be withdrawn from the Collection Account for
such purpose during the period from the end of each Due Period through the next
Payment Date if such withdrawal would result in the funds on deposit in the
Collection Account on such Payment Date being less than the Available Funds for
such Payment Date as set forth in the related Payment Date Statement and (ii)
such Issuer Expenses, to the extent not paid on such Payment Date because of
clause (i), shall be paid as soon as possible after such Payment Date.
(e) After the entire principal amount of and accrued and unpaid
interest on the Notes and any unreimbursed Realized Loss Amounts have been paid
or provided for as provided in Section 4.01, the cash balance, if any, then
remaining in the Collection Account shall be withdrawn from such Collection
Account by the Trustee, released from the lien of this Indenture and paid to the
Issuer.
SECTION 8.03. General Provisions Regarding the Collection Account.
(a) The Collection Account shall relate solely to the Notes and to the
Accounts, Eligible Investments and other property securing the Notes. Funds and
other property in the Collection Account shall not be commingled with any other
moneys or property of the Issuer or any Affiliate thereof.
(b) The Issuer will not direct the Trustee to make any investment of
any funds in the Collection Account or to sell any investment held in the
Collection Account except under the following terms and conditions:
(i) each such investment shall be made in the name of the Trustee
(in its capacity as such) or in the name of a nominee of the Trustee
(or, if, as indicated by an Opinion of Counsel delivered to the
Trustee, applicable law provides for perfection of pledges of an
investment not evidenced by a certificate or other instrument through
registration of such pledge on books maintained by or on behalf of the
issuer of such investment, such pledge may be so registered),
(ii) the Trustee shall have sole control over such investment, the
income thereon and the proceeds thereof,
(iii) any certificate or other instrument evidencing such
investment shall be delivered directly to the Trustee or its agent, and
(iv) the proceeds of each sale of such an investment shall be remitted
by the purchaser thereof directly to the Trustee for deposit in the
Collection Account.
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(c) If any amounts are needed for disbursement from the Collection
Account and sufficient uninvested funds are not available therein to make such
disbursement, in the absence of an Issuer Order for the liquidation of
investments held therein in an amount sufficient to provide the required funds,
the Trustee shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in the Collection Account.
(d) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Collection Account except for its liability on investments
which are liabilities of the Trustee in its commercial capacity as an obligor of
any Eligible Investment.
(e) All investments of funds in the Collection Account and all sales of
investments held in the Collection Account shall, except as provided below, be
made by the Trustee in accordance with an Issuer Order; provided, however, such
Issuer Order shall specify investment of such funds only in Eligible
Investments. Subject to compliance with the requirements of Sections 8.02(b) and
8.03(b), such Issuer Order may authorize the Trustee to make the specific
investments set forth therein, to make investments from time to time consistent
with the general instructions set forth therein, or to make specific investments
pursuant to written, telegraphic or telephonic instructions of the employees or
agents of the Issuer identified therein, in each case only in Eligible
Investments and in such amounts as such Issuer Order shall specify.
In the event that:
(i) the Issuer shall have failed to give investment directions to
the Trustee by 10:30 a.m. Eastern Time on the Business Day prior to any
day on which funds are due to be deposited in the Collection Account
(whether with respect to Remittances or payments of principal of or
interest on Eligible Investments) authorizing the Trustee to invest
such funds,
(ii) a Default or Event of Default shall have occurred and be
continuing but the Notes shall not have been declared due and payable
pursuant to Section 5.02, or if such Notes shall have been declared due
and payable following an Event of Default, amounts collected or
receivable from the Trust Estate are being applied in accordance with
Section 5.05, or
(iii) an Event of Default shall have occurred and be continuing,
the Notes shall have been declared due and payable pursuant to Section
5.02 and amounts collected or receivable from the Trust Estate are
being applied in accordance with Section 5.08, the Trustee shall invest
and reinvest the funds then in the Collection Account to the fullest
extent practicable, in such manner as the Trustee shall from time to
time determine, but only in Eligible Investments described in paragraph
(a) of the definition thereof. In determining the practicability of
making any investment required by this Section 8.03(e), the Trustee
shall be entitled to take into account the availability to it, in the
normal course of its corporate trust business, of investments of the
required maturity and in the amounts available to be invested. All
investments made pursuant to clause (i) above shall mature on the next
Business Day following the date of such
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investment, all such investments made pursuant to clause (ii) above
shall mature no later than the maturity date therefor permitted by
Section 8.02(b), and all investments made pursuant to clause (iii)
above shall mature no later than the first date following the date of
such investment on which the Trustee proposes to make a distribution to
Holders of Notes pursuant to Section 5.08.
(f) Subject to the restriction on the maturity of investments set forth
in Section 8.02(b) and notwithstanding subsection (e) above, the Issuer will
give appropriate and timely investment directions to the Trustee such that at
the close of business on not more than two Business Days in any one calendar
year not more than an aggregate of $25,000 of funds in the Collection Account
are not invested pursuant, directly or indirectly, to an Issuer Order in
Eligible Investments bearing interest or sold at a discount which mature on or
after the opening of business on the next Business Day.
SECTION 8.04. Reports by Trustee to Noteholders.
On each Payment Date the Trustee shall deliver to the Noteholders a
written report based upon the Payment Date Statement for such Payment Date as
reviewed by a firm of Independent Accountants pursuant to Section 8.06(b)
setting forth the amount of such payment which represents principal and the
amount which represents interest (in each case on a per Individual Note basis),
and the principal amount of an Individual Note after giving effect to the
payment of principal made on such Payment Date.
SECTION 8.05. Reports by Trustee.
In addition to any statement required to be delivered or prepared by
the Trustee pursuant to Section 2.09, 8.02 or 10.01, the Trustee shall deliver
to the Issuer, the Servicer and the Independent Accountants appointed pursuant
to Section 8.06, within two Business Days after the request of the Issuer, or
such Independent Accountants, a written report setting forth the amount of the
Collection Account established hereunder and the identity of the investments
included therein. Without limiting the generality of the foregoing, the Trustee
shall, upon the request of the Issuer, promptly transmit to the Issuer copies of
all accountings of, and information with respect to, Remittances furnished it by
the Servicer and shall promptly notify the Issuer if, on the fifth day after any
Remittance Date, any Remittance then due or any portion thereof has not been
received by the Trustee.
SECTION 8.06. Reports by Independent Accountants.
(a) At the Closing Date the Issuer shall appoint the firm of
Independent Accountants to prepare and deliver the certificate or opinion
required to be delivered under Section 2.12(f), and prior to the time any report
or certificate pursuant to Section 8.06(b) is required to be delivered, the
Issuer will appoint a firm of Independent Accountants as its Independent
Accountants for purposes of preparing and delivering the reports or certificates
required by Section 8.06(b). Upon any resignation by such firm the Issuer shall
promptly appoint a successor thereto that shall also be a firm of Independent
Accountants of recognized national reputation. If the Issuer shall fail to
appoint a successor to a firm of Independent Accountants which has resigned
within fifteen days after such resignation, the Issuer shall promptly notify the
Trustee of such failure in writing. If the Issuer shall not have appointed a
successor within ten days thereafter, the Trustee shall promptly appoint a
successor firm of Independent
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Accountants of recognized national reputation. The fees of such successor shall
be payable by the Issuer, and any fees not so paid by the Issuer may be paid by
the Trustee on behalf of the Issuer, from amounts otherwise payable to the
Issuer from the related Collection Account pursuant to Section 8.02(d).
(b) If the Trustee shall fail to deliver to the Issuer any Payment Date
Statement by the due date therefor, the Issuer shall, at the opening of business
on the next Business Day after such due date, direct the firm of Independent
Accountants appointed pursuant to subsection (a) to prepare and deliver to the
Trustee such Payment Date Statement at the expense of the Trustee, no later than
2:00 p.m. on the Business Day following the day on which such direction was
given. Any fees of such Independent Accountants not paid by the Issuer may be
paid by the Trustee, on behalf of the Issuer (unless such fees are for the
account of the Trustee), from amounts otherwise payable to the Issuer from the
Collection Account pursuant to Section 8.02(d).
SECTION 8.07. Reports by the Servicer.
In the Servicing Agreement the Servicer has agreed to deliver to the
Trustee at the time specified therein the information called for by Section
3.01(a) of the Servicing Agreement.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of Noteholders.
Without the consent of the Holders of any Notes, the Issuer and the
Trustee when authorized by an Issuer Order, at any time and from time to time,
may enter into one or more indentures supplemental hereto, in form satisfactory
to the Trustee for any of the following purposes:
(1) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Trustee any property subject or required to be subjected to
the lien of this Indenture, or to subject to the lien of this Indenture
additional property;
(2) to evidence the succession 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:
(3) to add to the covenants of the Issuer, for the benefit of the
Holders of all Notes, or to surrender any right or power herein conferred
upon the Issuer;
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(4) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or questions
arising under this Indenture, which shall not be materially inconsistent
with the other provisions of this Indenture, provided that such action shall
not adversely affect in any material respect the interests of the Holders of
the Notes; or
(5) 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 TIA or under any similar federal statute hereafter enacted,
and to add to this Indenture such other provisions as may be expressly
required by TIA.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
With the consent of the Holders of Notes entitled to at least 50% of
the Voting Rights, by Act of said Holders delivered to the Issuer and the
Trustee, the Issuer, when authorized by an Issuer Order, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions, of this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(1) change the final installment of principal of, or any installment of
interest on, any Note or reduce the principal amount thereof, the Note
Interest Rate thereon or the Redemption Price with respect thereto, change
the Note Redemption Date, change any place of payment where, or the coin or
currency in which, any Note or any interest thereon is payable, or impair
the right to institute suit for the enforcement of the payment of any
installment of interest due on any Note on or after the date such payment is
due or for the enforcement of the payment of the entire remaining unpaid
principal amount of any Note on or after the Maturity of the final
installment of the principal thereof (or, in the case of redemption, on or
after the applicable Redemption Date);
(2) reduce the percentage of the Voting Rights, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with provisions of this Indenture or Defaults hereunder and their
consequences provided for in this Indenture;
(3) modify any of the provisions of this Section 9.02, Section 5.14 or
Section 5.18(b) or 5.18(c), except to increase any percentage specified
therein or to provide that certain other provisions of this Indenture cannot
be modified or waived without the consent of the Holder of each Outstanding
Note affected thereby;
(4) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
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(5) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust Estate
or terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security afforded by the
lien this Indenture; or
(6) modify any of the provisions of this Indenture in such manner as to
affect the calculation of the principal or interest for any Payment Date on
any Notes (including the calculation of any of the individual components of
such Debt Service Requirement) or to affect the rights of the Holders of
Notes to the benefits of any provisions contained herein for the mandatory
payment of principal.
The Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture pursuant to this Section 9.02 or
Section 9.01(4) hereof and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Trustee shall not be liable for any such determination
made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
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.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Issuer shall mail to the
Holders of the Notes to which such supplemental indenture relates a notice
setting forth in general terms the substance of such supplemental indenture. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not
(except to the extent required in the case of a supplemental indenture entered
into under Section 9.01(5)) be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes to which such supplemental indenture relates which have theretofore
been or thereafter are authenticated and delivered hereunder shall be bound
thereby.
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SECTION 9.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Section shall
conform to the requirements of the TIA as then in effect, so long as this
Indenture shall then be qualified under the TIA.
SECTION 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Issuer, to any such supplemental indenture which relates to the Notes may be
prepared and executed by the Issuer and authenticated and delivered by the
Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Optional Redemption of Notes.
The Notes are subject to redemption in whole and not in part at the
option of the Issuer on any Payment Date at the Redemption Price therefor if
before or after giving effect to the payment of principal otherwise required to
be made on such Payment Date the Current Principal Amount of each Class of Notes
outstanding (prior to allocations of any Realized Loss Amounts) equals 10% or
less of the initial principal amount of such Class of Notes.
Payment on the Notes pursuant to any optional redemption may be made
only with Eligible Moneys. If the Issuer elects to so redeem all Notes then
Outstanding, it shall, no later than 30 days prior to the Payment Date selected
for such redemption, deliver notice of such election to the Trustee, together
with an Issuer Order directing the Trustee to effect such redemption and the
Aggregate Redemption Price due on such Payment Date for deposit into the
Collection Account. All such Notes shall be due and payable on such Payment Date
upon the giving of the notice thereof required by Section 10.02.
SECTION 10.02. Form of Redemption Notice.
Notices of redemptions of Notes shall be given by the Trustee in the
name and at the expense of the Issuer and shall be mailed no later than 10 days
prior to the Redemption Date to the Persons who were Holders of such Notes on
the Record Date that would otherwise be applicable to the Payment Date on which
such notes are to be redeemed.
All notices of redemption shall state:
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(1) the Redemption Date,
(2) the Redemption Price and
(3) the place where such Notes are to be surrendered for payment of the
Redemption Price (which shall be the office or agency of the Issuer to be
maintained as provided in Section 3.02) and that no interest shall accrue on
such Note for any period after the date fixed for redemption.
Failure to give notice of redemption, or any defect therein, to any
Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
SECTION 10.03. Notes Payable on Redemption Date.
Notice of redemption having been given as provided in section 10.02,
the Notes so to be redeemed shall, on the applicable Redemption Date, become due
and payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on such Redemption
Price for any period after such Redemption Date. Upon surrender of such Notes
for redemption in accordance with said notice such Notes shall be paid by or on
behalf of the Issuer at the Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions.
Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request) shall include to the extent applicable:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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(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 individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with;
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with; and
(5) if the signer of such certificate or opinion is required to be
Independent, the statement required by the definition of the term
"Independent."
SECTION 11.02. Form of Documents Delivered to 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 officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of
counsel, unless such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate 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
Owner Trustee, the Grantor or any other Person, stating that the information
with respect to such factual matters is in the possession of such Person, unless
such officer or 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. Any Opinion of Counsel may be based on the written
opinion of other counsel, in which event such Opinion of Counsel shall be
accompanied by a copy of such other counsel's opinion and shall include a
statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the 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, 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
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such certificate or report. The foregoing shall not, however, be construed to
affect the Trustee's right to rely upon the truth and accuracy of any statement
or opinion contained in any such document as provided in Section 6.01(b)(2)
Wherever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Trustee at the request or direction
of the Issuer, then, notwithstanding that the satisfaction of such condition is
a condition precedent to the Issuer's right to make such request or direction,
the Trustee shall be protected in acting in accordance with such request or
direction if it does not have knowledge of the occurrence and continuation of
such Default or Event of Default as provided in Section 6.01(d).
SECTION 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by 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 Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Notes.
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SECTION 11.04. Notices, etc., to Trustee and Issuer.
(a) Any request, demand, authorization, direction, notice, consent
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with
(1) the Trustee by any Noteholder or by the Issuer shall be sufficient
for every purpose hereunder if filed in writing and mailed by registered
mail to the Trustee at __________________________________________________:
Corporate Trust Department with a copy sent to
______________________________________________________, or
(2) the Issuer by the Trustee or by any Noteholder shall be sufficient
for every purpose hereunder (except as provided in Section 5.01(3) and (4))
if in writing and mailed, first-class postage-prepaid, to the Issuer
addressed to it at _________________, as Owner Trustee,
_________________________________, Attention: ______________________, or at
any other address previously furnished in writing to the Trustee by the
Issuer.
(b) Notices required under this Indenture to be sent to Noteholders
with respect to material amendments to the Indenture, the Trust Agreement or the
Servicing Agreement, satisfaction and discharge of the Indenture and any
reports, statements, or other notices required hereunder shall in addition be
sent to each Rating Agency; to [Moody's at its address at 99 Church Street, New
York, New York 10007], [S&P at its address at 25 Broadway, New York, New York
10004], [DCR at its address at 55 East Monroe, 35th Floor, Chicago, Illinois
60603], [Fitch at its address at One State Street Plaza, New York, New York
10004].
SECTION 11.05. Notices and Reports to Noteholders; Waiver of Notices.
Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder as
it appears on the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by
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Noteholders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
SECTION 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for any meeting of Noteholders.
Any Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 11.07. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of TIA, such required provision shall control.
SECTION 11.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
SECTION 11.10. Separability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or co-trustee appointed under Section 6.14 and
the Noteholders any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 11.12. Legal Holidays.
In any case where the date of any Payment Date, Redemption Date, or any
other date on which principal of or interest on any Note is proposed to be paid
shall not be a
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Business Day, then (notwithstanding any other provision of the Notes or this
Indenture) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the nominal
date of any such Payment Date, Redemption Date, or other date for the payment of
principal of or interest on any Note, and no interest shall accrue for the
period from and after any such nominal date, provided such payment is made in
full on such next Succeeding Business Day.
SECTION 11.13. Governing Law.
This Indenture and each Note shall be construed in accordance with and
governed by the laws of the State of New York applicable to agreements made and
to be performed therein.
SECTION 11.14. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument
SECTION 11.15. Recording of Indenture.
This Indenture is subject to recording in any appropriate public
recording offices, such recording to be effected by the Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.12(b) or 3.06.
SECTION 11.16. Issuer Obligations.
No recourse may be taken, directly or indirectly, against (i) the Owner
Trustee in its individual capacity, (ii) any incorporator, subscriber to the
capital stock, stockholder, officer or director of the Owner Trustee or of any
predecessor or successor of the Owner Trustee in its individual capacity, (iii)
any holder of a beneficial interest in the Issuer, (iv) any partner,
beneficiary, agent, officer, director, employee, or successor or assign of a
holder of a beneficial interest in the Issuer, or (v) any incorporator,
subscriber to the capital stock, stockholder, officer, director or employee of
the Trustee or any predecessor or successor of the Trustee with respect to the
Issuer's obligations with respect to the Notes or the obligation of the Issuer
or the Trustee under this Indenture or any certificate or other writing
delivered in connection herewith or therewith.
SECTION 11.17. Inspection.
The Issuer and the Note Registrar will agree that, on reasonable prior
notice, they will permit any representative of Trustee, during normal business
hours, to examine all of the books of account, records, reports and other papers
in its possession relating to the Notes, to make copies and extracts therefrom
in the case of the Issuer, to cause such books to be audited by Independent
Accountants selected by the Trustee, and to discuss its affairs, finances and
accounts with its officers, employees and Independent Accountants (and by this
provision
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the Issuer hereby authorizes its Independent Accountants to discuss with such
representatives such affairs, finances and accounts), all at such reasonable
times and as often as may be reasonably requested. Any expense incident to the
exercise by the Trustee of any right under this Section 11.17 shall be borne by
the Issuer.
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IN WITNESS WHEREOF, the Owner Trustee on behalf of the Issuer and the
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized and the seal of the Owner Trustee and of the
Trustee, duly attested, to be hereunto affixed, all as of the day and year first
above written
MID-STATE TRUST 199
--
By: ,
-------------------------------
not in its individual capacity,
but solely as Owner Trustee
of Mid-State Trust 199
--
By:
------------------------------
Authorized Officer
Attest:
- -------------------
Authorized Officer
, as Trustee
-----------------
By:
------------------------------
Authorized Officer
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of _____, ____ before me, a notary public in and for
said State, personally appeared __________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument on behalf of one of the corporations therein
named, and acknowledged to me that such corporation executed it.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of _____, ____, before me, a notary public in and for
said State, personally appeared ____________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person who executed the
within instrument on behalf of one of the corporations therein named, and
acknowledged to me that such national banking association executed it.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
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EXHIBIT A
UNLESS THIS CLASS A-1 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
CERTIFICATE 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.
PRINCIPAL OF THIS CLASS A-1 NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-1
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE
ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-1 NOTE MAY BE ASCERTAINED
ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.
THE RIGHTS OF A HOLDER OF THIS CLASS A-1 NOTE ARE SUBJECT TO THE PROVISIONS OF
THE WITHIN-REFERENCED INDENTURE.
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MID-STATE TRUST 199 -
_____% ASSET BACKED NOTE, CLASS A-1 DUE: [ ]
ACCRUAL DATE: [ ] $ No.
----------------------------- -------------------
Mid-State Trust 199 - (the "Issuer"), a Delaware business trust
governed by a Trust Agreement dated as of ______ __, 199_ (the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns, the principal sum of ________ Dollars in quarterly
installments on January 1, April 1, July 1, and October 1 (the "Principal
Payment Dates") in each year, commencing on ________, 199_ and ending on or
before [ ] (the "Maturity" of such final installment of principal) and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal amount of this Class A-1 Note outstanding from time to time
from [ ] (the "Accrual Date"), or such later date to which interest has been
paid, until the principal amount of this Class A-1 Note is paid in full, at the
rate of __________ percent (_____%) per annum, such interest being payable
quarterly on January 1, April 1, July 1, and October 1 in each year, commencing
on ______, 199_ (the "Interest Payment Dates"). Installments of principal of
this Class A-1 Note are due and payable in the amounts and on the dates
described on the reverse hereof.
The principal of, and interest on, this Class A-1 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 Class A-1 Note shall be applied first to
interest due and payable on this Class A-1 Note as provided above and then to
the unpaid principal of this Class A-1 Note. Any installment of principal or
interest which is not paid when and as due shall bear interest at the rate of
interest borne by the principal of this Class A-1 Note from the date due to the
date of payment thereof, but only to the extent that the payment of such
interest shall be lawful and enforceable.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Class A-1 Note shall not be entitled to
any benefit under the Indenture referred to below, or be valid or obligatory for
any purpose.
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IN WITNESS WHEREOF, Mid-State Trust 199 - has caused this instrument to
be duly executed by ___________________, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement.
Dated:
-----------------
MID-STATE TRUST 199
--
By: ,
-------------------------------
not in its individual capacity,
but solely in its capacity as
Owner Trustee under the
Trust Agreement
By:
------------------------------
[Title]
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This Class A-1 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Asset Backed Notes, Class A-1 (herein called the
"Class A-1 Notes"). The Class A-1 Notes are issued and will be issued under an
Indenture dated as of April __, 1997 (herein called the "Indenture"), between
the Issuer and ___________________, as Trustee (the "Trustee", which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Trustee and the Holders of the
Class A-1 Notes and the terms upon which the Class A-1 Notes are, and are to be,
authenticated and delivered. Also issued under the Indenture are the [ ]% Asset
Backed Notes, Class A-2, [ ]% Asset Backed Notes, Class A-3 and [ ]% Asset
Backed Notes, Class A-4. The Class A-1 Notes are secured by the collateral
pledged as security therefor to the extent provided in the Indenture. All terms
used in this Class A-1 Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
An installment of principal shall be paid on the Class A-1 Notes on
each Principal Payment Date in the amount equal to the amount available to be
paid thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-1 Note
shall be due and payable on the Principal Payment Date in ________. Each payment
of principal of the Class A-1 Notes shall be allocated among the Class A-1 Notes
in proportion to their then remaining unpaid principal amounts. The unpaid
principal amount of this Class A-1 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Realized Loss Allocation
Amounts without any corresponding payment.
Payment of the then remaining unpaid principal amount of this Class A-1
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-1 Notes to payment of the then remaining
unpaid principal amount of this Class A-1 Note or to payment of the Redemption
Price payable on any date as of which this Class A-1 Note has been called for
redemption in full shall be made upon presentation of this Class A-1 Note to the
office or agency of the Issuer maintained for such purpose. Payments of interest
on this Class A-1 Note due and payable on each Interest Payment Date, together
with any installment of principal of this Class A- 1 Note due and payable on
each Interest Payment Date which is also a Principal Payment Date for this Class
A-1 Note, shall be made by check mailed to the Person whose name appears as the
registered Holder of this Class A-1 Note (or one or more Predecessor Notes) in
the Note Register as of the Record Date preceding such Interest Payment Date,
except that with respect to a Class A-1 Note registered in the name of the
nominee of a 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.
Checks for amounts due on this Class A-1 Note 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 Class A-1
Note be submitted for notation of
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payment and checks returned undelivered will be held for payment to the Person
entitled thereto, subject to the terms of the Indenture, at the office or agency
in the United States of America designated by the Issuer for such purpose
pursuant to the Indenture. Any reduction in the principal amount of this Class
A-1 Note (or any one or more Predecessor Notes) effected by any payments made on
any Principal Payment Date or by any allocation of a Realized Loss Amounts shall
be binding upon all Holders of this Class A-1 Note and of any Class A-1 Note
issued upon the registration of transfer hereof or in exchange herefor 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 Class
A-1 Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days prior to such Principal Payment Date, and the
amount then due and payable shall, if sufficient funds therefor are available,
be payable only upon presentation of this Class A-1 Note to the office or agency
of the Issuer maintained for such purpose.
If an Event of Default shall occur and be continuing with respect to
the Class A-1 Notes, the Class A-1 Notes may become or be declared due and
payable in the manner and with the effect provided in the Indenture. Reference
is hereby made to Article V of the Indenture which sets forth certain events
which constitute Events of Default. If any such acceleration of maturity occurs
prior to the Maturity of the final installment of principal of this Class A-1
Note, the amount payable to the Holder of this Class A-1 Note will be equal to
the aggregate unpaid principal amount of this Class A-1 Note on the date this
Class A-1 Note becomes so due and payable, together with accrued interest on
such unpaid principal amount to the date of payment thereof. The Indenture
provides that, notwithstanding the acceleration of the maturity of the Class A-1
Notes, under certain circumstances specified therein all amounts collected as
proceeds of the collateral securing the Class A-1 Notes or otherwise shall
continue to be applied to payments of principal of and interest on the Class A-1
Notes as if they had not been declared due and payable. In such event, interest
on the then unpaid principal amount of all Class A-1 Notes and on any overdue
installments of interest on the Class A-1 Notes following the acceleration of
the maturity of the Class A-1 Notes shall accrue and be payable at the
applicable Note Interest Rate, but only to the extent that the payment thereof
shall be lawful and enforceable.
The Class A-1 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Current Principal Amount which is 10% or less of the original
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.
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As provided in the Indenture the transfer of this Class A-1 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-1
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 Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of this Class
A-1 Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-1 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-1 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written 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 Class A-1 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding. The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, 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, at the time of the giving thereof, of this Class A-1 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-1 Note and of any Class A-1 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-1 Note.
The term "Issuer" as used in this Class A-1 Note includes any successor
to the Issuer under the Indenture.
The Class A-1 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth. The Class A-1 Notes are exchangeable for a like aggregate
initial principal amount of Class A-1 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.
As provided in the Indenture, this Class A-1 Note and the Indenture
shall be construed in accordance with, and governed by, the laws of the State of
New York applicable to agreements made and to be performed therein.
No reference herein to the Indenture and no provision of this Class A-1
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 Class A-1 Note at the times, place and rate, and in the coin or currency,
herein prescribed.
97
<PAGE>
Anything herein to the contrary notwithstanding, neither the Owner
Trustee in its individual capacity, any beneficial owner of the Issuer, the
Trustee nor 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 and
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in, this Class A-1 Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purpose of
binding the respective interests of the beneficial owners of the Issuer and the
Owner Trustee in the assets of the Issuer. The Holder of this Class A-1 Note by
the acceptance hereof agrees that 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 the enforcement against, the
assets of the Issuer of any and all liabilities, obligations and undertakings
contained in the Indenture or in this Class A-1 Note.
The Owner Trustee has executed this Class A-1 Note on behalf of the
Issuer, not in its individual capacity but solely as Owner Trustee under the
Trust Agreement and the Owner Trustee shall be liable hereunder only in respect
of the assets of the trust created by such Trust Agreement.
The remedies of the Holder hereof as provided herein and in the
Indenture, shall be cumulative and concurrent and may be pursued solely against
the assets of the Trust created by the Trust Agreement pledged under the
Indenture as security for the Class A-1 Notes. No failure on the part of the
holder in exercising any right or remedy hereunder shall operate as a waiver or
release thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder.
98
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Notes referred to in the within-mentioned
Indenture.
--------------------,
as Trustee
By:
------------------------------
Authorized Officer
99
<PAGE>
EXHIBIT B
UNLESS THIS CLASS A-2 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
CERTIFICATE 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.
PRINCIPAL OF THIS CLASS A-2 NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-2
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE
ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-2 NOTE MAY BE ASCERTAINED
ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.
THE RIGHTS OF A HOLDER OF THIS CLASS A-2 NOTE ARE SUBJECT TO THE PROVISIONS OF
THE WITHINREFERENCED INDENTURE.
THE RIGHTS OF THE CLASS A-2 NOTEHOLDERS TO RECEIVE PAYMENTS IN RESPECT
OF PRINCIPAL AND INTEREST ON THE CLASS A-2 NOTES ARE SUBORDINATE TO THE RIGHTS
OF THE CLASS A-1 NOTEHOLDERS TO RECEIVE PAYMENTS OF PRINCIPAL AND INTEREST.
100
<PAGE>
MID-STATE TRUST 199 -
_____% ASSET BACKED NOTE, CLASS A-2 DUE: [ ]
ACCRUAL DATE: [ ] $ No.
-------------------------- ------------------
Mid-State Trust 199 - (the "Issuer"), a Delaware business trust
governed by a Trust Agreement dated as of ________ __, 199_ (the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns, the principal sum of ________ Dollars in quarterly
installments on January 1, April 1, July 1, and October 1 (the "Principal
Payment Dates") in each year, commencing on ________, 199_ and ending on or
before [ ] (the "Maturity" of such final installment of principal) and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal amount of this Class A-2 Note outstanding from time to time
from [ ] (the "Accrual Date"), or such later date to which interest has been
paid, until the principal amount of this Class A-2 Note is paid in full, at the
rate of __________ percent (_____%) per annum, such interest being payable
quarterly on January 1, April 1, July 1, and October 1 in each year, commencing
on ______, 199_ (the "Interest Payment Dates"). Installments of principal of
this Class A-2 Note are due and payable in the amounts and on the dates
described on the reverse hereof.
The principal of, and interest on, this Class A-2 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 Class A-2 Note shall be applied first to
interest due and payable on this Class A-2 Note as provided above and then to
the unpaid principal of this Class A-2 Note. Any installment of principal or
interest which is not paid when and as due shall bear interest at the rate of
interest borne by the principal of this Class A-2 Note from the date due to the
date of payment thereof, but only to the extent that the payment of such
interest shall be lawful and enforceable.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Class A-2 Note shall not be entitled to
any benefit under the Indenture referred to below, or be valid or obligatory for
any purpose.
101
<PAGE>
IN WITNESS WHEREOF, Mid-State Trust 199 - has caused this instrument to
be duly executed by _______________, not in its individual capacity but solely
as Owner Trustee under the Trust Agreement.
Dated:
----------------
MID-STATE TRUST 199
--
By: ,
-------------------------------
not in its individual capacity,
but solely in its capacity as
Owner Trustee under the
Trust Agreement
By:
------------------------------
[Title]
102
<PAGE>
This Class A-2 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Asset Backed Notes, Class A-2 (herein called the
"Class A-2 Notes"). The Class A-2 Notes are issued and will be issued under an
Indenture dated as of April __, 1997 (herein called the "Indenture"), between
the Issuer and ____________________, as Trustee (the "Trustee", which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Trustee and the Holders of the
Class A-2 Notes and the terms upon which the Class A-2 Notes are, and are to be,
authenticated and delivered. Also issued under the Indenture are the [ ]% Asset
Backed Notes, Class A-1, [ ]% Asset Backed Notes, Class A-3 and [ ]% Asset
Backed Notes, Class A-4. The Class A-2 Notes are secured by the collateral
pledged as security therefor to the extent provided in the Indenture. All terms
used in this Class A-2 Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
An installment of principal shall be paid on the Class A-2 Notes on
each Principal Payment Date in the amount equal to the amount available to be
paid thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-2 Note
shall be due and payable on the Principal Payment Date in _____. Each payment of
principal of the Class A-2 Notes shall be allocated among the Class A-2 Notes in
proportion to their then remaining unpaid principal amounts. The unpaid
principal amount of this Class A-2 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Realized Loss Allocation
Amounts without any corresponding payment.
The rights of the Class A-2 Noteholders to receive payments in respect
of principal and interest on the Class A-2 Notes are subordinate to the rights
of the Class A-1 Noteholders to receive payments of principal and interest.
Payment of the then remaining unpaid principal amount of this Class A-2
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-2 Notes to payment of the then remaining
unpaid principal amount of this Class A-2 Note or to payment of the Redemption
Price payable on any date as of which this Class A-2 Note has been called for
redemption in full shall be made upon presentation of this Class A-2 Note to the
office or agency of the Issuer maintained for such purpose. Payments of interest
on this Class A-2 Note due and payable on each Interest Payment Date, together
with any installment of principal of this Class A- 2 Note due and payable on
each Interest Payment Date which is also a Principal Payment Date for this Class
A-2 Note, shall be made by check mailed to the Person whose name appears as the
registered Holder of this Class A-2 Note (or one or more Predecessor Notes) in
the Note Register as of the Record Date preceding such Interest Payment Date,
except that with respect to a Class A-2 Note registered in the name of the
nominee of a 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.
103
<PAGE>
Checks for amounts due on this Class A-2 Note 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 Class A-2
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture. Any reduction in the
principal amount of this Class A-2 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Realized Loss Amounts shall be binding upon all Holders of this Class A-2
Note and of any Class A-2 Note issued upon the registration of transfer hereof
or in exchange herefor 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 Class
A-2 Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days prior to such Principal Payment Date, and the
amount then due and payable shall, if sufficient funds therefor are available,
be payable only upon presentation of this Class A-2 Note to the office or agency
of the Issuer maintained for such purpose.
If an Event of Default shall occur and be continuing with respect to
the Class A-2 Notes, the Class A-2 Notes may become or be declared due and
payable in the manner and with the effect provided in the Indenture. Reference
is hereby made to Article V of the Indenture which sets forth certain events
which constitute Events of Default. If any such acceleration of maturity occurs
prior to the Maturity of the final installment of principal of this Class A-2
Note, the amount payable to the Holder of this Class A-2 Note will be equal to
the aggregate unpaid principal amount of this Class A-2 Note on the date this
Class A-2 Note becomes so due and payable, together with accrued interest on
such unpaid principal amount to the date of payment thereof. The Indenture
provides that, notwithstanding the acceleration of the maturity of the Class A-2
Notes, under certain circumstances specified therein all amounts collected as
proceeds of the collateral securing the Class A-2 Notes or otherwise shall
continue to be applied to payments of principal of and interest on the Class A-2
Notes as if they had not been declared due and payable. In such event, interest
on the then unpaid principal amount of all Class A-2 Notes and on any overdue
installments of interest on the Class A-2 Notes following the acceleration of
the maturity of the Class A-2 Notes shall accrue and be payable at the
applicable Note Interest Rate, but only to the extent that the payment thereof
shall be lawful and enforceable.
The Class A-2 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Current Principal Amount which is 10% or less of the original
104
<PAGE>
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.
As provided in the Indenture the transfer of this Class A-2 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-2
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 Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of this Class
A-2 Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-2 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-2 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written 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 Class A-2 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding. The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, 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, at the time of the giving thereof, of this Class A-2 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-2 Note and of any Class A-2 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-2 Note.
The term "Issuer" as used in this Class A-2 Note includes any successor
to the Issuer under the Indenture.
The Class A-2 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth. The Class A-2 Notes are exchangeable for a like aggregate
initial principal amount of Class A-2 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.
As provided in the Indenture, this Class A-2 Note and the Indenture
shall be construed in accordance with, and governed by, the laws of the State of
New York applicable to agreements made and to be performed therein.
105
<PAGE>
No reference herein to the Indenture and no provision of this Class A-2
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 Class A-2 Note at the times, place and rate, and in the coin or currency,
herein prescribed.
Anything herein to the contrary notwithstanding, neither the Owner
Trustee in its individual capacity, any beneficial owner of the Issuer, the
Trustee nor 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 and
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in, this Class A-2 Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purpose of
binding the respective interests of the beneficial owners of the Issuer and the
Owner Trustee in the assets of the Issuer. The Holder of this Class A-2 Note by
the acceptance hereof agrees that 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 the enforcement against, the
assets of the Issuer of any and all liabilities, obligations and undertakings
contained in the Indenture or in this Class A-2 Note.
The Owner Trustee has executed this Class A-2 Note on behalf of the
Issuer, not in its individual capacity but solely as Owner Trustee under the
Trust Agreement and the Owner Trustee shall be liable hereunder only in respect
of the assets of the trust created by such Trust Agreement.
The remedies of the Holder hereof as provided herein and in the
Indenture, shall be cumulative and concurrent and may be pursued solely against
the assets of the Trust created by the Trust Agreement pledged under the
Indenture as security for the Class A-2 Notes. No failure on the part of the
holder in exercising any right or remedy hereunder shall operate as a waiver or
release thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder.
106
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Notes referred to in the within-mentioned
Indenture.
--------------------,
as Trustee
By:
-------------------------------
Authorized Officer
107
<PAGE>
EXHIBIT C
UNLESS THIS CLASS A-3 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
CERTIFICATE 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.
PRINCIPAL OF THIS CLASS A-3 NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-3
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE
ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-3 NOTE MAY BE ASCERTAINED
ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.
THE RIGHTS OF A HOLDER OF THIS CLASS A-3 NOTE ARE SUBJECT TO THE PROVISIONS OF
THE WITHINREFERENCED INDENTURE.
THE RIGHTS OF THE CLASS A-3 NOTEHOLDERS TO RECEIVE PAYMENTS IN RESPECT
OF PRINCIPAL AND INTEREST ON THE CLASS A-3 NOTES ARE SUBORDINATE TO THE RIGHTS
OF THE CLASS A-1 NOTEHOLDERS AND CLASS A-2 NOTEHOLDERS TO RECEIVE PAYMENTS OF
PRINCIPAL AND INTEREST.
108
<PAGE>
MID-STATE TRUST 199 -
_____% ASSET BACKED NOTE, CLASS A-3 DUE: [ ]
ACCRUAL DATE: [ ] $ No.
--------------------- ----------------
Mid-State Trust 199 - (the "Issuer"), a Delaware business trust
governed by a Trust Agreement dated as of _______ __, 199_ (the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns, the principal sum of ________ Dollars in quarterly
installments on January 1, April 1, July 1, and October 1 (the "Principal
Payment Dates") in each year, commencing on __________, 199_ and ending on or
before [ ] (the "Maturity" of such final installment of principal) and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal amount of this Class A-3 Note outstanding from time to time
from [ ] (the "Accrual Date"), or such later date to which interest has been
paid, until the principal amount of this Class A-3 Note is paid in full, at the
rate of __________ percent (_____%) per annum, such interest being payable
quarterly on January 1, April 1, July 1, and October 1 in each year, commencing
on _______, 199_ (the "Interest Payment Dates"). Installments of principal of
this Class A-3 Note are due and payable in the amounts and on the dates
described on the reverse hereof.
The principal of, and interest on, this Class A-3 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 Class A-3 Note shall be applied first to
interest due and payable on this Class A-3 Note as provided above and then to
the unpaid principal of this Class A-3 Note. Any installment of principal or
interest which is not paid when and as due shall bear interest at the rate of
interest borne by the principal of this Class A-3 Note from the date due to the
date of payment thereof, but only to the extent that the payment of such
interest shall be lawful and enforceable.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Class A-3 Note shall not be entitled to
any benefit under the Indenture referred to below, or be valid or obligatory for
any purpose.
109
<PAGE>
IN WITNESS WHEREOF, Mid-State Trust 199 - has caused this instrument to
be duly executed by ______________, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement. Dated:
- ---------------
MID-STATE TRUST 199
--
By: ,
-------------------------------
not in its individual capacity,
but solely in its capacity as
Owner Trustee under the
Trust Agreement
By:
------------------------------
[Title]
110
<PAGE>
This Class A-3 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Asset Backed Notes, Class A-3 (herein called the
"Class A-3 Notes"). The Class A-3 Notes are issued and will be issued under an
Indenture dated as of April __, 1997 (herein called the "Indenture"), between
the Issuer and ______________________, as Trustee (the "Trustee", which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Trustee and the Holders of the
Class A-3 Notes and the terms upon which the Class A-3 Notes are, and are to be,
authenticated and delivered. Also issued under the Indenture are the [ ]% Asset
Backed Notes, Class A-1, [ ]% Asset Backed Notes, Class A-2 and [ ]% Asset
Backed Notes, Class A-4. The Class A-3 Notes are secured by the collateral
pledged as security therefor to the extent provided in the Indenture. All terms
used in this Class A-3 Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
An installment of principal shall be paid on the Class A-3 Notes on
each Principal Payment Date in the amount equal to the amount available to be
paid thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-3 Note
shall be due and payable on the Principal Payment Date in _______. Each payment
of principal of the Class A-3 Notes shall be allocated among the Class A-3 Notes
in proportion to their then remaining unpaid principal amounts. The unpaid
principal amount of this Class A-3 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Realized Loss Allocation
Amounts without any corresponding payment.
The rights of the Class A-3 Noteholders to receive payments in respect
of principal and interest on the Class A-3 Notes are subordinate to the rights
of the Class A-1 Noteholders and Class A-2 Noteholders to receive payments of
principal and interest.
Payment of the then remaining unpaid principal amount of this Class A-3
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-3 Notes to payment of the then remaining
unpaid principal amount of this Class A-3 Note or to payment of the Redemption
Price payable on any date as of which this Class A-3 Note has been called for
redemption in full shall be made upon presentation of this Class A-3 Note to the
office or agency of the Issuer maintained for such purpose. Payments of interest
on this Class A-3 Note due and payable on each Interest Payment Date, together
with any installment of principal of this Class A- 3 Note due and payable on
each Interest Payment Date which is also a Principal Payment Date for this Class
A-3 Note, shall be made by check mailed to the Person whose name appears as the
registered Holder of this Class A-3 Note (or one or more Predecessor Notes) in
the Note Register as of the Record Date preceding such Interest Payment Date,
except that with respect to a Class A-3 Note registered in the name of the
nominee of a 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.
111
<PAGE>
Checks for amounts due on this Class A-3 Note 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 Class A-3
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture. Any reduction in the
principal amount of this Class A-3 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Realized Loss Amounts shall be binding upon all Holders of this Class A-3
Note and of any Class A-3 Note issued upon the registration of transfer hereof
or in exchange herefor 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 Class
A-3 Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days prior to such Principal Payment Date, and the
amount then due and payable shall, if sufficient funds therefor are available,
be payable only upon presentation of this Class A-3 Note to the office or agency
of the Issuer maintained for such purpose.
If an Event of Default shall occur and be continuing with respect to
the Class A-3 Notes, the Class A-3 Notes may become or be declared due and
payable in the manner and with the effect provided in the Indenture. Reference
is hereby made to Article V of the Indenture which sets forth certain events
which constitute Events of Default. If any such acceleration of maturity occurs
prior to the Maturity of the final installment of principal of this Class A-3
Note, the amount payable to the Holder of this Class A-3 Note will be equal to
the aggregate unpaid principal amount of this Class A-3 Note on the date this
Class A-3 Note becomes so due and payable, together with accrued interest on
such unpaid principal amount to the date of payment thereof. The Indenture
provides that, notwithstanding the acceleration of the maturity of the Class A-3
Notes, under certain circumstances specified therein all amounts collected as
proceeds of the collateral securing the Class A-3 Notes or otherwise shall
continue to be applied to payments of principal of and interest on the Class A-3
Notes as if they had not been declared due and payable. In such event, interest
on the then unpaid principal amount of all Class A-3 Notes and on any overdue
installments of interest on the Class A-3 Notes following the acceleration of
the maturity of the Class A-3 Notes shall accrue and be payable at the
applicable Note Interest Rate, but only to the extent that the payment thereof
shall be lawful and enforceable.
The Class A-3 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Current Principal Amount which is 10% or less of the original
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<PAGE>
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.
As provided in the Indenture the transfer of this Class A-3 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-3
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 Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of this Class
A-3 Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-3 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-3 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written 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 Class A-3 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding. The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, 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, at the time of the giving thereof, of this Class A-3 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-3 Note and of any Class A-3 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-3 Note.
The term "Issuer" as used in this Class A-3 Note includes any successor
to the Issuer under the Indenture.
The Class A-3 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth. The Class A-3 Notes are exchangeable for a like aggregate
initial principal amount of Class A-3 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.
As provided in the Indenture, this Class A-3 Note and the Indenture
shall be construed in accordance with, and governed by, the laws of the State of
New York applicable to agreements made and to be performed therein.
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<PAGE>
No reference herein to the Indenture and no provision of this Class A-3
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 Class A-3 Note at the times, place and rate, and in the coin or currency,
herein prescribed.
Anything herein to the contrary notwithstanding, neither the Owner
Trustee in its individual capacity, any beneficial owner of the Issuer, the
Trustee nor 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 and
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in, this Class A-3 Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purpose of
binding the respective interests of the beneficial owners of the Issuer and the
Owner Trustee in the assets of the Issuer. The Holder of this Class A-3 Note by
the acceptance hereof agrees that 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 the enforcement against, the
assets of the Issuer of any and all liabilities, obligations and undertakings
contained in the Indenture or in this Class A-3 Note.
The Owner Trustee has executed this Class A-3 Note on behalf of the
Issuer, not in its individual capacity but solely as Owner Trustee under the
Trust Agreement and the Owner Trustee shall be liable hereunder only in respect
of the assets of the trust created by such Trust Agreement.
The remedies of the Holder hereof as provided herein and in the
Indenture, shall be cumulative and concurrent and may be pursued solely against
the assets of the Trust created by the Trust Agreement pledged under the
Indenture as security for the Class A-3 Notes. No failure on the part of the
holder in exercising any right or remedy hereunder shall operate as a waiver or
release thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder.
114
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Notes referred to in the within-mentioned
Indenture.
----------------------,
as Trustee
By:
-----------------------------
Authorized Signatory
115
<PAGE>
EXHIBIT D
UNLESS THIS CLASS A-4 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
CERTIFICATE 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.
PRINCIPAL OF THIS CLASS A-4 NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-4
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE
ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-4 NOTE MAY BE ASCERTAINED
ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.
THE RIGHTS OF A HOLDER OF THIS CLASS A-4 NOTE ARE SUBJECT TO THE PROVISIONS OF
THE WITHINREFERENCED INDENTURE.
THE RIGHTS OF THE CLASS A-4 NOTEHOLDERS TO RECEIVE PAYMENTS IN RESPECT
OF PRINCIPAL AND INTEREST ON THE CLASS A-4 NOTES ARE SUBORDINATE TO THE RIGHTS
OF THE CLASS A-1 NOTEHOLDERS, CLASS A-2 NOTEHOLDERS AND CLASS A-3 NOTEHOLDERS TO
RECEIVE PAYMENTS OF PRINCIPAL AND INTEREST.
116
<PAGE>
MID-STATE TRUST 199 -
_____% ASSET BACKED NOTE, CLASS A-4 DUE: [ ]
ACCRUAL DATE: [ ] $ No.
----------------------- ------------------
Mid-State Trust 199 - (the "Issuer"), a Delaware business trust
governed by a Trust Agreement dated as of ________ __, 199_ (the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns, the principal sum of ________ Dollars in quarterly
installments on January 1, April 1, July 1, and October 1 (the "Principal
Payment Dates") in each year, commencing on __________, 199_ and ending on or
before [ ] (the "Maturity" of such final installment of principal) and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal amount of this Class A-4 Note outstanding from time to time
from [ ] (the "Accrual Date"), or such later date to which interest has been
paid, until the principal amount of this Class A-4 Note is paid in full, at the
rate of __________ percent (_____%) per annum, such interest being payable
quarterly on January 1, April 1, July 1, and October 1 in each year, commencing
on ______, 199_ (the "Interest Payment Dates"). Installments of principal of
this Class A-4 Note are due and payable in the amounts and on the dates
described on the reverse hereof.
The principal of, and interest on, this Class A-4 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 Class A-4 Note shall be applied first to
interest due and payable on this Class A-4 Note as provided above and then to
the unpaid principal of this Class A-4 Note. Any installment of principal or
interest which is not paid when and as due shall bear interest at the rate of
interest borne by the principal of this Class A-4 Note from the date due to the
date of payment thereof, but only to the extent that the payment of such
interest shall be lawful and enforceable.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Class A-4 Note shall not be entitled to
any benefit under the Indenture referred to below, or be valid or obligatory for
any purpose.
117
<PAGE>
IN WITNESS WHEREOF, Mid-State Trust 199 - has caused this instrument to
be duly executed by _________________, not in its individual capacity but solely
as Owner Trustee under the Trust Agreement. Dated: ---------------
MID-STATE TRUST 199
--
By: ,
-------------------------------
not in its individual capacity,
but solely in its capacity as
Owner Trustee under the
Trust Agreement
By:
------------------------------
[Title]
118
<PAGE>
This Class A-4 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Asset Backed Notes, Class A-4 (herein called the
"Class A-4 Notes"). The Class A-4 Notes are issued and will be issued under an
Indenture dated as of April __, 1997 (herein called the "Indenture"), between
the Issuer and _____________________, as Trustee (the "Trustee", which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Issuer, the Trustee and the Holders of the
Class A-4 Notes and the terms upon which the Class A-4 Notes are, and are to be,
authenticated and delivered. Also issued under the Indenture are the [ ]% Asset
Backed Notes, Class A-1, [ ]% Asset Backed Notes, A-2 and [ ]% Asset Backed
Notes, Class A-3. The Class A-4 Notes are secured by the collateral pledged as
security therefor to the extent provided in the Indenture. All terms used in
this Class A-4 Note which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
An installment of principal shall be paid on the Class A-4 Notes on
each Principal Payment Date in the amount equal to the amount available to be
paid thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-4 Note
shall be due and payable on the Principal Payment Date in _____. Each payment of
principal of the Class A-4 Notes shall be allocated among the Class A-4 Notes in
proportion to their then remaining unpaid principal amounts. The unpaid
principal amount of this Class A-4 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Realized Loss Allocation
Amounts without any corresponding payment.
The rights of the Class A-4 Noteholders to receive payments in respect
of principal and interest on the Class A-4 Notes are subordinate to the rights
of the Class A-1 Noteholders, Class A-2 Noteholders and Class A-3 Noteholders to
receive payments of principal and interest.
Payment of the then remaining unpaid principal amount of this Class A-4
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-4 Notes to payment of the then remaining
unpaid principal amount of this Class A-4 Note or to payment of the Redemption
Price payable on any date as of which this Class A-4 Note has been called for
redemption in full shall be made upon presentation of this Class A-4 Note to the
office or agency of the Issuer maintained for such purpose. Payments of interest
on this Class A-4 Note due and payable on each Interest Payment Date, together
with any installment of principal of this Class A- 4 Note due and payable on
each Interest Payment Date which is also a Principal Payment Date for this Class
A-4 Note, shall be made by check mailed to the Person whose name appears as the
registered Holder of this Class A-4 Note (or one or more Predecessor Notes) in
the Note Register as of the Record Date preceding such Interest Payment Date,
except that with respect to a Class A-4 Note registered in the name of the
nominee of a clearing agency (initially, such nominee to be Cede & Co.) payments
will be
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<PAGE>
made by wire transfer in immediately available funds to the account designated
by such nominee.
Checks for amounts due on this Class A-4 Note 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 Class A-4
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture. Any reduction in the
principal amount of this Class A-4 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Realized Loss Amounts shall be binding upon all Holders of this Class A-4
Note and of any Class A-4 Note issued upon the registration of transfer hereof
or in exchange herefor 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 Class
A-4 Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days prior to such Principal Payment Date, and the
amount then due and payable shall, if sufficient funds therefor are available,
be payable only upon presentation of this Class A-4 Note to the office or agency
of the Issuer maintained for such purpose.
If an Event of Default shall occur and be continuing with respect to
the Class A-4 Notes, the Class A-4 Notes may become or be declared due and
payable in the manner and with the effect provided in the Indenture. Reference
is hereby made to Article V of the Indenture which sets forth certain events
which constitute Events of Default. If any such acceleration of maturity occurs
prior to the Maturity of the final installment of principal of this Class A-4
Note, the amount payable to the Holder of this Class A-4 Note will be equal to
the aggregate unpaid principal amount of this Class A-4 Note on the date this
Class A-4 Note becomes so due and payable, together with accrued interest on
such unpaid principal amount to the date of payment thereof. The Indenture
provides that, notwithstanding the acceleration of the maturity of the Class A-4
Notes, under certain circumstances specified therein all amounts collected as
proceeds of the collateral securing the Class A-4 Notes or otherwise shall
continue to be applied to payments of principal of and interest on the Class A-4
Notes as if they had not been declared due and payable. In such event, interest
on the then unpaid principal amount of all Class A-4 Notes and on any overdue
installments of interest on the Class A-4 Notes following the acceleration of
the maturity of the Class A-4 Notes shall accrue and be payable at the
applicable Note Interest Rate, but only to the extent that the payment thereof
shall be lawful and enforceable.
The Class A-4 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at
120
<PAGE>
the option of the Issuer on any Payment Date, if, either before or after giving
effect to the payment of principal otherwise required to be made on such Payment
Date, each Class of Notes shall be in an aggregate Current Principal Amount
which is 10% or less of the original principal amount of such Class of Notes, at
100% of the outstanding principal amount thereof together with interest accrued
and unpaid to the date set for redemption.
As provided in the Indenture the transfer of this Class A-4 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-4
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 Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of this Class
A-4 Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-4 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-4 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written 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 Class A-4 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding. The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, 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, at the time of the giving thereof, of this Class A-4 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-4 Note and of any Class A-4 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-4 Note.
The term "Issuer" as used in this Class A-4 Note includes any successor
to the Issuer under the Indenture.
The Class A-4 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth. The Class A-4 Notes are exchangeable for a like aggregate
initial principal amount of Class A-4 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.
121
<PAGE>
As provided in the Indenture, this Class A-4 Note and the Indenture
shall be construed in accordance with, and governed by, the laws of the State of
New York applicable to agreements made and to be performed therein.
No reference herein to the Indenture and no provision of this Class A-4
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 Class A-4 Note at the times, place and rate, and in the coin or currency,
herein prescribed.
Anything herein to the contrary notwithstanding, neither the Owner
Trustee in its individual capacity, any beneficial owner of the Issuer, the
Trustee nor 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 and
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in, this Class A-4 Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purpose of
binding the respective interests of the beneficial owners of the Issuer and the
Owner Trustee in the assets of the Issuer. The Holder of this Class A-4 Note by
the acceptance hereof agrees that 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 the enforcement against, the
assets of the Issuer of any and all liabilities, obligations and undertakings
contained in the Indenture or in this Class A-4 Note.
The Owner Trustee has executed this Class A-4 Note on behalf of the
Issuer, not in its individual capacity but solely as Owner Trustee under the
Trust Agreement and the Owner Trustee shall be liable hereunder only in respect
of the assets of the trust created by such Trust Agreement.
The remedies of the Holder hereof as provided herein and in the
Indenture, shall be cumulative and concurrent and may be pursued solely against
the assets of the Trust created by the Trust Agreement pledged under the
Indenture as security for the Class A-4 Notes. No failure on the part of the
holder in exercising any right or remedy hereunder shall operate as a waiver or
release thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder.
122
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Notes referred to in the within-mentioned
Indenture.
------------------------,
as Trustee
By:
------------------------------
Authorized Signatory
123
<PAGE>
[Letterhead of Cadwalader]
July 13, 1998
Mid-State Homes, Inc.
1500 North Dale Mabry Highway
Tampa, Florida 33607
Re: ASSET-BACKED NOTES
Ladies and Gentlemen:
We have acted as your counsel in connection with the Registration
Statement (No. 333-[_____]), filed with the Securities and Exchange
Commission (the "Commission") on July 13, 1998, pursuant to the Securities
Act of 1933, as amended (the "Registration Statement"). The Registration
Statement covers Asset-Backed Notes ("Notes") to be issued in one or more
series (each, a "Series"). Each Series of Notes will be issued under a
separate indenture (each, an "Indenture") between a trust formed by Mid-State
Homes, Inc., as depositor (each such trust, an "Issuer") and an indenture
trustee to be identified in the Prospectus Supplement for such Series of
Notes (an "Indenture Trustee"). A form of Indenture is included as an Exhibit
to the Registration Statement. Capitalized terms used and not otherwise
defined herein have the respective meanings ascribed to such terms in the
Registration Statement.
We have examined originals or copies certified or otherwise
identified to our satisfaction of such documents and records as we have
deemed necessary as a basis for the opinions hereinafter expressed.
Based on the foregoing, we are of the opinion that:
1. When an Indenture for a Series of Notes has been duly and
validly executed and delivered by the Issuer and the Indenture Trustee, such
Indenture will constitute a valid and legally binding agreement of the
Issuer, enforceable against the Issuer in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
laws affecting the enforcement of rights of creditors generally and to
general principles of equity and the discretion of the court (regardless of
whether enforceability is considered in a proceeding in equity or at law); and
<PAGE>
Mid-State Homes, Inc. July 13, 1998
2. When an Indenture for a Series of Notes has been duly and
validly executed and delivered by the Issuer and the Indenture Trustee, and
the Notes of such Series have been duly executed, authenticated, delivered
and sold as contemplated in the Registration Statement, such Notes will be
legally and validly issued, fully paid and nonassessable, and the holders of
such Notes will be entitled to the benefits of such Indenture.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration
Statement. This consent is not to be construed as an admission that we are a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Act.
Very truly yours,
/s/ CADWALADER, WICKERSHAM & TAFT
<PAGE>
[Letterhead of Cadwalader]
July 13, 1998
Mid-State Homes, Inc.
1500 North Dale Mabry Highway
Tampa, Florida 33607
Re: ASSET-BACKED NOTES
Ladies and Gentlemen:
We have acted as your special tax counsel in connection with
the Registration Statement (No. 333-[_____]), filed with the Securities and
Exchange Commission (the "Commission") on July 13, 1998, pursuant to the
Securities Act of 1933, as amended (the "Registration Statement"). The
Registration Statement covers Asset-Backed Notes ("Notes") to be issued in one
or more series (each, a "Series"). Each Series of Notes will be issued under a
separate indenture (each, an "Indenture") between a trust formed by Mid-State
Homes, Inc., as depositor (each such trust, an "Issuer") and an indenture
trustee to be identified in the Prospectus Supplement for such Series of Notes
(an "Indenture Trustee"). A form of Indenture is included as an Exhibit to the
Registration Statement. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to such terms in the Registration
Statement.
In rendering the opinion set forth below, we have examined and
relied upon the following: (i) the Registration Statement, the Prospectus and
the form of Prospectus Supplement constituting a part thereof, each
substantially in the form filed with the Commission, (ii) the form of Indenture,
substantially in the form filed with the Commission and (iii) such other
documents, records and instruments as we have deemed necessary for the purposes
of this opinion.
As your special tax counsel, we have advised you with respect
to certain federal income tax aspects of the proposed issuance of the Notes.
Such advice has formed the basis for the description of material federal income
tax consequences for holders of the Notes that appears under the headings
"Summary of Prospectus--Tax Status of the Notes" and "Material Federal
Income Tax Consequences" in the Prospectus and under the headings "Summary of
Terms--Tax Status of the Notes" and "Federal Income Tax Considerations" in
the form of Prospectus Supplement. Such descriptions do not purport to discuss
all possible federal income tax
<PAGE>
Mid-State Homes, Inc. July 13, 1998
ramifications of the proposed issuance of the Notes, but, with respect to those
federal income tax consequences that are discussed, in our opinion the
descriptions are accurate in all material respects.
This opinion is based on the facts and circumstances set forth
in the Prospectus and Prospectus Supplement and in the other documents reviewed
by us. Our opinion as to the matters set forth herein could change with respect
to a particular Series of Notes as a result of changes in facts or
circumstances, changes in the terms of the documents reviewed by us, or changes
in the law subsequent to the date hereof. Because the Registration Statement
contemplates Series of Notes with numerous different characteristics, the
particular characteristics of each Series of Notes must be considered in
determining the applicability of this opinion to a particular Series of Notes.
The opinion contained in each Prospectus Supplement and Prospectus prepared
pursuant to the Registration Statement is, accordingly, deemed to be
incorporated herein.
We hereby consent to the filing of this letter as an Exhibit
to the Registration Statement and to the reference to this firm under the
heading "Federal Income Tax Considerations" in the Prospectus forming a part of
the Registration Statement. This consent is not to be construed as an admission
that we are a person whose consent is required to be filed with the Registration
Statement under the provisions of the Act.
No opinion has been sought and none has been given concerning
the tax treatment of the issuance and sale of the Notes under the laws of any
state.
Very truly yours,
/s/ CADWALADER, WICKERSHAM & TAFT
<PAGE>
Exhibit 9.1
MID-STATE TRUST 199 -
TRUST AGREEMENT
Between
MID-STATE HOMES, INC.,
as Depositor
and
------------------------,
as Owner Trustee
Dated as of ___________, 199_
<PAGE>
- -8-
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
ARTICLE I...................................................................3
DEFINITIONS..............................................................3
ARTICLE II..................................................................6
ORGANIZATION.............................................................6
ARTICLE III.................................................................8
ISSUANCE, OWNERSHIP AND TRANSFER OF CERTIFICATES.........................9
ARTICLE IV.................................................................12
PAYMENTS AND DISTRIBUTIONS..............................................12
ARTICLE V..................................................................13
DUTIES OF THE OWNER TRUSTEE.............................................13
ARTICLE VI.................................................................14
THE OWNER TRUSTEE.......................................................15
ARTICLE VII................................................................20
INDEMNIFICATION BY OWNERS...............................................20
ARTICLE VIII...............................................................21
TERMINATION OF TRUST AGREEMENT..........................................21
ARTICLE IX.................................................................21
SUCCESSOR OWNER TRUSTEE AND ADDITIONAL TRUSTEES.........................22
ARTICLE X..................................................................24
MISCELLANEOUS...........................................................25
Exhibit A..................................................................28
</TABLE>
<PAGE>
TRUST AGREEMENT dated as of __________, 199_ (herein, as
amended or supplemented from time to time as permitted hereby, called this
"Trust Agreement") between Mid-State Homes, Inc., a Florida corporation, as
Depositor (the "Depositor"), and _____________, a ____________, as Owner Trustee
(the "Owner Trustee").
WHEREAS, the parties hereto desire to establish this Trust (as
defined herein) for the purposes set forth in Section 2.03 hereof and in
furtherance of such purposes the Depositor desires to sell to the Trust all of
its right, title and interest in and to the Trust Property (as defined herein)
pursuant to a purchase and sale agreement.
NOW, THEREFORE:
ARTICLE I
DEFINITIONS
1.01. Definitions. For all purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Accession" means the completion of the process by which a proposed
transferee becomes an Owner as provided in Section 3.02 hereof.
"Accession Agreement" means the instrument in which a proposed
transferee makes certain representations and agrees to be bound by the terms of
this Agreement, substantially in the form annexed hereto as Exhibit A.
"Agreement" means this Trust Agreement, as supplemented or amended
pursuant to Section 10.01 hereof.
"Bank" means ________________, in its individual capacity and not as
Owner Trustee.
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. ss. 3801 et seq.
"Certificate" means a certificate duly executed by the Owner Trustee
representing an undivided beneficial ownership interest in the Trust
substantially in the form annexed hereto as Exhibit B.
"Certificate of Trust" means the Certificate of Business Trust to be
filed by the Owner Trustee for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Closing Date" has the meaning assigned to it in the Indenture.
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"Collateral" means that portion of the Trust Property that may from
time to time be pledged by the Trust under the Indenture.
"Delaware Secretary of State" means the Secretary of State of the State
of Delaware.
"Depositor" means Mid-State Homes, Inc., in its capacity as grantor of
the Trust. The Depositor may also be referred to as the "Grantor".
"Eligible Investments" has the meaning specified in the Indenture.
"Holding Account Agreement" means the agreement, dated as of ______,
199_, among the Trust, _______________, as custodian for the benefit of itself
as Trustee (in such capacity, the "Custodian") and Mid-State Homes, Inc., as
servicer under the Servicing Agreement.
"Indebtedness" means (i) indebtedness or liability for borrowed money,
or for the deferred purchase price of property or services (including trade
obligations); (ii) obligations as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current liabilities in respect of unfunded vested
benefits under plans covered by Title IV of the Employee Retirement Income
Security Act of 1974; (iv) obligations issued for the account of any Person; (v)
all obligations arising under acceptance facilities; (vi) all guarantees,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any person or otherwise to assure a
creditor against loss; (vii) obligations secured by any lien, whether or not the
obligations have been assumed and (viii) obligations under any interest rate or
currency exchange agreement.
"Indenture" means the Indenture dated as of _____, 199_ between the
Trust and the Note Trustee, providing for the issuance of the Notes.
"Note Agreements" means the Indenture, the Notes, the Servicing
Agreement, the Purchase and Sale Agreement, the Holding Account Agreement, the
Underwriting Agreement and all other documents, agreements and instruments
related thereto.
"Noteholders" has the meaning assigned to it in the Indenture.
"Notes" means the [ ]% Asset Backed Notes, Class A-1; [ ]% Asset Backed
Notes, Class A-2; [ ]% Asset Backed Notes, Class A-3; and [ ]% Asset Backed
Notes, Class A-4 issued by the Trust under the Indenture.
"Note Trustee" means ___________________, as trustee under the
Indenture.
"Owner" means the holder of a Certificate duly registered and entered
on the books and records of the Owner Trustee.
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"Owner Trustee" means ________________, not in its individual capacity
but solely as trustee under this Agreement, and any successor trustee hereunder.
"Ownership Percentage", with respect to any Owner, means the proportion
(expressed as a percentage) of the entire beneficial ownership interest in the
Trust that is held by such Owner.
"Payment Date" has the meaning specified in the Indenture.
"Periodic Filings" means any filings or submissions that the Trust is
required to make with respect to the Notes.
"Purchase and Sale Agreement" means the agreement dated as of
_________, 199_ between the Depositor and the Trust which provides for, among
other things, the purchase by the Trust of all of the interest, right and title
of the Depositor in the Accounts.
"Qualified Owner" is an Owner that is none of the proposed Transferor,
the Transferee, an affiliate of either the Transferor or Transferee, or an Owner
which proposes to transfer any part of its Ownership Percentage in a related
transaction.
"Record Date" with respect to any distribution pursuant to Article IV
hereof means the Payment Date prior to the date of such distribution.
"Servicing Agreement" means the agreement to be entered into by the
Owner Trustee on behalf of the Trust and Mid-State Homes, Inc. in its capacity
as Servicer.
"Transferor" and "Transferee" shall have the meanings set forth in
Section 3.02 of this Agreement.
"Trust" means Mid-State Trust 199 - , the Delaware business trust
established and governed by this Agreement.
"Trust Estate" has the meaning specified in the Indenture.
"Trust Property" means all right, title and interest of the Trust in
and to any and all property sold by the Depositor to the Trust or otherwise
acquired by the Trust including, without limitation, (i) the Trust Estate,
subject to the lien of the Indenture, including any Accounts, all distributions,
payments, proceeds, insurance proceeds, or requisition and indemnity payments
with respect thereto, the Software Rights and (ii) all other property not
subject to, or released from, the lien of the Indenture. The Trust Property
shall not include any compensation or indemnity paid to the Bank pursuant to
Article VIII hereof.
"Underwriting Agreement" means the underwriting agreement dated
_______, 199_ relating to the public offering of the Notes, between the
Depositor and the Underwriter named therein.
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Capitalized terms used herein and not otherwise defined have the
meanings assigned thereto in the Indenture.
ARTICLE II
ORGANIZATION
2.01. Name. The name of the Trust shall be Mid-State Trust 199 - .
2.02. Office. The office of the Trust shall be in care of the Owner
Trustee, at the address set forth in Section 10.05 hereof or at such other
address as the Owner Trustee may designate by notice to the Owners. The office
shall be separate from any office maintained by any Owner.
2.03. Purpose and Powers. The purposes for which the Trust is created
and established are (i) to acquire, hold and manage the Trust Property,
including instituting foreclosure actions, acquiring title to real estate
securing Accounts and reselling such property, and in connection with the
management of the Trust Estate, to delegate to the Servicer the authority to act
on behalf of the Issuer as contemplated by the Servicing Agreement, (ii) to
issue and sell the Notes, (iii) to administer the Trust (including without
limitation administering and distributing the Trust Property and consenting to
the transfer of the Certificates) and (iv) to enter into and perform under the
Note Agreements and transactions contemplated thereby, all for the benefit of
the Owners. The Trust shall not have power to perform any act or engage in any
business whatsoever except for the foregoing and any activity that is both
necessary to the foregoing and within the contemplation of the Indenture and the
Note Agreements. The operations of the Trust will be conducted in accordance
with the following standards:
(a) The Trust will act solely in its own name through the
Owner Trustee or any co-trustee or through other agents
selected in accordance with this Agreement;
(b) The Trust shall not incur any Indebtedness other than
the Notes and Indebtedness arising under the Note Agreement;
(c) The Trust's funds and assets shall at all times
be maintained separately from those of the Depositor, the
Owners or any of their affiliates;
(d) The Trust shall maintain complete and correct
books and records of account and shall prepare financial
statements separately stating the Trust's income, assets and
liabilities which in each case shall be separate from those of
the Owner Trustee, the Depositor, the Owners or any of their
affiliates;
(e) The Trust shall conduct its business through the
office of the Owner Trustee and will use stationery and other
business forms (which may be
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stationery and forms of the Owner Trustee) under its own name
and not that of the Depositor, any Owner or any of their
affiliates;
(f) Except as contemplated by Section 2.01 of the
Servicing Agreement, new Accounts originated in connection
with the resale of repossessed property shall be originated in
the Trust's name;
(g) The Trust's operating expenses shall be paid out of its
own funds;
(h) The Trust shall file all reports required to be
filed by it under the Securities Exchange Act of 1934, as
amended;
(i) The Trust shall not hold itself out as liable for
the debts of the Depositor or any Owner or their respective
affiliates; and
(j) The Trust shall not engage in any transaction
with the Depositor or any Owner or any of their respective
affiliates unless such transaction is on terms not more nor
less favorable than the terms and conditions available at the
time to the Trust for comparable transactions with other
persons.
2.04. Appointment of the Owner Trustee. The Depositor hereby appoints
the Bank as Owner Trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein and, upon the filing of the
Certificate of Trust, in the Business Trust Statute with respect to
accomplishing the purposes of the Trust. The Owner Trustee accepts the
appointment as Owner Trustee of the Trust and acknowledges receipt in trust from
the Depositor, as of the date hereof, of the sum of $[________] constituting the
initial Trust Property. The Depositor acknowledges receipt from the Owner
Trustee of a Certificate representing an Ownership Percentage of 100% in
exchange for the Trust Property.
2.05. Declaration of Trust. The Owner Trustee hereby declares that it
will hold the Trust Property upon the trusts set forth herein and for the use
and benefit of the Owners. 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. No later
than the Closing Date, the Owner Trustee shall cause the filing of the
Certificate of Trust with the Delaware Secretary of State.
2.06. 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. The Trust shall not have
any employees in any state other than the State of Delaware. Payments will be
received by the Owner Trustee only in the State of Delaware, and payments will
be made by the Owner Trustee only from the State of Delaware. The only office of
the Trust will be at the principal office of the Owner Trustee within the State
of Delaware.
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2.07. Title to Trust Property. Title to all of the Trust Property shall
be vested in the Trust as a separate legal entity until this Agreement
terminates pursuant to Article IX hereof; provided, however, that if the laws of
any jurisdiction require that title to any part of the Trust Property be vested
in the trustee of the Trust, then title to that part of the Trust Property shall
be deemed to be vested in the Owner Trustee or any co-trustee or separate
trustee, as the case may be, appointed pursuant to Article IX of this Agreement.
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ARTICLE III
ISSUANCE, OWNERSHIP AND TRANSFER OF CERTIFICATES
3.01. Ownership Prior to Closing Date. The Depositor shall be the sole
Owner of the Trust prior to the Closing Date. The Owner Trustee acknowledges
that the Depositor is the Owner and holds on the date hereof a Certificate
evidencing an Ownership Percentage of 100%. The Depositor shall pay
organizational expenses of the Trust as they may arise prior to the Closing Date
and shall direct the Owner Trustee in the acquisition of the Collateral.
3.02. Accession.
(a) On or after the Closing Date, an Owner (hereinafter in this Section
3.02, a "Transferor") may transfer all or any portion of its Ownership
Percentage to such person or persons (hereinafter in this Section 3.02, a
"Transferee"), and on such terms as the Transferor shall determine and subject
to the following conditions:
(i) prior to the proposed transfer, the Transferor shall
advise the Owner Trustee of the proposed transfer, and shall cause the
Transferee to deliver to the Owner Trustee an executed Accession
Agreement together with such Transferee's audited financial statements
for the most recent fiscal year or, if such Transferee has been in
existence for less than a full fiscal year, such Transferee's unaudited
financial statements for a shorter period or, if such Transferee is a
trust, a certification by such Transferee as to its net worth;
(ii) unless the Owner Trustee and the nontransferring Owners,
if any, shall have otherwise consented (which consent may be given
without the consent of the Noteholders or Note Trustee), the Transferee
shall have a net worth as shown by the financial statements or
certifications delivered to the Owner Trustee pursuant to Section
3.02(a)(i) hereof that is not less than net worth requirements, if any,
imposed by state or federal regulations applicable to such Transferee,
if any;
(iii) the Owner Trustee shall have received an opinion of
counsel that such transfer is exempt from registration, or the related
Certificate is registered under, the Securities Act of 1933, as
amended, and any applicable state securities laws, which opinion of
counsel shall not be an expense of the Owner Trustee, and the
Transferor shall, and does hereby agree to, indemnify the Bank and the
Owner Trustee 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; and
(iv) if the Transferee is an employee benefit plan subject to
ERISA or is using the funds of such a plan to acquire the Certificate,
the Owner Trustee shall have received an opinion of counsel that as a
result of such transfer (i) the
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Owner Trustee will not be deemed to be an ERISA fiduciary with respect
to such plan and (ii) the Transferee's acquisition and holding of a
Certificate will not involve a "prohibited transaction" for which an
exemption is not available which opinion of counsel shall not be an
expense of the Owner Trustee, and the Transferor shall, and does hereby
agree to, indemnify the Bank and the Owner Trustee against any
liability that may result if the transfer is not so exempt or is not
made in accordance with such laws.
(b) Upon satisfaction of the conditions listed in Section
3.02(a) hereof and receipt by the Owner Trustee of the Transferor's Certificate,
the Owner Trustee shall cancel the Transferor's Certificate, accept the
Accession Agreement, deliver a copy thereof to the Transferee, record the name
of such Transferee as an Owner on its books and records, record its Ownership
Percentage and issue, execute and deliver to such new Owner a Certificate
evidencing such Ownership Percentage.
(c) The Owner Trustee may require, as a condition precedent to any
transfer, the payment by the Transferor of a sum sufficient to pay, or to
reimburse the Owner Trustee for the payment of, any tax or taxes or other
governmental charge required to be paid in connection with such transfer, and
such charge for any such transfer as the Owner Trustee may deem proper not
exceeding $25.00 for each new Certificate issued upon such transfer.
3.03. Ownership; Limited Transfer of Ownership Rights.
(a) The Owner Trustee shall maintain a register showing the name and
address of each Owner and its respective Ownership Percentages and shall treat
such register as definitive and binding for all purposes hereunder, and only
those persons so registered as Owners shall have the rights of Owners hereunder.
In the event an Owner transfers only a portion of its Ownership Percentage, the
Owner Trustee shall enter such Owner's new Ownership Percentage in such register
and issue, execute and deliver to such Owner a new Certificate evidencing such
Owner's new Ownership Percentage.
(b) Each Owner may transfer all or any portion of its Ownership
Percentage only in compliance with the provisions of Section 3.02 hereof and any
attempted transfer not in compliance therewith shall be null and void.
(c) Subsequent to a transfer, and upon the issuance of the new
Certificate or Certificates, the Owner Trustee shall cancel and dispose of the
Certificate surrendered to it in connection with the transfer in a manner deemed
acceptable to the Owner Trustee.
3.04. Legend on Certificates. Each Certificate shall bear a legend
setting forth restrictions on transferability substantially as follows: "THE
BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS, IN A MANNER THAT WILL NOT PERMIT A
DISTRIBUTION THEREOF WITHOUT FURTHER COMPLIANCE WITH THE REGISTRATION PROVISIONS
OF THE ACT, AND MAY NOT BE DIRECTLY OR
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INDIRECTLY OFFERED OR SOLD OR OTHERWISE TRANSFERRED (INCLUDING PLEDGED BY THE
HOLDER HEREOF) EXCEPT IN COMPLIANCE WITH THE ACT. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN THE
TRUST AGREEMENT UNDER WHICH THIS CERTIFICATE WAS ISSUED, INCLUDING RECEIPT BY
THE OWNER TRUSTEE OF AN OPINION OF COUNSEL SATISFACTORY TO THE OWNER TRUSTEE, TO
THE EFFECT THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT OR IS IN
COMPLIANCE WITH THE REGISTRATION PROVISIONS UNDER THE ACT. IN ADDITION, THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE AND, IF APPLICABLE,
OTHER HOLDERS OF CERTIFICATES OF BENEFICIAL INTEREST IN THE TRUST CONSENT TO
SUCH TRANSFER AND UNLESS OTHERWISE TRANSFERRED IN THE MANNER PROVIDED IN ARTICLE
III OF THE TRUST AGREEMENT AND IN ACCORDANCE WITH THE REQUIREMENTS THEREOF,
INCLUDING WITHOUT LIMITATION THE REQUIREMENT THAT THE TRANSFEREE SIGN AND
DELIVER TO THE OWNER TRUSTEE AN ACCESSION AGREEMENT IN WHICH THE TRANSFEREE
MAKES CERTAIN REPRESENTATIONS AND AGREES TO BE BOUND BY ALL THE TERMS AND
CONDITIONS OF THE TRUST AGREEMENT, AND THAT THE TRANSFEREE DELIVER TO THE OWNER
TRUSTEE CERTAIN FINANCIAL STATEMENTS OR CERTIFICATIONS."
3.05. Lost, Stolen, Mutilated or Destroyed Certificates. Upon
receipt of evidence satisfactory to the Owner Trustee that any Certificate has
been lost, stolen, mutilated or destroyed, and upon proof of ownership and
receipt of indemnity or a bond satisfactory to the Owner Trustee, and upon
payment of all reasonable expenses incurred by the Owner Trustee for any
investigation relating thereto and an amount not to exceed $25.00 for each new
Certificate, the Owner Trustee shall execute and deliver a new Certificate, of
like tenor and bearing an issue number, with such notations, if any, as the
Trustee shall determine, upon surrender and cancellation of, and in exchange and
substitution for, such mutilated Certificate or in lieu of and in substitution
for the Certificate so lost, stolen or destroyed. Any duplicate Certificate
issued pursuant to this Section 3.05 shall constitute complete and indefeasible
evidence of ownership of the Trust to the extent of the Ownership Percentage
represented by such Certificate, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
3.06. No Petition. By its acceptance of a Certificate each Owner agrees
not to cause or consent to the filing of a petition in bankruptcy against the
Trust for any reason until at least one year after payment in full of all the
Notes.
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ARTICLE IV
PAYMENTS AND DISTRIBUTIONS
4.01. Payments. Any amounts payable as expenses of the Trust shall be
paid solely pursuant to Section 8.02 of the Indenture until such time as the
Indenture has been satisfied and discharged pursuant to Section 4.01 of the
Indenture. After such time, any amounts paid to the Owner Trustee by the Note
Trustee, the Servicer or otherwise in respect of the property of the Trust shall
be applied in the following order:
(a) to pay fees and reimburse expenses of the Note
Trustee (to the extent the Owner Trustee has received an invoice for
such expenses from the Note Trustee) and to pay other fees and expenses
as then due under the Indenture, in each case to the extent, if any,
not previously paid by the Note Trustee out of amounts not otherwise
payable to the Owner Trustee;
(b) to pay any amounts due to the Owner Trustee or
the Bank, as the case may be, as then due under this Agreement; and
(c) to pay any other current operating expenses of the Trust.
Any sums remaining after such application shall be distributed on the
second business day after the day on which the Owner Trustee receives any such
amounts (or on such other day as the Owners may specify in writing) to the
Owners (or their designees specified in writing to the Owner Trustee on or
before such Record Date) as of the relevant Record Date, in proportion to their
Ownership Percentages free and clear of the lien of the Indenture. All payments
to be made under this Agreement by the Owner Trustee shall be made only from the
income and proceeds of the Trust Property and only to the extent that the Owner
Trustee has received such income or proceeds and in no event shall the Bank be
liable to make any such payments.
4.02. Method of Payment. All amounts payable to an Owner pursuant to
this Agreement shall be paid by the Owner Trustee to the Owner, or a nominee
therefor, by crediting the amount to be distributed to the Owner to an account
maintained by such Owner with the Bank in immediately available funds or by
transferring such amount in immediately available funds to a banking institution
with bank wire transfer facilities for the account of the Owner, as instructed
from time to time by the Owner.
4.03. Reports. Each payment pursuant to Section 4.01 hereof shall be
accompanied by a report setting forth, for each payment and cumulatively for the
current reporting year, the amounts received by the Owner Trustee together with
their application.
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ARTICLE V
DUTIES OF THE OWNER TRUSTEE
5.01. Issuance of the Notes. The Owner Trustee is hereby directed:
(a) to execute and deliver the Note Agreements;
(b) to acquire the Collateral and to pledge the Collateral as
security for the Notes;
(c) to issue the Notes pursuant to the Indenture; and
(d) to take whatever action shall be required to be taken by
the Owner Trustee by, and subject to, the terms of this Agreement.
5.02. In General. It shall be the duty of the Owner Trustee:
(i) to discharge (or cause to be discharged) all
responsibilities assigned to it pursuant to the terms of this
Agreement;
(ii) to execute any Periodic Filings; and
(iii) to furnish to the Owners and any designees of the Owners
specified in writing to the Owner Trustee, promptly upon
receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any
other instruments furnished to the Owner Trustee hereunder or
under the Note Agreements.
5.03. No Duties Except as Specified in Agreement or Instructions. The
Owner Trustee shall not have any duty or obligation to manage, service, perfect
or maintain any security interest in, make any payment or collection in respect
of, register, record, sell, dispose of or otherwise deal with the Collateral or
any other part of the Trust Property, prepare or file any report or other
document or to otherwise take or refrain from taking any action under, or in
connection with, any document contemplated hereby to which the Trust is a party,
except as expressly provided by the terms of this Agreement; and no implied
duties or obligations shall be read into this Agreement against the Owner
Trustee. The Bank nevertheless agrees that it shall, at its own cost and
expense, promptly take any action necessary to discharge any liens on any part
of the Trust Property or the Collateral which result from actions by or claims
against the Bank that are not related to the ownership of the Collateral or any
other part of the Trust Property or the administration of the Trust Property or
the transactions contemplated by the Note Agreements.
5.04. No Action Except under Specified Documents or Instructions. The
Owner Trustee agrees that it will not manage, control, use, sell, dispose of or
otherwise deal
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with the Collateral or any other part of the Trust Property except (i) as
required by the terms of the Note Agreements or (ii) in accordance with the
powers granted to, or the authority conferred upon, the Owner Trustee pursuant
to this Agreement.
5.05. Further Assurances. The Owner Trustee shall execute and deliver
all such other instruments, documents or certificates as the Owners may deem
necessary or advisable, in order to give effect to the transactions contemplated
hereby including the provisions of the Note Agreements, the taking of any such
action by the Owner Trustee in the presence of the Owners or their counsel to
evidence, conclusively, the direction of the Owners.
5.06. Restrictions. The Owner Trustee shall take no action (a) that is
inconsistent with Section 2.03 hereof or any Note Agreement and the Bank shall
be entitled to obtain an Opinion of Counsel at no expense to the Bank to the
effect that any contemplated action is not inconsistent with Section 2.03
hereof, (b) if the Owner Trustee has been notified that such action would cause
or threaten to cause any nationally recognized statistical rating agency or
agencies which rated the Notes to downgrade its or their rating of the Notes or
(c) to cause or to affirmatively consent to the filing of a petition in
bankruptcy against the Trust for any reason until at least 367 days after
payment in full of all the Notes and any indebtedness that is secured by or
based upon a Certificate. The Owners shall not direct the Owner Trustee to take
action that would violate the provisions of this Section 5.06. The Owner Trustee
may refrain from taking any action hereunder or under the Note Agreements (other
than the giving of notices) if the Bank reasonably concludes that the security
and indemnity referred to in Article VII of this Trust Agreement is not, at such
time, adequate to cover all liabilities, fees, costs, expenses (including
attorneys' fees) and related charges which are likely to be incurred in
connection with the taking of such action; provided, however, that the decision
of the Owner Trustee to refrain from taking any such action shall not be
construed to relieve the Trust of any of its obligations under the Note
Agreements.
5.07. Majority Control. Any instruction, direction or consent which is
required to be given by the Owners under this agreement shall mean such
instruction, direction or consent given in accordance with Section 10.05 hereof
by the Owners holding, in the aggregate, a majority of the Ownership Percentage
in the Trust.
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ARTICLE VI
THE OWNER TRUSTEE
6.01. Acceptance of Trusts and Duties. The Owner Trustee accepts the
trust hereby created and agrees to perform the same but only upon the terms of
this Agreement. The Bank shall not be answerable or accountable under any
circumstances, except (i) for its own willful misconduct or gross negligence,
(ii) for the inaccuracy of any representation or warranty contained in Section
6.02 hereof, (iii) for liabilities arising from the failure by the Bank to
perform obligations expressly undertaken by it in the last sentence of Section
5.03 hereof, (iv) for any investments made by the Owner Trustee with the Bank in
its commercial capacity, or (v) for federal or Delaware taxes, fees or other
charges on, based on or measured by any fees, commissions or compensation
received by the Bank in connection with any of the transactions contemplated by
this Agreement or the Note Agreements. In particular, but not by way of
limitation:
(a) The Bank shall not be liable for an error of judgment made
in good faith by a responsible officer of the Owner Trustee;
(b) The Bank shall not be liable with respect to any action
taken or omitted to be taken by the Owner Trustee in good faith in
accordance with the instructions of the Owners;
(c) No provision of this Agreement shall require the Bank to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of the Owner Trustee's rights or powers
hereunder, if the Bank 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 circumstance shall the Bank be liable for any
representation, warranty or covenant of the Trust, including, without
limitation, any Indebtedness evidenced by any Note, or be obligated to
perform any servicing duties with respect to the Trust Property;
(e) The Bank shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any Collateral or for or in respect
of the validity or sufficiency of the Note Agreements, and the Bank
shall in no event assume or incur any liability, duty or obligation to
any Noteholder, the Depositor or any Owner, other than as expressly
provided for herein;
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(f) The Bank shall not be liable or responsible for performing
any duties or obligations under this Agreement or the Note Agreements
which are not expressly required to be performed by the Owner Trustee
under this Agreement; and
(g) Notwithstanding anything contained herein or in the Note
Agreements to the contrary, neither the Bank nor the Owner Trustee
shall be required to take any action in any jurisdiction other than in
the State of Delaware if the taking of such action will (i) require the
consent or approval or authorization or order of or the giving of
notice to, or the registration with or taking of any action in respect
of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware; (ii) result in any fee,
tax or other governmental charge under the laws of any jurisdiction or
any political subdivisions thereof in existence on the date hereof
other than the State of Delaware becoming payable by the Bank; or (iii)
subject the Bank to personal jurisdiction in any jurisdiction other
than the State of Delaware for causes of action arising from acts
unrelated to the consummation of the transactions by the Bank or the
Owner Trustee, as the case may be, contemplated hereby.
6.02. Representations and Warranties.
(a) The Bank hereby represents and warrants to the Depositor, for the
benefit of the Owners, that:
(i) it has been duly incorporated and is validly existing as a
banking corporation in good standing under the laws of the State of
Delaware and it holds all corporate power and all material franchises,
grants, authorizations, consents, orders and approvals from all
governmental authorities necessary under the laws of the State of
Delaware to carry on its trust business as now conducted;
(ii) the execution, delivery and performance by the Bank of
this Agreement, and by the Owner Trustee on behalf of the Trust of the
Note Agreements, and the acceptance of the Accession Agreement and the
issuance of the Notes and the Certificates by the Owner Trustee
pursuant to this Agreement are within the corporate power of the Bank,
have been or will have been duly authorized by all necessary corporate
action on the part of the Bank (no action by its shareholders being
required) and do not and will not (A) violate or contravene any
statute, law, rule or regulation or any judgment, decree or order
binding on the Bank, or (B) conflict with or result in a breach of, or
constitute a default under, any provision of the charter or by-laws of
the Bank or of any material agreement, contract, mortgage or other
instrument binding on the Bank or (C) result in the creation or
imposition of any lien, charge or encumbrance on the Trust Property
resulting from actions by or claims against the Bank except as
expressly contemplated by this Agreement or the Indenture;
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(iii) no consent, approval, authorization or order of, or
filing with, any court or regulatory, supervisory or governmental
agency or body is required by the Bank under Delaware law in connection
with (A) the execution, delivery and performance by the Bank of this
Agreement or by the Owner Trustee of the Note Agreements, or (B) the
acceptance of the Accession Agreement and the issuance of the Notes or
the Certificates by the Owner Trustee pursuant to this Agreement, or
(C) the consummation by the Owner Trustee of the transactions
contemplated hereby (except as may be required by state or federal
securities laws);
(iv) this Agreement has been executed and delivered by its
officers who are duly authorized to execute and deliver such document
in such capacity on its behalf; and
(v) it has no present intent to cause a voluntary bankruptcy
of the Trust.
(b) The Depositor hereby represents, warrants and covenants to the
Owner Trustee that:
(i) it has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Florida and
it holds all corporate power and all material franchises, grants,
authorizations, consents, orders and approvals to carry on its business
as now conducted except in those jurisdictions where failure to so
qualify would not in the aggregate have a material adverse effect on
the financial condition or results of operations of the company;
(ii) the execution, delivery and performance by the Depositor
of this Agreement, acceptance of the Accession Agreement and the
issuance of the Notes and the Certificates by and the Grant of the
Trust Property to the Owner Trustee pursuant to this Agreement are
within the corporate power of the Depositor, have been or will have
been duly authorized by all necessary corporate action on the part of
the Depositor and do not and will not (A) violate or contravene any
judgment, decree or order binding on the Depositor, or (B) conflict
with or result in a breach of, or constitute a default under, any
provision of the articles of incorporation or by-laws of the Depositor
or of any material agreement, contract, mortgage or other instrument
binding on the Depositor (or if such a conflict with, breach of or
default under any such material agreement, contract, mortgage or other
instrument exists or will exist, the enforcement of remedies in respect
thereof has been or will be stayed under Title 11 of the United States
Code) or (C) result in the creation or imposition of any lien, charge
or encumbrance on the Trust Property except as expressly contemplated
by this Agreement or the Indenture;
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(iii) this Agreement has been duly executed and delivered by
the Depositor and constitutes a legal, valid and binding agreement of
the Depositor;
(iv) upon the sale, assignment or other transfer of any of the
Trust Property by the Depositor to the Owner Trustee under this
Agreement, the Depositor will have conveyed to the Owner Trustee good
title, free and clear of any lien, encumbrance or other interests of
others (including without limitation any claim of any creditor of the
Depositor or any of its affiliates) of any nature, and the Owner
Trustee will have the right to Grant and deliver the Collateral to the
Note Trustee in accordance with the Indenture and this Agreement and
upon the Grant and delivery of the Collateral by the Owner Trustee to
the Note Trustee in the manner contemplated by this Agreement and the
Indenture, and assuming the validity and binding effect of the
Indenture, the Note Trustee will have obtained a valid first priority
security interest therein, prior to all other liens;
(v) immediately upon the sale or other delivery of any Trust
Property to the Trust pursuant to this Agreement and the Purchase and
Sale Agreement, the Depositor will make any appropriate notations on
its records to indicate that the Trust Property has been transferred to
the Trust pursuant to this Agreement, and, to the extent it constitutes
Collateral, has been pledged by the Trust to the Note Trustee to secure
payment of the Notes issued under the Indenture;
(vi) it has no present intention to cause a voluntary
bankruptcy of the Trust;
(vii) it will hold itself out to the public under its own name
as a separate and distinct entity and will conduct its business so as
not to mislead others as to the identity of the entity under which
those others are concerned. Without limiting the generality of the
foregoing, all oral and written communications, including without
limitation, all letters, invoices, contracts, statements and
applications will be made solely in the name of the Trust if they are
made on behalf of the Trust and solely in the name of the Depositor if
they are made on behalf of the Depositor;
(viii) it will prepare and cause the filing of all Periodic
Filings, tax returns and reports of the Trust in accordance with this
Agreement and the Note Agreements, and maintain the books and records
of the Trust in accordance with Section 2.03 of this Agreement; and
(ix) it will disclose in all financial statements that the
assets of the Trust are not available to the Depositor's creditors.
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6.03. No Segregation of Moneys; No Interest. Except as
otherwise provided herein or in the Indenture or as otherwise directed in
writing by the Owners, moneys received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law and may be
deposited under such general conditions as may be prescribed by law, and neither
the Owner Trustee nor the Bank shall be liable to pay the Owners any interest
thereon.
6.04. Reliance; Employment of Agents and 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 manner of ascertainment 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, treasurer, assistant treasurer, secretary or assistant secretary 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 its exercise or administration of the trusts and powers
hereunder, including any duties or obligations of the Trust under the Note
Agreements, the Owner Trustee may, at the expense of the Trust, employ agents
and attorneys and enter into agreements with any of them, and the Owner Trustee
may delegate to the Servicer the authority to act on its behalf as contemplated
by the Servicing Agreement, and the Owner Trustee shall not be answerable for
the default or misconduct of any such agents or attorneys if such agents or
attorneys shall have been selected by the Owner Trustee in good faith.
(c) In the administration of the trusts hereunder or in the
performance of the Trust's duties and obligations under any of the Note
Agreements, the Owner Trustee may, at the expense of the Trust, consult with
counsel, accountants and other skilled persons to be selected and employed by
it, and the Owner Trustee shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons selected by the Owner Trustee in
good faith.
6.05. Not Acting in Individual Capacity. Except as expressly
provided in this Article VI, in accepting the trusts hereby created, the Owner
Trustee acts solely as trustee hereunder and not in the Bank's individual
capacity, and all persons having any claim against the Owner Trustee by reason
of the transactions contemplated by the Note Agreements shall look only to the
Trust Property for payment or satisfaction thereof.
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ARTICLE VII
INDEMNIFICATION BY OWNERS
7.01. Trust Expenses. The Owners shall pay (or reimburse the Bank for)
all reasonable expenses of the Owner Trustee hereunder, including, without
limitation, 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 duties under this
Agreement.
7.02. Indemnification. As between the Owners and the Bank, the Owners
shall be liable for, and shall indemnify the Bank and its successors, assigns,
agents and servants, against and from, any and all liabilities, obligations,
losses, damages, taxes, claims, actions, suits, costs, expenses and
disbursements (including legal fees and expenses) of any kind and nature
whatsoever (collectively, "Expenses") which may be imposed on, incurred by or
asserted at any time against the Owner Trustee or the Bank (whether or not
indemnified against by other parties) in any way relating to or arising out of
this Agreement, any Note Agreement, the Collateral, the administration of the
Trust Property or the action or inaction of the Owner Trustee hereunder, except
only that the Owners shall not be required to indemnify the Bank for expenses
arising or resulting from any of the matters described in the second sentence of
Section 6.01 hereof. The indemnities contained in this Section 7.02 shall
constitute additional Indebtedness hereunder and shall survive the termination
of this Agreement. The obligations of the Owners pursuant to this Section 7.02
shall be joint and several (with rights of contribution inter se in proportion
to their respective Ownership Percentages)
7.03. Compensation. The Bank shall receive as compensation for the
Owner Trustee's services hereunder a yearly fee equal to $________. The Bank
shall be compensated reasonably for any extraordinary services rendered by the
Owner Trustee hereunder. The Bank shall also be entitled to reimbursement for
all reasonable out-of-pocket expenses, disbursements and advances incurred or
made in connection with the Owner Trustee's administration of the Trust,
including the reasonable compensation and the reasonable expenses and
disbursements of its legal counsel and of other persons not regularly in its
employ. The compensation and expense reimbursement provided for herein shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust.
7.04. Lien on Trust Property. The Bank shall have a lien on and right
of set-off against the Trust Property for all compensation, expense
reimbursement and indemnity due hereunder, such lien to be subordinate only to
liens created by the Indenture; provided, however, that, except with respect to
any Trust Property that has been released from the lien of the Indenture, the
Bank may not enforce such lien on or right of set-off against the Trust Property
until after the satisfaction and discharge of the Indenture pursuant to Section
4.01 of the Indenture.
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ARTICLE VIII
TERMINATION OF TRUST AGREEMENT
8.01. Termination of Trust Agreement.
(a) This Agreement and the Trust created hereby shall terminate and the
Trust Property shall, subject to the Indenture and Section 4.01 hereof, be
distributed to the Owners in accordance with their respective Ownership
Percentages, and this Agreement shall be of no further force or effect, upon the
earlier of (i) the sale or other final disposition by the Note Trustee or the
Owner Trustee, as the case may be, of all of the Trust Estate and the Trust
Property, as the case may be, and the final distribution by the Note Trustee or
the Owner Trustee, as the case may be, of all moneys or other property or
proceeds of the Trust Estate and the Trust Property, as the case may be, in
accordance with the terms of the Indenture and Section 4.01 hereof and (ii) 21
years less one day after the death of the survivor of the descendants living on
the date of this Agreement of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James; provided that this Agreement shall
terminate no later than ________, 20__. The bankruptcy, death or incapacity of
any Owner shall not operate to terminate this Agreement, nor 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 the Trust
Property, nor otherwise affect the rights, obligations and liabilities of the
parties hereto.
(b) Neither the Depositor nor any Owner shall be entitled to revoke the
Trust established hereunder.
(c) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Delaware Secretary of State in accordance
with the provisions of Section 3810 of the Business Trust Statute.
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ARTICLE IX
SUCCESSOR OWNER TRUSTEE AND ADDITIONAL TRUSTEES
9.01. Resignation of Owner Trustee; Appointment of Successor.
(a) The Owner Trustee may resign at any time without cause by giving at
least 60 days' prior notice to the Owners, such resignation to be effective on
the acceptance of appointment by a successor Owner Trustee under Section 9.01(b)
hereof. In addition, the Owners holding in the aggregate a majority Ownership
Percentage, may, with the consent of the Note Trustee, at any time remove the
Owner Trustee without cause by an instrument in writing delivered to the Owner
Trustee, such removal to be effective upon the acceptance of appointment by a
successor Owner Trustee under Section 9.01(b) hereof. Subject to the approval of
the Note Trustee, in case of the resignation or removal of the Owner Trustee,
the Owners shall use their best efforts to appoint a successor Owner Trustee by
an instrument signed by Owners holding in the aggregate a majority Ownership
Percentage in the Trust. If a successor Owner Trustee shall not have been
appointed within 30 days after the giving of written notice of such resignation
or the delivery of the written instrument with respect to such removal, the
Owner Trustee or the Owners may apply to any court of competent jurisdiction to
appoint a successor Owner Trustee to act until such time, if any, as a successor
shall have been appointed by the Owners as above provided. Any successor Owner
Trustee so appointed by such court shall immediately and without further act be
superseded by any successor Owner Trustee appointed by the Owners as above
provided within one year from the date of the appointment by such court.
(b) Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee an instrument accepting such
appointment, and thereupon such successor Owner Trustee, without further act,
shall become vested with all the estates, properties, rights, powers, duties and
trusts of the predecessor Owner Trustee in the trusts hereunder with like effect
as if originally named the Owner Trustee herein; but nevertheless, upon the
written request of such successor Owner Trustee, such predecessor Owner Trustee
shall execute and deliver an instrument transferring to such successor Owner
Trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers, duties and trusts of such predecessor Owner Trustee, and such
predecessor Owner Trustee shall duly assign, transfer, deliver and pay over to
such successor Owner Trustee all moneys or other property then held or
subsequently received by such predecessor Owner Trustee upon the trusts herein
expressed.
(c) Any successor Owner Trustee, however appointed, shall be a bank or
trust company incorporated and doing business within the United States of
America and having combined capital and surplus of at least $[50,000,000], if
there be such an institution willing, able and legally qualified to perform the
duties of the Owner Trustee hereunder upon reasonable or customary terms;
provided, however, that any successor Owner Trustee may not be an affiliate of
any Owner.
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(d) 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 to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall, subject to the terms of
Section 9.01(c) hereof, be the Owner Trustee under this Agreement without
further act.
(e) Upon the happening of any of the events described in this Section
9.01, the successor Owner Trustee shall cause an amendment to the Certificate of
Trust to be filed with the Delaware Secretary of State, in accordance with the
provisions of Section 3810 of the Business Trust Statute, indicating the change
with respect to the Owner Trustee's identity.
9.02. Appointment of Additional Trustees.
(a) At any time or times, for the purpose of meeting any legal
requirements of any jurisdiction in which any of the Trust Property may at the
time be located, the Owners and the Owner Trustee shall have the power to
appoint one or more individuals or corporations either to act as co-trustee, or
co-trustees, jointly with the Owner Trustee of all or any part of the Trust
Property or to act as separate trustee or separate trustees of all or any part
of the Trust Property and to vest in such person or persons, in such capacity,
such title to the Trust Property or any part thereof, and such rights, powers,
duties, trusts or obligations as the Owner Trustee may consider necessary or
desirable, subject to the remaining provisions of this Section 9.02.
(b) Unless otherwise provided in the instrument appointing such
co-trustee or separate trustee, every co-trustee or separate trustee shall, to
the extent permitted by law, be appointed subject to the following terms,
namely:
(i) The Certificates, the Notes and the Note
Agreements shall be executed and delivered, and all rights, powers,
trusts, duties and obligations by this Agreement conferred upon the
Owner Trustee in respect of the custody, control or management of
moneys, papers, securities and other personal property, shall be
exercised, solely by the Owner Trustee;
(ii) All rights, powers, trusts, duties and obligations
conferred or imposed upon the trustees shall be conferred or imposed
upon and exercised or performed by the Owner Trustee, or by the Owner
Trustee and such co-trustee or co-trustees, or separate trustee or
separate trustees jointly, except to the extent that, under the 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 act or acts shall be
performed by such co-trustee or co-trustees or separate trustee or
separate trustees;
(iii) Any request in writing by the Owner Trustee to any
co-trustee or separate trustee to take or to refrain from taking any
action hereunder shall be
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sufficient warrant for the taking, or the refraining from taking, of
such action by such co-trustee or separate trustee;
(iv) Any co-trustee or separate trustee to the extent
permitted by law may delegate to the Owner Trustee the exercise of any
right, power, trust, duty or obligation, discretionary or otherwise;
(v) The Owner Trustee at any time, by an instrument in
writing, with the concurrence of the Owners, may accept the resignation
of, or remove, any co-trustee or separate trustee appointed under this
Section 9.02. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this
Section 9.02;
(vi) No trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder;
(vii) Any demand, request, direction, appointment, removal,
notice, consent, waiver or other action in writing executed by the
Owners and delivered to the Owner Trustee shall be deemed to have been
delivered to each such co-trustee or separate trustee; and
(viii) Any moneys, papers, securities or other items of
personal property received by any such co-trustee or separate trustee
hereunder shall forthwith, so far as may be permitted by law, be turned
over to the Owner Trustee to be held pursuant to the terms hereof.
(c) Upon the acceptance in writing of such appointment by any such
co-trustee or separate trustee, it or he shall be vested with the estate, right,
title and interest in the Trust Property, or portion thereof, and with such
rights, powers, duties, trusts or obligations, jointly or separately with the
Owner Trustee, all as shall be specified in the instrument of appointment,
subject to all the terms hereof. Every such acceptance shall be filed with the
Owner Trustee.
(d) In case any co-trustee or separate trustee shall die, become
incapable of acting, resign or be removed, the estate, right, title and interest
in the Trust Property and all rights, powers, trusts, duties and obligations of
said co-trustee or separate trustee shall, so far as permitted by law, vest in
and be exercised by the Owner Trustee unless and until a successor co-trustee or
separate trustee shall be appointed pursuant to this Section 9.02.
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ARTICLE X
MISCELLANEOUS
10.01. Supplements and Amendments . Until such time as the Indenture
has been terminated pursuant to its terms, Section 2.03 of this Agreement may
not be amended. Subject to the terms of the Note Agreements, at the unanimous
written request of the Owners, this Agreement (other than Section 2.03, Section
8.01 and Section 10.02 hereof and this Section 10.01 which may in no event be
supplemented or amended until the Notes have been retired and the Indenture
terminated) shall be supplemented and amended by a written instrument signed by
the Owner Trustee and the Owners, with the written consent of the Note Trustee,
but if in the opinion of the Owner Trustee, any instrument required to be so
executed adversely affects any right, duty or liability of, or immunity or
indemnity in favor of, the Owner Trustee under this Agreement or any of the
documents contemplated hereby to which the Owner Trustee is a party, or would
cause or result in any conflict with or breach of any terms, conditions or
provisions of, or default under, the charter documents or by-laws of the Owner
Trustee or any document contemplated hereby to which the Owner Trustee is a
party, the Owner Trustee may in its sole discretion decline to execute such
instrument. Notwithstanding anything to the contrary in this Section, until the
time when the Indenture has been executed and delivered, this Agreement may be
supplemented and amended by a written instrument signed by the Depositor and
_______________, without the consent of any other person.
10.02. No Legal Title to Trust Property in Owners. The Owners shall not
have legal title to any part of the Trust Property and shall only be entitled to
receive distributions with respect to their undivided beneficial interest
therein in proportion to their Ownership Percentage pursuant to Section 4.01
hereof. No transfer, by operation of law or otherwise, of any right, title and
interest of the Owners in and to their undivided beneficial interests in the
Trust Property or hereunder shall operate to terminate this Agreement or the
trusts hereunder or entitle any successor transferee to an accounting or to the
transfer to it of legal title to any part of the Trust Property.
10.03. Pledge of Collateral by Owner Trustee Is Binding. The pledge of
the Collateral to the Note Trustee by the Owner Trustee made under the Indenture
and pursuant to the terms of this Agreement shall bind the Owners and shall be
effective to transfer and convey the rights of the Owner Trustee and the Owners
in and to such Collateral to the extent set forth in the Indenture. Other than
as required by the Indenture, no purchaser or other grantee of the Collateral
shall be required to inquire as to the authorization, necessity, expediency or
regularity of such pledge or as to the application of any proceeds with respect
thereto by the Owner Trustee.
10.04. Limitations on Rights of Others. Nothing in this Agreement,
whether express or implied, shall be construed to give to any person, other than
the Bank, Owner Trustee, the Owners and the Note Trustee to the extent expressly
provided herein, any legal or
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equitable right, remedy or claim in the Trust Property or under or in respect of
this Agreement or any covenants, conditions or provisions contained herein.
10.05. Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all notices shall be in writing and delivered by hand or
mailed by certified mail, postage prepaid, if to the Owner Trustee, addressed to
__________________________________________, Attention:________________________,
or to such other address as the Owner Trustee may have set forth in a written
notice to the Owners; and if to an Owner, addressed to it at the address set
forth for such Owner in the register maintained by the Owner Trustee. Whenever
any notice in writing is required to be given by the Owner Trustee, such notice
shall be deemed given and such requirement satisfied if such notice is mailed
by certified mail, postage prepaid, addressed as provided above.
10.06. Severability. Any provision of this Agreement which 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.
10.07. 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.
10.08. Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Owner Trustee and
its successors and assigns and each Owner and its successors, 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.
10.09. Headings. Table of Contents and 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.
10.10. Governing Law. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Delaware,
including all matters of construction, validity and performance.
10.11. Entire Agreement. This Agreement contains the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings relating to the
subject matter hereof.
10.12. Memorandum of Trust. The Owner Trustee is hereby authorized and
empowered from time to time to prepare and to execute on behalf of the Trust a
memorandum of trust in such form and summarizing such provisions of this
Agreement as may be required by the laws of any jurisdiction and to file and/or
record such memorandum of trust in such manner as may be required by the laws of
such jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
----------------------------
By:
-----------------------------
Name:
Title:
MID-STATE HOMES, INC.
By:
-----------------------------
Name:
Title:
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Exhibit A
28
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[Letterhead of Proposed Transferee]
, 199
------------- -
Dear Sirs:
This letter shall constitute our Accession Agreement, as that term is used in
the Trust Agreement dated as of _______ __, 199_ as further amended and restated
from time to time (the "Trust Agreement"), between Mid-State Homes, Inc., a
Florida corporation, as Depositor, and _________, a _______________, as owner
trustee (the "Owner Trustee"). We propose to acquire from [transferor] a ___%
Ownership Percentage (as defined in the Trust Agreement) evidencing an undivided
ownership interest in Mid-State Trust 199 - (the "Trust"), a business trust
under the laws of the State of Delaware, and to thereby become an Owner of the
Trust in accordance with the Trust Agreement.
The terms capitalized herein shall have the same meanings as in the Trust
Agreement unless otherwise defined herein or the context shall otherwise
require.
We hereby represent and warrant to you that:
1. [the [audited] financial statements, together with the related notes and
schedules, if any, enclosed herewith, are our most recent [audited] financial
statements and fairly present our financial condition as of the periods
specified in conformity with generally accepted accounting principles applied on
a consistent basis during such periods, except as may be indicated therein] [our
net worth is $__________];
2. [since the date as of which the [audited] financial statements referred to in
the preceding paragraph are given, there has been neither any material adverse
change in our net worth determined in accordance with generally accepted
accounting principles;] nor any development involving a prospective material
adverse change in our net worth;
3. we have read and are familiar with the terms and conditions of the Trust
Agreement, and we understand the rights and obligations of an Owner of the
Trust;
4. we understand that the Certificates [have not been and will not be]
registered under the Securities Act of 1933, as amended (the "Securities Act")
[for the purpose of a distribution thereof], and are being transferred to us in
a transaction that is [exempt from] the registration requirements of the
Securities Act;
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5. we have received a copy of the ________________ dated ____________, relating
to the Certificates, and we confirm that any documents annexed thereto or
incorporated by reference, and any information we desire concerning the
Certificates, the Trust or any other matter relevant to our decision to acquire
the Certificate, is or has been made available to us;
6. we are knowledgeable and experienced in financial and business matters
generally and are capable of evaluating the merits and risks of an investment in
an Ownership Percentage; we are able to bear the economic risks of an investment
in an Ownership Percentage; and [we are an accredited investor as defined in
Regulation D under the Securities Act];
7. the acquisition of an Ownership Percentage by us will not result in any
violation of any law, rule or regulation applicable to us, has been duly
authorized by all necessary action on our part, will not conflict or result in a
breach of or default under any agreement, document or instrument to which we are
a party, and does not require any consent, order, approval or authorization,
other than those obtained by us;
8. we are acquiring the Ownership Percentage for our own account or for accounts
as to which we exercise sole investment discretion and not with a view to a
distribution of our Ownership Percentage; provided, however, that it is
understood that we shall retain control over disposition of the Ownership
Percentage if such disposition is not in contravention of the Trust Agreement;
9. we are [not] an employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and are [not] using funds of
such a plan to acquire a Certificate, and if we are such a plan or are using
funds of such a plan to acquire a Certificate, we understand that, prior to the
transfer of an Ownership Percentage to us, the Owner Trustee must receive an
opinion of counsel that (i) our acquisition of an Ownership Percentage and
holding of a Certificate will not involve a "prohibited transaction", as defined
in ERISA, for which an exemption is not available and (ii) such transfer will
not cause the Owner Trustee to become an ERISA fiduciary with respect to such
plan; and
10. we understand that each Certificate bears and, unless subsequently
registered, shall continue to bear, a legend that reads substantially as
follows:
"THE BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, IN A MANNER THAT WILL NOT PERMIT THE
FURTHER DISTRIBUTION THEREOF WITHOUT FURTHER COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF THE ACT AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE TRANSFERRED (INCLUDING PLEDGED BY THE HOLDER HEREOF) EXCEPT IN
COMPLIANCE WITH THE ACT. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN
RESTRICTIONS
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AND CONDITIONS SET FORTH IN THE TRUST AGREEMENT UNDER WHICH THIS CERTIFICATE WAS
ISSUED, INCLUDING RECEIPT BY THE OWNER TRUSTEE OF AN OPINION OF COUNSEL
SATISFACTORY TO THE OWNER TRUSTEE, TO THE EFFECT THAT THE TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE ACT OR IS IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF THE ACT. IN ADDITION, THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS THE OWNER TRUSTEE AND, IF APPLICABLE, OTHER HOLDERS OF CERTIFICATES OF
BENEFICIAL INTEREST IN THE TRUST CONSENT TO SUCH TRANSFER AND UNLESS OTHERWISE
TRANSFERRED IN THE MANNER PROVIDED IN ARTICLE III OF THE TRUST AGREEMENT, AND IN
ACCORDANCE WITH THE REQUIREMENTS THEREOF, INCLUDING WITHOUT LIMITATION THE
REQUIREMENT THAT THE TRANSFEREE SIGN AND DELIVER TO THE OWNER TRUSTEE AN
ACCESSION AGREEMENT IN WHICH THE TRANSFEREE MAKES CERTAIN REPRESENTATIONS AND
AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS OF THE TRUST AGREEMENT, AND
THAT THE TRANSFEREE DELIVER TO THE OWNER TRUSTEE CERTAIN FINANCIAL STATEMENTS OR
CERTIFICATIONS."
We hereby also agree that:
11. the Certificate may be required to be held indefinitely by us unless an
exemption from the registration requirements of the Securities Act is available
or the registration requirements of the Securities Act are complied with (the
Trust not being obligated to register the Certificates under the Securities
Act);
12. we will not transfer or exchange the Certificate unless:
(a) the Owner Trustee shall have consented to such transfer or exchange as
provided in Section 3.02 of the Trust Agreement and the other conditions to
transfer in the Trust Agreement have been satisfied; and (b) either (i) (A) if
such transfer or exchange is a sale, the sales price is at least $[250,000]; (B)
we do not know and have no reasonable grounds to believe that the transfer or
exchange is made to a transferee that cannot truthfully make representations and
warranties with respect to itself to substantially the same effect as those set
forth herein; and (C) all offers or solicitations in connection with the sale
(if a sale), whether directly or through any agent working on our behalf, are
limited to transferees that we reasonably believe can make representations and
warranties with respect to itself to substantially the same effect as those set
forth herein; or (ii) the Certificate is transferred or exchanged pursuant to
Rule 144 under the Securities Act after we have held it for more than three
years; or (iii) the Certificate is transferred or exchanged in any other
transaction exempt from registration under, or in a transaction in compliance
with the registration provisions of, the Securities Act;
13. we will pay to the Owner Trustee all reasonable expenses incurred by the
Owner Trustee in connection with the transfer of the Certificate, other than
those expenses paid by the transferor including those fees and expenses incurred
pursuant to Section 3.02(c) of the Trust
31
<PAGE>
Agreement and those fees and expenses of counsel giving any required opinion to
the Owner Trustee;
14. we will not cause or consent to the filing of a petition in bankruptcy
against the Trust for any reason until at least one year after payment in full
of all the Notes;
15. we understand that we will not become an Owner until all conditions
precedent to Accession have been met and all actions precedent to Accession have
been taken pursuant to Section 3.02 of the Trust Agreement; and
16. we hereby agree to be bound by all of the terms and conditions of the Trust
Agreement, including any supplements or amendments thereto, and the Certificate.
This Agreement shall in all respects be governed by, and construed in accordance
with, the laws of the State of Delaware.
Very truly yours,
[Seal] [Name of Transferee]
Attest:
By
-----------------------------
Name:
Authorized Officer Title:
Accepted and Acknowledged this day of , 1997.
--- --------
- --------------------------------,
not in its individual capacity
but solely as Owner Trustee
of Mid-State Trust 199 -
By
-----------------------------------
Name:
Title:
32
<PAGE>
THE BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS IN A MANNER THAT WILL NOT PERMIT A
DISTRIBUTION THEREOF WITHOUT FURTHER COMPLIANCE WITH THE REGISTRATION PROVISIONS
OF THE ACT, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
TRANSFERRED (INCLUDING PLEDGED BY THE HOLDER HEREOF) EXCEPT IN COMPLIANCE WITH
THE ACT. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND
CONDITIONS SET FORTH IN THE TRUST AGREEMENT UNDER WHICH THIS CERTIFICATE WAS
ISSUED, INCLUDING RECEIPT BY THE OWNER TRUSTEE OF AN OPINION OF COUNSEL
SATISFACTORY TO THE OWNER TRUSTEE, TO THE EFFECT THAT THE TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE ACT OR IS IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF THE ACT. IN ADDITION, THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS THE OWNER TRUSTEE AND, IF APPLICABLE, OTHER HOLDERS OF CERTIFICATES OF
BENEFICIAL INTEREST IN THE TRUST CONSENT TO SUCH TRANSFER AND UNLESS OTHERWISE
TRANSFERRED IN THE MANNER PROVIDED IN ARTICLE III OF THE TRUST AGREEMENT
(REFERENCED BELOW) AND IN ACCORDANCE WITH THE REQUIREMENTS THEREOF, INCLUDING
WITHOUT LIMITATION THE REQUIREMENT THAT THE TRANSFEREE SIGN AND DELIVER TO THE
OWNER TRUSTEE AN ACCESSION AGREEMENT IN WHICH THE TRANSFEREE MAKES CERTAIN
REPRESENTATIONS AND AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS OF THE
TRUST AGREEMENT, AND THAT THE TRANSFEREE DELIVER TO THE OWNER TRUSTEE CERTAIN
FINANCIAL STATEMENTS OR CERTIFICATIONS.
33
<PAGE>
CERTIFICATE OF BENEFICIAL INTEREST
MID-STATE TRUST 199 -
________________, a Delaware banking corporation, solely in its fiduciary
capacity as trustee (the "Owner Trustee") under the Trust Agreement referenced
below and not in its individual capacity, certifies that Mid-State Homes, Inc.
is the registered owner (an "Owner") of a 100% undivided ownership interest in a
business trust (the "Trust") existing under the laws of the State of Delaware
pursuant to a trust agreement dated as of _________, 199_ as further amended and
restated from time to time (the "Trust Agreement"), between Mid-State Homes,
Inc. and
---------------.
The terms capitalized herein shall have the same meaning as in the Trust
Agreement unless otherwise defined herein or the context shall otherwise
require.
This Certificate is one of the Certificates referred to in the Trust Agreement
and is issued under and subject to the terms and conditions of the Trust
Agreement. Reference is hereby made to the Trust Agreement for a statement of
the rights and obligations of the holder of this Certificate, as well as for a
statement of the terms and conditions of the Trust created by the Trust
Agreement.
This Certificate and each of the other Certificates issued under the Trust
Agreement evidence an undivided beneficial ownership interest and participation
in the Trust Property. The holder hereof is entitled to receive, ratably with
the holders of the other Certificates, a proportional share (for each Owner, its
"Ownership Percentage") of the sums required to be distributed by the Owner
Trustee to the Owners pursuant to the terms of the Trust Agreement. The first
paragraph of this Certificate indicates the Ownership Percentage of the holder
hereof.
The holder of this Certificate through the execution of the Accession Agreement
and by the acceptance hereof, assents to and agrees to be bound by all of the
terms and conditions of the Trust Agreement. Without limiting the generality of
the foregoing, the holder hereof agrees (i) that it shall be liable, in the
manner and amount specified in the Trust Agreement, for all fees, expenses,
taxes, indemnity payments and other obligations of the Trust (to the extent not
paid out of the Trust Property) other than the Notes and (ii) not to transfer
this Certificate except with the requisite consents and otherwise in the manner
provided in the Trust Agreement.
IN WITNESS HEREOF, the Owner Trustee has caused this Certificate to be executed
manually on the date hereof by one of its authorized officers.
Dated: _____________________, not in its individual capacity, but solely as
Owner Trustee of Mid-State Trust 199-
By:
---------------------------
Name:
Title:
34
<PAGE>
35
<PAGE>
SUPPLEMENTAL TRUST AGREEMENT (CORPORATE)
SUPPLEMENTAL TRUST AGREEMENT (CORPORATE) dated as of _____ __, 199_, by and
among MID-STATE HOMES, INC., a corporation duly organized and existing under the
laws of the State of Florida ("Beneficiary"), _________________, a corporation
duly organized and existing under the laws of the State of Delaware, not in its
individual capacity but solely as trustee under the Trust Agreement referred to
below, having its principal offices at _____________________ (hereinafter called
the "Trustee"), and ____________________, a __________________________ having
its principal offices at _____________________ (hereinafter called the
"Corporate Trustee");
W I T N E S S E T H :
WHEREAS, the Beneficiary and the Trustee have entered into a Trust Agreement
dated as of the date hereof (as the same may be amended or restated from time to
time, the "Trust Agreement") creating Mid-State Trust 199 - , a business trust
formed under the laws of the State of Delaware (the "Trust"); terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Trust
Agreement; and
WHEREAS, pursuant to the Trust Agreement, the Purchase and Sale Agreement,
security agreements, mortgages, deeds of trust, assignments, pledge agreements
and similar documents entered into and to be entered into in connection
therewith (such agreements, mortgages, deeds of trust, assignments, pledge
agreements and similar documents being hereinafter collectively referred to as
the "Trust Documents"), title to certain property will be transferred and
conveyed to the Trust, to be held as part of the trust estate of the Trust and
certain security interests have been or will be granted by the Trust in property
lying, situate and being in numerous jurisdictions throughout the United States,
all as more fully described in the Trust Agreement and the Trust Documents; and
WHEREAS, a corporation having its principal place of business in Florida must be
named as a co-trustee to permit the Trustee or such co-trustee to act as such
with respect to property located in Florida;
NOW, THEREFORE, the parties hereto hereby agree as follows:
FOR AND IN CONSIDERATION OF THE PREMISES, it is mutually covenanted and agreed
pursuant to the terms of Section 9.02 of the Trust Agreement, that
___________________ has been, and by these presents is, appointed to serve as a
co-trustee to act jointly with the Trustee with respect to all of the property
from time to time subject to the Trust Agreement and the Trust Documents and
located within the territorial jurisdictions of the State of Florida. It is
understood and agreed that (a) the liabilities, duties and responsibilities of
the Corporate Trustee shall be limited to the property with respect to which it
has been appointed and shall, in every respect, be governed by the terms,
provisions, conditions and limitations in the Trust Agreement and the Trust
Documents, and (b) the Corporate Trustee shall be entitled to the benefits and
protections provided to the Trustee in the Trust Agreement and the Trust
36
<PAGE>
Documents. By its execution hereof, the Corporate Trustee accepts the trusts
created hereinabove and in the Trust Agreement and the Trust Documents, subject,
however, to all the terms, conditions, provisions and limitations herein or
therein contained.
The Beneficiary, its successors and assigns, shall be liable for, and shall
indemnify the Corporate Trustee against and from, any and all liabilities,
obligations, losses, damages, taxes, claims, actions, suits, costs, expenses and
disbursements (including legal fees and expenses) of any kind and nature
whatsoever which may be imposed on, incurred by or asserted at any time against
the Corporate Trustee (whether or not indemnified against by other parties) in
any way relating to or arising out of this Supplemental Trust Agreement
(Corporate), the Trust Documents, the administration of the trust estate or the
action or inaction of the Corporate Trustee hereunder, except only that the
Beneficiary shall not be required to indemnify the Corporate Trustee for any of
the foregoing arising or resulting from the gross negligence or willful
misconduct of the Corporate Trustee in carrying out its obligations hereunder.
Every power given hereby to, or which it is provided hereby may be exercised by,
the Corporate Trustee shall be exercised hereunder by the Corporate Trustee
jointly with, or with the consent in writing of, the Trustee, anything herein or
in the Trust Agreement contained to the contrary notwithstanding.
This Supplemental Trust Agreement (Corporate) may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.
37
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Supplemental Trust Agreement (Corporate) on the day and year first above
written.
------------------------,
not in its individual capacity
but solely as Trustee
By:
---------------------------
Title:
MID-STATE HOMES, INC.
By:
---------------------------
Title:
------------------------------
By:
---------------------------
Title:
38
<PAGE>
SUPPLEMENTAL TRUST AGREEMENT (INDIVIDUAL)
SUPPLEMENTAL TRUST AGREEMENT (INDIVIDUAL) dated as of _______ __, 199_, by and
among Mid-State Homes, Inc., a corporation duly organized and existing under the
laws of the State of Florida ("Beneficiary"), __________________, a corporation
duly organized and existing under the laws of the State of _______, not in its
individual capacity but solely as trustee under the Trust Agreement referred to
below, having its principal offices at ___________________ (hereinafter called
the "Trustee"), and ___________, an individual having an office at
______________________ (hereinafter called the "Individual Trustee");
W I T N E S S E T H :
WHEREAS, the Beneficiary and the Trustee have entered into a Trust Agreement
dated as of the date hereof (as the same may be amended or restated from time to
time, the "Trust Agreement") creating Mid-State Trust 199 - , a business trust
formed under the laws of the State of Delaware (the "Trust"); terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Trust
Agreement; and
WHEREAS, pursuant to the Trust Agreement, the Purchase and Sale Agreement,
security agreements, mortgages, deeds of trust, assignments, pledge agreements
and similar documents entered into and to be entered into in connection
therewith (such agreements, mortgages, deeds of trust, assignments, pledge
agreements and similar documents being hereinafter collectively referred to as
the "Trust Documents"), title to certain property will be transferred and
conveyed to the Trust, to be held as part of the trust estate of the Trust and
certain security interests have been or will be granted by the Trust in property
lying, situate and being in numerous jurisdictions throughout the United States,
all as more fully described in the Trust Agreement and the Trust Documents; and
WHEREAS, an individual must be named as a co-trustee to permit the Trustee or
such co-trustee to act as such with respect to property located in several of
such jurisdictions;
NOW, THEREFORE, the parties hereto hereby agree as follows:
FOR AND IN CONSIDERATION OF THE PREMISES, it is mutually covenanted and agreed
pursuant to the terms of Section 9.02 of the Trust Agreement, that
____________________ has been, and by these presents is, appointed to serve as a
co-trustee to act jointly with the Trustee with respect to all of the property
from time to time subject to the Trust Agreement and the Trust Documents and
located within the territorial jurisdictions of the States of [Alabama, Georgia,
Kentucky, Illinois, Louisiana, Mississippi, Missouri, Oklahoma and Virginia]. It
is understood and agreed that (a) the liabilities, duties and responsibilities
of the Individual Trustee shall be limited to the property with respect to which
it has been appointed and shall, in every respect, be governed by the terms,
provisions, conditions and limitations in the Trust Agreement and the Trust
Documents, and (b) the Individual Trustee shall be entitled
39
<PAGE>
to the benefits and protections provided to the Trustee in the Trust Agreement
and the Trust Documents. By its execution hereof, the Individual Trustee accepts
the trusts created hereinabove and in the Trust Agreement and the Trust
Documents, subject, however, to all the terms, conditions, provisions and
limitations herein or therein contained.
The Beneficiary, its successors and assigns, shall be liable for, and shall
indemnify the Individual Trustee against and from, any and all liabilities,
obligations, losses, damages, taxes, claims, actions, suits, costs, expenses and
disbursements (including legal fees and expenses) of any kind and nature
whatsoever which may be imposed on, incurred by or asserted at any time against
the Individual Trustee (whether or not indemnified against by other parties) in
any way relating to or arising out of this Supplemental Trust Agreement
(Individual), the Trust Documents, the administration of the trust estate or the
action or inaction of the Individual Trustee hereunder, except only that the
Beneficiary shall not be required to indemnify the Individual Trustee for any of
the foregoing arising or resulting from the gross negligence or willful
misconduct of the Individual Trustee in carrying out his obligations hereunder.
Every power given hereby to, or which it is provided hereby may be exercised by,
the Individual Trustee may be exercised hereunder by the Individual Trustee
jointly with, or with the consent in writing of, the Trustee, anything herein or
in the Trust Agreement contained to the contrary notwithstanding.
This Supplemental Trust Agreement (Individual) may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.
40
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Supplemental Trust
Agreement (Individual) on the day and year first above written.
-----------------------,
not in its individual capacity
but solely as Trustee
By:
---------------------------
Title:
MID-STATE HOMES, INC.
By:
---------------------------
Title:
[INDIVIDUAL]
--------------------------------
41
<PAGE>
PAGE 1
STATE OF DELAWARE
[LOGO]
OFFICE OF SECRETARY OF STATE
I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF BUSINESS
TRUST OF "MID-STATE TRUST 199 - " FILED IN THIS OFFICE ON THE
________________________, A. D. 199_, AT 9 O'CLOCK A.M.
* * * * * *
- --------------------------
Secretary of State
AUTHENTICATION:
DATE:
CERTIFICATE OF TRUST OF MID-STATE TRUST VI
THIS Certificate of Trust of Mid-State Trust 199 - (the "Trust"), dated _____
__, 199_, is being duly executed and filed by _______________, a
__________________, as trustee, to form a business trust under the Delaware
Business Trust Act (12 Del.C. ss.3801 et seq.).
1. Name. The name of the business trust formed hereby is Mid-State Trust 199 - .
2. Delaware Trustee. The name and business address of the trustee of the Trust
in the State of Delaware is
------------------------------------------.
42
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first-above
written.
-----------------,
as Trustee
By:
---------------------------
Name:
Title:
43
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SERVICING AGREEMENT
Dated as of _________, 199_
among
MID-STATE TRUST 199 -
Issuer
and
MID-STATE HOMES, INC.,
Servicer
and
,
-----------------------------
Trustee
Relating to the Accounts Pledged to _____________________________, as Trustee,
as Collateral for the Issuer's [ ]% Asset Backed Notes, Class A-1, [ ]% Asset
Backed Notes, Class A-2 [ ]% Asset Backed Notes, Class A-3 and [ ]% Asset Backed
Notes, Class A-4 in the Aggregate Original Principal Amount of $____________.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE ONE.......................................................................................................1
DEFINITIONS....................................................................................................1
Section 1.01. Defined Terms...............................................................................1
Section 1.02. Terms Defined in the Indenture..............................................................3
ARTICLE TWO.......................................................................................................3
ADMINISTRATION AND SERVICING OF ACCOUNTS.......................................................................3
Section 2.01. The Servicer to Act as Servicer.............................................................3
Section 2.02. Sub-Servicing Agreements Between Servicer and Sub-Servicer..................................6
Section 2.03. Successor Sub-Servicers.....................................................................7
Section 2.04. Liability of the Servicer...................................................................7
Section 2.05. No Contractual Relationship Between Sub-Servicer and Trustee or Issuer......................7
Section 2.06. Assumption of Sub-Servicing Agreement by Successor Servicer.................................8
Section 2.07. Collection of Account Payments; Holding Account.............................................8
Section 2.08. Collection Account; Servicing Account......................................................10
Section 2.09. Records and Servicing Account Moneys.......................................................11
Section 2.10. Assumption Agreements......................................................................12
Section 2.11. Permitted Withdrawals from the Collection Account..........................................13
Section 2.12. Advances for Delinquent Taxes..............................................................13
Section 2.13. Maintenance of Insurance; Collection Thereunder............................................13
Section 2.14. Realization upon Defaulted Accounts........................................................14
Section 2.15. Release of Accounts........................................................................15
Section 2.16. Servicing Compensation.....................................................................16
ARTICLE THREE....................................................................................................16
STATEMENTS, REPORTS AND NOTICES...............................................................................16
Section 3.01. Reporting by the Servicer..................................................................16
Section 3.02. Annual Certificate; Account Statement......................................................17
Section 3.03. Annual Accountants' Reports................................................................17
Section 3.04. Notices....................................................................................18
ARTICLE FOUR.....................................................................................................18
THE SERVICER..................................................................................................18
Section 4.01. Representations and Warranties of the Servicer.............................................18
Section 4.02. Merger or Consolidation of the Servicer....................................................19
Section 4.03. Performance of Obligations.................................................................19
Section 4.04. Servicer Not to Resign.....................................................................20
Section 4.05. Fidelity Bond..............................................................................20
ARTICLE FIVE.....................................................................................................21
DEFAULT.......................................................................................................21
Section 5.01. Events of Default..........................................................................21
Section 5.02. No Effect on Other Parties.................................................................22
Section 5.03. Rights Cumulative..........................................................................23
ARTICLE SIX......................................................................................................23
THE ACCOUNTS..................................................................................................23
Section 6.01. Representations and Warranties; Account Documents..........................................23
ARTICLE SEVEN....................................................................................................24
MISCELLANEOUS PROVISIONS......................................................................................24
Section 7.01. Termination................................................................................24
Section 7.02. Amendment..................................................................................24
Section 7.03. Governing Law..............................................................................25
Section 7.04. Notices....................................................................................25
Section 7.05. Severability of Provisions.................................................................25
Section 7.06. Inspection and Audit Rights................................................................26
Section 7.07. Binding Effect.............................................................................26
Section 7.08. Article and Section Headings...............................................................26
Section 7.09. The Owner Trustee..........................................................................26
Section 7.10. Distribution of Servicing Procedures and Standards.........................................27
Section 7.11. Property Address...........................................................................27
Section 7.12. Power of Attorney..........................................................................27
Section 7.13. Rights Upon Discharge of Indenture.........................................................27
EXHIBIT A FORM OF STANDBY SERVICING AGREEMENT................................................................29
EXHIBIT B MID-STATE TRUST VI SERVICER'S CERTIFICATE.........................................................30
EXHIBIT C None...............................................................................................36
EXHIBIT D Historical Servicing Standards.....................................................................37
</TABLE>
3
<PAGE>
THIS SERVICING AGREEMENT, dated as of __________, 199_, among Mid-State
Trust 199 - a Delaware business trust (such trust being herein called the,
"Issuer"), Mid-State Homes, Inc., a Florida corporation (herein, together with
its successors and assigns, called the "Servicer") and ___________________, as
Trustee under the Indenture referred to below.
PRELIMINARY STATEMENT
The Issuer is a business trust created by a Trust Agreement dated as of
___________, 199_ between ________________ (in its capacity as Trustee
thereunder, the "Owner Trustee") and Mid-State Homes, Inc., as Grantor. The
Issuer will act at all times through the Owner Trustee. The Issuer has entered
into an Indenture (the "Indenture"), dated as of the date of this Agreement,
with ___________________, as Trustee (the "Trustee"), pursuant to which the
Issuer intends to issue its [ ]% Asset Backed Notes, Class A-1 (the "Class A-1
Notes"), [ ]% Asset Backed Notes, Class A-2 (the "Class A-2 Notes"), [ ]% Asset
Backed Notes, Class A-3 (the "Class A-3 Notes") and [ ]% Asset Backed Notes,
Class A-4 (the "Class A-4 Notes" and together with the Class A-1 Notes, Class
A-2 Notes and Class A-3 Notes, the "Notes"). Pursuant to the Indenture, as
security for the Notes, the Issuer is Granting to the Trustee a security
interest in, among other things, certain Accounts, its rights under this
Agreement, the Collection Account, the Holding Account and the Hazard Insurance
Policies (as such terms are hereinafter defined).
The parties desire to enter into this Agreement to provide, among other
things, for the servicing of the Accounts by the Servicer. The Servicer
acknowledges that, in order further to secure the Notes, the Issuer is Granting
to the Trustee a security interest in, among other things, its rights under this
Agreement, and the Servicer agrees that all covenants and agreements made by the
Servicer herein with respect to the Accounts shall also be for the benefit and
security of the Trustee and Holders of the Notes. For its services hereunder,
the Servicer will receive a Servicing Fee with respect to each Account serviced
hereunder as provided herein.
ARTICLE ONE
DEFINITIONS
Section 1.01. Defined Terms
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Agreement, and the definitions of such terms are applicable to
the singular as well as to the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms:
<PAGE>
"Acquired Property": Property acquired by the Issuer by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of a defaulted Account.
"Agreement": This Servicing Agreement as originally executed and as
amended or supplemented from time to time in accordance with the terms hereof
and of the Indenture.
"Bankruptcy Code": Title 11 of the United States Code.
"Custodian": As defined in the Holding Account Agreement dated as of
_______, 199_ between the Servicer and _______________________________, as
trustee.
"Default": Any occurrence or circumstance that, with notice or lapse of
time or both, would be an Event of Default.
"Event of Default": Any of the occurrences or circumstances enumerated
in Section 5.01.
"Holding Account": A custodial account established by the Servicer
pursuant to the Holding Account Agreement, dated as of _________, 199_ in the
name of the _______________, as Custodian for _______________________ as Trustee
under the Indenture and the Servicer, maintained at a depositary institution (i)
the deposits in which are fully insured by the Federal Deposit Insurance
Corporation through either the Bank Insurance Fund or the Savings Association
Insurance Fund and (ii) the commercial paper or other short term obligations of
which (or, in the case of a depository institution which is the principal
subsidiary of a holding company the commercial paper or other short-term debt
obligations of such holding company) have a credit rating of at least A-1 and
P-2 from S&P and Moody's, respectively.
"Homes": Jim Walter Homes, Inc., a Florida corporation.
"Indenture": The Indenture dated as of _________, 199_ between the
Issuer and _________________, as Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
"Monthly Cut-off Date": The last day of any Remittance Period.
"Remittance Date": The first Business Day of each week (beginning
________, 199_) and the first Business Day following the end of each Due Period.
"Remittance Period": The period from the end of the preceding
Remittance Period (or from ______, 199_ in the case of the first Remittance
Period) through the last Friday of the next month or, in the case of the last
Remittance Period of a Due Period, through the last day of the next month.
"Reporting Date": With respect to any Remittance Period, the 20th day
of the month following such Remittance Period or if such day is not a Business
Day the next preceding Business Day.
2
<PAGE>
"Servicer Termination": As defined in Section 5.01.
"Servicing Account": As defined in Section 2.08(b).
"Servicing Fee": As defined in Section 2.16.
"Standby Servicing Agreement": The Standby Servicing Agreement dated as
of ________, 199_ by and among the Servicer, the Issuer and the Successor
Servicer in the form attached hereto as Exhibit A.
"Sub-Servicer": As defined in Section 2.02.
"Sub-Servicing Agreement": An agreement between the Servicer and a
Sub-Servicer as described in Section 2.02.
"Successor Servicer": As defined in the Indenture.
"Uninsured Cause": Any cause of damage to property subject to a
Mortgage such that the property cannot be completely restored out of the
proceeds of the Hazard Insurance Policies required to be maintained pursuant to
Section 2.13.
Section 1.02. Terms Defined in the Indenture.
For purposes of this Agreement, all capitalized terms used herein that
are defined in the Indenture (other than terms defined in Section 1.01 of this
Agreement) shall have the respective meanings assigned to such terms in the
Indenture.
ARTICLE TWO
ADMINISTRATION AND SERVICING OF ACCOUNTS
Section 2.01. The Servicer to Act as Servicer.
The Servicer shall service and administer the Accounts, in accordance
with the express terms of this Agreement, applicable state and federal law, and
with the standards and procedures employed by a prudent servicer with respect to
the servicing of similar accounts held in its own portfolio and in accordance
with the Servicer's historical servicing standards set forth on Exhibit D, and
the Servicer shall have full power and authority, acting alone, to do any and
all things in connection with such servicing and administration that it may deem
necessary or desirable and, subject to the foregoing and the provisions of the
Indenture to execute and deliver in the Servicer's own name, on behalf of the
Issuer, any and all deeds, sale contracts, instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Accounts and with respect to the
Mortgaged Properties; provided, however, any Successor Servicer shall not be
bound by the Servicer's historical servicing standards.
3
<PAGE>
Notwithstanding the preceding paragraph, the Servicer shall at all
times follow the procedures set forth below:
1. The Servicer shall use its reasonable best efforts to contact,
either by telephone, mail, in person, or in such other manner as the Servicer
deems appropriate under the circumstances, each Obligor on any Account that is
delinquent 30 days or more in any payments called for under the terms and
provisions of the Accounts (including outstanding advances for taxes, insurance
and other amounts) as of the most recent Monthly Cut-off Date, in order to
ascertain the reason for the delinquency and the likelihood that the Account
will become current. Thereafter, the Servicer shall diligently pursue collection
efforts in order to bring the Account current with respect to all outstanding
amounts (including outstanding taxes, insurance and other amounts) unless the
Servicer in its good faith judgment believes it is most appropriate, under the
circumstances, and not as a general matter, not to pursue the outstanding
amounts for taxes, insurance and other amounts.
2. The Servicer shall use its reasonable best efforts to physically
inspect or visit the Mortgaged Property securing any Account that is 60 or more
days delinquent as of the most recent Monthly Cut-off Date, unless the Servicer
otherwise determines to its reasonable satisfaction that the value of the
Mortgaged Property securing such Account has not been materially impaired and
that such property has not been abandoned.
3. The Servicer shall use its reasonable best efforts to diligently
pursue, foreclose upon or otherwise comparably convert the ownership of
properties securing an Account that continues in default (including default in
payment of taxes and insurance) for more than 90 days, unless the Servicer, in
its best judgment, believes that the Account can be returned to current status
within a reasonable period of time or, solely with respect to defaults due
solely to default in payment of taxes and insurance and other amounts, unless
the Servicer in its good faith judgment believes it is most appropriate, under
the circumstances, and not as a general matter, not to pursue the outstanding
amounts for taxes, insurance and other amounts.
4. With respect to Mortgaged Properties that are known by the Servicer
to be abandoned or in foreclosure, or properties with respect to which title has
been acquired, the Servicer shall take such action as it deems necessary in its
good faith judgment and not in violation of law to protect such property from
vandalism or damage by the elements.
5. The deed to any Acquired Property delivered as a result of any
foreclosure or similar proceeding or deed in lieu thereof shall name the Issuer
as grantee unless the Servicer deems it necessary to foreclose or otherwise
comparably convert title to any Mortgaged Property in the name of a party other
than the Issuer. In that event, the Servicer may designate such a party (which,
except in the States of Ohio and Maryland, shall not be an Affiliate of the
Grantor) to hold title to the Acquired Property. The party designated to hold
such title shall sign a written acknowledgment that it is holding title on
behalf of the Issuer and any such acknowledgment shall be delivered to the
Trustee together with the deed to such Acquired Property.
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6. Upon acquisition of an Acquired Property by the Issuer, the Servicer
shall prepare a Trust Mortgage in form appropriate to the state in which such
Acquired Property is located and furnish such Trust Mortgage to the Trustee
within two Business Days of acquiring a deed in respect of such Acquired
Property for execution by the Issuer and recordation in accordance with the
terms of the Indenture. The Servicer or Sub-Servicer in order to facilitate the
sale of the Acquired Property, at its option, may execute and record as agent
and attorney in fact for the Issuer a deed granting to the Servicer or
Sub-Servicer a ten percent interest in the Acquired Property as a tenant in
common, which interest shall be subject to the Trust Mortgage. As consideration
for that interest, the Servicer or Sub-Servicer shall convey and hereby agrees
to convey to the Issuer all of its share of the proceeds of disposition of any
such Acquired Property (including any interest in any new Account with respect
to such Acquired Property). No other consideration shall be payable by the
Servicer or Sub-Servicer to the Issuer for that interest.
If an Acquired Property is resold in exchange for a new Account within
two Business Days of acquisition of such Acquired Property, the mortgage or deed
of trust executed by the Issuer need not be executed and delivered to the
Trustee, provided the Account Documents for such new Account and all assignments
and endorsements with respect to such new Account required by the Indenture are
delivered to the Trustee within five Business Days of acquisition.
7. Upon the acquisition of an Acquired Property, the Servicer shall (i)
deliver the deed or certificate of sale to the Trustee, (ii) advance all taxes
and standard hazard insurance premiums relating to the Acquired Property, (iii)
process any claims for redemption and otherwise comply with any redemption
procedures required by law, (iv) use its reasonable best efforts to promptly
sell or otherwise dispose of such Acquired Property at a price which in its best
judgment represents reasonable value and remit the proceeds to the Trustee, and
(v) if, in order to sell the property at what it reasonably determines to be the
best price available, the Servicer deems it reasonably necessary for the Issuer
to provide mortgage financing to the prospective buyer, the Servicer shall
undertake, as agent for the Issuer, to apply substantially the same underwriting
standards as the Servicer applies to similar transactions originated by it for
its own account; provided however that the Maturity Date of any such Account
shall not exceed June 1, 2031.
8. If the Servicer deems it reasonably necessary to convey an Acquired
Property in exchange for a new Account, such new Account may be originated on
documents naming the Servicer or Sub-Servicer as payee; provided, however, that
the Maturity Date of any such new Account shall not exceed _______, 20__. The
Sub-Servicer's or Servicer's rights under any such documents shall be subject to
its obligation to convey proceeds of the disposition of Acquired Property.
In connection with the sale of an Acquired Property, any contract of
sale or deed shall be executed by the Servicer or Sub-Servicer in its individual
capacity and as agent and attorney in fact for the Issuer. The Servicer shall
request release of the Trust Mortgage by the Trustee. Immediately upon
consummation of the sale, the Servicer or Sub-Servicer shall
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assign all of its right, title and interest in the new Account to the Issuer and
the Issuer shall assign all of its right, title and interest in the new Account
to the Trustee. The Servicer shall record the release, the deed, the Mortgage,
the assignment of the Servicer's or Sub-Servicer's interest to the Issuer and an
assignment of the Mortgage by the Issuer to the Trustee immediately.
9. The Servicer shall segregate and hold all funds collected and
received in connection with the rental or sale of any Acquired Property separate
and apart from its own funds and general assets and shall deposit such moneys in
the Holding Account in accordance with Section 2.07(b).
10. Except as expressly permitted by Section 2.10 or as otherwise
provided in Exhibit D, the Servicer shall not alter, change or modify, or permit
the alteration, change or modification of, any Account without the prior consent
of the Trustee; provided, however, that the Servicer may charge-off or write-off
Accounts when the Servicer determines in its best judgment that it is prudent to
do so and that the costs and expenses of continued servicing of such Accounts
(including foreclosure proceedings) exceeds the expected revenues therefrom, and
such determination is evidenced by a certification signed by a duly authorized
officer of the Servicer setting forth such conclusions and the basis therefor.
Promptly after the execution and delivery of this Agreement, the
Servicer shall deliver to the Issuer and the Trustee a list of officers of the
Servicer involved in, or responsible for, the administration and servicing of
the Accounts, which list shall from time to time be updated by the Servicer
after each change in servicing officers.
At all times while the Servicer is servicing the Accounts pursuant to
this Agreement, the Servicer shall employ field servicing personnel for each
state in which Mortgaged Properties are located who are assigned to service the
related outstanding Accounts of that state; provided, however, that if the
Servicer does not employ field servicing personnel in any such state or does not
employ sufficient field servicing personnel in any such state to service the
related outstanding Accounts of that state in accordance with the terms and
provisions of this Agreement, the Servicer shall enter into one or more
Sub-Servicing Agreements as described in Section 2.02 with a Sub-Servicer that
employs field servicing personnel or agents for that state providing for the
servicing of the effected outstanding Accounts of that state.
Section 2.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicer.
The Servicer may enter into sub-servicing agreements (each a
"Sub-Servicing Agreement") with sub-servicers (each, a "Sub-Servicer") which may
include Homes, an affiliate of the Servicer, for the servicing and
administration of any or all of the Accounts. In the event that any such
Sub-Servicing Agreement exists, the Sub-Servicer will represent and warrant that
it is duly organized and existing under the applicable laws of the United States
or any state and is duly qualified and licensed to do business in each state in
which Mortgaged Property relating to an Account to be serviced under such
Sub-Servicing Agreement is located. The requirements of the immediately
preceding sentence of this Section 2.02 shall not apply to
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any sub-servicing agreement entered into by the Successor Servicer upon its
assuming the rights, powers, duties and responsibilities of the Servicer
hereunder pursuant to Section 5.01 hereof. For purposes of this Agreement
(except as otherwise provided herein), the Servicer shall be deemed to have
received payments on Accounts referred to in Sections 2.07 and 2.15 when the
Sub-Servicer has received such payments. The Servicer and any Sub-Servicer may
enter into amendments of a Sub-Servicing Agreement; provided, however, that any
such amendments shall be consistent with and not violate the provisions of this
Agreement. Copies of all amendments shall promptly be sent as provided in
Section 7.04 hereof to the Trustee.
Section 2.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing Agreement
that may exist from time to time in accordance with the terms and conditions of
such Sub-Servicing Agreement and, except as hereinafter provided in this Section
2.03, without any limitation by virtue of this Agreement; provided, however,
that in the event of termination of any Sub-Servicing Agreement by the Servicer
or the Sub-Servicer the Servicer shall either act as primary servicer of the
related Accounts or enter into a Sub-Servicing Agreement in accordance with the
provisions of Section 2.02 with a successor Sub-Servicer.
Section 2.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Servicer shall remain primarily obligated and liable to the Issuer and the
Trustee for the servicing and administering of the Accounts in accordance with
the provisions of this Agreement without diminution of such obligation or
liability by virtue of such Sub-Servicing Agreement or arrangements or by virtue
of indemnification from the Sub-Servicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Accounts. The Servicer shall be entitled to enter into any
agreement with a Sub-Servicer for indemnification of the Servicer by such
Sub-Servicer, and nothing contained in this Agreement shall be deemed to limit
or modify such indemnification.
Section 2.05. No Contractual Relationship Between Sub-Servicer and
Trustee or Issuer.
Any Sub-Servicing Agreement that may be entered into and any other
transactions or services relating to the Accounts involving a Sub-Servicer in
its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone and the Sub-Servicer shall have no claim against the Trustee or
the Issuer except to the extent set forth in Section 2.06 arising from any
Sub-Servicing Agreement; provided, however, that the Trustee and the Issuer may
upon the happening of a default thereunder enforce the Servicer's rights under
any Sub-Servicing Agreement as third party beneficiaries thereof.
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Section 2.06. Assumption of Sub-Servicing Agreement by Successor
Servicer.
In the event the Servicer shall for any reason no longer be the Service
(including by reason of an Event of Default or Trigger Event), the Successor
Servicer may, at its election, assume all of the rights and obligations of the
Servicer under each Sub-Servicing Agreement that may have been entered into. The
Indenture provides that the Successor Servicer may, at its election, assume all
of the Servicer's interest therein and replace the Servicer as a party to the
Sub-Servicing Agreement to the same extent as if the Sub-Servicing Agreement had
been assigned to the assuming party, except that the Servicer shall not thereby
be relieved of any liability or obligation under the Sub-Servicing Agreement.
The Servicer shall, upon request of the Trustee or the Successor
Servicer but at the expense of the Servicer, deliver to the Successor Servicer
all documents and records pursuant to Section 2.09 relating to the Sub-Servicing
Agreement and the Accounts 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 Sub-Servicing Agreement to the assuming
party.
Section 2.07. Collection of Account Payments; Holding Account.
(a) In accordance with the servicing standards set forth in Section
2.01, the Servicer shall use its reasonable best efforts to cause each Obligor
to make all payments in respect of his or her Account to the Servicer and to
collect all payments (including amounts for taxes and insurance) called for
under the terms and provisions of the Accounts (other than any fees and charges
the collectibility of which is not legally enforceable). Consistent with the
foregoing, the Servicer may in its discretion (i) waive any late payment charge,
assumption fee, prepayment charge, or penalty interest in connection with the
prepayment of an Account and (ii) arrange a schedule for liquidation of
delinquent payments due on an Account, running for a period as the Servicer
reasonably believes prudent under the circumstances.
(b) On or before the Closing Date the Servicer shall establish the
Holding Account and shall cause all payments received with respect to the
Accounts to be deposited in the Holding Account. The deposit of substantially
all such amounts shall be made as soon as reasonably practicable after such
payment is actually received by it but in no event later than one Business Day
after receipt by the Servicer, and in the case of all payments received by
Sub-Servicers with respect to the Accounts, such amounts shall be mailed as soon
as reasonably practicable to the Servicer but in no event later than two
Business Days after collection by the Sub-Servicer and deposited by the Servicer
in the Holding Account as described above. The Sub-Servicer shall not deposit
any amounts received by it in any deposit, trust, or similar account prior to
remitting such amounts to the Servicer. On each Remittance Date the Servicer
shall submit to the Custodian, with a copy to the Trustee, a report
substantially in the form provided in the Holding Account Agreement relating to
funds deposited in the Holding Account during the immediately preceding calendar
week which specifies the amount of such funds referred to in Section 2.08(a) to
be transferred from the Holding Account by the Custodian to the Collection
Account.
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(c) The Servicer may, by written request delivered to the Custodian,
with a copy to the Trustee, receive funds from the Holding Account for the
following purposes:
(i) to repay to the Servicer moneys in the Holding Account upon
certification by the Servicer reasonably acceptable to the
Trustee that such funds are not part of the Trust Estate;
(ii) to clear the Holding Account pursuant to Section 7.01(a);
(iii) to deposit Insurance Proceeds in the Servicing Account for
application to restoration or repair of a Mortgaged Property
in the future, to the extent such proceeds were deposited in
the Holding Account;
(iv) to pay the Servicer the Servicing Fee pursuant to Section
2.16;
(v) to pay the Servicer amounts represented by any late payment
charges, interest charged on advances of taxes and insurance
premiums, assumption fees and other such additional charges
and net income earned on investments of funds on deposit in
the Holding Account as additional servicing compensation;
(vi) to reimburse the Servicer for advances of taxes, insurance
premiums and other amounts in accordance with Sections 2.12
and 2.13, respectively; provided, however, that with respect
to advances of taxes and insurance premiums and other amounts
made on the Accounts on or prior to the Cut-Off Date the
extent of reimbursement for such advances shall be limited to
the related amounts collected by the Servicer or, in the case
of a liquidation, the amount by which the related Liquidation
Proceeds, if any, for each such Account exceeds the sum of the
Economic Balance of the related Account and the related
Liquidation Expenses other than such advances;
(vii) to reimburse the Servicer from the related Insurance Proceeds
and Liquidation Proceeds with respect to a Mortgaged Property
for any expenses incurred by it in good faith pursuant to
Section 2.14 for restoration of such Mortgaged Property
damaged by an Uninsured Cause;
(viii) to reimburse the Servicer from the Holding Account for any
unreimbursed usual and customary Liquidation Expenses subject
to the limitations set forth in Sections 2.12 and 2.13 with
respect to advances for taxes and insurance;
(ix) to reimburse the Servicer for expenses reasonably incurred by
the Servicer pursuant to Section 6.01; and
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(x) to reimburse the Servicer for reasonable and necessary
expenses incurred in connection with the preservation and
management of Acquired Properties.
Section 2.08. Collection Account; Servicing Account.
(a) On or before the Closing Date the Issuer shall open the Collection
Account as provided in Section 8.02 of the Indenture. On the Closing Date, the
Servicer shall on behalf of the Issuer remit to the Trustee for deposit in the
Collection Account all Monthly Payments and all prepayments (net of the
applicable Servicing Fee) collected on the Accounts after the Cut-off Date and
received by the Servicer not less than five Business Days before the Closing
Date. All funds collected in respect of the Accounts prior to the Closing Date
not deposited in the Collection Account pursuant to the preceding sentence on
the Closing Date shall be deposited in the Holding Account on the Closing Date
and transferred to the Collection Account on the first Remittance Date following
the Closing Date. Thereafter, the Servicer shall submit to the Custodian, with a
copy to the Trustee, the report required by Section 2.07(b) directing the
deposit into the Collection Account or, with respect to certain Insurance
Proceeds, the Servicing Account of all payments and collections in respect of
the Accounts then on deposit in the Holding Account (other than withdrawals
simultaneously requested pursuant to Section 2.07(c) and amounts in respect of
payments by Obligors made by checks subsequently returned for insufficient funds
or other reason for non-payment) including the following:
(i) all Obligor payments on account of principal, including Full
Prepayments, of the Accounts;
(ii) all Obligor payments on account of finance charges on the
Accounts; and
(iii) all net Insurance Proceeds (other than proceeds to be applied
to the restoration or repair of the related Mortgaged Property
which shall be deposited to the Servicing Account) and Net
Liquidation Proceeds with respect to the Accounts.
The Servicer may request withdrawals from the Collection Account as
permitted by Section 2.11 hereof.
(b) The Servicer shall open, at the Corporate Trust Office or at any
other financial institution the deposits of which are fully insured by the
Federal Deposit Insurance Corporation ("FDIC") (through either the Bank
Insurance Fund or the Savings Association Insurance Fund), one or more accounts
(collectively, the "Servicing Account"), which such accounts shall be Eligible
Accounts, designated as follows: "Mid-State Homes, Inc., as Servicer for
Mid-State Trust 199 - ". There shall be deposited in the Servicing Account on
the Closing Date all Insurance Proceeds which are to be applied to the
restoration or repair of the related Mortgaged Property received after the
Cut-off Date and still in the custody of the Servicer on the Closing Date;
thereafter all Insurance Proceeds shall be deposited into the Servicing Account.
If required by any applicable law or regulation, Obligors' funds in a
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Servicing Account shall be segregated, and the Servicer shall instruct the
financial institution in which such account is maintained accordingly. The
Servicing Account shall be an interest bearing account fully insured as to
amounts deposited therein by the FDIC. In addition, moneys in the Servicing
Account may be invested as provided in Section 2.08(c). The Servicer shall make
withdrawals from a Servicing Account only (i) for the purpose of applying
proceeds of a Hazard Insurance Policy or other insurance policy to the
restoration or repair of a Mortgaged Property, to the extent such proceeds were
deposited in such Servicing Account; (ii) to the extent required by applicable
law or regulation or by the related Accounts and to the extent of earnings on
the Servicing Account then on deposit in the Servicing Account to pay interest
on funds in such Servicing Account to the Obligors entitled thereto; (iii) to
pay to the Obligors Insurance Proceeds required to be paid to them pursuant to
the terms of the related Account Note; (iv) to clear and terminate such
Servicing Account at the termination of this Agreement in accordance with
Section 7.01; (v) to pay to the Servicer net earnings on amounts in the
Servicing Account to the extent permitted by Section 2.08(c) below; or (vi) to
transfer to the Holding Account any funds then on deposit in the Servicing
Account upon a determination by the Servicer that such funds will not be applied
in the manner described in (i) through (v) above.
(c) Moneys in any Servicing Account from time to time may be invested
and reinvested by the Servicer, but only in one or more Eligible Investments and
obligations on which the Trustee in its commercial capacity is the obligor. All
net income or gain from such investment of moneys shall be paid to the Servicer
as it is earned and received, provided that all interest required to be paid to
Obligors shall be paid to them as required or shall be held for the Obligors
entitled thereto. If any loss results from such investments, the Servicer shall
promptly reimburse the Servicing Account for the amount of any such loss. The
maturity of such investments shall be such as not to conflict with the
requirements for disbursement of funds out of such Servicing Account. Whenever
any amounts invested as aforesaid shall be needed for disbursement from a
Servicing Account, the Servicer shall cause a sufficient amount of such
investments to be sold or otherwise converted to cash for such purpose.
(d) Notwithstanding Section 2.08(c), all funds in the Servicing Account
are held by the Servicer as agent and bailee of the Trustee for the benefit of
the Trustee, the Noteholders and the Obligors.
Section 2.09. Records and Servicing Account Moneys.
(a) The Servicer agrees to act as agent and bailee of the Trustee in
holding any Account Documents released to the Servicer pursuant to Section
3.13(c) of the Indenture, and any other items constituting a part of the Trust
Estate that from time to time come into the possession of the Servicer. The
Servicer agrees, for the benefit of the Trustee and the Noteholders, to act as
such agent and bailee, and to hold and deal with such Accounts and such items,
as agent and bailee for the Trustee, in accordance with the provisions of this
Agreement and the Indenture.
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(b) The Servicer shall for a period of four years following termination
of this Agreement or from the time an Account is paid in full, with respect to
such Account, retain all data relating directly to or maintained in connection
with the servicing of the Accounts at the Servicer's principal service office in
Tampa, Florida, or at such other place where the servicing offices of the
Servicer are located, and shall give the Trustee access to all data at all
reasonable times, and, while an Event of Default shall be continuing, the
Servicer shall, on demand of the Trustee or the Successor Servicer, deliver to
the Trustee or the Successor Servicer, as the case may be, all data necessary
for the servicing of the Accounts, provide the Trustee and the Successor
Servicer with the information called for by Section 2.07(b) concerning all
moneys in the Holding Account and deliver to the Trustee all moneys in each
Servicing Account and all other moneys collected by it from Obligors and not
previously deposited in the Holding Account or the Servicing Account. If the
rights of the Servicer shall have been terminated in accordance with Section
5.01 or if this Agreement shall have been terminated pursuant to Section
7.01(b), the Servicer shall, upon demand of the Trustee, the Successor Servicer
or the Noteholders in the case of Section 5.01, or of the successor to the
rights of the Issuer in the case of Section 7.01(b), deliver to the Successor
Servicer all data necessary for the servicing of the Accounts, provide the
Trustee and the Successor Servicer with the information called for by Section
2.07(b) concerning all moneys in the Holding Account and deliver to the Trustee
all moneys in each Servicing Account and all other moneys collected by it from
obligors and not previously deposited in the Holding Account or the Servicing
Account. In addition to delivering such data and moneys the Servicer shall use
its reasonable best efforts to effect the orderly and efficient transfer of the
servicing of the Accounts to the party which will be assuming responsibility for
such servicing.
Section 2.10. Assumption Agreements.
(a) When a Mortgaged Property has been or is about to be conveyed by
the Obligor, the Servicer is authorized to take or enter into an assumption
agreement or other similar agreement from or with the person to whom such
Mortgaged Property has been or is about to be conveyed, provided that (i) the
Account Rate on, Monthly Payment and balance of such Account shall not be
reduced, (ii) the term of the Account shall not be extended, (iii) there are
either no unreimbursed advances for taxes and insurance on such Account
following assumption or such advances are assumed and (iv) the Servicer shall
not agree to any other modification unless in the best judgment of the Servicer
such modification would not materially adversely affect the collectibility or
enforceability of the Accounts or the interests of the Noteholders. The Servicer
shall notify the Trustee that any such assumption agreement or similar agreement
has been completed by forwarding to the Trustee the original copy of such
assumption agreement or similar agreement for addition to the related Account
Documents. Any fee collected by the Servicer for entering into an assumption
agreement or similar agreement shall be retained by the Servicer as additional
servicing compensation. The Servicer shall use its reasonable best efforts to
enter into an assumption agreement or other similar agreement; however, if, in
connection with the conveyance of such Mortgaged Property, the continuation of
liability of the original Obligor shall be impracticable, or if, in the opinion
of the Servicer, the release of the liability of the original Obligor would not
substantially impair the ability of the holder of the related Account to realize
the full repayment of such Account,
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the Servicer may release the original Obligor from liability on such Account so
long as the new Obligor meets the underwriting standards which the Servicer is
applying to similar transactions originated for its own account. The Servicer
shall notify the Trustee if the original Obligor is released from liability on
such Account.
(b) The Servicer shall not be deemed to be in default, breach or any
other violation of its obligations under this Agreement by reason of any
assumption of an Account by operation of law or any assumption or transfer of
property subject to an Account which the Servicer may be restricted by law from
preventing, for any reason whatever.
Section 2.11. Permitted Withdrawals from the Collection Account.
If at any time funds on deposit in the Holding Account are insufficient
to satisfy the Servicer withdrawal requests referred to in Section 2.07(c)
hereof, and so long as no Event of Default or Trigger Event shall have occurred
and be continuing, the Servicer may request withdrawal of such deficiency from
the Collection Account, and upon receipt of such written request, the Trustee
shall withdraw the amount of such deficiency from the Collection Account and
make the requested payments to the Servicer, provided that such payments shall
not be made within six Business Days of a Payment Date.
Section 2.12. Advances for Delinquent Taxes.
(a) If the Servicer shall have knowledge that real property taxes or
other taxes, charges or assessments relating to any Mortgaged Property have not
been paid when due, the Servicer shall make such payment prior to the time by
which failure to make such payment would give rise to a lien on the related
Mortgaged Property. Any costs so incurred by the Servicer shall be recoverable
by the Servicer as Liquidation Expenses pursuant to Section 2.07, or to the
extent recoverable from any Sub-Servicer servicing such Account, or from the
related Obligor or from other funds on deposit in the Holding Account to the
extent that the Servicer certifies that such advances are not otherwise
recoverable due to insufficient Net Liquidation Proceeds.
(b) The Servicer shall indemnify the Issuer for any losses resulting
from a failure to make the payments referred to in Paragraph (a) above and the
Servicer shall deposit the amount of such loss in the Collection Account on the
next Remittance Date following the determination of such loss.
Section 2.13. Maintenance of Insurance; Collection Thereunder.
(a) Except as otherwise provided in subsection (b) of this Section
2.13, the Servicer shall cause to be maintained with respect to each Mortgaged
Property and Acquired Property one or more Hazard Insurance Policies that
provide at least the same coverage as a standard form fire and extended coverage
insurance policy issued by a company regulated under applicable state law and
authorized by such state to issue such policies in the state in which the
Mortgaged Property or Acquired Property is located and in an amount that is not
less than an amount that would satisfy the definition of Full Prepayment with
respect to the
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related Account; provided, however, that the amount of coverage provided by each
Hazard Insurance Policy shall be sufficient to avoid the application of any
co-insurance clause contained therein. Any individual Hazard Insurance Policies
shall name the Servicer as additional loss payee and run to the benefit of the
Servicer's successors and assigns as their interests may appear. Any amounts
received under any such policies shall be transferred to or deposited in the
Holding Account or Servicing Account (or paid over to the related Obligor if the
Servicer reasonably does not deem it necessary to deposit such amounts in the
Servicing Account) pursuant to Sections 2.07 and 2.08. If any Obligor is in
default in the payment of such premiums, the Servicer shall pay such premiums
out of its own funds, and any costs so incurred by the Servicer shall be
recoverable by the Servicer to the extent such costs constitute Liquidation
Expenses pursuant to Section 2.14, or to the extent recoverable from any
Sub-Servicer servicing such Account, or from the related Obligor or from other
funds on deposit in the Holding Account to the extent that the Servicer
certifies that such advances are not otherwise recoverable due to insufficient
Net Liquidation Proceeds.
(b) The Servicer may, in lieu of causing individual Hazard Insurance
Policies to be maintained with respect to each Mortgaged Property pursuant to
subsection (a) of this Section 2.13, and shall, to the extent that the related
Accounts do not require the Obligor to maintain a Hazard Insurance Policy with
respect to the related Mortgaged Property, maintain one or more blanket
insurance policies covering losses on the mortgagee's interest in the Accounts
resulting from the lack of or insufficiency of individual Hazard Insurance
Policies issued by a company regulated under applicable state law and authorized
by such state to issue such policies in the state in which the Mortgaged
Property is located and in an amount that is not less than an amount that would
satisfy the definition of Full Prepayment with respect to the related Account.
The Servicer shall pay the premium for such policy on the basis described
therein and shall pay any deductible amount with respect to claims under such
policy relating to the Accounts; provided, however, that such deductible cannot
exceed an amount that is customary under similar policies. If the insurer
thereunder shall cease to be acceptable to the Servicer, the Servicer shall
exercise its best efforts to obtain from another insurer a replacement policy
comparable to such policy. All amounts collected by the Servicer under any such
policy and reimbursements by the Servicer of deductible amounts shall be
deposited in the Holding Account in accordance with Section 2.07.
(c) The Servicer shall indemnify the Issuer for any losses resulting
from a failure to maintain insurance pursuant to this Section 2.13 and the
Servicer shall deposit the amount of such loss in the Collection Account on the
next Remittance Date following the determination of such loss.
Section 2.14. Realization upon Defaulted Accounts
With respect to any defaulted Account, the Servicer shall use its
reasonable best efforts consistent with the servicing procedures as set forth in
Section 2.01 hereof, to foreclose upon or otherwise comparably convert (through
replevin, deed in lieu of foreclosure or otherwise) the ownership of properties
securing any Account that comes into and continues in default and as to which no
satisfactory arrangements can be made for collection of delinquent
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payments pursuant to Section 2.07. The Servicer shall prepare all documents
necessary and appropriate in connection with the realization upon defaulted
Accounts. The Servicer's obligations under this Section 2.14 are subject to the
proviso that, in the case of damage to Mortgaged Property from an Uninsured
Cause, the Servicer shall not be required to expend its own funds in restoring
such property unless it shall in good faith determine (i) that such restoration
will increase the proceeds of liquidation of the related Account, after
reimbursement to itself for such expenses, and (ii) that such expenses will be
recoverable by it either as Liquidation Expenses or as Insured Expenses. For
purposes of clause (ii) of the preceding sentence, if the Servicer is
maintaining a blanket Hazard Insurance Policy pursuant to Section 2.13(b),
expenses shall be deemed recoverable as Insured Expenses if they would have been
recoverable under an individual Hazard Insurance Policy maintained pursuant to
Section 2.13(a). The Servicer shall be responsible for all other costs and
expenses incurred by it in connection with any action taken in respect of a
defaulted Account; provided, however, that it shall be entitled to reimbursement
of such costs and expenses to the extent they constitute Liquidation Expenses,
Insured Expenses or reasonable and necessary expenses incurred in the
preservation and the management of Acquired Properties. All Liquidation Proceeds
shall be deposited in the Holding Account in accordance With Section 2.07(b)
hereof.
Section 2.15. Release of Accounts.
In the case of a final Monthly Payment, Full Prepayment or liquidation
of any Account, the Servicer shall deliver to the Trustee and the Issuer an
Officers' Certificate (i) identifying the Account that was the subject of such
final payment, Full Prepayment or liquidation, (ii) stating with respect to a
Full Prepayment that all prepayment proceeds received in connection therewith
are in an amount necessary to effect a Full Prepayment (after taking into
account amounts representing reimbursement for advances by the Servicer for
taxes and insurance premiums) and have been deposited in the Holding Account,
(iii) stating with respect to a liquidation of an Account, that all Liquidation
Proceeds which have been determined by the Servicer in its reasonable judgment
to be finally recoverable have been received and the Net Liquidation Proceeds
have been deposited in the Holding Account, (iv) stating that with respect to a
final Monthly Payment, all amounts due under such Account have been paid (after
taking into account amounts representing reimbursement for advances by the
Servicer for taxes and insurance premiums) and such amounts have been deposited
in the Holding Account and (v) identifying such documents as the Servicer or the
Obligor may request to evidence satisfaction and discharge of such Account. In
connection with any prepaid Account with respect to which the related Mortgage
is a deed of trust, the Servicer is authorized to procure from the trustee under
such deed of trust a deed of full reconveyance covering the property encumbered
by such deed of trust, which deed of reconveyance shall be delivered by the
Servicer to the person or persons entitled thereto, but no expenses incurred in
connection with such deed of reconveyance shall be payable out of the proceeds
received in respect of such Account. If from time to time and as appropriate for
the servicing or foreclosure of any Account the Servicer requests the Trustee to
release the related Account Documents and delivers to the Trustee a trust
receipt reasonably satisfactory to the Trustee and signed by a Servicing
Officer, the Trustee shall release the related Account Documents to the
Servicer. Such trust receipt shall obligate the Servicer to return the related
Account Documents to the
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Trustee when the need therefor by the Servicer no longer exists. If such Account
shall be liquidated and the Trustee receives a certificate from the Servicer as
provided above, then, upon request of the Issuer, the Trustee shall release the
trust receipt to or upon the order of the Issuer.
Section 2.16. Servicing Compensation.
As compensation for the performance of its obligations under this
Agreement, the Servicer shall be entitled to a servicing fee (the "Servicing
Fee") for each Account that is not a repossessed or foreclosed Account at the
beginning of any month and that has an Economic Balance commencing on the
Cut-off Date and terminating on the first to occur of the maturity of such
Account or the date of Full Prepayment of such Account. The Servicing Fee with
respect to any Account is $____ per month. The Servicing Fee in respect of an
Account for a particular month shall be paid to the Servicer by the Custodian
from amounts held in the Holding Account upon submission to the Custodian of a
withdrawal request pursuant to Section 2.07(c). In addition to the Servicing
Fee, the Servicer shall be entitled to receive pursuant to this Section 2.16 as
additional servicing compensation all late payment charges, assumption fees,
interest on taxes, insurance premiums and similar charges paid in respect of the
Accounts and previously deposited in the Holding Account together with net
income earned on investments of funds on deposit in the Holding Account. The
Servicer shall pay all expenses and charges imposed on the Servicer hereunder,
including servicing fees, expenses and charges of any Sub-Servicers, out of its
servicing compensation or its own funds, and shall not be entitled to
reimbursement for such expenses and charges except as specifically provided for
herein.
ARTICLE THREE
STATEMENTS, REPORTS AND NOTICES
Section 3.01. Reporting by the Servicer.
(a) On or before each Reporting Date, the Servicer shall render to the
Issuer, the Independent Accountant, the Trustee and Lehman Brothers Inc. a
certificate, as of the immediately preceding Monthly Cut-Off Date, certifying to
all funds collected by it through such Monthly Cut-off Date that it was required
to deposit in the Holding Account in respect of the preceding Remittance Period
and, except for amounts provided on a cumulative basis, that have not been
previously reflected on a prior certificate pursuant to this Section 3.01 and
reporting certain other information. Such certificate shall be substantially in
the form of Exhibit B hereto. Such certificate shall also be sent to [Moody's
Investors Service, Inc., 99 Church Street, N.Y., N.Y. 10007 Attention: ABS
Monitoring Department] [Standard & Poor's Ratings Service, 25 Broadway, N.Y.,
N.Y. 10004 Attention: Asset Backed Surveillance Group] [Duff & Phelps Credit
Rating Co., 55 East Monroe, 35th Floor, Chicago, IL 60603 Attention:_______]
[Fitch IBCA, Inc., One State Street Plaza, N.Y., N.Y. 10004 Attention:________].
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(b) On or before each Reporting Date, the Servicer shall provide the
Issuer, with such information as of the immediately preceding Monthly Cut-off
Date as is necessary in connection with the maintenance of the Issuer's
financial records and preparation of the Issuer's financial statements.
(c) On or before each Reporting Date, the Servicer shall provide the
Successor Servicer with servicing tapes in a format compatible with the
Successor Servicer's computer systems and containing such data as the Successor
Servicer may reasonably request.
Section 3.02. Annual Certificate; Account Statement.
On or before 120 days after the end of the first fiscal year of the
Servicer that ends more than three months after the Closing Date and each fiscal
year thereafter, the Servicer shall deliver or cause to be delivered to the
Issuer and the Trustee an Officers' Certificate, dated as of the first Monthly
Cut-off Date following the end of the preceding fiscal year, to the effect that
a review of the activities of the Servicer during the period from the beginning
of the first Remittance Period (or the Closing Date in the case of the first
such Officers' Certificate required to be delivered) to the end of the last
Remittance Period during the preceding fiscal year has been made under the
supervision of the officers executing such Officers' Certificate with a view to
determining whether during such period the Servicer had performed and observed
all of its obligations under this Agreement. Such Certificate shall state to the
best of the Servicer's knowledge either (A) no Default by the Servicer under
this Agreement has occurred and is continuing, or (B) if such a Default has
occurred and is continuing, specifying such Default and the nature and status
thereof.
Section 3.03. Annual Accountants' Reports.
On or before 120 days after the end of the first fiscal year of the
Servicer that ends more than three months after the Closing Date and each fiscal
year thereafter, the Servicer shall deliver to the Issuer and the Trustee a
report, prepared by a firm of Accountants of recognized national standing
selected by the Servicer, to the effect that (i) they have examined the balance
sheet of the Servicer as of the last day of said fiscal year and the related
statements of income, retained earnings and changes in financial position for
such fiscal year in accordance with generally accepted auditing standards and
have issued an opinion thereon, specifying the date thereof and (ii) they have
examined certain documents and records relating to the Accounts during the
preceding fiscal year in accordance with the requirements of the Uniform Single
Audit Program for Mortgage Bankers and disclosed no exceptions that, in their
opinion, were material, relating to such Accounts, or, if any such exceptions
were disclosed thereby, setting forth such exceptions that, in their opinion,
were material. If any of the Accounts are being serviced by a Sub-Servicer, the
firm of Accountants preparing the report with respect to the servicing of such
Accounts by the Servicer may rely, as to matters relating to the servicing of
such Accounts, upon a comparable report (rendered with respect to the most
recent fiscal year of such Sub-Servicer which ended at or prior to the end of
the Servicer's fiscal year) of another firm of Accountants of recognized
national standing with respect to such Sub-Servicer's servicing of such
Accounts.
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Section 3.04. Notices.
The Servicer shall, as promptly as practicable (i) following receipt by
it of notice thereof, notify the Trustee of the commencement of a class-action
litigation challenging the validity or enforceability of Accounts having an
aggregate Economic Balance totaling $1,000,000 or more or any individual claim
for damage with respect to the Accounts in excess of $250,000 and (ii) notify
the Trustee of any occurrence that materially and adversely affects the
Servicer's ability to service the Accounts.
ARTICLE FOUR
THE SERVICER
Section 4.01. Representations and Warranties of the Servicer.
The Servicer represents and warrants to the Issuer as follows:
(a) The Servicer (i) is a corporation, validly existing and in good
standing under the laws of the State of its incorporation, (ii) has qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, and (iii) has full power,
authority and legal right 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 by the Servicer of this Agreement are
within the corporate power of the Servicer and have been duly authorized by all
necessary corporate action on the part of the Servicer. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof, will conflict with or
result in a breach of, or constitute a default under, any of the provisions of
any law, governmental rule, regulation, judgment, decree or order binding on the
Servicer or its properties or the charter or by-laws of the Servicer, or any of
the provisions of any indenture, mortgage, contract or other instrument to which
the Servicer is a party or by which it is bound or result in the creation or
imposition of any lien, charge or encumbrance upon any of its property pursuant
to the terms of any such indenture, mortgage, contract or other instrument (or
if such conflict with, breach of or default under any such indenture, mortgage,
contract or other instrument exists or will exist, any remedies in respect
thereof and in respect of any such related lien, charge or encumbrance have been
stayed under the Bankruptcy Code).
(c) The execution, delivery and performance by the Servicer of this
Agreement and the consummation of the transactions contemplated hereby do not
require the consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any state, federal or
other governmental authority or agency, except as has been previously obtained
and are in effect.
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(d) This Agreement has been duly executed and delivered by the Servicer
and constitutes a legal, valid and binding instrument enforceable against the
Servicer in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
(e) Except as set forth in Exhibit C attached hereto, there are no
actions, suits or proceedings pending or, to the knowledge of the Servicer,
threatened or likely to be asserted against or affecting the Servicer, before or
by any court, administrative agency, arbitrator or governmental body with
respect to any of the transactions contemplated by this Agreement or the
Indenture, or which will, if determined adversely to the Servicer, materially
and adversely affect it or its business, assets, operations or condition,
financial or otherwise, or adversely affect the Servicer's ability to perform
its obligations under this Agreement. The Servicer is not in default with
respect to any order of any court, administrative agency, arbitrator or
governmental body so as to materially and adversely affect the transactions
contemplated by the above-mentioned documents.
(f) The Servicer has obtained or made all necessary consents,
approvals, waivers and notifications of stockholders, creditors, lessors and
other nongovernmental persons, in each case, in connection with the execution,
delivery and performance of this Agreement.
The foregoing representations and warranties shall be deemed to be made
to the Trustee, as assignee of the Issuer.
Section 4.02. Merger or Consolidation of the Servicer.
The Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Florida, 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 Agreement, the Indenture or any of the Accounts and to
perform its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any entity resulting from any merger or consolidation to which the Servicer
shall be a party, or any Person succeeding to the business of the Servicer shall
be the successor of the Servicer hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
Section 4.03. Performance of Obligations.
(a) The Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement and shall take such
action as may be necessary to prevent the attachment on the Mortgaged Properties
of liens or levies superior to the lien of the Mortgages securing the Accounts
arising from actions by or claims against the Servicer.
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(b) The Servicer shall not take any action, or permit any
action to be taken by others, which would (i) materially and adversely affect
the validity or collectibility of the Accounts or (ii) excuse any person from
any of its covenants or obligations under any of the Accounts or under any other
instrument included in the Trust Estate, or (iii) result in the amendment,
hypothecation, subordination, termination or discharge of, or (iv) impair the
validity or effectiveness of any of the Account Documents or any such
instrument, except as expressly provided herein and therein.
Section 4.04. Servicer Not to Resign.
(a) The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee. No such resignation shall become effective
unless and until the Successor Servicer or another new servicer, qualified to
act as a mortgage servicer, enters into a servicing agreement with the Issuer
and the Trustee in form and substance substantially similar to this Agreement.
(b) The Servicer may not assign this Agreement or any of its rights,
powers, duties or obligations hereunder except as permitted under Section 4.02
hereof.
(c) Except as provided in Section 4.04(a), the duties and obligations
of the Servicer under this Agreement shall continue until this Agreement shall
have been terminated as provided in Section 7.01, and shall survive the exercise
by the Issuer or the Trustee of any right or remedy under this Agreement, or the
enforcement by the Issuer, the Trustee or any Noteholder of any provision of the
Indenture, the Notes or this Agreement.
Section 4.05. Fidelity Bond.
On or before the Closing Date, the Servicer shall obtain and deliver to
the Trustee and shall thereafter maintain in effect a fidelity bond (or a direct
surety bond) in the amount of $1,500,000 (subject to a deductible of an amount
not exceeding $[250,000.00]), issued by a surety company qualified to do
business in the State of North Carolina and having an Alfred M. Best Company
general policyholders rating of A or better and a financial rating of Class 15,
or equivalent ratings by a generally recognized successor rating agency. Such
bond shall name the Trustee as an additional insured and as a joint loss payee,
shall provide for 30 days' prior notice of cancellation to the Trustee and shall
otherwise be in form and substance reasonably satisfactory to the Trustee. Any
successor to the Servicer appointed as servicer of the Accounts pursuant to
Section 3.07(d) of the Indenture or Section 4.04(a) of this Agreement shall be
obligated to obtain and maintain a fidelity bond to the same extent as the
Servicer is obligated under this Section 4.05 or 28 under the then current FNMA
or FHLMC guidelines and shall deliver a copy of such bond to the Trustee
promptly after its appointment. The Servicer or any successor servicer shall
deliver to the Trustee, within 30 days prior to the expiration of any such bond,
a renewal or replacement thereof.
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ARTICLE FIVE
DEFAULT
Section 5.01. Events of Default.
(a) Any of the following acts or occurrences shall constitute an Event
of Default by the Servicer under this Agreement:
(i) any failure by the Servicer to remit to the Trustee any amount
required to be so remitted under the terms of this Agreement
that continues unremedied for a period of two Business Days
after the date upon which such amount was due to be so
remitted; or
(ii) failure to submit to the Trustee the report called for by
Section 2.07(b) within 2 days following the related Remittance
Date; or
(iii) failure on the part of the Servicer duly to observe or perform
in any material respect any other of the covenants or
agreements on the part of the Servicer in this Agreement
contained that continues unremedied for a period of 30 days
after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Servicer by the Trustee or to the Servicer and the Trustee
by the holders of Notes representing at least a majority of
the Voting Rights; or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises pursuant to any
bankruptcy or insolvency law or any other law relating to the
relief of debtors, to the readjustment, composition or
extension of indebtedness, to liquidation or to
reorganization, or any formal or informal proceeding for the
dissolution, liquidation or winding up of the affairs of, or
for the settlement of claims against, the Servicer which is
involuntary on the part of the Servicer is entered and is not
discharged or stayed for a period of sixty (60) days; or
(v) the Servicer becomes insolvent, generally fails to pay its
debts as they become due, has any receiver, trustee,
liquidator, sequestrator or custodian of it or any of its
property appointed (whether with or without its consent),
makes any assignment for the benefit of creditors or commences
any case or other proceeding pursuant to any bankruptcy or
insolvency law or any other law relating to the relief of
debtors, to the readjustment, composition or extension of
indebtedness, to liquidation or to reorganization, or any
formal or informal proceeding for the dissolution, liquidation
or winding up of the affairs of, or for the settlement of
claims against it; or
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(vi) any representation, warranty or statement of the Servicer made
in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any
material respect as of the time when the same shall have been
made and, within 30 days after written notice thereof shall
have been given to the Servicer by the Trustee or by the
holders of Notes representing not less than a majority of the
Voting Rights, the circumstance or condition in respect of
which such representation, warranty or statement was incorrect
shall not have been eliminated or otherwise cured.
(b) If an Event of Default shall have occurred and be continuing, the
Issuer or the Trustee (in each case subject to the provisions of the Indenture),
or, the holders of Notes representing not less than a majority of the then
Voting Rights, may, by notice given to the Servicer (with a copy to the parties
not giving such notice), terminate all of the rights and powers of the Servicer
under this Agreement ("Servicer Termination"), including without limitation all
rights of the Servicer to receive the Servicing Fee. On and after the receipt of
such notice, all rights, powers, duties and responsibilities of the Servicer
under this Agreement, whether with respect to the Accounts, Holding Account,
Collection Account, Servicing Account, any Servicing Fee or otherwise, shall
vest in and be assumed by the Successor Servicer as provided in Section 3.07 of
the Indenture, and the Issuer and the Trustee are each hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, all documents and other instruments (including any notices to
Obligors deemed necessary or advisable by the Trustee) and to do or accomplish
all other acts or things necessary or appropriate to effect such vesting and
assumption. The terminated Servicer shall cooperate promptly and in good faith
with the Successor Servicer to transfer the servicing records and other account
documents maintained by the terminated Servicer to the Successor Servicer in a
prompt and efficient manner. Except as otherwise expressly provided in the
Indenture, the Issuer shall not have any right to waive any Default or Event of
Default by the Servicer under this Agreement. In addition to any right of the
Trustee upon an Event of Default hereunder, the Trustee may take any action at
law or in equity that it deems appropriate to protect the interest of the
Holders of Notes.
Section 5.02. No Effect on Other Parties.
Upon any termination of the rights and powers of the Servicer from time
to time pursuant to Section 5.01 or upon any appointment of a successor to the
Servicer, all the rights, powers, duties and obligations of the Issuer under
this Agreement or under the Indenture shall remain unaffected by such
termination or appointment and shall remain in full force and effect thereafter,
except as otherwise expressly provided in this Agreement or in the Indenture.
Section 5.03. Rights Cumulative.
All rights and remedies from time to time conferred upon or reserved to
the Issuer, the Trustee or the Noteholders or to any or all of the foregoing are
cumulative, and none is intended to be exclusive of another. No delay or
omission in insisting upon the strict
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observance or performance of any provision of this Agreement, or in exercising
any right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy. Every right and remedy may
be exercised from time to time and as often as deemed expedient.
ARTICLE SIX
THE ACCOUNTS
Section 6.01. Representations and Warranties; Account Documents.
The representations and warranties of the Issuer set forth in Section
3.11 of the Indenture with respect to each Account shall survive delivery of the
Account Documents to the Trustee and shall continue so long as such Account
remains outstanding. Upon discovery by the Issuer, the Trustee or the Servicer
that any of such representations or warranties was incorrect as of the time made
or that any of the Account Documents relating to any such Account has not been
properly executed by the Obligor or contains a material defect or has not been
received by the Trustee, the party making such discovery shall give prompt
notice to the other and to the Trustee (other than in cases where the Trustee
has given notice thereof). If any such defect, misrepresentation or omission
materially and adversely affects the interest of the holders of Notes, as
provided in Section 3.11(b) of the Indenture, the Servicer shall, after
discovery thereof or receipt of notice thereof, use its best efforts to cure the
defect or eliminate or otherwise cure the circumstances or condition in respect
of which such representation or warranty was incorrect as of the time made and
within 90 days of notice of such defect the Servicer shall notify the Trustee of
the action it has taken with respect thereto and the results thereof. If such
breach, omission or defect is not or cannot be cured within such 90-day period
or, with the prior written consent of a Responsible Officer of the Trustee if so
consented to under the Indenture, such longer period as specified in such
consent, the Servicer shall cause the Issuer to either (i) deposit into the
Collection Account an amount equal to 100% of the then current Economic Balance
of the affected Account, at which time the Defective Account shall be released
from the lien of the Indenture and reconveyed to the Grantor or (ii) remove such
Account from the Trust Estate and substitute one or more Qualified Substitute
Accounts. The Servicer shall be entitled to reimbursement for any reasonable and
necessary expenses incurred by it in the performance of its obligations under
this Section 6.01.
ARTICLE SEVEN
MISCELLANEOUS PROVISIONS
Section 7.01. Termination.
(a) The respective duties and obligations of the Servicer and the
Issuer created by this Agreement shall terminate upon the final payment or other
liquidation of the last outstanding Account. Upon the termination of this
Agreement pursuant to this Section
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7.01(a), the Servicer shall pay all moneys in the Servicing Account to the
persons entitled thereto, and shall direct the Trustee to pay over to the Issuer
or any other person entitled thereto all other moneys held in the Holding
Account.
(b) Following an Event of Default under the Indenture and foreclosure
upon the Trust Estate pursuant thereto, the successor to the rights of the
Issuer (including, without limitation, the Trustee or any or all of the related
Noteholders) shall have the right to terminate this Agreement by notice to the
Servicer and the Issuer, within 90 days after the date such successor shall have
succeeded to such rights of the Issuer. Upon such termination, the Servicer
shall be entitled to receive only the accrued and unpaid Servicing Fee to the
date of such termination, any amounts it would have been permitted to receive
pursuant to Section 2.07 from the Holding Account or the Collection Account as
of the date of such termination.
Section 7.02. Amendment.
(a) This Agreement may be amended from time to time by the Issuer and
the Servicer in each case with the prior written consent of the Trustee, or any
of the Noteholders, provided that such action shall not adversely affect in any
material respect the interests of any Noteholder and the Trustee shall have
received an Opinion of Counsel to the effect that such amendment does not
adversely affect in any material respect the interest of the Noteholders (such
Opinion of Counsel may rely as to factual matters on representations of the
parties hereto or other persons appropriate therefor).
(b) Notwithstanding paragraph (a) of this Section 7.02, this Agreement
may be amended in accordance with the proviso set forth in the first sentence of
Section 3.14 of the Indenture.
(c) This Agreement may also be amended from time to time by the Issuer
and the Servicer, with the written consent of the Trustee and the Holders of
Notes representing more than 50% of the Voting Rights, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement; provided, however, that no such amendment shall, without the
consent of the Trustee and each holder of Outstanding Notes, (i) adversely
affect in any material respect the amount of, or the timing of, payments
received on the related Accounts which are required to be deposited in the
Holding Account and the Collection Account; (ii) alter the priorities with which
any allocation of funds shall be made under this Agreement; (iii) permit the
creation of any lien on the Trust Estate or any portion thereof or deprive any
such holder of the benefit of this Agreement with respect to the Trust Estate or
any portion thereof; or (iv) modify this Section 7.02 or Section 4.02, 4.03(b),
4.04 or 4.05.
(d) Promptly after the execution of any amendment, the Servicer shall
send to the Trustee a conformed copy of each such amendment, but the failure to
do so will not impair or affect its validity.
(e) It shall not be necessary for any consent of Noteholders under this
Section 7.02 to approve the particular form of any proposed amendment, but it
shall be sufficient
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if such consent shall approve the substance thereof. The manner of obtaining
such consents and of evidencing the authorization of the execution thereof by
Noteholders shall be subject to such reasonable regulations as the Trustee may
prescribe.
(f) Any amendment or modification effected contrary to the provisions
of this Section 7.02 shall be void.
Section 7.03. Governing Law.
This Agreement shall be construed in accordance with the laws of the
State of North Carolina, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 7.04. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be delivered or mailed by registered or certified United States mail,
postage prepaid, and addressed in each case as follows: (a) if to the Issuer, at
________________________, Attention: _____________________, (b) if to the
Servicer, at 1500 North Dale Mabry Highway, Tampa, Florida, 33607, Attention:
Edward A. Porter, (c) if to the Trustee, at _________________________________,
Attention: ________________, with a copy sent to
__________________________________________, Attention: ____________ and (d) if
to any Noteholder, at the address of such holder as it appears in the Note
Register. Any of the persons in subclauses (a) through (c) above may change its
address for notices hereunder by giving notice of such change to the other
persons. Any change of address shown on a Note Register shall, after the date of
such change, be effective to change the address for such Noteholder hereunder.
All notices and demands shall be deemed to have been given either at the time of
the delivery thereof to any officer of the person entitled to receive such
notices and demands at the address of such person for notices hereunder, or on
the third day after the mailing thereof to such address, as the case may be.
Section 7.05. Severability of Provisions.
If one or more of the provisions of this Agreement shall be for any
reason whatever held invalid or unenforceable, such provisions shall be deemed
severable from the remaining covenants, agreements and provisions of this
Agreement and such invalidity or unenforceability shall in no way affect the
validity or enforceability of such remaining provisions, the rights of any
parties hereto, or the rights of the Trustee or any Noteholders. To the extent
permitted by law, the parties hereto hereby waive any provision of law that
renders any provision of this Agreement invalid or unenforceable in any respect.
Section 7.06. Inspection and Audit Rights.
Section 7.06. Inspection and Audit Rights
The Servicer agrees that, on reasonable prior notice, it will permit
any representative of the Trustee or the Issuer, during the Servicer's normal
business hours, to
25
<PAGE>
examine all the books of account, records, reports and other papers of the
Servicer relating to the Accounts, to make copies and extracts therefrom to
cause such books to be audited by Accountants selected by the Trustee or the
Issuer, as the case may be, and to discuss its affairs, finances and accounts
relating to the Accounts with its officers, employees and Independent
Accountants (and by this provision the Servicer hereby authorizes said
Independent Accountants to discuss with such representatives such affairs,
finances and accounts) all at such reasonable times and as often as may be
reasonably requested. Any expense incident to the exercise by the Trustee or the
Issuer of any right under this Section 7.06 shall be borne by the Trustee or the
Issuer, as the case may be, provided that if an audit is made during the
continuance of an Event of Default, the expense incident to such audit shall be
borne by the Servicer.
Section 7.07. Binding Effect.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the Trustee, the Noteholders and
their successors and assigns.
Section 7.08. Article and Section Headings.
The article and section headings herein are for convenience of
reference only, and shall not limit or otherwise affect the meaning thereof.
Section 7.09. The Owner Trustee.
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by ___________________, not
individually or personally but solely as Owner Trustee under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it as the Owner Trustee, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by ________________ but is
made and intended for the purpose for binding only the Trust Property, (c)
nothing herein contained shall be construed as creating any liability on
______________________, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the Servicer, Trustee and by any Person claiming by, through
or under the Servicer and Trustee and (d) under no circumstances shall
_____________________ be personally liable for the payment of any indebtedness
or expenses of the Trustee or be liable for the breach or failure of any
obligation, representations, warranty or covenant made or undertaken by the
Issuer under this Agreement.
Section 7.10. Distribution of Servicing Procedures and Standards.
The Servicer agrees to distribute the procedures and standards set
forth herein to each of its field offices and to take all reasonable action to
instruct its field servicing personnel concerning their duties hereunder as soon
as practicable after execution hereof.
26
<PAGE>
Section 7.11. Property Address.
Within nine months from the Closing Date the Servicer shall provide the
Trustee a magnetic tape showing, for each Account, the Account number, property
address and customer name.
Section 7.12. Power of Attorney.
The Issuer is authorized from time to time to deliver one or more
powers of attorney to the Servicer or Sub-Servicer that authorize the Servicer
and/or Sub-Servicer, as applicable, to act on behalf of the Issuer as
contemplated by this Agreement and any Sub-Servicing Agreement. The Issuer shall
upon request of any Successor Servicer deliver one or more powers of attorney to
the Successor Servicer or its designated agent for purposes contemplated by this
Agreement.
Section 7.13. Rights Upon Discharge of Indenture.
Upon the payment in full of the Notes, the satisfaction and discharge
of the Indenture, the Owner Trustee will succeed to all rights of the Trustee
hereunder and the Owners (as such term is defined in the Trust Agreement) will
succeed to all rights of the Noteholders hereunder.
27
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Issuer, the
Servicer and the Trustee have caused this Agreement to be duly executed by their
respective officers thereunder duly authorized as of the day and year first
above written.
ISSUER:
MID-STATE TRUST 199 -
By: ________________, not
in its individual capacity,
but solely as Owner Trustee of
Mid-State Trust 199 -
By:
-----------------------------------
Name:
Title:
SERVICER:
MID-STATE HOMES, INC.
By:
-----------------------------------
Name:
Title:
------------------------------,
as Trustee
By:
-----------------------------------
Name:
<PAGE>
EXHIBIT A
FORM OF STANDBY SERVICING AGREEMENT
<PAGE>
EXHIBIT B
MID-STATE TRUST 199 -
SERVICER'S CERTIFICATE
_______________ and ________________ hereby certify that they
are officers of Mid-State Homes, Inc. (the "Servicer") holding their respective
offices set forth beneath their signatures and that they are duly authorized to
execute this Servicer's Certificate on behalf of the Servicer and further
certify that with respect to the preceding Remittance Period (________ to
________):
(i) the Economic Balance of all Accounts as of the first
day of the month preceding each Payment Date;
(ii) the total number of Outstanding Accounts as of the end of
the preceding Due Period is _____ and the aggregate funds collected on
the Accounts with respect to the preceding Remittance Period is
$________ and the cumulative amount for the related Due Period is
$__________;
(iii) (a) the aggregate amount of the Servicing Fee included
in (i) above is $________ based on the ________ Outstanding Accounts
that have an Economic Balance of more than zero as of the beginning of
the preceding Remittance Period and the cumulative amount for the
related Due Period is $________;
(b) the aggregate amount of reimbursement for advances
for taxes and insurance premiums and other advances
included in (i) above is $________ and the cumulative
amount for the related Due Period is $__________;
(c) the aggregate amount of late payment charges,
prepayment penalties and assumption fees included in
(i) above is $___________ and the cumulative amount
for the related Due Period is $_________________;
(d) the aggregate amount previously deposited in the
Holding Account in respect of payments by Obligors
made by checks subsequently returned for insufficient
funds or other reason for non-payment is $_________
and the cumulative amounts for the related Due Period
is $_________;
(iv) the amount in (i) for the preceding Remittance Period
minus the total of amounts in (ii) for the preceding Remittance Period
is $___________ and the cumulative amount in (i) for the related Due
Period minus the total of the cumulative amounts in (ii) for the
related Due Period is $_____________;
(v) (a) the aggregate amount withdrawn from the Holding
Account as reimbursement to the Servicer for expenses for the
restoration of Mortgaged Property damaged by an Uninsured Cause and as
reimbursement for usual and customary Liquidation Expenses is
$______________, [A schedule of the Account numbers for
<PAGE>
the related Account shall be attached] and the cumulative amount for
the related Due Period is $___________;
(b) the aggregate amount withdrawn from the Holding
Account as reimbursement for Insured Expenses is
$________, [A schedule of the Account numbers for the
related Accounts, shall be attached] and the
cumulative amount for the related Due Period is
$_________; and
(c) the aggregate amount withdrawn from the Holding
Account that is not part of the Trust Estate is
$_______ and the cumulative amount for the related
Due Period is $_______;
(vi) the amount in (iv) minus the total of the amounts in (v)
is $________ and the cumulative amount for the related Due Period is
$________;
(a) the portion of such amount that represents Net
Insurance Proceeds that do not constitute a Full
Prepayment with respect to any Account is $________
and the cumulative amount for the related Due Period
is $_________;
(b) the portion of such amount that represents Net
Liquidation Proceeds is $___________ and the
cumulative amount for the related Due Period is
$_________;
(c) the portion of such amount that represents Full
Prepayments is $_________ and the cumulative amount
for the related Due Period is $_________;
(vii) with respect to each Account that was the subject of a
Full Prepayment:
Account Number Full Prepayment Amount
-------------- ---------------------
(viii) the amount of Cumulative Prepayments is $______;
(ix) the amount of Cumulative Actual Net Economic Losses is
$___________;
(a) the cumulative Economic Balance of all Accounts which
have been repossessed equals $_______; and
(b) if applicable, the Economic Balance of those Accounts
which are delinquent over 120 days equals $_________;
and
(c) the amount of cumulative Net Liquidation Proceeds is
$_____________;
(x) the Economic Balance of all Accounts with respect to which
there is a material breach of any representation or warranty made in
Section 3.11 of the Indenture
31
<PAGE>
or as to which there is a material defect in the related Account
Documents in accordance with Section 3.12(b) of the Indenture is
$________.
(xi) the amount that represents the cumulative amount since
the Cut-Off Date of the cash component of aggregate Net Liquidation
Proceeds equals $________;
(xii) with respect to delinquent Accounts:
<TABLE>
<CAPTION>
Period Number of Account Balance
of Delinquency Accounts $
--------------------------- --------------------------- ---------------------------
<S> <C> <C>
0-30 days
31-60 days
67-90 days
91 or more days
--------------------------- --------------------------- ---------------------------
Total
--------------------------- --------------------------- ---------------------------
</TABLE>
The percentage of Accounts on a gross receivables basis that
are 90 days or more delinquent (including Accounts in foreclosure and
the balance of "real estate owned" on a gross receivables basis) for
the immediately preceding three months is set forth on Schedule _
hereto.
(xiii) with respect to property acquired in respect of an Account:
<TABLE>
<CAPTION>
Period of Time Number of Account Balance
As Real Estate Owned Accounts $
--------------------------- --------------------------- ---------------------------
<S> <C> <C>
0-3 months
4-6 months
7-9 months
10-12 months
over 12 months
--------------------------- --------------------------- ---------------------------
Total
--------------------------- --------------------------- ---------------------------
</TABLE>
(xiv) delivered herewith, if previously requested, is a copy
of a magnetic ape file containing the Schedule of Accounts information
and current mailing address information for each Account and showing
the paid-through status of each Account;
(xv) a list of Accounts which became the subject of an
Assumption Agreement;
32
<PAGE>
(xvi) with respect to the Servicing Account for the related
Due Period:
Beginning Balance
Deposits
Disbursements
----------------
Ending Balance $
---------------
(xvii) with respect to each Account that was the subject of a
Repossession:
Account Number Account Balance
-------------- --------------
(xviii) with respect to each Account that was the subject of a
Resale:
Account Number Account Balance
-------------- --------------
(xix) the total number of Outstanding Accounts as of the end
of the previous Due Period was ;
------------
(xx) the aggregate number and gross receivable balance of all
Accounts that were set-up (i.e., rewritten) during the Remittance
Period was $________ and $________, respectively;
(xxi) the aggregate number and gross receivables balance of
all Accounts that were set-up (i.e., rewritten) during the Remittance
Period and the prior eleven (11) Remittance Periods was _________ and
$________, respectively;
(xxii) the numbers and Aggregate Economic Balances of all
Accounts, 30, 60 and 90 or more days past due and in reposession,
foreclosure or bankruptcy are as follows:______________.
The undersigned hereby certify that all amounts received from the
Holding Account during the preceding Remittance Period are authorized
withdrawals pursuant to Section 2.07(c) or 2.11 of the Servicing Agreement.
Mid-State Homes, Inc.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
33
<PAGE>
34
<PAGE>
State of New York )
) ss.
County of New York )
Be it remembered that on this ____ day of _____________, 1997
A.D. personally came before me, the undersigned, a Notary Public in and for said
State duly commissioned and sworn, ______________, of _______________, not in
its individual capacity but solely as Owner Trustee under the Trust Agreement,
party to the within and foregoing instrument, known to me personally to be such
and the person who executed such instrument on behalf of such trust, and
acknowledged to me that such instrument was his own act and deed and the act and
deed of such trust, that the signature therein is his own proper handwriting,
that his act of executing and delivering such instrument was duly authorized and
that the facts stated therein are true. Given under my hand and seal of office
the day and year aforesaid.
[Seal]
Signature of Notary Public
MID-STATE TRUST 199 -
By:_________________, not in its individual
capacity but solely as Owner Trustee of
Mid-State Trust 199-
By:
------------------------------------
35
<PAGE>
EXHIBIT C
None.
<PAGE>
EXHIBIT D
Historical Servicing Standards
MID-STATE HOMES, INC.
1500 North Dale Mabry Highway
Tampa, Florida 33607
, 199
--------- -
Servicing Procedures
Mid-State Homes, Inc.
Reference is made to the Servicing Agreement (the "Servicing
Agreement") dated as of _______, 199_, among the undersigned (the "Servicer"),
Mid-State Trust 199 - , a business trust established under the laws of the State
of Delaware (the "Trust") and __________________ (the "Trustee") entered into in
connection with the issuance and sale by the Trust of its Asset-Backed Notes
(the "Notes") pursuant to the indenture dated as of ________, 199_ (the
"Indenture") between the Trust and the Trustee.
Set forth below is a description of the servicing standards
historically employed by the Servicer referred to in Section 2.01 of the
Servicing Agreement.
I. COLLECTION PROCEDURES
The following procedures are those generally followed by the Servicer
as of ________, 199_ in the collection, through its subservicing agent, Jim
Walter Homes, Inc. ("JWH"), of past-due Accounts. However, it should be noted
that since supervisory personnel and management exercise substantial
discretionary judgment in the collection effort, the procedures followed in the
collection of any particular past-due Account may deviate from those described
below.
A. Accounts
Lists of delinquent Accounts are produced each month, between the 7th
and 11th of the month. Each delinquent Account is assigned to one of the three
following categories:
1. "Field Accounts": Accounts in respect of which the outstanding gross
receivable mortgage balance, in each case, equals or exceeds $10,000 and in
respect of which the Obligor will, if a payment is not made during the course of
the then current month, be in arrears by at least two installment payments.
Field Account Obligors may also owe amounts advanced by the Servicer in respect
of insurance premiums, real property taxes or other amounts.
<PAGE>
2. "Low-Balance Accounts": Accounts in respect of which the outstanding
gross receivable mortgage balance, in each case, is less than $10,000.
Low-Balance Account Obligors may be:
(a) current on installment payments, but indebted for amounts
advanced by the Servicer in respect of insurance premiums, real
property taxes or other amounts;
(b) delinquent by one or more installment payments and
indebted for amounts advanced by the Servicer in respect of insurance
premiums, real property taxes or other amounts; or
(c) delinquent by two or more installment payments, in the
event that no payment is made during the course of the then-current
month, and owe no amounts with respect to insurance or taxes.
3. "Off-Code Accounts": Accounts in respect of which the outstanding
gross receivable mortgage balance, in each case, equals or exceeds $10,000 and
in respect of which the Obligor either is current on installment payments or, in
the event that a payment is not made during the course of the then-current
month, will be in arrears with respect to only one installment payment at the
end of such month, and is indebted to the Servicer for amounts advanced by the
Servicer in respect of insurance premiums, real property taxes or other amounts.
B. Field Offices
Field Accounts are serviced from JWH's Field Offices. JWH has
approximately 109 such Field Offices located in 17 different states.
Approximately one-third of the Field Offices have either two or three Field
Representatives, while the remainder have one Field Representative. Each Field
Representative services an average of 175 Accounts per month. Each Field
Representative is furnished monthly with the report of delinquent Field Accounts
respecting properties within his service area, and a copy of such list for each
Field Office within a region is furnished to the Regional and Assistant Regional
Supervisors. Lead Representatives receive copies for the Field Offices for which
they are directly responsible.
Upon receipt of such list, each Field Representative seeks to make
contact with each delinquent Obligor either by telephone or in person, in order
to make payment arrangements with such Obligors. Field Representatives and their
respective Lead Representatives communicate not less frequently than every other
day to review each list of Field Accounts and to discuss progress and problems
in such Field Representative's collection efforts. All collection efforts of the
Field Representatives (whether by phone or in person) are documented directly on
the Field Representative's own monthly delinquency report (cover sheets) with a
cross reference to the Field Representative's personal file or chase card.
At least weekly, the Lead Representative reviews orally with the
respective Assistant Regional Supervisor and Regional Supervisor the results of
the field collection efforts for the previous week. Additionally, Lead
Representatives request, upon the recommendation
38
<PAGE>
of the Field Representative, that the account be foreclosed or repossessed,
request a deed in lieu of foreclosure or refrain from foreclosing or
repossessing an account which is two or more installments in arrears. The final
decision is made by the Regional Supervisor.
In the event an Obligor fails to adhere to the payment schedule
arranged with the Field Representative, the Field Representative will re-contact
such Obligor, usually by means of a visit to the Obligor's home. The Field
Representatives spend a significant portion of their time on the road making
face-to-face contact with delinquent Obligors. Not only does such visit seek to
impress upon the Obligor the urgency of coming to some successful arrangement,
but also affords the Field Representative the opportunity to make a cursory
inspection of the condition of the house and property, so that repair plans can
be made should reacquisition become necessary. The highest priority of
visitation is placed on the delinquent accounts with the largest balance.
In some circumstances, a satisfactory payment schedule can be arranged
with the Obligor (see below "WORK-OUT POLICIES"). However, if it is felt that
the chances of arranging a successful repayment program satisfactory to the
Servicer are not good, after a final attempt by all or some of the Lead
Representatives, the Regional or Assistant Regional Supervisor, the Field
Account Obligor will either be requested to sign a deed in lieu of foreclosure
or will be advised that his Account has been or will be referred to an attorney
for the commencement of foreclosure proceedings (see below "FORECLOSURE
POLICIES").
Field Representatives frequently receive monthly payments and other
repayments of outstanding advances directly from the Obligors. The Field
Representatives give the Obligor a receipt for such payment and mail the payment
to Tampa as soon as practicable. When the receipt book is used up it is
forwarded to the Regional Office for review and then forwarded to Tampa for
filing for a period of one year. Each day the Field Representatives take all
collections made or which have otherwise been received and mail such payments to
Tampa headquarters.
C. Collection of Low-Balance Accounts and Off-Code Accounts
Five Collection Managers at the central office of JWH in Tampa, Florida
are primarily responsible for the collection of Low-Balance or Off-Code
Accounts. Collection efforts begin immediately upon receipt of the monthly
delinquency report and are confined to contacting Obligors by telephone and by
mail. Since the majority of Obligors with respect to Accounts in these
categories have built up substantial equity in the relevant properties, it is
the experience of the Servicer that such Obligors can be persuaded to bring
their Account balance current with relative ease. Therefore, the bulk of the
collection effort expended by such Collection Managers is directed toward
collecting amounts advanced by the Servicer on such Obligor's behalf in respect
of insurance premiums and real property taxes. All Obligor contacts in the
collection effort are documented directly on the collector's terminal and stored
in the computer. Account Obligors incapable of paying all such amounts upon
demand are permitted to pay in installments pursuant to a repayment schedule
satisfactory to the Servicer.
39
<PAGE>
However, in the event that (i) a Low-Balance Account should fall into
arrears by three installment payments, (ii) an Off-Code Account with respect to
which installment payments are due on the 5th of each month should fall into
arrears by two installment payments or (iii) an Off-Code Account with respect to
which installment payments are due on the 20th of each month should fall into
arrears by one installment payment, then, in each case, such Account is referred
to the relevant Field Office to be treated as a Field Account, as described in
Section B above.
Central Office Collection Managers review the collection status of all
their accounts with the Collection Supervisor at least every other day. When in
his judgment, the Collection Manager deems it appropriate, he will refer a
Low-Balance or Off-Code account to the field for collection efforts by a Field
Representative.
II. WORK-OUT POLICIES
As a general rule, the Servicer will not permit an Account to remain
two installment payments in arrears. Whether or not the Obligor will be allowed
to arrange a repayment schedule rather than be required either to bring the
Account current or see foreclosure proceedings brought will depend upon the
Servicer's estimate of the likelihood of a successful work-out being
accomplished. Naturally, such an estimate is subjective to a certain degree.
The factors considered in arriving at a decision whether or not to
enter into an arrangement with an Obligor include whether or not the Obligor has
a record of making previous payments in a timely fashion, the nature of the
reason for failure to remain current on mortgage payments, the likelihood of
such reason being cured or removed in the near future and the difficulty, if
any, anticipated in prosecuting an action for foreclosure.
Generally, an acceptable work-out schedule of payments will require the
Obligor to pay either two installment payments, or a payment and a half, in the
immediately following month or months. On rare occasions, if an Obligor has a
good past payment record and experiences difficulty in making payment, which
difficulty, in the judgment of the relevant Representatives and Supervisors, is
likely to be cured or removed, the Account may be deemed current and the
delinquent payments added to the end of the original outstanding balance of such
Account.
A successful work-out should result in a current Account within the
space of two or three months following agreement upon a repayment schedule.
III. FORECLOSURE POLICIES
A. Generally
Accounts in respect of which foreclosure proceedings are to be
commenced are assigned for foreclosure to Jim Walter Homes, Inc. ("JWH"). The
actual foreclosure process consists of JWH delivering the necessary Account
Documents to attorneys in the state in which
40
<PAGE>
the mortgaged property is located with direction to foreclose on the Account as
quickly as possible. JWH also has counsel in Tampa, North Carolina to oversee
the foreclosure activities of all local counsel. In any case in which an Obligor
has agreed to surrender the mortgaged property by deed in lieu of foreclosure,
Mid-State performs a search of the judgment records on file in the applicable
county to determine whether the property is subject to tax or other liens. If
there are liens on record, other than tax liens, Mid-State refuses the deed in
lieu of foreclosure and, if necessary, initiates foreclosure to acquire the
property free of such liens.
Accounts recommended for foreclosure are notified that JWH intends to
initiate foreclosure or repossession if payment is not made in 30 days. Provided
that JWH is the successful bidder at the resulting judicial sale, the relevant
JWH Field Representative will be responsible for reselling the repossessed
property. The average period elapsed between repossession of a property by JWH
and its resale is approximately 30 days.
B. Maintenance and Completion of Repossessed Homes
Immediately upon becoming aware that a property has been abandoned or
vacated or following repossession of a property, the Field Representative will
arrange for basic clean-up of the yard and interior of the house as necessary.
Periodic inspections of the property are made during the period between
repossession and resale to ensure that the property does not deteriorate
significantly.
The Field Representative will recommend needed repairs to the Regional
Supervisor. Generally speaking, repairs necessary to prevent any structural
deterioration will be made forthwith. Depending upon the magnitude of interior
repairs, such repairs may either be made at once or they may be made a part of
the negotiation of the price and terms of the resale contract. Likewise, in the
case of a house which was both sold and repossessed in an unfinished state, as a
rule no work will be done on the interior to bring it to a higher state of
completion except as part of a firm contact of resale.
JWH generally does not maintain a Hazard Insurance Policy on each
Acquired Property; however, it does pay all property taxes, assessments and
utility bills for such properties and arranges for utilities to be connected or
disconnected, as appropriate, and for the properties to be protected in winter
months to avoid damage to plumbing.
C. Resale
During the repossession and/or foreclosure process, the Field
Representative resale efforts are commenced. The Field Representative's resale
effort may take the form of canvassing the neighborhood, leaving information and
pictures at corner stores and factories or advertising in local newspapers.
1. Resale Price
Several points of reference are used in arriving at a resale price for
a repossessed home. First, the Servicer will provide the Field Representative
with a figure
41
<PAGE>
representing the Servicer's actual cash cost in the home multiplied by a factor
of 150%. This figure provides a baseline price below which the property
generally will not be sold. Sales for a price below such baseline price require
the permission of the Regional or Assistant Regional Supervisor. Second, the
Field Representative makes reference to the current price for a similar new
home. Finally, the Field Representative refers to the market price prevailing
for comparable homes in the area, discounting, if necessary, for the work left
to be done to bring the house to completion.
2. Resale Credit Policies
Prospective purchasers at resale are subject to the same credit review
procedures as purchasers of new homes. In lieu of the pledge of real property
received from new home buyers, a certain amount of equity in the property is
provided in a resale by requiring the purchaser at resale to make a down payment
of between $500 and $1,000, depending upon the creditworthiness of such
purchaser.
MID-STATE HOMES, INC.
By:
-------------------------------------
Title: Vice President
42
<PAGE>
Exhibit 10.2
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into as of ______, 199_ by and
between MID-STATE HOMES, INC., a Florida corporation ("Mid-State" or the
"Seller"), and Mid-State Trust 199 - (the "Issuer" or the "Purchaser"), a
statutory Delaware business trust. Capitalized terms used but not defined herein
shall have the meaning ascribed to them in the Indenture or the Trust Agreement
each as defined below.
W I T N E S S E T H :
WHEREAS, the Purchaser is a business trust created under the Delaware
Business Trust Act by a trust agreement dated as of _________, 199_ (the "Trust
Agreement") between Mid-State, as Depositor, and ________________ (in its
capacity as trustee thereunder, the "Owner Trustee"); and
WHEREAS, Jim Walter Homes, Inc. ("Jim Walter Homes"), an affiliate of
the Seller, is in the business of constructing and selling partially-finished
homes, generally on a deferred, installment sale basis pursuant to a building or
installment sale contract between Jim Walter Homes and the purchaser of the home
(the "Obligor"), and Jim Walter Homes receives from each such Obligor an Account
Note and a related Mortgage. All Account Notes together with the related
Mortgages are collectively referred to herein as the "Accounts"; and
WHEREAS, the Seller desires to sell and assign all of its right, title
and interest in and to the Accounts listed on the Schedule of Accounts (the
"Mortgage Collateral") and the related Account Files, as defined below, to the
Purchaser and the Purchaser desires to purchase all the Seller's right, title
and interest in and to the Mortgage Collateral and the related Account Files;
and
WHEREAS, the Issuer will issue [ ]% Asset Backed Notes, Class A-1 (the
"Class A-1 Notes"), [ ]% Asset Backed Notes, Class A-2 (the "Class A-2 Notes"),
[ ]% Asset Backed Notes, Class A-3 (the "Class A-3 Notes") and [ ]% Asset Backed
Notes, Class A-4 (the "Class A-4 Notes", and together with the Class A-1 Notes,
Class A-2 Notes and Class A-3 Notes, the "Notes"), secured by related mortgage
and other collateral, as more particularly set forth in the Indenture dated as
of __________, 199_ (the "Indenture") between the Issuer and ________________,
as trustee (the "Indenture Trustee");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereby do agree as follows:
1. Purchase and Sale of Mortgage Collateral; Registration Instructions.
Subject to the terms and conditions set forth herein, the Seller in its capacity
as such agrees to sell and assign, and hereby does sell and assign, to the
Purchaser all of its right, title and interest in and to (i) the Mortgage
Collateral, including all payments received in respect of the Accounts
comprising the Mortgage Collateral due after the Cut-Off Date and all payments
in respect of such Accounts due prior to the Cut-Off Date but received after the
Cut-Off Date and (ii) all
<PAGE>
documents and instruments related to the Accounts comprising the Mortgage
Collateral as specified in Section 3 hereof (the "Account Files") to the
Purchaser, and the Purchaser agrees to purchase, and does hereby purchase from
the Seller, for a purchase price equal to the net proceeds of the sale of the
Notes, all of the Seller's right, title and interest in and to (i) the Mortgage
Collateral, including all payments in respect of the Accounts comprising the
Mortgage Collateral due after the Cut-Off Date and all payments in respect of
such Accounts due prior to the Cut-Off Date but received after the Cut-Off Date
and (ii) the Account Files. The Seller shall direct the Issuer to deposit from
the net proceeds of the sale of the Notes an amount equal to all payments
received on or before five Business Days prior to the Closing Date in respect of
the Mortgage Collateral into the Collection Account on the Closing Date. All
payments received in respect of the Mortgage Collateral subsequent to such date
shall be deposited by the Servicer in the Holding Account.
2. Conditions Sale and Purchase. The sale to the Purchaser of the
Mortgage Collateral and Account Files as provided in Section 1 hereof is subject
to the following conditions: (i) the Seller shall have delivered to the
Purchaser those documents set forth in subsections (i) through (v) of Section 3
hereof and (ii) the Purchaser shall deliver to the Seller the net proceeds from
the sale of the Notes.
3. Account Documents and Files. Except as otherwise disclosed in
writing at the time of delivery, each Account File with respect to each Account
shall consist of the following documents or instruments: (i) the building or
installment sale contract relating to such Account; (ii) the Account Note,
endorsed to the order of the Purchaser, without recourse; (iii) the original of
the recorded Mortgage and the originals of other documents, if any, securing
such Account Note; (iv) unrecorded assignments in recordable form to the
Purchaser, together with originals or certified copies of any recorded
assignment(s) from the originator of such Account to the Seller in respect of
each such Account; (v) the originals of any assumption agreement, written
assurance or substitution agreement relating to any Mortgaged Property conveyed
by an Obligor in respect of any such Account; (vi) all insurance policies,
including without limitation, fire and extended hazard insurance policies,
related to the Accounts, naming the Issuer, the Indenture Trustee, the Servicer
or the Subservicer as the loss payee of such policies; and (vii) any and all
other documents or instruments in the possession of the Seller relating to the
Accounts, which evidence, or were created in connection with the origination of,
or necessary for the administration of the Accounts, including without
limitation any credit reports, copies of deeds, completion certificates, title
search reports and credit applications; provided, however, that if the original
copy of any document described in clause (iii), (iv) or (v) has been retained by
the recording office in which such document was recorded or is otherwise
unavailable, then a copy thereof certified as true and correct by a duly
authorized representative of such local recording office or officer of Mid-State
shall be included as part of the documents for the related Account.
4. Representations, Warranties and Covenants with respect to the
Accounts.
A. Mid-State represents, warrants and covenants as of the date
hereof and as of the Closing Date with respect to each Account comprising the
Mortgage Collateral that:
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(i) The information set forth with respect to such
Account comprising the Mortgage Collateral in the Schedule of
Accounts referred to in the Indenture is true and correct as
of the date as of which such information is given.
(ii) The building or installment sale contract
relating to each Account has been duly executed by the parties
thereto and the duties to be performed thereunder by the
parties thereto and the Seller prior to the date the first
payment in connection with such installment sale contract is
due have been performed.
(iii) The Account Documents have been duly executed
and endorsed to the Purchaser and the Mortgage has been duly
executed by the Obligor and, to the extent required under
local law for recordation or enforcement, properly
acknowledged.
(iv) Each Mortgage has been properly recorded as
required by law. Each such Mortgage shall constitute a valid
first priority lien upon and secure title to the real property
and improvements thereon described therein, which includes a
single family detached dwelling, and such Mortgage and the
Account Note secured thereby are, or shall be, fully
enforceable in accordance with their terms, except as
enforceability thereof may be limited by bankruptcy,
insolvency, moratorium and other laws affecting creditors'
rights generally and by general principles of equity (whether
applied in a proceeding in law or at equity).
(v) All costs, fees, intangible, documentary and
recording taxes and expenses incurred in making, closing and
recording each Account have been paid.
(vi) No part of the Mortgaged Property purporting to
secure any Account Note has been, or shall have been, released
from the lien or security interest of the Mortgage securing
such Account Note, except for Mortgaged Property securing
Account Notes which have been prepaid in full between the
Cut-Off Date and the Closing Date, the amounts of such
prepayments from the Cut-Off Date to the date that is five
business days prior to the Closing Date to be deposited into
the Collection Account on or prior to the Closing Date any
prepayments thereafter to be deposited in the Holding Account
pursuant to Section 2.07 of the Servicing Agreement.
(vii) The Seller is the owner of the Mortgage
Collateral and the Account Files free and clear of all liens,
encumbrances and other interests. After the completion of the
sale contemplated by this Agreement, the Purchaser will be
sole owner of each Account and will have good title to such
Account and full right and authority to transfer such Account
and to Grant such Account to the Indenture Trustee.
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(viii) The Seller acquired title to the Mortgage
Collateral in good faith, for value and without notice of any
adverse claim. Except to the extent permitted by the Servicing
Agreement, no term or provision of any Account has been or
will be altered, changed or modified in any way by the
Purchaser or the Seller.
(ix) he Account Notes evidence obligations bearing a
fixed rate of finance charge and fully amortizing level
monthly payments due on the 5th or the 15th day of each month.
Each Account Note has an original term to maturity not in
excess of 30 years. No less than [ ]% the Account Notes that
have an Economic Balance greater than zero were originated
from _________, 199_ through ___________, 199_ with the
exception of Account Notes which represent the financing of
subsequent resales of repossessed houses that secured Account
Notes originated during such period. Each Account Note bears a
finance charge of not less than [ ]% and not more than [ ]%
per annum.
(x) As of the Closing Date, there is no right of
rescission, setoff, defense or counterclaim to any Account
Note or Mortgage, including both the obligation of the Obligor
to pay the unpaid principal or finance charge on such Account
Note and the defense of usury; furthermore, neither the
operation of any of the terms of the Account Note and the
Mortgage nor the exercise of any right thereunder will render
the Account Note or Mortgage unenforceable, in whole or in
part, or subject such Account Note or Mortgage to any right of
rescission, setoff, counterclaim or defense, including the
defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect
thereto.
(xi) As of the Closing Date, there are no mechanics'
liens or claims for work, labor or material (and to the best
of the Seller's knowledge, no rights are outstanding that
under law could give rise to such lien) affecting any
Mortgaged Property which are or may be a lien prior to, or
equal with, the lien of such Mortgage.
(xii) Each Account Note at origination complied in
all material respects with applicable local, state and federal
laws, including without limitation, usury, equal credit
opportunity, real estate settlement procedures,
truth-in-lending and disclosure laws, and consummation of the
transactions contemplated hereby and by the Indenture will not
involve the violation of any such laws.
(xiii) As of the Closing Date, with respect to each
Mortgage constituting a deed of trust, a trustee, duly
qualified under applicable law to serve as such, is properly
designated, serving and named in such Mortgage.
(xiv) There has been no fraud, dishonesty,
misrepresentation or negligence on the part of the originator
(which is Jim Walter Homes) in
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connection with the origination of any Account Note or in
connection with the sale of the related Account.
(xv) To the best knowledge of the Seller, except
Mortgaged Properties for which Insurance Proceeds are
available, each Mortgaged Property is free of damage which
materially and adversely affects the value thereof.
B. If any of the representations and warranties with respect
to any Account set forth in Section 4(A) hereof are found to be incorrect as of
the time made in any respect or if any Account Document is defective in any
material respect which materially and adversely affects the interest of the
Purchaser in the Accounts or if any document required to be delivered to the
Indenture Trustee has not been delivered or if any documents so delivered do not
relate to an Account listed on the Schedule of Accounts, the Seller shall notify
the Purchaser immediately after obtaining knowledge thereof and shall use its
best efforts to eliminate or otherwise cure the circumstances and conditions in
respect of such omission or defect or of which such representation or warranty
was incorrect as of the time made within 90 days of such notice to the
Purchaser. If such breach or omission or defect is not or cannot be cured within
such 90- day period or, with the prior written consent of a Responsible Officer
of the Indenture Trustee if so consented to under the Indenture, such longer
period as specified in such consent, the Seller shall either (i) repurchase such
Account from the Issuer for an amount equal to 100% of the then current Economic
Balance of the affected Account (a "Defective Account") or (ii) substitute for
such affected Account one or more Qualified Substitute Accounts (in which case
the removed Account shall become a "Deleted Account"). The Seller shall promptly
reimburse the Purchaser for any reasonable expenses (including without
limitation reasonable attorney's fees) incurred by the Purchaser, in respect of
any such breach, omission or defect.
As to any Deleted Account for which the Seller substitutes a
Qualified Substitute Account or Qualified Substitute Accounts, the Seller shall
effect such substitution by delivery to the Purchaser for such Qualified
Substitute Account or Qualified Substitute Accounts the Account Note and such
other Account Documents related thereto, with the Account Note endorsed to the
order of the Seller, without recourse, and endorsed by the Seller in blank or to
the order of the Purchaser, without recourse. Monthly Payments due with respect
to Qualified Substitute Accounts in the month of substitution will be retained
by the Seller. Available Funds will include the Monthly Payment due on any
Deleted Account in the month of substitution, and the Seller shall deposit such
amount in the Collection Account if received by it subsequent to the month of
substitution. The Seller shall be entitled to receive all amounts due subsequent
to the month of substitution in respect of such Deleted Account. The Seller
shall give or cause to be given written notice to the Purchaser, the Indenture
Trustee and the Rating Agencies that such substitution has taken place. Upon
such substitution, such Qualified Substitute Account or Qualified Substitute
Accounts shall be subject to the terms of this Agreement in all respects, and
the Seller shall be deemed to have made with respect to such Qualified
Substitute Account or Qualified Substitute Accounts, as of the date of
substitution, the representations and warranties set forth in Section 4A hereof.
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For any month in which the Seller substitutes one or more
Qualified Substitute Accounts for one or more Deleted Accounts, the Seller will
determine the amount (if any) by which the aggregate outstanding Economic
Balance of all such Qualified Substitute Accounts as of the date of substitution
is less than the aggregate outstanding Economic Balance of all such Deleted
Accounts. On the date of such substitution, the Seller will deposit from its own
funds into the Collection Account an amount equal to the amount of such
shortfall, if any, without reimbursement therefor.
It is understood and agreed that the obligations of the Seller
set forth in this Section 4B to cure, substitute for or deposit funds in the
Collection Account in connection with an Account constitute the sole remedies
available to the Purchaser respecting a breach of the representations and
warranties set forth in Section 4A or defect or omission.
5. Representations, Warranties and Covenants of the Seller. The Seller
hereby represents and warrants to the Purchaser that, as of the Closing Date:
(i) The Seller has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full
corporate power and authority to own, lease, operate and sell
its properties and to conduct its business as presently
conducted by it.
(ii) The Seller has the full corporate power and
authority and legal right to own the Mortgage Collateral and
the related Account Files and to transfer and convey the
Mortgage Collateral and the related Account Files to the
Purchaser and has the full power and authority and legal right
to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and
conditions of, this Agreement.
(iii) This Agreement has been duly and validly
authorized, executed and delivered by the Seller, all
requisite corporate action has been taken, and this Agreement
constitutes the legal, valid and binding obligation of the
Seller, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights
generally.
(iv) No consent, approval, authorization or order of,
or filing with, any court or governmental agency or body is
required for the consummation by the Seller of the sale
contemplated by this Agreement except as required under the
Uniform Commercial Code or in respect of recordings under real
estate recording statutes and except as has been obtained and
are in effect.
(v) Neither the sale of the Mortgage Collateral to
the Purchaser nor the execution, delivery or performance of
this Agreement by the Seller conflicts or will conflict with
or results or will result in a breach of or constitutes or
will constitute a default under (i) any term or provision of
the charter or bylaws of the Seller, (ii) any term or
provision of any agreement, contract, instrument or
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indenture of any nature whatsoever, to which the Seller or
any of its subsidiaries is a party or is bound or (iii) any
law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having
jurisdiction over the Seller or its subsidiaries, or results
or will result in the creation or imposition of any lien,
charge or encumbrance upon the Mortgage Collateral or any
documents or instrument evidencing or securing the Mortgage
Collateral, except as contemplated by the Indenture.
(vi) The Seller shall keep and maintain, for the
period during which the representations contained in this
Section 5 survive, all records pertaining to the Seller's loss
on account, foreclosure and delinquency experience for the
Mortgage Collateral and shall permit the Purchaser or its
designee, their agents or employees access to such records
upon reasonable notice for the purposes of auditing the same
in order to verify the accuracy and completeness thereof.
(vii) Except as set forth in Exhibit A attached
hereto, there are no actions, suits or proceedings pending or
threatened against or affecting the Seller which if adversely
determined, individually or in the aggregate, would materially
adversely affect the Seller's obligations under this
Agreement.
(viii) The Seller has duly and validly sold and
assigned its entire right, title and interest in and to the
Mortgage Collateral and the related Account Files to the
Purchaser, free and clear of any lien, encumbrance or any
other interests of others (including without limitation any
claim of any creditor of the Seller or any affiliate of the
Seller).
(ix) The Seller agrees to include in its financial
statements a footnote describing the sale of the Mortgage
Collateral and Account Files to the Purchaser and the issuance
and sale of the Notes and indicating that the Purchaser's
assets are not available to satisfy the claims of creditors,
if any, of the Seller.
6. Payment for the Mortgage Collateral. The Seller acknowledges receipt
of payment in full for the Mortgage Collateral and Account Files and the
Purchaser and the Seller agree that subsequent to the date hereof, no
modification or adjustment shall be made in respect of such purchase price.
7. Indemnity. The Seller agrees to indemnify, reimburse and hold the
Purchaser and its successors, assigns, trustees, employees, agents and servants
(hereinafter in this Section 8 referred to individually as "Indemnitee," and
collectively as "Indemnities") harmless from any and all claims, demands,
actions, suits, judgments and any and all costs and expenses (including
reasonable attorneys' fees and expenses) (for the purposes of this Section 8 the
foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnities in any way
relating to or arising out of this Agreement or the enforcement of any of the
terms of, or the preservation of any rights hereunder, or in any way relating to
or arising out of the origination, ownership, purchase,
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repossession, sale or other disposition of any of the Accounts, the breach of
any representation or warranty herein, the violation of the laws of any state or
other governmental body or unit, or any tort or contract claim (including
without limitation the claims or off-sets of third parties based on facts that
cause a breach of a representation or warranty herein); provided that no
Indemnitee shall be indemnified pursuant to this Section 8 for losses, damages
or liabilities to the extent caused by the negligence or misconduct of such
Indemnitee. The Seller agrees that upon written notice by any Indemnitee of the
assertion of such a claim, demand, action, judgment or suit, the Seller shall
assume full responsibility for the defense thereof. Each Indemnitee agrees to
use its best efforts to promptly notify Seller of any such assertion of which
such Indemnitee has knowledge.
8. Notices. All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
to or mailed by registered mail, postage prepaid, or transmitted by telex or
telegraph and confirmed by a similar mailed writing, if to the Purchaser,
addressed to the Purchaser, at such address as the Purchaser may designate in
writing to the Seller; and if to the Seller, addressed to the Seller at such
address as the Seller may designate in writing to the Purchaser.
9. Severability of Provisions. Any part, provision, representation or
warranty of this Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction as to any Account shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the parties hereto waive any
provision of law which prohibits or renders void or unenforceable any provision
hereof.
10. Further Assurances.
(i) The Seller agrees to execute and deliver such
instruments and take such actions as the Purchaser may, from
time to time, reasonably request in order to convey the
Accounts and the Account Files to the Purchaser and to
effectuate the purpose and to carry out the terms of this
Agreement.
(ii) The Seller and the Purchaser intend that, as a
result of the consummation of the transaction contemplated by
this Agreement, the Seller will have transferred all of its
right, title and interest in the Mortgage Collateral and the
Account Files to the Purchaser and that this transaction be a
true sale and agree that their actions have been and will be
consistent with this characterization of the transaction.
(iii) Notwithstanding subsection (ii) hereof, solely
in the event that a court of appropriate jurisdiction were to
recharacterize the transaction as a
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secured loan, the Seller hereby grants a security interest
in and pledges, assigns and transfers to the Purchaser as of
the date hereof (a) all of the right, title and interest of
the Seller in and to the Mortgage Collateral and the related
Account Files, (b) all cash, instruments or other property
owned by the Seller and relating to the Mortgage Collateral
held or required to be deposited on the Closing Date or
thereafter in the Holding Account or the Collection Account,
including all investments made with such funds and all
income from such investments and (c) all proceeds of the
foregoing, including, without limitation, all new Accounts
originated in connection with the sale of property acquired
in respect of the Mortgage Collateral, all insurance
proceeds and condemnation awards. The Seller agrees to
execute any financing statements (including a UCC-1
financing statement naming the Seller as seller/debtor and
the Purchaser as purchaser/secured party) or other
documentation necessary to create, maintain or perfect this
security interest in the Mortgage Collateral and Account
Files. The Seller and the Purchaser acknowledge that in the
event a court were to recharacterize the transaction as a
secured loan, the Indenture Trustee will act as agent of the
Issuer pursuant to the terms of that certain letter between
the Issuer and the Indenture Trustee attached hereto as
Exhibit B.
11. Survival. The Seller agrees that the representations, warranties
and agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to be relied upon by the Purchaser,
notwithstanding any investigation heretofore or hereafter made by the Purchaser
or on the Purchaser's behalf, and that the representations, warranties and
agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Collateral
and the related Account Files.
12. Parties. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
13. 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 agreements and understandings relating to the
subject matter hereof. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
14. 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.
15. Successors and Assigns. All representatives, warranties, covenants
and agreements contained herein shall be binding upon, and inure to the benefit
of the Purchaser and the Indenture Trustee and its successors and assigns and
the Seller and its successors and assigns, all as provided herein.
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16. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
17. Governing Law. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Florida, including
all matters of construction, validity and performance.
18. Liability. It is expressly understood and agreed by the parties
hereto that (a) this Agreement is executed and delivered on behalf of the
Purchaser by __________________, not individually or personally but solely as
Owner Trustee under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in it as the Owner Trustee, (b) each of the
representations, undertakings and agreements herein made on the part of the
Purchaser is made and intended not as personal representations, undertakings and
agreements by ____________ but is made and intended for the purpose for binding
only the Purchaser and (c) under no circumstances shall _____________ be
personally liable for the payment of any indebtedness or expenses of the
Purchaser or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Purchaser under
this Agreement.
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IN WITNESS WHEREOF, each party has caused this Agreement to be signed
and executed by its proper officer thereunder duly authorized, as of the day and
year first written above.
SELLER:
MID-STATE HOMES, INC.
By: _________________________
Name:
Title:
PURCHASER:
MID-STATE TRUST 199 -
By: ______________________________,
not in its individual capacity
but solely as Owner Trustee
By:________________________________
Name:
Title:
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EXHIBIT A
[Actions, suits, proceedings - See Section 5(vii)]
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EXHIBIT B
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[Letterhead of the Indenture Trustee]
_________________________, 1997
Mid-State Trust 199 -
c/o ___________________,
as Owner Trustee
[Address]
Attention:
Re: Indenture dated as of _________, 199_ Between
________________, as Trustee, and Mid-State Trust 199 - , as
Issuer Relating to [ ]% Asset-Backed Notes, Class A-1, [ ]%
Asset Backed Notes, Class A-2, [ ]% Asset Backed Notes, Class
A-3 and [ ]% Asset Backed Notes, Class A-4
Ladies and Gentlemen:
We are writing in connection with the issuance of your asset-backed
notes pursuant to the Indenture described above. Capitalized terms used in this
letter shall have the meanings assigned to them in the Indenture.
This will confirm that in the event that the Purchase and Sale
Agreement is deemed to transfer to the Issuer a security interest in any portion
of the Trust Estate, we will act as the agent of the Issuer solely for purposes
of perfecting its security interest in any such portion of the Trust Estate in
our possession during the term of the Indenture, subject to the Grant made by
the Issuer in the Indenture and in acting as such agent, we will have all of the
protections given to us as Trustee under the Indenture.
Very truly yours,
[Indenture Trustee]
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