SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 30, 1998
(Date of earliest event reported)
Commission File No. 333-58995
Mid-State Homes, Inc.
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Florida 50-0945134
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(State of Incorporation) (I.R.S. Employer Identification No.)
1500 North Dale Mabry Highway
Tampa, Florida 33607
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Address of principal executive offices (Zip Code)
(813) 871-481
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Registrant's Telephone Number, including area code
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(Former name, former address and former fiscal year,
if changed since last report)
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Item 5. Other Events
On December 10, 1998, Mid-State Trust VII (the "Trust") issued
6.34% Asset Backed Notes (the "Notes"), having an aggregate original principal
balance of $313,488,000. The Notes were issued pursuant to an Indenture, dated
December 10, 1998 (the "Indenture"), between the Trust and First Union National
Bank, as indenture trustee, a copy of which is filed as an exhibit hereto. The
Trust was formed by Mid-State Homes, Inc., a Florida corporation (the
"Registrant"), pursuant to a Trust Agreement, dated as of November 19, 1998 (the
"Trust Agreement"), between the Registrant and Wilmington Trust Company, as
owner trustee, as amended from time to time. The Notes are secured by the assets
of the Trust, consisting primarily of certain building and installment sale
contracts, promissory notes, related mortgages and other security agreements and
certain insurance proceeds paid pursuant to Certificate Guaranty Insurance
Policy Number AB0217BE issued by Ambac Assurance Corporation.
Interest on the Notes will be paid on each Payment Date (as
defined in the Indenture). Monthly payments in reduction of the principal
balance of the Notes will be allocated to the Notes in accordance with the
priorities set forth in the Indenture.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
(EX 4.1) Indenture, dated December 10,
1998, between Mid-State Trust VII
and First Union National Bank.
(EX 4.2) Certificate Guaranty Insurance
Policy Number AB0217BE issued
by Ambac Assurance Corporation,
with endorsement attached.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MID-STATE HOMES, INC.
January 5, 1999
By: /s/ DEAN FJELSTUL
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Dean Fjelstul
Vice President
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INDEX TO EXHIBITS
Paper (P) or
Exhibit No. Description Electronic (E)
(EX 4.1) Indenture, dated December 10, 1998, E
between Mid-State Trust VII and
First Union National Bank.
(EX 4.2) Certificate Guaranty Insurance E
Policy Number AB0217BE issued
by Ambac Assurance Corporation
with endorsement attached.
FINAL EXECUTION COPY
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MID-STATE TRUST VII
Issuer
and
FIRST UNION NATIONAL BANK
Trustee
INDENTURE
Dated December 10, 1998
Relating to
6.34% Asset-Backed Notes
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. General Definitions...........................................3
ARTICLE II
THE NOTES
SECTION 2.01. Forms Generally..............................................23
SECTION 2.02. Forms of Notes and Certificate of Authentication.............23
SECTION 2.03. Notes; General Provisions with Respect to Principal
and Interest Payments.....................................29
SECTION 2.04. Denominations................................................30
SECTION 2.05. Execution, Authentication, Delivery and Dating...............30
SECTION 2.06. Temporary Notes..............................................31
SECTION 2.07. Registration, Registration of Transfer and Exchange..........31
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Notes...................32
SECTION 2.09. Payments of Principal and Interest...........................33
SECTION 2.10. Persons Deemed Owners........................................37
SECTION 2.11. Cancellation.................................................37
SECTION 2.12. Authentication and Delivery of Notes.........................37
ARTICLE III
COVENANTS; REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Payment of Notes.............................................41
SECTION 3.02. Maintenance of Office or Agency..............................41
SECTION 3.03. Money for Note Payments to Be Held in Trust..................41
SECTION 3.04. Existence of Issuer..........................................43
SECTION 3.05. Protection of Trust Estate...................................44
SECTION 3.06. Opinions as to Trust Estate..................................45
SECTION 3.07. Performance of Obligations; Servicing Agreement..............45
SECTION 3.08. Negative Covenants...........................................46
SECTION 3.09. Annual Statement as to Compliance............................47
SECTION 3.10. Recording of Assignments.....................................48
SECTION 3.11. Representations and Warranties Concerning the Accounts.......48
SECTION 3.12. Trustee's Review of Account Documents........................51
SECTION 3.13. Trust Estate; Account Documents..............................53
SECTION 3.14. Amendments to Servicing Agreement............................54
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SECTION 3.15. Servicer as Agent and Bailee of Trustee......................54
SECTION 3.16. Investment Company Act.......................................55
SECTION 3.17. Business Activity............................................55
SECTION 3.18. Liability of Owner Trustee...................................56
SECTION 3.19. Exculpation of the Trustee...................................56
SECTION 3.20. Owner Trustee Agrees Not to File for Bankruptcy of
the Issuer................................................56
SECTION 3.21. Reports to the Commission....................................56
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture......................57
SECTION 4.02. Application of Trust Money...................................59
SECTION 4.03. Subrogation and Cooperation..................................59
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. Event of Default.............................................61
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment...........62
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee................................................63
SECTION 5.04. Remedies.....................................................64
SECTION 5.05. Optional Preservation of Trust Estate........................65
SECTION 5.06. Trustee May File Proofs of Claim.............................67
SECTION 5.07. Trustee May Enforce Claims Without Possession of Notes.......68
SECTION 5.08. Application of Money Collected...............................69
SECTION 5.09. Limitation on Suits..........................................70
SECTION 5.10. Unconditional Rights of Noteholders to Receive
Principal and Interest....................................71
SECTION 5.11. Restoration of Rights and Remedies...........................71
SECTION 5.12. Rights and Remedies Cumulative...............................71
SECTION 5.13. Delay or Omission Not Waiver.................................71
SECTION 5.14. Control by the Insurer or Noteholders........................72
SECTION 5.15. Waiver of Past Defaults......................................72
SECTION 5.16. Undertaking for Costs........................................73
SECTION 5.17. Waiver of Stay or Extension Laws.............................73
SECTION 5.18. Sale of Trust Estate.........................................74
SECTION 5.19. Action on Notes..............................................76
SECTION 5.20. Replacement of the Insurer...................................76
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ARTICLE VI
THE TRUSTEE
SECTION 6.01. Duties of Trustee............................................77
SECTION 6.02. Notice of Default............................................78
SECTION 6.03. Rights of Trustee............................................79
SECTION 6.04. Not Responsible for Recitals or Issuance of Notes............79
SECTION 6.05. May Hold Notes...............................................79
SECTION 6.06. Money Held in Trust..........................................80
SECTION 6.07. Compensation and Reimbursement...............................80
SECTION 6.08. Eligibility; Disqualification................................81
SECTION 6.09. Trustee's Capital and Surplus................................81
SECTION 6.10. Resignation and Removal; Appointment of Successor............81
SECTION 6.11. Acceptance of Appointment by Successor.......................83
SECTION 6.12. Merger; Conversion, Consolidation or Succession to
Business of Trustee.......................................83
SECTION 6.13. Preferential Collection of Claims Against Issuer.............84
SECTION 6.14. Co-trustees and Separate Trustees............................84
SECTION 6.15. Authenticating Agents........................................85
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer to Furnish Trustee and Insurer Names and
Addresses of Noteholders..................................87
SECTION 7.02. Preservation of Information; Communications to
Noteholders...............................................87
SECTION 7.03. Reports by Trustee...........................................87
SECTION 7.04. Reports by Issuer............................................88
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.01. Collection of Moneys.........................................89
SECTION 8.02. Collection Account...........................................89
SECTION 8.03. Policy Payment Account.......................................91
SECTION 8.04. General Provisions Regarding the Collection Account
and the Policy Payment Account............................91
SECTION 8.05. Reports by Trustee to Noteholders............................93
SECTION 8.06. Reports by Trustee...........................................93
SECTION 8.07. Reports by Independent Accountants...........................94
SECTION 8.08. Reports by the Servicer......................................94
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of Noteholders.......95
SECTION 9.02. Supplemental Indentures with Consent of Noteholders..........95
SECTION 9.03. Execution of Supplemental Indentures.........................97
SECTION 9.04. Effect of Supplemental Indentures............................97
SECTION 9.05. Conformity with Trust Indenture Act..........................97
SECTION 9.06. Reference in Notes to Supplemental Indentures................98
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Optional Redemption of Notes................................99
SECTION 10.02. Form of Redemption Notice...................................99
SECTION 10.03. Notes Payable on Redemption Date...........................100
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions.......................101
SECTION 11.02. Form of Documents Delivered to Trustee.....................101
SECTION 11.03. Acts of Noteholders........................................102
SECTION 11.04. Notices, etc., to Trustee and Issuer.......................103
SECTION 11.05. Notices and Reports to Noteholders; Waiver of Notices......104
SECTION 11.06. Rules by Trustee and Agents................................105
SECTION 11.07. Conflict with Trust Indenture Act..........................105
SECTION 11.08. Effect of Headings and Table of Contents...................105
SECTION 11.09. Successors and Assigns.....................................105
SECTION 11.10. Separability...............................................105
SECTION 11.11. Benefits of Indenture......................................105
SECTION 11.12. Legal Holidays.............................................106
SECTION 11.13. Governing Law..............................................106
SECTION 11.14. Counterparts...............................................106
SECTION 11.15. Recording of Indenture.....................................106
SECTION 11.16. Issuer Obligations.........................................106
SECTION 11.17. Inspection.................................................107
<PAGE>
INDENTURE, dated December 10, 1998 (herein, as amended or
supplemented from time to time as permitted hereby, called this "Indenture"),
between MID-STATE TRUST VII (the "Issuer"), a Delaware business trust and FIRST
UNION NATIONAL BANK, a national banking association, 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
November 19, 1998, as amended, restated, supplemented or otherwise modified from
time to time, between Wilmington Trust Company (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 6.34% Asset-Backed Notes (the "Notes"), issuable as provided in
this Indenture. All covenants and agreements made by the Issuer herein, in the
Policy and in the Insurance and Indemnity Agreement (each as defined herein) are
for the benefit and security of the Holders of the Notes and Ambac Assurance
Corporation (the "Insurer") 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.
Pursuant to the Insurance and Indemnity Agreement, the Insurer has
issued the Policy guaranteeing the timely payment by the Issuer of Insured
Amounts (as defined below) on the Notes and the payment of any amount paid on
the Notes and subsequently avoided as a preference under applicable law. 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 and the Insurer, 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) all new Accounts originated in connection with the sale
of property acquired in respect of Accounts (f) the Software Rights and (g) 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 insurance proceeds and
condemnation awards.
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Such Grants are made, however, in trust to secure the Notes equally
and ratably without priority or discrimination, except as provided in this
Indenture, between any Note and any other Note by reason 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, (iii) compliance with the provisions of this
Indenture, all as provided in this Indenture and (iv) compliance with the terms
of and payments of amounts due under the Insurance and Indemnity Agreement. (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
and the Insurer as set forth herein may be adequately and effectively protected.
<PAGE>
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 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
<PAGE>
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 November 1, 1998.
"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.
"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).
<PAGE>
"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 and in the case of the Insurer, the President,
any managing director, any senior vice president or any vice president.
"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 Collection
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 (or,
in the case of the first Payment Date, from the Closing Date) to the date two
Business Days prior to such Payment Date plus (iii) net reinvestment income on
funds in the Holding Account from the preceding Payment Date through the first
business day of the month immediately preceding the Payment Date. Available
Funds will be net of any Issuer Expenses.
"Bank": Wilmington Trust Company, a Delaware banking
corporation, 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 a day on
which banking institutions in New York City or in the city in which the
Corporate Trust Office of the Trustee under this Indenture or the Insurer is
located are authorized or obligated by law or executive order to be closed.
"Closing Date": December 10, 1998.
"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 last 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.
"Collection Period": With respect to any Payment Date, the
three-month period, or in the case of the first Payment Date, the four-month
period, ending on the close of business on the last day of the month
preceding the month in which such Payment Date occurs.
"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.
"Controlling Party": (i) the Insurer so long as an Insurer Default
shall not have occurred and be continuing and (ii) the Trustee so long as an
Insurer Default shall have occurred; provided, however, that the Trustee shall
be Controlling Party after delivery by the Insurer to the Trustee of a notice of
resignation as Controlling Party.
"Corporate Trust Office": The designated corporate trust office of
the Trustee located at 230 South Tryon Street, Charlotte, North Carolina
28288-1179 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.
"Corporate Trust Office of the Insurer": The office of AMBAC
Assurance Corporation at One State Street Plaza, New York, New York 10004.
"Cumulative Actual Net Economic Losses": With respect to any Payment
Date, the cumulative excess as of the end of the related Collection 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
all prior payments, if any, made with respect to principal of such Note.
"Cut-Off Date": October 31, 1998.
"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 third 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": As defined in Section 3.11(b) and
Section 3.12(b).
"Deficiency Amount": With respect to the Notes as of any Payment
Date (i) any shortfall in amounts available in the Collection Account to pay
interest due on such Payment Date on the Aggregate Current Principal Amount
of the Notes at the Note Interest Rate, (ii) the
<PAGE>
Collateral Deficiency Amount, if any, (iii) the related Preference
Amount (without duplication) and (iv) the Aggregate Current Principal Amount of
the Notes to the extent unpaid on the Maturity Date or earlier acceleration of
the Notes at the option of the Insurer pursuant to the terms of this Indenture.
"Deleted Account": As defined in Section 3.11(b) and
-----------------
Section 3.12(b).
"Delinquency Ratio": The ratio (expressed as a percentage), computed
for any Payment Date of (i) the average Aggregate Economic Balance of Accounts
for the related Collection Period for which the Monthly Payment thereon remains
unpaid for 60 days or more after the Due Date thereof to (ii) the average
Aggregate Economic Balance for such Collection Period.
"Due Date": With respect to any Account, the date each month on
which the Monthly Payment is payable.
"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 $200 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 8% per annum or above
10.25% 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 at
<PAGE>
least "A" by S&P and at least "A1" by Moody's at the time of any
deposit therein or whose short-term unsecured debt obligations are rated at
least "A-1" by S&P and at least "P-1" by Moody's (or, if such obligations are,
at the time of such deposit, not rated by both S&P and 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; provided, however, that to qualify as an Eligible Investment, if
an investment is subject to rating by either of the Rating Agencies, the
investment may not have an "r" highlighter affixed to its rating:
(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,
Federal National Mortgage Association 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 "Aaa" 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 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, as may be acceptable to the Insurer, as evidenced in writing to that
effect, as may from time to time be confirmed in writing to the Trustee by the
Insurer, provided that the Controlling Party shall have, prior to such
confirmation, given prior written notice of such other investment to the Rating
Agencies and 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 "Aaa" 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 and the
Insurer have received an unqualified Opinion of Counsel nationally recognized as
expert in bankruptcy acceptable to the Trustee and the Insurer 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": As defined in Section 5.01.
"Exchange Act": As defined in Section 3.21(a).
"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": Federal National Mortgage Association, 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.
"Holding Account Agreement": The Holding Account Agreement dated
December 10, 1998 among First Union National Bank, 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.
"Indenture Maturity Date": December 15, 2036.
"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.
"Insolvency Claim": As defined in Section 5.02.
"Insurance and Indemnity Agreement": The Insurance and Indemnity
Agreement, dated as of December 10, 1998, by and among the Depositor, the
Servicer, the Insurer, the Issuer and the Trustee providing, among other things,
for the issuance of the Policy, as the same may be modified or amended from time
to time.
"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 excluding any amounts
paid under the Policy.
"Insured Amount": As of any Payment Date, any Deficiency Amount.
"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.
<PAGE>
"Insurer": Ambac Assurance Corporation.
"Insurer Default": The Insurer fails to make a payment required
under the Policy in accordance with its terms.
"Interest Accrual Amount": With respect to any Payment Date, an
amount equal to the interest accrued on the Aggregate Current Principal Amount
of the Notes (after giving effect to payments on the preceding Payment Date)
during the related Interest Accrual Period.
"Interest Accrual Period": With respect to a Payment Date, the
period beginning on the 15th day of the month in which the immediately preceding
Payment Date occurred (or, in the case of the first Payment Date, November 1,
1998) and ending on the 14th day of the month in which such Payment Date occurs.
"Issuer": Mid-State Trust VII, 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 and amounts payable to the Insurer pursuant to clause
third of Section 8.02(c), but including the fees and expenses of the Owner
Trustee and the Trustee (including, without limitation, amounts to which the
Trustee is entitled under Section 5.04)), the Standby Servicer Fee, the
Servicing Fee (which includes amounts payable to the Sub-Servicer) and any
Premium payable on such Payment Date.
"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, if
earlier, 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 greatest of (i) the product of (x) 19.25% and (y) the
Aggregate Economic Balance of the Accounts as of the last day of the month
preceding the month of such Payment Date, (ii) the product of (x) the
Overcollateralization Percentage and (y) the Aggregate Economic Balance of the
Accounts as of the last day of the month preceding the month of such Payment
Date, (iii) $11,734,845.03, (iv) the sum of the Economic Balances of the three
largest Accounts as of the last day of the month preceding the month of such
Payment Date, and (v) two times the difference between (x) the product of (A)
50% and (B) the average of the Aggregate Economic Balance of all Accounts, which
are more than 90 days delinquent, on the last day of each of the three months
preceding the month of such Payment Date, and (y) an amount equal to (A) the
product of four and the amount to be distributed on such Payment Date pursuant
to clause Fourth of Section 8.02(c) divided by (B) 3, or (b) in the event that
Mid-State Homes, Inc. is no longer the Servicer, an amount equal to the greater
of (x) the Aggregate Current Principal Amount of the Notes and (y) the Aggregate
Economic Balance of the Accounts as of the last day of the month preceding the
month of such Payment Date.
"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
and assigns.
"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": As defined 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.
<PAGE>
"Obligor": Each Person who is indebted under an Account Note or
who has acquired real property subject to the Mortgage securing an Account
Note.
"Officer's Certificate": A certificate signed by an Authorized
Officer.
"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 and the Insurer.
"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
Current Principal Amount.
"Outstanding": As of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof 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 (i) for the purposes of effectuating the Insurer's right
of subrogation as set forth in Section 4.03 hereof only, all Notes that have
been paid with proceeds provided under the Policy shall be deemed to be
Outstanding until the Insurer has been paid as subrogee hereunder or reimbursed
with respect thereto pursuant to the Insurance and Indemnity Agreement as
evidenced by a written notice from the Insurer delivered to the Trustee, and the
Insurer shall be deemed to be the Holder thereof to the extent of any payments
thereon made by the Insurer; and (ii) 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.
"Overcollateralization Amount": With respect to a Payment Date, the
amount equal to (a) the Aggregate Economic Balance of the Accounts on the last
day of the month preceding the month of such Payment Date less (b) the Aggregate
Current Principal Amount of the Notes, in each case after giving effect to the
payments made 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 Accounts as of the last day of the month preceding the
month in which the Target Overcollateralization Date occurs over (ii) the
Aggregate Current Principal Amount of the Notes on the Target
Overcollateralization Date (after giving effect to payments on the Target
Overcollateralization Date) and the denominator of which is the Aggregate
Economic Balance of the Accounts as of the last day of the month preceding the
month in which the Target Overcollateralization Date occurs.
"Owner Trustee": Wilmington Trust Company, 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": Each March 15, June 15, September 15 and December
15 beginning March 15, 1999 or, if such date is not a Business Day, the next
Business Day thereafter.
"Payment Date Statement": As defined in Section 2.09(e).
"Person": Any individual, corporation, partnership, limited
liability company, national banking association, joint venture, association,
joint stock company, trust (including any beneficiary thereof), unincorporated
organization or government or any agency or political subdivision thereof.
"Pledged Account" or "Pledged Fund": As defined in
Section 8.05(a).
"Policy": As defined in the Insurance and Indemnity Agreement.
"Policy Payment Account": As defined in Section 8.03.
"Pool Delinquency Rate": With respect to any calendar month, a
fraction, expressed as a percentage, (x) the numerator of which is the Aggregate
Economic Balances of all Accounts 60 or more days delinquent as of the close of
business on the last day of such month; and (y) the denominator of which is the
Aggregate Economic Balance as of the close of business on the last day of such
month.
"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.
"Preference Amount": Any amount previously distributed to a Holder
of a Note that is recoverable and sought to be recovered as a voidable
preference by a trustee in a bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
non-appealable order of a court having competent jurisdiction.
"Preference Claim": As defined in Section 5.02.
"Premium": As defined in the Insurance and Indemnity Agreement.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative Proceeding.
"Purchase and Sale Agreement": The Purchase and Sale Agreement,
dated December 10, 1998, between Mid-State Homes, Inc. and Mid-State Trust
VII which provides for, among other things, the purchase by Mid-State Trust
VII 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 Economic Balance, after deduction of all scheduled payments
due in the month of substitution, not less than the Economic Balance of the
Deleted Account (unless 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 the Effective Financing Rate of the
Deleted Account, (iii) comply with each representation and warranty set forth in
Section 3.11(a), (iv) generally be of like quality and type as the Deleted
Account and (v) have an original term to maturity which shall not exceed October
15, 2034. 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 and Moody's.
"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 day immediately prior to
such Payment Date.
"Redemption Date": Any 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, together with interest on such amount and interest
on any unpaid interest at the 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,
the Available Funds for such Payment Date, if any, in excess of (a) the
amount of interest due on the Notes on such Payment Date and (b)
reimbursements and other amounts owed to the Insurer.
"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 Collection Period.
"Replacement Event": The first to occur of any of the following
events:
(i) the Insurer (1) files any petition or commences any case
or proceeding under any provision or chapter of the Federal
Bankruptcy Code or any other similar federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (2) makes a general assignment for the benefit of
its creditors, or (3) has an order for relief entered against it
under the Federal Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable;
(ii) a court of competent jurisdiction or the New York
Department of Insurance enters a final and nonappealable order,
judgment or decree (1) appointing a custodian, trustee, agent or
receiver for the Insurer or for all or any material portion of its
property or (2) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Insurer (or the taking of
possession of all or any material portion of the property of the
Insurer), unless such appointment or authorization is vacated or
dismissed or such possession is terminated within one hundred and
eighty days from the date of such appointment, authorization or
commencement of such possession; or
(iii) the financial strength rating of the Insurer is reduced
below "A-" by S&P or "A3" by Moody's.
"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 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., its successors and assigns.
"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.
Column Number Information
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
"Seller": Mid-State Homes, Inc. a Florida corporation.
"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 Insurer, the Successor Servicer, the Accountants and the Trustee
information concerning the Accounts, 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.
"Servicer Termination Delinquency Rate Trigger": As of any Payment
Date commencing with the second Payment Date, if the percentage equal to the
average of the Pool Delinquency Rate for each of the six immediately preceding
calendar months with respect to the Accounts exceeds 8.5%.
"Servicer Termination Loss Trigger": With respect to any Payment
Date, if the sum of the Cumulative Actual Net Economic Losses, determined as of
such Payment Date and each of the three preceding Payment Dates, exceeds 1.50%
of the Aggregate Economic Balance as of the first day of the 12 month period
preceding such Payment Date.
"Servicing Account": As defined in Section 2.08(b) of the
Servicing Agreement.
"Servicing Agreement": The Servicing Agreement, dated December 10,
1998, 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 annual fee shall be the product of .60% (60 basis
points) and the Economic Balance of such Account as of the beginning of the
immediately preceding Interest Accrual Period, 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 the Servicer as contemplated by the Purchase and Sale Agreement.
"Standby Servicer Fee": The fee payable to the Successor
Servicer pursuant to the Standby Servicing Agreement.
"Standby Servicing Agreement": The Standby Servicing Agreement
dated December 10, 1998 by and among the Servicer, the Issuer and the
Successor Servicer.
"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 December 2002.
"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 Economic Balance of the
Accounts as of the last day of the month preceding the month of such Payment
Date and (ii) the Minimum Target Overcollateralization Amount; provided,
however, that in no event shall the Target Overcollateralization Level exceed
100% of the Aggregate Current Principal Amount of the Notes after giving effect
to the payments made on such Payment Date.
"Trigger Event": Any one of the following events under the
Servicing Agreement:
(a) the Issuer fails to make a payment due hereunder or under the
Insurance and Indemnity Agreement 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 in the reasonable opinion of the Insurer 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 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 Homes, Inc. and
in either case released from the lien of this Indenture,
within 90 days after notice thereof from the Insurer;
(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 ceases to be in full force and effect;
<PAGE>
(i) the lien of this Indenture ceases to be effective or ceases
to be of a first priority;
(j) the occurrence of a Servicer Termination Delinquency Rate
Trigger or a Servicer Termination Loss Trigger.
"Trust": The trust established by the Trust Agreement.
"Trust Agreement": The amended and restated trust agreement,
dated as of December 10, 1998, 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 and the Insurer 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": First Union National Bank, a national banking
association, 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.
<PAGE>
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 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 Notes is as set forth below:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY 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 NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE ACTUAL OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE MAY BE ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION
THEREOF FROM THE TRUSTEE NAMED HEREIN.
<PAGE>
MID-STATE TRUST VII
6.34% ASSET-BACKED NOTE
DUE: DECEMBER 15, 2036
ACCRUAL DATE: NOVEMBER 1, 1998
CUSIP: 595498 AA 4
$______________ No. __
Mid-State Trust VII (the "Issuer"), a Delaware business trust
governed by an Amended and Restated Trust Agreement dated as of December 10,
1998 (the "Trust Agreement"), for value received, hereby promises to pay to Cede
& Co. or registered assigns, the principal sum of _______________ Dollars in
quarterly installments on March 15, June 15, September 15 and December 15, or if
such date is not a Business Day, the next Business Day thereafter (the "Payment
Dates") in each year, commencing on March 15, 1999 and ending on or before
December 15, 2036 (the "Maturity" of such final installment of principal) and to
pay interest accrued during the period beginning on the 15th day of the month in
which the immediately preceding Payment Date occurred, or in the case of the
first Payment Date, November 1, 1998, and ending on the 14th day of the month in
which such Payment Date occurs (the "Interest Accrual Period"), until the
principal amount of this Note is paid in full, at the rate of six and
thirty-four hundredths percent (6.34%) per annum, such interest being computed
on the basis of a 360-day year of twelve 30-day months and payable quarterly on
each Payment Date. Installments of principal of this Note are due and payable in
the amounts and on the dates described on the reverse hereof.
The principal of, and interest on, this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note. 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 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 Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be valid or obligatory
for any purpose.
<PAGE>
IN WITNESS WHEREOF, Mid-State Trust VII has caused this instrument
to be duly executed by and under the corporate seal of Wilmington Trust Company,
not in its individual capacity but solely as Owner Trustee under the Trust
Agreement.
Dated: _______________ MID-STATE TRUST VII
By: Wilmington Trust Company,
not in its individual
capacity but solely in
its capacity as Owner
Trustee under the Trust
Agreement
[SEAL] By: ___________________________
Title
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its 6.34% Asset-Backed Notes (herein called the "Notes"). The
Notes are issued and will be issued under an Indenture dated December 10, 1998
(herein called the "Indenture"), between the Issuer and First Union National
Bank, 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 Notes and the terms upon which
the Notes are, and are to be, authenticated and delivered. The Notes are secured
by the collateral pledged as security therefor to the extent provided in the
Indenture. All terms used in this 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 Notes on each
Payment Date in the amount equal to the amount equal to the amount available to
be paid thereon as principal pursuant to and subject to the priorities set forth
in Section 8.02(c) of the Indenture on such Payment Date; provided that the
unpaid principal shall be due and payable on the Payment Date occurring in
December 2036 and any payment pursuant to clause (ii) of the definition of
"Insured Amount" shall be applied as principal of the Notes. Each payment of
principal of the Notes shall be allocated among the Notes in proportion to their
then remaining unpaid principal amounts.
Payment of the then remaining unpaid principal amount of this 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 Notes to payment of the then remaining unpaid principal
amount of this Note or to payment of the Redemption Price payable on any date as
of which this Note has been called for redemption in full shall be made upon
presentation of this Note to the office or agency of the Issuer maintained for
such purpose. Payments of interest on this Note due and payable on each Payment
Date, together with any installment of principal of this Note due and payable on
each Payment Date which is also a Payment Date for this Note, shall be made by
check mailed to the Person whose name appears as the registered Holder of this
Note (or one or more Predecessor Notes) on the Note Register as of the Record
Date preceding such Payment Date, except that with respect to a 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 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 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 Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all Holders of this
Note and of any 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 Note
on a 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 day immediately preceding
such Payment Date, and the amount then due and payable shall, if sufficient
funds therefor are available, be payable only upon presentation of this Note to
the office or agency of the Issuer maintained for such purpose.
The Trustee, for the benefit of the Holder of this Note, is the
beneficiary under a surety bond (the "Policy") issued by Ambac Assurance
Corporation (the "Insurer") with all of the rights described therein. Under the
Policy, the Insurer unconditionally and irrevocably guarantees to the Holder of
this Note the full and complete payment with respect to any Payment Date, (i) an
amount equal to the amount, if any, by which interest at the Note Interest Rate
on the Aggregate Current Principal Amount of the Notes exceeds Available Funds
which are available to be distributed therefor in accordance with the Indenture
on such Payment Date, (ii) an amount equal to the Collateral Deficiency Amount,
if any, (iii) on the Indenture Maturity Date, the amount, if any, by which the
Aggregate Current Principal Amount of the Notes exceeds Remaining Available
Funds which are available to be distributed as principal of the Notes in
accordance with the Indenture on such Final Scheduled Payment Date, and (iv) an
amount equal to the Preference Amount to the extent such payment is otherwise
guaranteed under the Policy. The Insurer shall be subrogated to the rights of
the Holder of this Note to receive payments under this Note to the extent of any
payment by the Insurer under the Policy. The Policy is held by the Trustee and
is available for inspection at its offices.
If an Event of Default shall occur and be continuing with respect to
the Notes, the 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 Note, the amount payable to the
Holder of this Note will be equal to the aggregate unpaid principal amount of
this Note on the date this 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 Notes, under certain circumstances specified therein all amounts collected
as proceeds of the collateral securing the Notes or otherwise shall continue to
be applied to payments of principal of and interest on the Notes as if they had
not been declared due and payable. In such event, interest on the then unpaid
principal amount of all Notes and on any overdue installments of interest on the
Notes following the acceleration of the maturity of the Notes shall accrue and
be payable at the Note Interest Rate, but only to the extent that the payment
thereof shall be lawful and enforceable.
The 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, the Notes shall be in an Aggregate
Current Principal Amount which is 10% or less of the original principal amount
of the 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 Note may be
registered on the Note Register of the Issuer, upon surrender of this Note for
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the 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
Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee and the
Insurer may treat the Person in whose name this 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 Note be overdue, and
neither the Issuer, the Trustee, any such agent nor the Insurer 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 Notes under the Indenture at any
time by the Issuer, with the written consent of the Insurer (except during an
Insurer Default) and the Holders of Notes representing more than 50% of the
Aggregate Current Principal Amount of all Notes at the time Outstanding. The
Indenture also contains provisions that, unless the Insurer is the Controlling
Party, permit the Holders of Notes representing specified percentages of the
Aggregate Current Principal Amount of the Notes at the time Outstanding, 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 Note (or any one or more Predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in the denominations
provided in the Indenture and subject to certain limitations therein set forth.
The Notes are exchangeable for a like aggregate initial principal amount of
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 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 Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, 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 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 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 Note.
The Owner Trustee has executed this 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 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.
(b)...The form of the Trustee's certificate of authentication is
as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned
Indenture.
First Union National Bank,
as Trustee
By:
Authorized Signatory
Section 2.03 Notes; General Provisions with Respect to
Principal and Interest Payments.
(a)...The aggregate principal amount of Notes that may be
authenticated and delivered under the Indenture is limited to $313,488,000,
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. There shall be one class of Notes.
The principal of each Note shall be payable in installments ending
no later than the Indenture Maturity Date 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 shall be payable on each Payment Date in the
amount of the Interest Accrual Amount. The Notes shall accrue interest at the
rate of 6.34% per annum (the "Note Interest Rate"). 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 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.
All payments of principal of and interest on any Note shall be made
in the manner specified in Section 2.09 and in the amounts prescribed in Section
5.08 and 8.02(c), as the case may be.
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 shall be identical in all respects except for the
denominations, Note numbers and dates thereof. All Notes 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 and in integral multiples thereof.
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 Closing
Date. All other Notes which are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
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 Section
2.02(b) 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, type-written, 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 and the Insurer shall have the right to inspect such Note Register at
all reasonable times 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 a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes
of any authorized denominations and of a like aggregate initial principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the 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 the
Trustee receives a written notice from the Issuer that (i) 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.
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 and the Insurer to save each of the
Trustee, the Issuer and the Insurer 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 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,
the Insurer 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 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.
(b)...All reductions in the principal amount of a Note (or one or
more Predecessor Notes) effected by payments of installments of principal made
on any Payment Date shall be binding upon all Holders of such Note and of any
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note. The final
installment of principal of each Note (including the Redemption Price of any
Note called for 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 Collection 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 Payment
Date, it shall, no later than ten days prior to such 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 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 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 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) or (c) of this Section 2.09 and returned undelivered shall be
held in accordance with Section 3.03.
(d)...Not later than each Debt Service Requirement Determination
Date, the Trustee shall prepare and deliver to the Issuer and the Insurer 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 Collection 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;
(iv) Optimal Principal Amount for such Payment Date;
(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 Collateral Deficiency Amount, if any;
(vii) 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;
(viii) the amount, if any, to be released to the Issuer pursuant to
clause fifth of Section 8.02(c)(ii);
(ix) the unpaid principal amount of the 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;
(x) the Cumulative Actual Net Economic Losses as of the end of the
related Collection Period;
(xi) the Economic Balance as of the end of the related Collection
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);
(xii) the Minimum Target Overcollateralization Amount;
(xiii) the Aggregate Economic Balance of the Accounts at immediately
following the end of the related Collection Period; and
(xiv) the number and Aggregate Economic Balance of all Accounts 30,
60 and 90 or more days past due and in repossession, foreclosure or
bankruptcy.
Each Payment Date Statement shall be delivered by the Trustee to the
Issuer, each designee of the Issuer specified in writing to the Trustee, the
Insurer, Lehman Brothers Inc., S&P, Moody's, the firm of Independent Accountants
appointed by the Issuer pursuant to Section 8.07(a) and, upon request, to the
beneficial owners of the Notes.
(e)...On the second Business Day prior to any Payment Date, (x) if
there are not on deposit in the Collection Account sufficient moneys available
to pay the amount of interest due and payable on such Payment Date, or (y) there
exists as reported on the related Payment Date Statement a Collateral Deficiency
Amount, or (z) on the Indenture Maturity Date, Remaining Available Funds are
insufficient to pay the Aggregate Current Principal Amount of the Notes, the
Trustee shall give notice on such day to the Insurer pursuant to the terms of
the Policy of the amount of such deficiency and the allocation of such
deficiency between the amount required to pay interest on the Notes and the
amount required to pay principal of the Notes, confirmed in writing to the
Insurer, if any, by 12:00 noon, New York City Time, on such third Business Day
prior to any Payment Date in the form set forth as Exhibit A (Notice of Payment)
under the Policy. The Insurer will deposit an amount equal to such deficiency
with the Trustee in accordance with the Policy. The Trustee will deposit or
cause to be deposited such amount in the Policy Payment Account and distribute
such amount only for purposes of paying an Insured Amount on that Payment Date
and not for any expenses, liabilities or advances of the Trustee or the Issuer.
(i) The Trustee shall keep a complete and accurate record of
the amount of all funds deposited by the Insurer in the Policy
Payment Account and the allocation of interest and principal paid in
respect of any Note from moneys received under the Policy. The
Insurer shall have the right to inspect such records at reasonable
times upon one Business Day's prior written notice to the Trustee.
(ii) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any payment of
principal of or interest on a Note has been avoided in whole or in
part as a preference payment under applicable Bankruptcy Law, the
Trustee shall so notify the Insurer, shall comply with the
provisions of the Policy to obtain payment by the Insurer of such
voided payment and shall, at the time it provides notice to the
Insurer, notify the Noteholders, by mail, that in the event that any
Noteholder's payment is so recovered, such Noteholder will be
entitled to payment pursuant to the terms of the Policy, a copy of
which shall be made available through the Trustee, and the Trustee
shall furnish to the Insurer, its records evidencing the payments of
principal of and interest on the Notes which have been made by the
Trustee and subsequently recovered from Noteholders, and the dates
on which such payments were made and all other documents and
deliveries required under the Policy. The Trustee shall furnish to
the Insurer its records evidencing the payments of Insured Amounts
on the Notes which have been made by the Trustee and subsequently
recovered from Noteholders, and the dates on which such payments
were made.
(iii) The Issuer shall not be discharged from its obligations
hereunder upon payment of any amount by the Insurer under the
Policy.
(f)...Following any payment under the Policy and until the Insurer
has been reimbursed with respect thereto pursuant to Section 8.02(c) third, not
later than the third day of each month, or if such day is not a Business Day,
the next succeeding Business Day, the Trustee shall prepare and deliver to the
Issuer and the Insurer a statement setting forth the aggregate amount of the
payments under the Policy.
Section 2.10. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Note,
the Issuer, the Trustee, the Insurer any Agent and any other agent of the
Issuer, the Trustee or the Insurer 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, the
Insurer, 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 canceled 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
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes held by the 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 Officer's 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 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 Notes have been rated "AAA" by
S&P and "Aaa" by Moody's; and
(vi) each of the Accounts satisfies the requirements of subsection
(c) below;
(c)...all of the Accounts and all Account Documents (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 Officer's 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:
(i)...shall have an Aggregate Economic Balance at least equal to
$335,281,286 as of the Cut-Off Date, and
(ii)..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 and an
executed counterpart of the Standby Servicing Agreement;
(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, 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; and
(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; and
(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; and
(B) the Economic Balance calculated by the Issuer for
the Accounts (specifically, $335,281,286) 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 106.95% of the 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 Officer's 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;
(k)...the Policy;
(l)...a copy of the fidelity bond required pursuant to Section
4.05 of the Servicing Agreement; and
(m)...an Opinion of Counsel in the form required by the
underwriting agreement between Mid-State Homes, Inc. and Lehman Brothers
Inc., as representative of the several underwriters named therein.
<PAGE>
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 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 First Union National Bank, 40
Broad Street, 5th Floor Suite 550, New York, New York 10004, 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 or
8.02. The Trustee will hold the Policy in trust, and amounts paid under the
Policy (other than in respect of preference payments) shall be held in the
Policy Payment Account and applied only to payments of principal of and interest
on the Notes. Payments on the Notes under the Policy shall not be deemed to
constitute payment of the Notes for purposes of terminating the Trust Estate.
The Trustee shall surrender the Policy to the Insurer for cancellation upon
expiration of the term of the Policy in accordance with its provisions.
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 third 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.
Any Paying Agent other than the Trustee shall be appointed by Issuer
Order, and the Trustee is hereby appointed, and the Trustee hereby accepts such
appointment, as initial Paying Agent. 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
and the Insurer 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 amount has become due and payable to the Holder of such
Note shall be discharged from such trust and paid to the Issuer or if such funds
were paid by the Insurer under the Policy, to the Insurer; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Issuer or the Insurer, as the case may be, for payment thereof (but only to the
extent of the amounts so paid to the Issuer or the Insurer), and all liability
of the Trustee, the Insurer 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 with the prior written consent of the Controlling Party 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 and the Insurer 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.
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(m), 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 1999, 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 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 and the Insurer
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 representing more than 50% of the then Aggregate Current
Principal Amount of the Outstanding Notes 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 Insurer or with the consent of the Insurer 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 (subject to and in accordance
with the Standby Servicing Agreement). 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 and, if no Insurer Default
shall have occurred and be continuing, the Insurer.
(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
and, provided no Insurer Default shall have occurred and be continuing,
the Insurer.
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 and the Insurer 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' 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 and the Insurer;
(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 finance
charge rate and fully amortizing level monthly payments. Each Account Note
has an original term to maturity not in excess of 30 years;
(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 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
Properties for which Insurance Proceeds are available, each Mortgaged
Property is in good condition and 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, the Noteholders or the Insurer 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 delivery to the Trustee of the Account Notes for
such Qualified Substitute Account or Qualified Substitute Accounts and such
other Account Documents related thereto, with each such 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 (or other date of
transfer to the Trust of an Account or substitution of a Qualified Substitute
Account), the Account Documents delivered to it on or prior to the Closing Date
(or other date of transfer to the Trust of an Account or substitution of a
Qualified Substitute Account) 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 (1) 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 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, the Noteholders
or the Insurer 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 of the Account Note(s) for
such Qualified Substitute Account or Qualified Substitute Accounts and such
other Account Documents related thereto, with each such 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 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 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 Officer's Certificate of
the Servicer pursuant to Section 2.15 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 and payment in full of
all amounts owing, if any, to the Insurer under the Insurance and Indemnity
Agreement.
Section 3.14. Amendments to Servicing Agreement.
The Trustee may, with the consent of the Controlling Party, 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
following an Insurer Default, 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 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 and the Insurer 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.
(e)...The Issuer represents, warrants and covenants that its chief
executive office is and shall be located in the State of Delaware.
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 Wilmington Trust Company, 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 Wilmington Trust
Company 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 Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the Trustee and the Noteholders and by any
Person claiming by, through or under the Trustee and the Noteholders and (d)
under no circumstances shall Wilmington Trust Company be personally liable for
the payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the 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 Policy,
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.
Section 3.20. Owner Trustee Agrees Not to File for Bankruptcy
of the Issuer.
Prior to one year after payment in full of all the Notes, the Owner
Trustee will not cause or consent to the filing of a petition in bankruptcy
against the Issuer for any reason without the written consent of all the
Noteholders.
Section 3.21. Reports to the Commission .
(a)...The Trustee shall, on behalf of the Issuer, cause to be filed
with the Commission the following periodic reports required to be filed under
the provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder (the "Exchange Act").
(i) By June 30, 1999, the Trustee shall file a Form 15 with
the Commission on behalf of the Issuer;
(ii) By April 14, 1999, the Trustee shall file a Form 10-Q
with the Commission on behalf of the Issuer; and
(iii) By August 29, 1999, the Trustee shall file a Form 10-K
with the Commission on behalf of the Issuer.
(b)...Upon the request of the Trustee, the Depositor shall cooperate
with the Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section. Execution copies of each such report shall be
delivered to the Issuer for signature at least three Business Days prior to the
date on which such materials are required to be filed. The Issuer shall execute
such forms and return them to the Trustee at least one Business Day prior to the
date on which they are required to be filed.
(c)...In the event the Seller notifies the Trustee and the Servicer
in writing as to any change in the Exchange Act reporting requirements
applicable to the Notes, the Trustee and the Servicer shall conform the
reporting obligations as set forth herein to any such changes as notified by the
Seller.
(d)...The Issuer shall designate, and pay the expenses of, (i) its
Independent accountants in connection with preparation of financial statements
to be included in Form 10-K and (ii) a financial printer or other entity (which
may be the Trustee) to prepare the materials required to be filed pursuant to
this Section 3.21 for filing via the EDGAR system.
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 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 or under the Insurance and Indemnity Agreement by
the Issuer and returned the Policy to the Insurer;
(3) the Issuer has delivered to the Trustee and the Insurer an
Officer's 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.
SECTION 4.03. Subrogation and Cooperation.
(a)...Anything herein to the contrary notwithstanding, any payment
with respect to the principal of or interest on the Notes which is made with
moneys received pursuant to the terms of the Policy shall not be considered
payment by the Issuer of the Notes, shall not discharge the Issuer in respect of
its obligation to make such payment and shall not result in the payment of or
the provision for the payment of the principal of or interest on the Notes
within the meaning of Section 4.01 hereof. The Issuer and the Trustee
acknowledge that without the need for any further action by or on the part of
the Insurer, the Issuer or the Note Registrar, if the Insurer makes payments
under the Policy on account of principal of or interest on the Notes, (i) the
Insurer will be fully subrogated to the rights of such Holders to receive such
principal and interest from the Issuer to the extent of such payments, and (ii)
the Insurer shall be paid such principal and interest but only from the sources
and in the manner provided herein and in the Insurance and Indemnity Agreement
for the payment of such principal and interest. Without limiting the preceding
sentence, the Trustee, on behalf of the Holders, shall assign to the Insurer the
rights of the Holders with respect to the Notes to the extent of any payments
under the Policy, including, without limitation, any amounts due to the Holders
in respect of securities law violations arising from the offer and sale of the
Notes, and shall take such other actions and deliver such other instruments as
may be reasonably requested or required by the Insurer to effectuate the purpose
or provisions of this Section.
Without limiting the rights of the Noteholders as otherwise set
forth in the Indenture, the Trustee, subject to Section 6.01(e), shall cooperate
in all respects with any reasonable request by the Insurer for action to
preserve or enforce the Insurer's rights or interests under this Indenture or
the Insurance and Indemnity Agreement, including a request to take any one or
more of the following actions:
(i) institute Proceedings for the collection of all amounts
then payable on the Notes, or under this Indenture in respect to
Notes and all amounts payable under the Insurance and Indemnity
Agreement, enforce any judgment obtained and collect from the Issuer
moneys adjudged due;
(ii) if an Event of Default shall have occurred and be
continuing and the Notes have been declared due and payable and such
action and its consequences have not been rescinded and annulled,
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;
(iii) file or record all Assignments that have not previously
been recorded;
(iv) if an Event of Default shall have occurred and be
continuing and the Notes have been declared due and payable and such
action and its consequences have not been rescinded and annulled,
institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture; and
(v) 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 Insurer hereunder.
In the event the Insurer requests the Trustee to take any of the
foregoing actions to protect the Insurer's rights or interests under the
Indenture, the Insurer shall be required to pay all reasonable fees and expenses
incurred by the Trustee in taking such actions to the extent moneys are not
available from the Issuer or the Trust Estate for such purpose and the Trustee
shall be indemnified by the Insurer against any loss, liability or expense
arising out of or in connection with any such actions.
<PAGE>
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 Indenture 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 Notes and such default shall
continue for a period of 30 days or (iv) there shall occur a failure
to pay the Current Principal Amount of any of the Notes on the
Indenture Maturity Date;
(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 representing at least 40% of the Aggregate Current
Principal Amount of the Outstanding Notes, 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.
Section 5.02. Acceleration of Maturity; Rescission and
Annulment.
Prior to the Indenture Maturity Date, if an Event of Default occurs
and is continuing, then and in every such case, the Insurer, if the Insurer is
the Controlling Party, or if the Insurer is not the Controlling Party, the
Trustee or the Holders of Notes representing not less than 40% of the Aggregate
Current Principal Amount of the Outstanding Notes 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 Insurer or 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, (i) 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, and (ii) the Trustee shall promptly notify
the Noteholders of the commencement of any of the events or proceedings
(individually, an "Insolvency Proceeding") described in Section 5.01(4) or (5)
hereof with respect to the Issuer and 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 Claim is expressly limited to such matters of which a
Responsible Officer of 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, all matters relating to any
Preference Claim, any appeal of any order relating to any Preference Claim and
the posting of any surety, supersedeas or performance bond pending any such
appeal.
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 Insurer, or if the Insurer is no longer the Controlling Party, the Holders
of Notes representing more than 50% of the Aggregate Current Principal Amount of
the Outstanding Notes 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, upon demand of the Controlling Party, pay to the
Trustee for the benefit of the Holders of the Notes and the Insurer:
(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 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 Note Interest Rate; 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 Note Interest Rate for the Notes, on the
Aggregate Current Principal Amount and interest to the date of
such declaration at the Note Interest Rate, on any installment
of interest on such Notes that was not paid when due, but only
to the extent that payment of such interest on interest shall
be legally enforceable 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 Aggregate Current Principal Amount of all Notes
and on any installment of interest on such Notes that was not
paid when due, but only to the extent that payment of such
interest on interest shall be legally enforceable; and
(3)...in addition thereto, all amounts owing to the Insurer under
the Insurance and Indemnity Agreement and 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 (1) 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.
If an Event of Default occurs and is continuing, the Controlling
Party may in its discretion instruct the Trustee to proceed to protect and
enforce its rights and the rights of the Noteholders and the Insurer by such
appropriate Proceedings as the Controlling Party 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 Trustee 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 Controlling Party may
instruct the Trustee (subject to Sections 5.02, 5.05 and 5.18, to the extent
applicable) to 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, the Insurer or the Holders of the Notes
hereunder.
In the event the Insurer requests the Trustee to take any of the
foregoing actions to protect the Insurer's rights or interests under the
Indenture, the Insurer shall be required to pay all reasonable fees and expenses
incurred by the Trustee in taking such actions to the extent moneys are not
available from the Issuer or the Trust Estate for such purpose and the Trustee
shall be indemnified by the Insurer 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 Controlling Party may instruct the Trustee to 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, including reimbursement of the Insurer 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) if the Insurer is no longer the Controlling Party all 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 and under the Insurance and Indemnity
Agreement 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;
(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.
(b)...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 first to payment of Issuer Expenses that consist of the fees and
expenses of, and other amounts payable to, the Owner Trustee, the Trustee and
the Successor Servicer, and the Servicing Fee and then pursuant to Section
8.02(c) 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 or the
Controlling Party determines not to take the action specified in said subsection
(a), then all amounts collected by the Trustee pursuant to this Section 5.05 or
otherwise shall be applied in accordance with Section 5.08.
Section 5.06. Trustee May File Proofs of Claim.
(a)...So long as the Insurer is the Controlling Party, the Trustee
shall promptly notify the Insurer of (i) the commencement of any of the events
or proceedings (individually, an "Insolvency Proceeding") described in Section
5.01(5) hereof with respect to the Issuer (and without regard to any Insurer
Default) 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 Insurer of any Insolvency Proceeding or
Preference Claims is expressly limited to such matters of which a Responsible
Officer of the Trustee has actual knowledge. The Trustee, on its behalf and on
behalf of the Holders, shall appoint the Insurer as agent and attorney-in-fact
for the Trustee and each such Holder in any legal proceeding with respect to the
Notes. So long as no Insurer Default shall have occurred and be continuing, each
Holder, by its purchase of Notes, and the Trustee hereby agree that the Insurer
may, at any time during the continuation of an Insolvency Proceeding, direct all
matters relating to such Insolvency Proceeding, including, without limitation,
(i) all matters relating to any Preference Claim, (ii) the direction of any
appeal of any order relating to any Preference Claim and (iii) the posting of
any surety, supersedeas or performance bond pending any such appeal and the
Insurer shall be subrogated to, 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 Controlling Party may instruct the Trustee, and the Trustee (irrespective of
whether the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Controlling Party shall
have instructed the Trustee to make any demand on the Issuer for the payment of
any overdue principal or interest) 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), the Insurer 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 the Insurer and
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 Insurer or
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 the Insurer or 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 the Insurer or any Noteholder in
any such Proceeding.
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 and the Insurer. 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 (except that all proceeds of the Policy, if any, must be applied solely to
make payments of Insured Amounts in respect of the principal of and interest on
the Notes and may not be applied to pay any costs or expenses, liabilities or
advances of the Trustee), 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 payment of amounts then due and unpaid upon
the Outstanding Notes for:
(a) interest on the Aggregate Current Principal Amount of the
Notes to the date the Notes were declared due and payable at the
Note Interest Rate,
(b) interest on the Aggregate Current Principal Amount of the
Notes from and including the date the Notes were declared due and
payable to the date of payment thereof at the Note Interest Rate or
such lower rate at which payment of such interest shall be legally
enforceable, and
(c) interest (but only to the extent payment thereof shall be
legally enforceable) on any overdue installments of interest on the
Notes from the due date of any such installments to the date the
Notes were declared due and payable at the Note Interest Rate or
such lower rate at which payment of such interest shall be legally
enforceable, all such amounts to be paid ratably among the Notes,
without preference or priority of any kind;
Third: To the payment of the Aggregate Current Principal
Amount of the Notes, based upon their respective Current
Principal Amounts, ratably, without preference or priority of any
kind;
Fourth: To the payment to the Insurer of all amounts due to
reimburse the Insurer for draws under the Policy and with respect
to other amounts owed in connection with the Insurance and
Indemnification Agreement; and
Fifth: To the payment of the remainder, if any, to the
Issuer or any other Person legally entitled thereto.
Notwithstanding the foregoing, if the Notes have become due and
payable following an Event of Default and such declaration and its consequences
have not been rescinded or annulled, the Trustee shall continue to be required
to give notice pursuant to Section 2.09(f) if moneys are insufficient to make
required payments of principal of and interest on the Notes due on any Payment
Date (after application of any amounts received and applied as set forth in this
Section 5.08). Under those circumstances, the Insurer shall have no obligation
to make payments under the Policy except as described in Section 2.09(f) and as
provided in the Policy.
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 representing not less than 40% of the
Aggregate Current Principal Amount of the Outstanding Notes shall
have made written request to the Trustee to institute such
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 representing more than 50% of the Aggregate Current
Principal Amount of the Outstanding Notes;
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 the Insurer or any other Holders of Notes or to obtain or to seek to obtain
priority or preference over the Insurer or 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 the Insurer and all the Holders of Notes.
Notwithstanding the foregoing, there shall be no restriction on the ability of
the Holders of the Notes to institute any proceedings, judicial or otherwise, to
recover due and unpaid principal and interest on the Notes.
Section 5.10. Unconditional Rights of Noteholders to Receive
Principal and Interest.
To the extent permitted by applicable law, the Holder of any Note
shall have the right, 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 except as otherwise set forth in this
Indenture, such right shall not be impaired without the consent of such Holder.
Section 5.11. Restoration of Rights and Remedies.
If the Controlling Party, 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, to the Controlling Party or to such
Noteholder, then and in every such case the Issuer, the Controlling Party, 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 Controlling Party, 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
Controlling Party, 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 Controlling Party, 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 Controlling Party, the Trustee or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Controlling Party, the Trustee or by the Noteholders, as the
case may be.
Section 5.14. Control by the Insurer or Noteholders.
If the Insurer is the Controlling Party, the Insurer, or if the
Insurer is no longer the Controlling Party, the Holders of Notes representing
more than 50% of the Aggregate Current Principal Amount of the Outstanding
Notes, 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
Insurer, if it is the Controlling Party, or, if the Insurer is not
the Controlling Party, the Holders of Notes representing the
percentage of the Aggregate Current Principal Amount of the
Outstanding Notes specified in Section 5.18(b)(1) or (3), whichever
is applicable,
(3) if the Insurer is no longer the Controlling Party, and 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) if the Insurer is no longer the Controlling Party, 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.
Section 5.15. Waiver of Past Defaults.
The Insurer, if it is the Controlling Party, or the Holders of Notes
representing more than 50% of the Aggregate Current Principal Amount of the
Outstanding Notes, if the Insurer is no longer the Controlling Party, 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;
(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; or
(3) the waiver of which would materially adversely affect the
interest of the Insurer or modify its obligation under the Policy.
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 Aggregate
Current Principal Amount of the Outstanding Notes, 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.
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 Controlling Party may instruct
the Trustee from time to time to postpone any public Sale by public announcement
made at the time and place of such Sale. To the fullest extent permitted by law,
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 or public Sale sell
the Trust Estate, or any portion thereof, unless
(1) if the Insurer is the Controlling Party, the Insurer, or
if the Insurer is no longer the Controlling Party, the Holders of
all Outstanding Notes consent to or direct the Trustee to make, such
Sale, or
(2) if the Insurer is the Controlling Party, 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, and the Insurer shall have received
all amounts due it under the Insurance and Indemnity Agreement, or
(3) if the Insurer is not the Controlling Party, 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 representing at least 66 2/3%
of the Aggregate Current Principal Amount of the Outstanding Notes
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 Insurer, if the Insurer is the Controlling Party,
or the Holders of all Outstanding Notes, if the Insurer is no longer the
Controlling Party 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 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, the
Insurer 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.
Section 5.20. Replacement of the Insurer.
If a Replacement Event occurs, then, upon payment in full of all
amounts owing to the Insurer under the Insurance and Indemnity Agreement, the
Issuer may, at its discretion, obtain a new credit enhancer to credit enhance
the Notes in substitution for the Policy. Any such new credit enhancer and the
documentation for the credit enhancement must be acceptable to the Trustee and
must not result, at the time of such substitution, in the reduction or
modification of the then-existing rating of the Notes by the Rating Agencies, as
evidenced by a letter from each Rating Agency delivered to the Trustee prior to
the effectiveness of such substitution. Upon such substitution, in accordance
with the terms hereof, the Trustee shall surrender the Policy to the Insurer for
cancellation. All fees and expenses incurred by the Trustee in connection with
such substitution shall be paid by the Issuer.
<PAGE>
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 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(2)
through 5.01(5) or any Default described in Section 5.01(2) through 5.01(5)
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 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.
(h)...The Trustee agrees not to consent or cause the filing of a
petition in bankruptcy against the Issuer as a result of any amounts due and
owing the Trustee in its capacity as trustee hereunder.
Section 6.02. Notice of Default.
Upon the occurrence of an event that would constitute an Event of
Default but for the fact that no Insurer Default has occurred and that is known
to the Trustee, the Trustee shall, promptly give notice thereof to the Insurer.
Within 90 days after the occurrence of any Default becomes known to the Trustee,
the Trustee shall transmit by mail to all Holders of Notes as to which such
Default has occurred notice of each such Default 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(1), 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 Officer's 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,
draw on the Policy 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.
(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 or at the direction of the Insurer as provided herein.
(e)...The Trustee shall not be liable for any action it takes or
omits to take in good faith pursuant to the Indenture at the direction of either
the Insurer or Holders of Notes representing more than 50% of the Aggregate
Current Principal Amount of the Outstanding Notes, as the case may be after
notice to the Insurer and 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);
(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 Insurer and 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 Insurer and 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) and who is Independent of the Issuer and
Servicer (except that the Trustee may serve as Successor Servicer). 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). The Trustee shall have a place of
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 and the
long-term unsecured debt obligations of which are rated at least "A1" by Moody's
and the short-term unsecured debt obligations of which are rated at least "A-1"
by S&P. 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. Any
successor trustee appointed hereunder is subject to the approval of the Insurer
so long as the Insurer is the Controlling Party, such approval not to be
unreasonably withheld or delayed.
(b)...The Trustee may resign at any time by giving written notice
thereof to the Issuer and to the Insurer. 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
the Insurer, so long as the Insurer is the Controlling Party, or in the event
that the Insurer is no longer the Controlling Party, by Act of the Holders of
Notes representing more than 50% of the Aggregate Current Principal Amount of
the Outstanding Notes, 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 Insurer, so long as it is the Controlling Party,
may remove the Trustee, (ii) the Issuer by an Issuer Order may remove the
Trustee, or (iii) 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, with the consent of the Insurer if the Insurer is the Controlling
Party, by an Issuer Order shall promptly appoint a successor Trustee. If within
one year after such resignation, removal or incapability or the occurrence of
such vacancy, a successor Trustee has not been appointed by the Issuer, then a
successor trustee may be appointed by the Insurer, if the Insurer is the
Controlling Party, or if the Insurer elects not to act or is no longer the
Controlling Party, a successor trustee shall be appointed by Act of the Holders
of Notes representing more than 50% of Aggregate Current Principal Amount of the
Outstanding Notes 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, the Insurer 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, the Insurer 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, the Insurer 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, the Insurer 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 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 in
TIA ss. 311(a).
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, the Insurer or of the
Holders of Notes representing more than 50% of the Aggregate Current Principal
Amount of the Outstanding Notes, 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 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
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.
<PAGE>
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Trustee and Insurer Names and
Addresses of Noteholders.
(a)...The Issuer will furnish or cause to be furnished to the
Trustee and the Insurer (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 Insurer
or 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 and the Trustee shall provide such list
to the Insurer at the times referred to above.
(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.
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 TIAss.312(c).
Section 7.03. Reports by Trustee.
(a)...(1) 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)) and the Insurer 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 and the Insurer 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)(3), 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 and the Insurer 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).
<PAGE>
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 representing more
than 50% of the then Aggregate Current Principal Amount of the Outstanding Notes
or the Insurer 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") in the name of the Trustee on behalf of the
Noteholders 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 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 Available Funds for such
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 in the following order of priority:
first, to the holders of the Notes, in an amount up to the
Interest Accrual Amount;
second, to the holders of the Notes, in an amount equal to all
amounts remaining after distribution in accordance with clause first
above up to the Optimal Principal Amount;
third, to the payment to the Insurer of all amounts due to
reimburse the Insurer for draws under the Policy and with respect to
other amounts owed in connection with the Insurance and Indemnity
Agreement; and
fourth, 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 the amounts applied
pursuant to subclauses first, second, third and fourth in this
Section 8.02(c) for such Payment Date, each such amount being the
amount thereof set forth in the applicable 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 (or, in the case of fees payable to
the Servicer, in accordance with the Servicing Agreement) 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
Collection 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 has been paid or provided for as provided in Section 4.01
and no amounts are due and owing to the Insurer under the Insurance and
Indemnity Agreement, 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. Policy Payment Account.
On or before the Closing Date, the Issuer shall open, at the
Corporate Trust Office, a separate, special purpose trust account for the
benefit of the Noteholders which shall be the "Policy Payment Account" and over
which the Trustee shall have exclusive control and sole right of withdrawal. Any
amounts received by the Trustee which are paid under the Policy together with
any Eligible Investments in which such moneys are or will be invested or
reinvested, shall be held by the Trustee in the Policy Payment Account as part
of the Trust Estate. Funds in the Policy Payment Account may only be invested in
Eligible Investments included in clause (a)(i) of the definition of Eligible
Investments. On any Payment Date on which funds are on deposit in the Policy
Payment Account, such funds shall be withdrawn by the Trustee and applied to the
payments of principal of and interest on the Notes required to be paid on such
Payment Date.
Section 8.04. General Provisions Regarding the Collection
Account and the Policy Payment Account.
(a)...The Collection Account and Policy Payment Account (herein
referred to as "Pledged Accounts or Funds") shall relate solely to the Notes and
to the Accounts, Eligible Investments and other property securing the Notes.
Funds and other property in any Pledged 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 a Pledged Account or Fund 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
such Pledged Account or Fund.
(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 a Pledged Account or Fund and all
sales of investments held in a Pledged Account or Fund 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 8.04(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 a Pledged Account or Fund
(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 a Pledged Account or Fund 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 8.04(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 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 each Pledged Account or
Fund 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 8.05. Reports by Trustee to Noteholders.
On each Payment Date the Trustee shall deliver to the Noteholders
and the Insurer a written report based upon the Payment Date Statement for such
Payment Date as reviewed by a firm of Independent Accountants pursuant to
Section 8.07(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 8.06. 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, the Insurer and the Independent Accountants
appointed pursuant to Section 8.07, within two Business Days after the request
of the Issuer, the Insurer or such Independent Accountants, a written report
setting forth the amount of each Pledged Account or Fund 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
or the Insurer, promptly transmit to the Issuer or the Insurer copies of all
accountings of, and information with respect to, Remittances furnished it by the
Servicer and shall promptly notify the Issuer or the Insurer 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 8.07. 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 8.07(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 8.07(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 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(e).
(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(e).
Section 8.08. Reports by the Servicer.
In the Servicing Agreement the Servicer has agreed to deliver to the
Trustee and the Insurer at the time specified therein the information called for
by Section 3.01(a) of the Servicing Agreement.
<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures without Consent of
Noteholders.
Without the consent of the Holders of any Notes and, so long as an
Insurer Default shall not have occurred and be continuing, with the written
consent of the Insurer, and with notice to Moody's and S&P, the Insurer, 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 and the Insurer 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 and the Insurer, or to surrender any right
or power herein conferred upon the Issuer;
(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 representing not less than
50% of the Aggregate Current Principal Amount of all Outstanding Notes, by Act
of said Holders delivered to the Issuer and the Trustee, the Issuer, when
authorized by an Issuer Order, and the Trustee may, so long as an Insurer
Default shall not have occurred and be continuing, with the written consent of
the Insurer, 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 Aggregate Current Principal
Amount of the Outstanding Notes, the consent of the Holders of which
is required for any such supplemental indenture, or the consent of
the Holders of which is required for any waiver of compliance with
provisions of this Indenture or Defaults hereunder and their
consequences provided for in this Indenture;
(3) modify any of the provisions of this Section 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";
(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.
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.
<PAGE>
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 (i)
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date the Aggregate Current Principal Amount
of the Notes outstanding equals 10% or less of the initial principal amount of
the Notes and (ii) any amount due and owing the Insurer under the Insurance and
Indemnity Agreement shall have been paid on or before the Redemption Date.
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 Insurer and 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:
(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.
<PAGE>
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 Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
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;
(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 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.
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 230 South Tryon Street,
Charlotte, North Carolina 28288-1179, Attention: Corporate Trust
Department with a copy sent to First Union Corporation, Legal
Division, One First Union Center, NC-0013 Charlotte, North Carolina
28288-0013, Attention: General Counsel, 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 c/o Wilmington
Trust Company, as Owner Trustee, Corporate Financial Services
Division, Rodney Square North, Wilmington, Delaware 19890,
Attention: Corporate Trust Administration, or at any other address
previously furnished in writing to the Trustee by the Issuer, or
(3) the Insurer by the Issuer or the Trustee or by any
Noteholder shall be sufficient for every purpose hereunder (except
as provided in 5.01(3) and (4)) if in writing and mailed, by
registered mail, or personally delivered or telecopied to the
Insurer addressed to it at AMBAC Assurance Corporation, One State
Street Plaza, New York, New York 10004, Attention: Structured
Finance Department - MBS, Consumer Structured Finance, or at any
other address previously furnished in writing to the Trustee and the
Issuer by the Insurer.
(b)...Notices required under this Indenture to be sent to
Noteholders or the Insurer 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, and to S&P at its address at 25
Broadway, New York, New York.
NOTICES REQUIRED TO BE SENT BY THE TRUSTEE TO THE NOTEHOLDER SHALL
ALSO BE SENT BY THE TRUSTEE TO THE INSURER.
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 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, or which
is deemed to be included in this Indenture (an "incorporated provision") by
operation of, any of the provisions of TIA, such required provision or
incorporated 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.
The Insurer and its successors and assigns shall be a third party
beneficiary to the provisions of this 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, the
Noteholders and the Insurer 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 or is proposed to
be paid shall not be a Business Day, then (notwithstanding any other provision
of the Notes or this Indenture) payment need not be made on such date, but may
be made on the next succeeding Business Day with the same force and effect as if
made on the nominal date of any such Payment Date, Redemption Date or other date
for the payment of principal of or interest on any Note, and no interest shall
accrue for the period from and after any such nominal date, provided such
payment is made in full on such next succeeding Business Day.
Section 11.13. Governing Law.
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(m) 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 the Insurer and the
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 the
Insurer, and to discuss its affairs, finances and accounts with its officers,
employees and Independent Accountants (and by this provision 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
or the Insurer of any right under this Section 11.17 shall be borne by the
Issuer.
<PAGE>
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 to be hereunto affixed, all as of the day and year first above written
MID-STATE TRUST VII
By: Wilmington Trust Company, not in its
individual capacity, but solely as
Owner Trustee of Mid-State Trust VII
By______________________________
Authorized Officer
FIRST UNION NATIONAL BANK,
as Trustee
By__________________________
Authorized Signatory
<PAGE>
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.
------------------------
Ambac Ambac Assurance Corporation
Certificate Guaranty Insurance c/o CT Corporation Systems
Policy 44 East Mifflin Street, Madison, Wisconsin
35703
Administrative Office:
One State Street Plaza, New York, New York
10004
Telephone: (212) 668-0340
Insured Obligations: $313,488,000 Policy Number: AB0217BE
Mid-State Trust VII
6.34% Asset-Backed Notes
Premium:
As specified in the Insurance
Agreement
Ambac Assurance Corporation (Ambac) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations, that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by reason
of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such payments
of principal or interest shall be made only upon presentation of an instrument
of assignment in form and substance satisfactory to Ambac, transferring to Ambac
all rights under such Insured Obligations to receive the principal of an
interest on the Insured Obligation. Ambac shall be subrogated to all the
Holders' rights to payment on the Insured Obligations to the extent of the
insurance disbursements so made. Once payments of the Insured Amounts have been
made to the Trustee, Ambac shall have no further obligation hereunder in respect
of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Holder will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by Ambac for any reason, including failure to
receive payment of any premium due hereunder. The premium on this Policy is not
refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation, other than at the sole option of Ambac, nor
against any risk other than Nonpayment, including failure of the Trustee to make
any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law. Ambac hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to Ambac, to avoid payment of its obligations
under this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such terms
in the endorsement attached hereto or in the Agreement.
In witness whereof, Ambac has caused this Policy to be affixed with is corporate
seal and to be signed by its duly authorized officers in facsimile to become
effective as their original signatures and binding upon Ambac by virtue of the
countersignature of its duly authorized representative.
President Secretary
Effective Date: December 10, 1998 Authorized Representative
<PAGE>
CERTIFICATE GUARANTY INSURANCE ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy #AB0217BE December 10, 1998
issued to:
First Union National Bank
as Indenture Trustee for the Holders of
Mid-State Trust VII Asset-Backed Notes
For all purposes of this Policy, the following terms shall have the
following meanings:
"Certificate Insurance Policy" or "Policy" shall mean this Certificate
Guaranty Insurance Policy together with each and every endorsement hereto.
"Due for Payment" shall mean the Business Day immediately preceding the
Payment Date on which Insured Payments are due.
"First Payment Date" shall mean March 15, 1999.
"Holder" shall mean any person who is the registered owner or
beneficial owner of any Note.
"Indenture" shall mean the Indenture dated as of December 10, 1998
among Mid-State Trust VII, as Issuer, and First Union National Bank, as
Indenture Trustee, as such Indenture may be amended, modified or supplemented
from time to time as set forth in the Indenture.
"Indenture Trustee" shall mean First Union National Bank or its
successor-in-interest, in its capacity as trustee under the Indenture, or if any
successor trustee or any co-trustee shall be appointed as provided therein, then
"Indenture Trustee" shall also mean such successor trustee or such co-trustee,
as the case may be, subject to the provisions thereof.
"Insolvency Proceeding" means the commencement, after the date hereof,
of any bankruptcy, insolvency, readjustment or debt, reorganization, marshaling
of assets and liabilities or similar
<PAGE>
- 2 -
proceedings by or against the Indenture Trustee as debtor, or the commencement,
after the date hereof, of any proceedings by or against the Indenture Trustee as
debtor for the winding up or the liquidation of its affairs, or the consent
after the date hereof to the appointment of a trustee, conservator, receiver or
liquidator in any bankruptcy, insolvency, readjustment of debt, reorganization,
marshaling of assets and liabilities or similar proceedings relating to the
Indenture Trustee as debtor.
"Insurance Agreement" shall mean the Insurance and Indemnity
Agreement, dated as of December 10, 1998, among Mid-State Trust VII, as Issuer,
Mid-State Homes, Inc., as Depositor and Servicer, First Union National Bank, as
Indenture Trustee and Ambac Assurance Corporation, as Insurer, as such Indenture
may be amended, modified or supplemented from time to time.
"Insured Amounts" shall mean, with respect to any Payment Date, the
Deficiency Amount for such Payment Date.
"Insured Payments" shall mean, with respect to any Payment Date, the
aggregate amount actually paid by the Insurer to the Indenture Trustee in
respect of (i) Insured Amounts for such Payment Date and (ii) Preference Amounts
for any given Business Day.
"Insurer" shall mean Ambac Assurance Corporation, or any successor
thereto, as issuer of the Certificate Insurance Policy.
"Late Payment Rate" shall mean for any Payment Date, the greater of (i)
the rate of interest, as it is publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
Citibank, N.A.) plus 2% and (ii) the then applicable highest rate of interest on
the Notes. The Late Payment Rate shall be computed on the basis of a year of 360
days and the actual number of days elapsed. In no event shall the Late Payment
Rate exceed the maximum rate permissible under any applicable law limiting
interest rates.
"Nonpayment" shall mean, with respect to any Payment Date, a Insured
Payment, owing in respect of such Payment Date.
"Notice" shall mean the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A to the
Policy, the original of which is subsequently delivered by registered or
certified mail, from the Indenture Trustee specifying the amount of any Insured
Payment which shall be due and owing on the applicable Payment Date.
"Payment Date" shall mean each March 15, June 15, September 15 and
December 15 (or if such day is not a Business Day, the first Business Day
immediately following) beginning with the First Payment Date.
"Preference Amount" means any payment of principal or interest on a
Note which has become Due for Payment and which is made to a Holder by or on
behalf of the Indenture Trustee
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which has been deemed a preferential transfer and theretofore recovered from its
Holder pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction.
"Premium Percentage" shall have the meaning set forth in the Insurance
Agreement.
"Reimbursement Amount" shall mean, as to any Payment Date, the sum of
(x) (i) all Insured Payments paid by the Insurer, but for which the Insurer has
not been reimbursed prior to such Payment Date pursuant to Section 5.1(x)(i)(C)
and (D) and 5.1(y)(i)(C) and (D) of the Indenture, plus (ii) interest accrued
thereon, calculated at the Late Payment Rate from the date the Trustee received
the related Insured Payments, and (y) without duplication (i) any amounts then
due and owing to the Insurer under the Insurance Agreement plus (ii) interest on
such amounts at the Late Payment Rate.
Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Indenture.
As provided by the Policy, the Insurer will pay any amount payable
hereunder no later than 12:00 noon, New York City time, on the later of the
Payment Date on which the related Insured Payment is due or the third Business
Day following receipt in New York, New York on a Business Day by the Insurer of
a Notice; provided that, if such Notice is received after 12:00 noon, New York
City time, on such Business Day, it will be deemed to be received on the
following Business Day. If any such Notice is not in proper form or is otherwise
insufficient for the purpose of making a claim under the Policy, it shall be
deemed not to have been received for purposes of this paragraph, and the Insurer
shall promptly so advise the Indenture Trustee and the Indenture Trustee may
submit an amended Notice.
The Insurer shall pay any Preference Amount when due to be paid
pursuant to the Order referred to below, but in any event no earlier than the
third Business Day following receipt by the Insurer of (i) a certified copy of a
final, non-appealable order of a court or other body exercising jurisdiction in
such Insolvency Proceeding to the effect that the Holder is required to return
such Preference Amount paid during the term of this Policy because such payments
were avoided as a preferential transfer or otherwise rescinded or required to be
restored by the Holder (the "Order"), (ii) a certificate by or on behalf of the
Holder that the Order has been entered and is not subject to any stay, (iii) an
assignment, in form and substance satisfactory to the Insurer, duly executed and
delivered by the Holder, irrevocably assigning to the Insurer all rights and
claims of the Holder relating to or arising under the Indenture against the
estate of the Indenture Trustee or otherwise with respect to such Preference
Amount and (iv) a Notice of Nonpayment appropriately completed and executed by
the Holder. Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, and not to the
Holder directly, unless the Holder has made a payment of the Preference Amount
to the court or such receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case the Insurer will pay the Holder,
subject to the delivery of (a) the items referred to in clauses (i), (ii), (iii)
and (iv) above
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to the Insurer and (b) evidence satisfactory to the Insurer that payment has
been made to such court or receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order.
The Insurer hereby agrees that if it shall be subrogated to the rights
of Holders by virtue of any previous payment under this Policy, no recovery of
such payment will occur unless the full amount of the Holders' allocable
distributions for such Payment Date can be made. In so doing, the Insurer does
not waive its rights to seek full payment of all Reimbursement Amounts owed to
it under the Indenture.
The terms and provisions of the Indenture constitute the instrument of
assignment referred to in the second paragraph of the face of this Policy.
A premium will be payable on this Policy on each Payment Date as
provided in Section 8.02 of the Indenture, beginning with the First Payment
Date, in an amount equal to the Premium.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy to which this Endorsement is attached and of which it forms
a part is hereby amended to provide that there shall be no acceleration payment
due under the Policy unless such acceleration is at the sole option of the
Insurer.
Nothing herein contained shall be held to vary, alter, waive or extend
any of the terms, conditions, provisions, agreements or limitations of the above
mentioned Policy other than as above stated.
This Policy is issued under and pursuant to, and shall be construed
under, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Ambac Assurance Corporation has caused this
Endorsement to the Policy to be signed by its duly authorized officers.
- ----------------------------- ---------------------------------
Vice President Assistant Secretary
<PAGE>
A-1
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
--------------------------------------------
Policy No. AB0217BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED PAYMENTS
Date: [ ]
AMBAC ASSURANCE CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. AB0217BE
(the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Indenture Trustee hereby certifies as follows:
1. The Indenture Trustee is the Indenture Trustee under the Indenture for the
Holders.
2. The relevant Payment Date is [date].
3. Payment on the Notes in respect of the Payment Date is due
to be received on __________________________________ under
the Indenture, in an amount equal to $_________________.
4. There is an Insured Payment of $_________________ in
respect of the Notes, which amount is an Insured Payment
pursuant to the terms of the Indenture.
5. The sum of $____________________ is the Insured Payment that
is Due For Payment.
6. The Indenture Trustee has not heretofore made a demand for
the Insured Payment in respect of the Payment Date.
7. The Indenture Trustee hereby requests the payment of the
Insured Payment that is Due For Payment be made by Ambac
under the Policy and directs
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A-2
that payment under the Policy be made to the following
account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of
the Policy to: ______________________________________
Indenture Trustee's account number.
8. The Indenture Trustee hereby agrees that, following receipt
of the Insured Payment from Ambac, it shall (a) hold such
amounts in trust and apply the same directly to the
distribution of payment on the Notes when due; (b) not apply
such funds for any other purpose; (c) deposit such funds to
the Note Account and (d) maintain an accurate record of such
payments with respect to each Note and the corresponding
claim on the Policy and proceeds thereof.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
By:______________________________
Indenture Trustee
Title:___________________________
(Officer)
