<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
COMMISSION FILE NO. 1-7797
------------
PHH CORPORATION
(Exact name of Registrant as specified in its charter)
MARYLAND 52-0551284
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
6 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
(Address of principal executive (Zip Code)
office)
(973) 428-9700
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if applicable)
------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ]
The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is, therefore, filing this Form with the reduced disclosure
format.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
NET REVENUES
Service fees:
Relocation services (net of interest costs of $5 and $6) $ 91 $ 91
Mortgage services (net of amortization of mortgage servicing
rights and interest costs of $45 and $61) 77 93
------------- -------------
Service fees, net 168 184
Other 7 2
------------- -------------
Net revenues 175 186
------------- -------------
EXPENSES
Operating 117 103
General and administrative 21 25
Depreciation and amortization 10 8
Other unusual charges 2 -
------------- -------------
Total expenses 150 136
------------- -------------
INCOME BEFORE INCOME TAXES 25 50
Provision for income taxes 10 18
------------- -------------
INCOME FROM CONTINUING OPERATIONS 15 32
Income from discontinued operations, net of tax - 22
------------- -------------
NET INCOME $ 15 $ 54
============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
1
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------- -------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 42 $ 80
Accounts and notes receivable, net 534 566
Property and equipment, net 162 167
Investment in convertible preferred stock 374 369
Other assets 342 379
------------- -------------
Total assets exclusive of assets under programs 1,454 1,561
------------- -------------
Assets under management and mortgage programs
Mortgage loans held for sale 1,226 1,112
Mortgage servicing rights 1,196 1,084
Relocation receivables 522 530
------------- -------------
2,944 2,726
------------- -------------
TOTAL ASSETS $ 4,398 $ 4,287
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 510 $ 447
Deferred income 35 32
------------- -------------
Total liabilities exclusive of liabilities under programs 545 479
------------- -------------
Liabilities under management and mortgage programs
Debt 2,341 2,314
Deferred income taxes 312 310
------------- -------------
2,653 2,624
------------- -------------
Commitments and contingencies (Note 6)
Stockholder's equity
Preferred stock - authorized 3,000,000 shares; none issued and outstanding - -
Common stock, no par value - authorized 75,000,000 shares; issued and
outstanding 1,000 shares 512 512
Retained earnings 690 674
Accumulated other comprehensive loss (2) (2)
------------- -------------
Total stockholder's equity 1,200 1,184
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,398 $ 4,287
============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 15 $ 54
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations, net of tax - (22)
Depreciation and amortization 10 8
Other, net 87 (31)
------------- -------------
112 9
Management and mortgage programs:
Depreciation and amortization 27 30
Origination of mortgage loans (3,916) (6,819)
Proceeds on sale and payments from mortgage loans held for sale 3,802 7,280
------------- -------------
(87) 491
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS 25 500
------------- -------------
INVESTING ACTIVITIES
Property and equipment additions (6) (13)
Other, net (16) (4)
------------- -------------
(22) (17)
Management and mortgage programs:
Equity advances on homes under management (1,619) (1,462)
Repayment on advances on homes under management 1,655 1,501
Additions to mortgage servicing rights (139) (183)
Proceeds from sales of mortgage servicing rights 35 57
------------- -------------
(68) (87)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES FROM CONTINUING OPERATIONS (90) (104)
------------- -------------
FINANCING ACTIVITIES
Other, net (1) 14
Management and mortgage programs:
Proceeds from debt issuance or borrowings 777 1,821
Principal payments on borrowings (1,421) (1,939)
Net change in short-term borrowings 672 (334)
Net change in fundings to discontinued operations - 67
------------- -------------
28 (385)
------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES FROM CONTINUING OPERATIONS 27 (371)
------------- -------------
Effect of changes in exchange rates on cash and cash equivalents - (21)
Cash used in discontinued operations - (187)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (38) (183)
Cash and cash equivalents, beginning of period 80 281
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 42 $ 98
============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNLESS OTHERWISE NOTED, ALL AMOUNTS ARE IN MILLIONS)
1. BASIS OF PRESENTATION
The accompanying unaudited Consolidated Condensed Financial Statements
include the accounts of PHH Corporation and its wholly owned subsidiaries
(collectively, the "Company"). The Company is a wholly owned subsidiary
of Cendant Corporation ("Cendant" or the "Parent Company"). Pursuant to
certain covenant requirements in the indentures under which the Company
issues debt, the Company continues to operate and maintain its status as
a separate public reporting entity, which is the basis under which the
accompanying Consolidated Condensed Financial Statements and Notes
thereto are presented.
In management's opinion, the Consolidated Condensed Financial Statements
contain all normal recurring adjustments necessary for a fair
presentation of interim results reported. In addition, management is
required to make estimates and assumptions that affect the amounts
reported and related disclosures. Estimates, by their nature, are based
on judgment and available information. Accordingly, actual results could
differ from those estimates. These Consolidated Condensed Financial
Statements should be read in conjunction with the Company's Annual Report
on Form 10-K for the year ended December 31, 1999.
Certain reclassifications have been made to prior period amounts to
conform to the current period presentation.
The results of operations reported for interim periods are not
necessarily indicative of the results of operations for the entire year
or any subsequent interim periods.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 137 defers the
effective date of SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," issued in June 1998, to fiscal years commencing
after June 15, 2000. Completion of the Company's implementation plan and
determination of the impact of adopting SFAS No. 133 is expected by the
fourth quarter of 2000. The Company will adopt SFAS No. 133 on January 1,
2001, as required.
3. COMPREHENSIVE INCOME
The components of comprehensive income are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Net income $ 15 $ 54
Other comprehensive income (loss):
Currency translation adjustment (1) (22)
Unrealized holding gain (loss) on marketable securities, net of tax 1 (2)
------------- -------------
Total comprehensive income $ 15 $ 30
============= =============
</TABLE>
4
<PAGE>
The after tax components of accumulated other comprehensive loss for the
three months ended March 31, 2000 are as follows:
<TABLE>
<CAPTION>
UNREALIZED ACCUMULATED
CURRENCY GAIN (LOSS) ON OTHER
TRANSLATION MARKETABLE COMPREHENSIVE
ADJUSTMENT SECURITIES LOSS
---------- ---------- ----
<S> <C> <C> <C> <C>
Balance, January 1, 2000 $ (1) $ (1) $ (2)
Current period change (1) 1 -
-------------- ------------- --------------
Balance, March 31, 2000 $ (2) $ - $ (2)
============== ============= ==============
</TABLE>
4. OTHER UNUSUAL CHARGES
In connection with a Parent Company restructuring initiative, the Company
incurred facility related charges of $2 million as a result of the
consolidation of business operations.
5. DISCONTINUED OPERATIONS
In June 1999, the Company completed the disposition of its fleet
businesses, a former segment of the Company which was classified as a
discontinued operation. The Fleet segment primarily provided fleet and
fuel card related products and services to corporate clients and
government agencies. Summarized financial data of discontinued operations
for the three months ended March 31, 1999, were as follows:
Net revenues $ 100
=============
Income before income taxes 31
Provision for income taxes 9
-------------
Net income $ 22
=============
The fleet businesses disposition was structured as a tax-free
reorganization and, accordingly, no tax provision has been recorded on a
majority of the gain. However, pursuant to a recent interpretive ruling,
the Internal Revenue Service ("IRS") has taken the position that
similarly structured transactions do not qualify as tax-free
reorganizations under the Internal Revenue Code Section 368(a)(1)(A). If
the transaction is not considered a tax-free reorganization, the
resultant incremental liability could range between $10 million and $170
million depending upon certain factors including utilization of tax
attributes and contractual indemnification provisions. Notwithstanding
the IRS interpretive ruling, the Company believes that, based upon
analysis of current tax law, its position would prevail, if challenged.
6. COMMITMENTS AND CONTINGENCIES
Parent Company Class Action Litigation and Government Irregularities.
Since the April 15, 1998 announcement by Cendant of the discovery of
accounting irregularities in former CUC International Inc. ("CUC")
business units of Cendant, approximately 70 lawsuits claiming to be class
actions, two lawsuits claiming to be brought derivatively on Cendant's
behalf and several individual lawsuits and arbitration proceedings have
commenced in various courts and other forums against Cendant and other
defendants by or on behalf of persons claiming to have purchased or
otherwise acquired securities or options issued by CUC or Cendant between
May 1995 and August 1998.
The Securities and Exchange Commission ("SEC") and the United States
Attorney for the District of New Jersey are also conducting
investigations relating to the matters referenced above. The SEC advised
Cendant that its inquiry should not be construed as an indication by the
SEC or its staff that any violations of law have occurred. As a result of
the findings from Cendant's internal investigations, Cendant made all
adjustments considered necessary. Although Cendant can provide no
assurances that additional adjustments will not be necessary as a result
of these government investigations, Cendant does not expect that
additional adjustments will be necessary.
5
<PAGE>
On December 7, 1999, Cendant announced that it reached a preliminary
agreement to settle the principal securities class action pending against
Cendant in the U.S. District Court in Newark, New Jersey brought on
behalf of purchasers of all Cendant and CUC publicly traded securities
between May 1995 and August 1998. Under the agreement, Cendant would pay
the class members approximately $2.85 billion in cash. The settlement
remains subject to approval by the court. If the settlement is not
approved by the court, Cendant can make no assurances that the final
outcome or settlement of such proceedings will not be for an amount
greater than that set forth in the preliminary agreement.
The proposed settlements do not encompass all litigation-asserting claims
associated with Cendant's accounting irregularities. Cendant does not
believe that it is feasible to predict or determine the final outcome or
resolution of these unresolved proceedings. The Company does not believe
that the impact of such unresolved proceedings would be material to its
consolidated financial position or liquidity.
Other pending litigation. The Company and its subsidiaries are involved
in pending litigation in the usual course of business. In the opinion of
management, such other litigation will not have a material adverse effect
on the Company's consolidated financial position, results of operations
or cash flows.
7. SEGMENT INFORMATION
Management evaluates each segment's performance based upon a modified
earnings before interest, income taxes, and depreciation and amortization
calculation. For this purpose, Adjusted EBITDA is defined as earnings
before non-operating interest, income taxes, and depreciation and
amortization (exclusive of depreciation and amortization on assets under
management and mortgage programs), adjusted to exclude items which are of
a non-recurring or unusual nature and are not measured in assessing
segment performance or are not segment specific.
SEGMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------
2000 1999
------------------------- -------------------------
ADJUSTED ADJUSTED
REVENUES EBITDA REVENUES EBITDA
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Relocation $ 91 $ 18 $ 91 $ 18
Mortgage 77 12 93 44
Other 7 7 2 (4)
---------- ---------- ---------- ----------
Total $ 175 $ 37 $ 186 $ 58
========== ========== ========== ==========
</TABLE>
Provided below is a reconciliation of total Adjusted EBITDA for
reportable operating segments to income before income taxes.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Adjusted EBITDA for reportable segments $ 37 $ 58
Depreciation and amortization 10 8
Other unusual charges 2 -
------------- -------------
Income before income taxes $ 25 $ 50
============= =============
</TABLE>
8. SUBSEQUENT EVENT
On April 25, 2000, the Company's relocation subsidiary entered into a
financing agreement with Apple Ridge Funding LLC ("Apple Ridge"), a
bankruptcy remote, special purpose entity. Under the terms of the
agreement, certain relocation receivables will be transferred for cash,
on a revolving basis, to Apple Ridge until January 31, 2005. On April 25,
2000, the Company received $400 million for receivables transferred to
Apple Ridge. The Company retains a subordinated residual interest and the
related servicing rights in the relocation receivables.
6
<PAGE>
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS AND
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
We are a leading provider of mortgage and relocation services and a wholly owned
subsidiary of Cendant Corporation ("Cendant" or the "Parent Company"). Pursuant
to certain covenant requirements in the indentures under which we issue debt, we
continue to operate and maintain our status as a separate public reporting
entity.
RESULTS OF CONSOLIDATED OPERATIONS
The following discussion should be read in conjunction with the information
contained in our Consolidated Condensed Financial Statements and accompanying
Notes thereto appearing elsewhere herein.
Revenues decreased $11 million (6%) to $175 million in 2000 from $186 million in
1999. In addition, Adjusted EBITDA decreased $21 million (36%) to $37 million in
2000 from $58 million in 1999. The Adjusted EBITDA margin in 2000 was 21%, which
represents a decrease of 10 percentage points compared to 1999. Net income
decreased $39 million (72%) in first quarter 2000 compared with first quarter
1999 due to $22 million of income from discontinued operations in 1999 and to
net revenue decreases in our Mortgage segment (see discussion below).
The underlying discussion of each segment's operating results focuses on
Adjusted EBITDA, which is defined as earnings before non-operating interest,
income taxes and depreciation and amortization (exclusive of depreciation and
amortization on assets under management and mortgage programs), adjusted to
exclude items which are of a non-recurring or unusual nature and are not
measured in assessing segment performance or are not segment specific. Our
management believes such discussion is the most informative representation of
how management evaluates performance. However, our presentation of Adjusted
EBITDA may not be comparable with similar measures used by other companies.
RELOCATION
Revenues, Adjusted EBITDA and the Adjusted EBITDA margin remained unchanged in
first quarter 2000 compared with first quarter 1999. An increase in revenues
from fee-based services, referral fees and international services offset a
reduction in corporate and government home sale revenue, reflecting a continuing
trend from asset-based to service-based fees.
MORTGAGE
Revenues and Adjusted EBITDA decreased $16 million (17%) and $32 million (73%),
respectively, in first quarter 2000 compared with first quarter 1999. Revenues
from mortgage loans closed declined $18 million, partially offset by a $2
million increase in loan servicing revenues. The average servicing portfolio
grew $6.6 billion (14%). Mortgage loan closings for the quarter were $3.8
billion, consisting of $3.5 billion in purchase mortgages and $0.3 billion in
refinancing mortgages. Total loans closed declined by $2.9 billion (43%),
primarily because of a $2.8 billion reduction in mortgage refinancing volume.
Purchase mortgage closings in our teleservices business ("Phone-In, Move-In")
amounted to $2.4 billion first quarter 2000 (6% above first quarter of 1999). We
anticipate that enhanced product offerings, particularly variable rate products
that contributed 25% of mortgage volume, will increase closing volume in future
quarters. Mortgage closings from our Internet business ("Log-In, Move-In")
amounted to $160 million in first quarter 2000 compared with $28 million in
first quarter 1999. The Adjusted EBITDA margin decreased to 16% in first quarter
2000 from 47% in first quarter 1999. The decline in Adjusted EBITDA and the
Adjusted EBITDA margin resulted from the reductions in net revenue, increased
expenses to service a larger servicing portfolio and the impact of higher
technology, infrastructure and teleservices costs incurred to support capacity
for volume anticipated in
7
<PAGE>
future periods. As anticipated, Adjusted EBITDA for first quarter 2000 was below
the prior year period; however, we continue to expect that market conditions
will improve in the second half of the year and will produce more positive
comparisons as the year progresses. We expect full year 2000 Adjusted EBITDA to
be lower than 1999.
DISCONTINUED OPERATIONS
Our fleet businesses generated revenues and net income of $100 million and $22
million, respectively, for the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
To ensure adequate funding, we maintain three sources of liquidity: ongoing
liquidation of assets under management, global capital markets, and committed
credit agreements with various domestic and international banks. In the ordinary
course of business, the liquidation of assets under management and mortgage
programs, as well as cash flows generated from operating activities, provide the
cash flow necessary for the repayment of existing liabilities. Financial
covenants are designed to ensure our self-sufficient liquidity status and
include restrictions on dividends payable to our Parent Company and loans made
to our Parent Company, limitations on the ratio of debt to equity, and other
separate financial restrictions.
Our exposure to interest rate and liquidity risk is minimized by effectively
matching floating and fixed interest rate and maturity characteristics of
funding to related assets, varying short and long-term domestic and
international funding sources, and securing available credit under committed
banking facilities.
Depending upon asset growth and financial market conditions, we utilize the
United States commercial paper markets, public and private debt markets, as well
as other cost-effective short-term instruments. Augmenting these sources, we
will continue to manage outstanding debt with the potential sale or transfer of
managed assets to third parties while retaining fee-related servicing
responsibility. At March 31, 2000, aggregate borrowings consisted of commercial
paper, medium-term notes, secured obligations, and other borrowings of $1,291
million, $660 million, $314 million and $76 million, respectively. Our secured
obligations of $314 million consisted of a 364 day financing agreement to sell
mortgage loans under an agreement to repurchase such mortgages. The agreement is
collateralized by the underlying mortgage loans held in safekeeping by the
custodian to the agreement. The total commitment under this agreement is $500
million and is renewable on an annual basis at the discretion of the lender in
accordance with the securitization agreement.
In addition, as of March 31, 2000, we had approximately $375 million available
for issuing notes under a shelf registration statement. Proceeds from future
offerings will continue to be used to finance assets we manage for our clients
and for general corporate purposes.
FINANCING AGREEMENTS
Mortgage. We maintain a revolving sales agreement, under which an unaffiliated
buyer, Bishops Gate Residential Mortgage Trust (the "Buyer"), a special purpose
entity, has committed to purchase, at our option, mortgage loans originated by
us on a daily basis, up to the Buyer's asset limit of $2.1 billion. Under the
terms of this sale agreement, we retain the servicing rights on the mortgage
loans sold to the Buyer and arrange for the sale or securitization of the
mortgage loans into the secondary market. The Buyer retains the right to select
alternative sale or securitization arrangements. At March 31, 2000, we were
servicing approximately $633 million of mortgage loans owned by the Buyer.
Relocation. On April 25, 2000, we entered into a financing agreement with Apple
Ridge Funding LLC ("Apple Ridge"), a bankruptcy remote, special purpose entity.
Under the terms of the agreement, certain relocation receivables will be
transferred for cash, on a revolving basis to Apple Ridge until January 31,
2005.
8
<PAGE>
On April 25, 2000, the Company received $400 million for receivables
transferred to Apple Ridge. We retain a subordinated residual interest and the
related servicing rights in the relocation receivables.
OTHER CREDIT FACILITIES
To provide additional financial flexibility, the Company's current policy is to
ensure that minimum committed facilities aggregate 100 percent of the average
amount of outstanding commercial paper. As of March 31, 2000, the Company
maintains $1.5 billion of unsecured committed credit facilities, which are
provided by domestic and foreign banks. The facilities consist of a $750 million
revolving credit maturing in February 2001 and a $750 million revolving credit
maturing in February 2005. We closely evaluate not only the credit of the banks
but also the terms of the various agreements to ensure ongoing availability. The
full amount of our committed facilities at March 31, 2000 was undrawn and
available. We believe that our current policy provides adequate protection
should volatility in the financial markets limit the Company's access to
commercial paper or medium-term notes funding. We continuously seek additional
sources of liquidity to accommodate our asset growth and to provide further
protection from volatility in the financial markets.
In the event that the public debt market is unable to meet our funding needs, we
believe that we have alternative sources to provide adequate liquidity,
including current and potential future secured obligations and our $1.5 billion
of revolving credit facilities.
CREDIT RATINGS
On May 10, 2000, Thomson Financial Bankwatch initiated coverage of us and
assigned ratings of A- for senior debt and TBD-1 for short-term debt. In
addition to these ratings, we have the following long-term/short-term debt
ratings: A/F1, A/D1, A-/A2, and Baal/P2 from Fitch IBCA, Duff and Phelps Credit
Rating Co., Standard and Poor's Corporation and Moody's Investor Service,
respectively.
CASH FLOWS
During first quarter 2000, we generated $25 million of cash flows from
operations, which included an $87 million net increase in management and
mortgage program ("Program") requirements. This represents a $475 million
decrease from first quarter 1999, which included a $491 million decrease in
Program requirements. The increase in cash flows from operations, excluding
Program, was attributable to increases in working capital.
We used $90 million of cash flows for investing activities during first quarter
2000, representing a $14 million decrease from first quarter 1999. This decrease
was primarily attributed to a $19 million decrease, from $87 million in 1999 to
$68 million in 2000, in our investment in Programs.
Financing activities provided $27 million in cash flow in first quarter 2000,
whereas we used $371 million in first quarter 1999, principally to reduce
liabilities under Programs.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 defers the effective date of SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities," issued in June
1998, to fiscal years commencing after June 15, 2000. Completion of our
implementation plan and determination of the impact of adopting SFAS No. 133 is
expected to be completed by the fourth quarter of 2000. We will adopt SFAS No.
133 on January 1, 2001, as required.
9
<PAGE>
FORWARD-LOOKING STATEMENTS
We make statements about our future results in this quarterly report that may
constitute "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based on our
current expectations and the current economic environment. We caution you that
these statements are not guarantees of future performance. They involve a number
of risks and uncertainties that are difficult to predict. Our actual results
could differ materially from those expressed or implied in the forward-looking
statements. Important assumptions and other important factors that could cause
our actual results to differ materially from those in the forward-looking
statements, include, but are not limited to:
o The resolution or outcome of the pending litigation and government
investigations relating to the previously announced accounting
irregularities at our Parent Company;
o Our ability to develop and implement operational and financial systems to
manage growing operations;
o Competition in our existing and potential future lines of business; and
o Our ability to obtain financing on acceptable terms to finance our growth
strategy and for us to operate within the limitations imposed by financing
arrangements.
We derive the forward-looking statements in this quarterly report from the
foregoing factors and from other factors and assumptions, and the failure of
such assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. We assume no obligation to
publicly correct or update these forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting such
forward-looking statements or if we later become aware that they are not likely
to be achieved.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As previously disclosed in our 1999 Annual Report filed on Form 10-K, we assess
our market risk based on changes in interest and foreign currency exchange rates
utilizing a sensitivity analysis. The sensitivity analysis measures the
potential loss in earnings, fair values, and cash flows based on a hypothetical
10% change (increase or decrease) in our market risk sensitive positions. We
used March 31, 2000 market rates to perform the sensitivity analysis separately
for each of our market risk exposures. The estimates assume instantaneous,
parallel shifts in interest rate yield curves and exchange rates. We have
determined, through such analyses, that the impact of a 10% change in interest
and foreign currency exchange rates and prices on our earnings, fair values and
cash flows would not be material.
11
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 - Indenture, dated April 25, 2000 by and between Apple Ridge
Funding LLC, Bank One, National Association and The Bank of New
York.
4.2 - Indenture Supplement, dated April 25, 2000 by and between Apple
Ridge Funding LLC, Bank One, National Association and The Bank of
New York.
4.3 - Purchase Agreement, dated April 25, 2000 by and between Cendant
Mobility Financial Corporation and Cendant Mobility Services
Corporation.
12 - Computation of Ratio of Earnings to Fixed Charges
27 - Financial Data Schedule (for electronic transmission only)
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PHH CORPORATION
By: /s/ Duncan H. Concroft
--------------------------------
Duncan H. Concroft
Executive Vice President and
Chief Financial Officer
By: /s/ Jon F. Danski
--------------------------------
Jon F. Danski
Executive Vice President, Finance
and Chief Accounting Officer
Date: May ___, 2000
12
<PAGE>
Exhibits
--------
Exhibit Number Exhibit
- -------------- -------
4.1 Indenture, dated April 25, 2000 by and between Apple Ridge
Funding LLC, Bank One, National Association and The Bank of
New York.
4.2 Indenture Supplement, dated April 25, 2000 by and between
Apple Ridge Funding LLC, Bank One, National Association and
The Bank of New York.
4.3 Purchase Agreement, dated April 25, 2000 by and between
Cendant Mobility Financial Corporation and Cendant Mobility
Services Corporation.
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule (for electronic transmission only)
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
MASTER INDENTURE
- --------------------------------------------------------------------------------
APPLE RIDGE FUNDING LLC
as Issuer,
BANK ONE, NATIONAL ASSOCIATION
as Indenture Trustee,
and
THE BANK OF NEW YORK
as Paying Agent, Authentication Agent and
Transfer Agent and Registrar
MASTER INDENTURE
Dated as of April 25, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions....................................................2
Section 1.02. Other Definitional Provisions.................................14
ARTICLE II
THE NOTES
Section 2.01. Form Generally................................................15
Section 2.02. Denominations.................................................15
Section 2.03. Execution, Authentication and Delivery........................15
Section 2.04. Authentication Agent..........................................16
Section 2.05. Registration of and Limitations on Transfer and Exchange
of Notes......................................................17
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes....................18
Section 2.07 Persons Deemed Owners.........................................19
Section 2.08. Paying Agent..................................................19
Section 2.09 Cancellation..................................................20
Section 2.10. New Issuances.................................................21
Section 2.11. Book-Entry Notes..............................................22
Section 2.12. Notices to Clearing Agency or Foreign Clearing Agency.........23
Section 2.13. Definitive Notes..............................................23
Section 2.14. Global Note; Euro-Note Exchange Date..........................24
Section 2.15. Representations and Covenants of Paying Agent,
Authentication Agent and Transfer Agent and Registrar.........24
ARTICLE III
REPRESENTATIONS AND COVENANTS OF THE ISSUER
Section 3.01. Representations and Warranties of the Issuer..................25
Section 3.02. Affirmative Covenants of the Issuer...........................28
Section 3.03. Negative Covenants of the Issuer..............................30
Section 3.04. Protection of Pledged Assets..................................31
Section 3.05. Opinions as to Pledged Assets.................................32
Section 3.06. Obligations Regarding Servicing of Receivables................32
Section 3.07 Separate Corporate Existence of the Issuer....................33
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TABLE OF CONTENTS
(Continued)
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of this Indenture..................34
Section 4.02. Application of Trust Money....................................35
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5.01. Events of Default.............................................36
Section 5.02. Acceleration of Maturity; Rescission and Annulment............37
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by the Indenture Trustee......................................37
Section 5.04. Remedies; Priorities..........................................39
Section 5.05. Sale of Assets................................................40
Section 5.06. Limitations on Suits..........................................41
Section 5.07. Unconditional Right of Noteholders to Receive Principal
and Interest..................................................42
Section 5.08. Restoration of Rights and Remedies............................42
Section 5.09. Rights and Remedies Cumulative................................42
Section 5.10. Delay or Omission Not a Waiver................................42
Section 5.11. Control by Noteholders........................................42
Section 5.12. Waiver of Past Defaults.......................................43
Section 5.13. Undertaking for Costs.........................................43
Section 5.14. Waiver of Stay or Extension Laws..............................44
Section 5.15. Action on Notes...............................................44
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of the Indenture Trustee...............................44
Section 6.02. Notice of Event of Default....................................46
Section 6.03. Rights of Indenture Trustee...................................46
Section 6.04. Not Responsible for Recitals or Issuance of Notes.............47
Section 6.05. May Hold Notes................................................48
Section 6.06. Money Held in Trust...........................................48
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TABLE OF CONTENTS
(Continued)
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Section 6.07. Compensation, Reimbursement and Indemnification...............48
Section 6.08. Replacement of Indenture Trustee..............................49
Section 6.09. Successor Indenture Trustee by Merger.........................49
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.............................................50
Section 6.11. Eligibility; Disqualification.................................51
Section 6.12. Representations and Covenants of the Indenture Trustee........51
Section 6.13. Custody of Pledged Assets and Other Collateral................51
ARTICLE VII
NOTEHOLDERS' LIST AND REPORTS BY INDENTURE TRUSTEE
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders................................................52
Section 7.02. Preservation of Information...................................52
ARTICLE VIII
ALLOCATION AND APPLICATION OF POOL COLLECTIONS
Section 8.01. Collection of Money...........................................53
Section 8.02. Rights of Noteholders.........................................53
Section 8.03. Establishment of Accounts.....................................53
Section 8.04. Pool Collections and Allocations..............................54
Section 8.05. Release of Pledged Assets.....................................55
Section 8.06. Officer's Certificate.........................................55
Section 8.07. Money for Note Payments to Be Held in Trust...................55
ARTICLE IX
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures Without Consent of Noteholders........56
Section 10.02. Supplemental Indentures with Consent of Noteholders...........58
Section 10.03. Execution of Supplemental Indentures..........................59
Section 10.04. Effect of Supplemental Indenture..............................59
Section 10.05. Reference in Notes to Supplemental Indentures.................59
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TABLE OF CONTENTS
(Continued)
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ARTICLE XI
DEFEASANCE
Section 11.01. Defeasance....................................................60
ARTICLE XII
MISCELLANEOUS
Section 12.01. Compliance Certificates and Opinions, etc.....................61
Section 12.02. Form of Documents Delivered to Indenture Trustee..............63
Section 12.03. Acts of Noteholders...........................................64
Section 12.04. Notices to Issuer, Indenture Trustee, Paying Agent,
Authentication Agent and Transfer Agent and Registrar.........65
Section 12.05. Notices to Noteholders; Waiver................................65
Section 12.06. Alternate Payment and Notice Provisions.......................65
Section 12.07. Effect of Headings and Table of Contents......................66
Section 12.08. Successors and Assigns........................................66
Section 12.09. Separability..................................................66
Section 12.10. Benefits of Indenture.........................................66
Section 12.11. Legal Holidays................................................66
Section 12.12. GOVERNING LAW.................................................66
Section 12.13. Counterparts..................................................66
Section 12.14. No Petition...................................................67
Section 12.15 Provision of Information to Rating Agencies...................67
IV
<PAGE>
This MASTER INDENTURE, dated as of April 25, 2000 (as amended, modified
or supplemented from time to time, the "INDENTURE"), by and between APPLE RIDGE
FUNDING LLC, a limited liability company organized under the laws of the State
of Delaware (together with its permitted successors and assigns, the "ISSUER"),
BANK ONE, NATIONAL ASSOCIATION, a national banking association, as indenture
trustee (herein, together with its successors in the trusts hereunder, the
"INDENTURE TRUSTEE"), and THE BANK OF NEW YORK, a New York state banking
corporation, as paying agent, authentication agent and transfer agent and
registrar (together with its permitted successors and assigns, "BNY"). This
Indenture may be supplemented at any time and from time to time by an indenture
supplement in accordance with Article X hereof (each, an "INDENTURE
SUPPLEMENT"). If a conflict exists between the terms and provisions of this
Indenture and any Indenture Supplement, the terms and provisions of the
Indenture Supplement shall be controlling with respect to the related Series.
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for issuances from time to time of its asset backed notes
as provided in this Indenture. All covenants and agreements made by the Issuer
herein are for the benefit and security of the Noteholders. The Issuer is
entering into this Indenture, and the Indenture Trustee is accepting the trusts
created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.
Simultaneously with the delivery of this Indenture the Issuer is
entering into the Transfer and Servicing Agreement (the "TRANSFER AND SERVICING
AGREEMENT") with Apple Ridge Service Corporation, a Delaware corporation, as
transferor (the "Transferor"), Cendant Mobility Financial Corporation ("CMF"), a
Delaware corporation, as an originator, and Cendant Mobility Services
Corporation ("CMSC"), a Delaware corporation, as an originator and as servicer
(in such capacity, the "SERVICER"), pursuant to which (a) the Transferor will
convey to the Issuer all of its right, title and interest in, to and under the
Pledged Assets and (b) the Servicer will agree to service the Pledged Assets and
make collections thereon on behalf of the Noteholders. The Pledged Assets were,
and in the future will be, originated by either CMSC or Cendant Mobility
Financial Corporation (each an "ORIGINATOR"). The Pledged Assets originated by
CMSC will be purchased by CMF pursuant to the Purchase Agreement. The Pledged
Assets originated by CMF, together with those originated by CMSC and purchased
by CMF, will be purchased by the Transferor pursuant to the Receivables Purchase
Agreement.
Under the Transfer and Servicing Agreement, additional Pledged Assets
from time to time will automatically be conveyed thereunder to the Issuer
without any further action by either Originator or the Transferor.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee, for the benefit of
the Holders of the Notes, all of the Issuer's right, title and interest, whether
now owned or hereafter acquired, in, to and under all of the following: (i) all
Receivables; (ii) all Related Property; (iii) all Pool
<PAGE>
Collections; (iv) the Collection Account (excluding any subaccount of the
Collection Account established pursuant to an Indenture Supplement), the
Distribution Account, and all money, instruments, investment property and other
property credited to or deposited in such accounts; (v) the PHH Guarantee, the
Transfer and Servicing Agreement, the Receivables Purchase Agreement and the
Purchase Agreement; (vi) all accounts, money, chattel paper, investment
property, instruments, documents, deposit accounts, certificates of deposit,
letters of credit, advices of credit, general intangibles and goods consisting
of, arising from or relating to any of the foregoing; (vii) all other property
of the Issuer; and (viii) all proceeds of the foregoing (collectively, the
"PLEDGED ASSETS"); provided, however, that (1) the Pledged Assets shall not
include the following, and the following shall not be subject to the lien of
this Indenture: (a) Liquidated Receivables, (b) any Receivable as to which CMSC
or CMF has paid a CMSC Noncomplying Asset Adjustment or a CMF Noncomplying Asset
Adjustment, as applicable, and all proceeds thereof, (c) any amounts paid to the
Issuer pursuant to Section 8.04(d) and (d) all proceeds of clauses (a) through
(c) of this proviso. Notwithstanding any other provision of this Indenture, the
property described in the preceding proviso and the release thereof to the
Issuer shall not be subject to the provisions of Section 8.05 or 12.01(b).
ARTICLE I
DEFINITIONS
Section 1.01. Definitions
Whenever used in this Agreement, the following words and phrases shall
have the following meanings, and the definitions of such terms are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
"ACT" shall have the meaning specified in Section 12.03(a).
"ADJUSTED AGGREGATE RECEIVABLE BALANCE" shall mean, as of any date of
determination, the excess of (a) the Aggregate Receivable Balance on such date
over (b) the Aggregate Adjustment Amount on such date.
"AFFILIATE" shall mean, when used with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with, such Person. As used in this definition of Affiliate, the term "control"
means the power, directly or indirectly, to direct or cause the direction of the
management and policies of a Person, whether through ownership of such Person's
voting securities, by contract or otherwise, and the terms "affiliated,"
"controlling" and "controlled" have correlative meanings.
"AGGREGATE ADJUSTMENT AMOUNT" shall mean, as of any date of
determination, an amount equal to the sum of (a) the Overconcentration Amount
plus (b) the Excess Longer Term Receivable Amount plus (c) the Excess Special
Homes Receivable Amount plus (d) the aggregate Unpaid Balance of all Eligible
Receivables relating to Homes that have been owned by
2
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CMSC or CMF, as the case may be, for more than 540 days as of the last day of
the Monthly Period immediately preceding the first day of the Interest Period in
which such date occurs.
"AGGREGATE EMPLOYER BALANCE" shall mean, with respect to any Employer
at any time, the aggregate Unpaid Balance of the Pool Receivables of such
Employer, calculated in the following manner: the Unpaid Balance will be reduced
(without duplication), by (a) in the case of any Receivables of such Employer,
the amount of any funds received on account of or otherwise in connection
therewith, including the amount of any Advance Payment made by such Employer
with respect to such Receivables or any other obligations of such Employer, and
the amount of Home Sale Proceeds received with respect to the related Home (to
the extent that they have not previously been applied to reduce the Unpaid
Balance of the related Receivable), (b) in the case of any Receivables of such
Employer (including without limitation any Self-Funding Obligor), the amount of
any net gains on sales of Homes or other amounts (including without limitation
rebates for referral fees, if any, and if allowed by law) that have not yet been
remitted to such Employer and (c) in the case of all Receivables owed by such
Employer, the Unpaid Balance of any Advance Billing Receivables of such
Employer.
"AGGREGATE RECEIVABLE BALANCE" shall mean, as of any date of
determination, the sum of the Aggregate Employer Balances with respect to each
Employer under the Pool Relocation Agreements, minus the aggregate Unpaid
Balance of all Pool Receivables that are not Eligible Receivables, minus the
aggregate Unpaid Balance of all Defaulted Receivables in each case to only the
extent such amounts have not already been subtracted in calculating the
Aggregate Employer Balances.
"AGGREGATE REQUIRED ASSET AMOUNT" shall mean, on any date of
determination, the sum of the Required Asset Amounts with respect to each Series
of Notes.
"AMORTIZATION EVENT" with respect to each Series of Notes shall be
specified in the related Indenture Supplement.
"AMORTIZATION PERIOD" shall mean, with respect to any Series, a period
following the Revolving Period during which Pool Collections are distributed to
Noteholders, which shall be a controlled amortization period, a rapid
amortization period or other amortization period, in each case as defined with
respect to such Series in the related Indenture Supplement.
"APPLICABLE SERIES ENHANCER" means each Series Enhancer except to the
extent otherwise provided in the relevant Indenture Supplement.
"ASSET DEFICIENCY" shall mean, on any date of determination, the
amount, if any, by which the Aggregate Required Asset Amount as of such date
exceeds the Adjusted Aggregate Receivable Balance as of such date.
"AUTHENTICATION AGENT" shall mean BNY and any successor thereto.
"AUTHORIZED OFFICER" shall mean:
(a) with respect to the Issuer, any officer of the Issuer who is
authorized to act for the Issuer in matters relating to the Issuer and who is
identified on the list of Authorized
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Officers (containing the specimen signature of each such Person) delivered by
the Issuer to the Indenture Trustee on the initial Closing Date (as such list
may be modified or supplemented from time to time thereafter); or
(b) with respect to the Servicer, any officer of the Servicer who is
authorized to act for the Servicer in matters relating to the Servicer and who
is identified on the list of Authorized Officers (containing the specimen
signature of each such Person) delivered by the Servicer to the Indenture
Trustee on the initial Closing Date (as such list may be modified or
supplemented from time to time thereafter).
"BENEFICIAL OWNER" shall mean, with respect to a Book-Entry Note, the
Person who is the owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or Foreign Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency or Foreign Clearing Agency
(directly as a Clearing Agency Participant or as an Indirect Participant, in
accordance with the rules of such Clearing Agency or Foreign Clearing Agency).
"BNY" shall have the meaning set forth in the Preliminary Statement.
"BOOK-ENTRY NOTES" shall mean beneficial interests in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency or Foreign Clearing Agency as described in Section 2.11.
"CLEARSTREAM BANKING" shall mean Clearstream Banking, societe anonyme,
a professional depository incorporated under the laws of Luxembourg, and its
successors.
"CLEARING AGENCY" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended, and serving as clearing agency for a Series of Book-Entry Notes.
"CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" shall mean, with respect to any Series, the closing date
specified in the related Indenture Supplement.
"CMF" shall have the meaning set forth in the preliminary statements to
this Indenture.
"CMSC" shall have the meaning set forth in the preliminary statement to
this Indenture.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the Securities and Exchange Commission and its
successors in interest.
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"CORPORATE TRUST OFFICE" shall mean the principal office of the
Indenture Trustee at which at any particular time its corporate trust business
shall be administered, which office on the date of the execution of this
Agreement is located at 1 Bank One Plaza, Suite IL1-0126, Chicago, IL 60670-0126
or at such other address as the Indenture Trustee may designate from time to
time by notice to the Noteholders and the Issuer, or the principal corporate
trust office of any successor Indenture Trustee (of which address any successor
Indenture Trustee shall notify the Noteholders and the Issuer).
"DATE OF PROCESSING" shall mean, with respect to any transaction, the
date on which such transaction is first recorded on the Servicer's computer
master file maintained for the purpose of recording Pool Collections.
"DEFAULT" shall mean any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"DEFEASANCE" shall have the meaning specified in Section 11.01(a).
"DEFEASED SERIES" shall have the meaning specified in Section 11.01(a).
"DEFINITIVE NOTES" shall mean Notes in definitive, fully registered
form.
"DEPOSIT DATE" shall mean each day on which the Servicer deposits Pool
Collections in the Collection Account in accordance with Section 3.02 of the
Transfer and Servicing Agreement.
"DISTRIBUTION ACCOUNT" shall have the meaning specified in Section
8.03(b).
"DISTRIBUTION DATE" shall mean, with respect to any Series, the date
specified in the applicable Indenture Supplement.
"DOLLARS," "$" or "U.S. $" shall mean United States dollars.
"DTC" shall mean The Depository Trust Company.
"ELIGIBLE RECEIVABLE" shall have the meaning specified in the
Receivables Purchase Agreement.
"ENHANCEMENT AGREEMENT" shall mean any agreement, instrument or
document governing the terms of any Series Enhancement or pursuant to which any
Series Enhancement is issued or outstanding.
"EUROCLEAR OPERATOR" shall mean Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System.
"EVENT OF DEFAULT" shall have the meaning specified in Section 5.01.
"EXCESS LONGER TERM RECEIVABLE AMOUNT" shall mean, as of any date of
determination, an amount equal to the excess, if any, of (a) the aggregate
Unpaid Balance of all
5
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Billed Receivables that are payable more than 35 days after the original invoice
date of such Billed Receivable as of the last day of the Monthly Period
immediately preceding the first day of the Interest Period in which such date
occurs over (b) an amount equal to 40% of the aggregate Unpaid Balance of all
Billed Receivables included in the Aggregate Receivable Balance as of such last
day of such Monthly Period.
"EXCESS SPECIAL HOMES RECEIVABLE AMOUNT" shall mean, as of any date of
determination, an amount equal to the excess, if any, of (a) the aggregate
Unpaid Balance of all Eligible Receivables arising from Equity Payments or
Mortgage Payoffs relating to any Home that qualifies as a "Special Home
Transaction" (as such term is defined in the applicable Home Sale Service
Supplement), reduced by any Advance Payments identified as relating to such
Homes, as of the close of business on the last day of the Monthly Period
immediately preceding the first day of the Interest Period in which such date
occurs over (b) an amount equal to 10% of the Aggregate Receivable Balance as of
such last day of such Monthly Period.
"FOREIGN CLEARING AGENCY" shall mean Clearstream Banking and the
Euroclear Operator.
"GLOBAL NOTE" shall have the meaning specified in Section 2.14.
"GRANT" shall mean to mortgage, pledge, bargain, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Pledged Assets or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Pledged Assets and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"INDENTURE" shall have the meaning set forth in the introductory
paragraph to this Indenture.
"INDENTURE SUPPLEMENT" shall have the meaning set forth in the
introductory paragraph to this Indenture.
"INDENTURE TRUSTEE" shall have the meaning set forth in the
introductory paragraph of this Indenture.
"INDEPENDENT" shall mean, when used with respect to any specified
Person, that the Person (a) is in fact independent of the Issuer, any other
obligor upon the Notes, the Transferor, CMF, CMSC and any Affiliate of any of
the foregoing Persons, (b) does not have any direct financial interest or any
material indirect financial interest in the outstanding equity or debt
securities of the Issuer, any such other obligor,
6
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the Transferor, CMF, CMSC or any Affiliate of any of the foregoing Persons and
(c) is not connected with the Issuer, any such other obligor, the Transferor,
CMF, CMSC or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"INDEPENDENT CERTIFICATE" shall mean a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 12.01, made by
an Independent appraiser or other expert, and such opinion or certificate shall
state that the signer has read the definition of "Independent" in this Indenture
and that the signer is Independent within the meaning thereof.
"INDEPENDENT DIRECTOR" shall mean an individual who is an Independent
Director as defined in the Limited Liability Company Agreement of the Issuer as
in effect on the date of this Indenture.
"INELIGIBLE RECEIVABLE" shall mean any Receivable which is not an
Eligible Receivable.
"INDIRECT PARTICIPANT" shall mean Persons such as securities brokers
and dealers, banks and trust companies that clear or maintain a custodial
relationship with a participant of DTC, either directly or indirectly.
"INSOLVENCY EVENT" shall mean, for any Person:
(a) that such Person shall admit in writing its inability, or fail
generally, to pay its debts as they become due; or
(b) (i) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect
of such Person in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of such Person or for
any substantial part of its property, or for the winding-up or liquidation
of its affairs and (ii) either such proceedings shall remain undismissed or
unstayed for a period of 60 days or any of the actions sought in such
proceedings shall occur, provided that the grace period allowed for by this
clause (ii) shall not apply to any proceeding instituted by an Affiliate of
such Person in furtherance of any of the actions set forth in the preceding
clause (i); or
(c) the commencement by such Person of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or such Person's consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of such Person or for
any substantial part of its property, or any general assignment for the
benefit of creditors; or
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(d) if such Person is a corporation or a limited liability company,
such Person or any Subsidiary of such Person shall take any corporate or
limited liability company action in furtherance of any of the actions set
forth in the preceding clause (a), (b) or (c).
"INTEREST PERIOD" with respect to any Series, shall have the meaning
set forth in the applicable Indenture Supplement.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of 1940,
as amended.
"ISSUER" shall have the meaning set forth in the introductory paragraph
to this Indenture.
"ISSUER ORDER" shall mean a written order or request signed in the name
of the Issuer by any one of its Authorized Officers and delivered to the
Indenture Trustee or BNY, as the case may be.
"LIQUIDATED RECEIVABLE" shall mean any Receivable the Unpaid Balance of
which has been reduced to zero, whether by payment of a CMSC Noncomplying Asset
Adjustment or a CMF Noncomplying Asset Adjustment or otherwise.
"MAJORITY INVESTORS" shall mean Noteholders holding Notes evidencing
more than 50% of the Outstanding Amount.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any event or
circumstance, a material adverse effect on (a) the business, financial
condition, operations or assets of the Issuer or any Transaction Party, (b) the
ability of the Issuer or any Transaction Party to perform its obligations under
any Transaction Document to which it is a party, (c) the validity or
enforceability of, or collectibility of, amounts payable by the Issuer or any
Transaction Party under any Transaction Document to which it is a party, (d) the
status, existence, perfection or priority of the interest of the Issuer or any
assignee thereof in the Pledged Assets, taken as a whole, in each case free and
clear of any Lien (other than a Permitted Lien) or (e) the validity,
enforceability or collectibility of all or any substantial portion of the
Pledged Assets.
"MODIFIED RECEIVABLE BALANCE" shall mean, for any Employer as of any
date of determination, an amount equal to the sum of (a) the product of (i) 50%
multiplied by (ii) the sum of the aggregate Unpaid Balance of all Eligible
Receivables of such Employer included in the Aggregate Employer Balance arising
from (A) Equity Payments plus (B) Mortgage Payoffs plus (C) Mortgage Payments
that are owing by such Employer plus (b) the aggregate Unpaid Balance of each
other Eligible Receivable of such Employer included in the Aggregate Employer
Balance, reduced (without duplication) by any Advance Payments and by the Unpaid
Balance of any Advance Billing Receivables of such Employer.
"MOODY'S" shall mean Moody's Investors Service.
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"MONTHLY PERIOD" shall mean (i) a calendar month or (ii) with respect
to the initial Monthly Period, the period commencing on the Closing Date with
respect to the initial Series of Notes and ending on May 31, 2000.
"NEW ISSUANCE" shall have the meaning specified in Section 2.10.
"NOTE INTEREST RATE" shall mean, as of any date of determination and
with respect to any Series, the rate at which interest accrues on the Notes of
such Series (or formula on the basis of which such rate shall be determined)
specified therefor in the related Indenture Supplement.
"NOTE REGISTER" shall have the meaning specified in Section 2.05.
"NOTEHOLDER" or "HOLDER" shall mean the Person in whose name a Note is
registered on the Note Register or such other Person deemed to be a "Noteholder"
or "Holder" in any related Indenture Supplement.
"NOTES" shall mean all Series of Notes issued by the Issuer pursuant to
this Indenture and the applicable Indenture Supplement.
"NYUCC" shall have the meaning specified in Section 2.05.
"OBLIGOR LIMIT" shall mean, as of any date of determination, (a) with
respect to each Obligor having an unsecured long-term debt rating (or equivalent
shadow rating) of "AAA" from S&P and "Aaa" from Moody's, 5% of the Aggregate
Receivable Balance, (b) with respect to each Obligor having an unsecured
long-term debt rating (or equivalent shadow rating) lower than "AAA" but equal
to or higher than "AA-" from S&P and lower than "Aaa" but equal to or higher
than "Aa3" from Moody's, 4% of the Aggregate Receivable Balance, (c) with
respect to each Obligor having an unsecured long-term debt rating (or equivalent
shadow rating) lower than "AA-" but equal to or higher than "A-" from S&P and
lower than "Aa3" but equal to or higher than "A3" from Moody's, 3% of the
Aggregate Receivable Balance, (d) with respect to each Obligor having an
unsecured long-term debt rating (or equivalent shadow rating) lower than "A-"
but equal to or higher than "BBB-" from S&P and lower than "A3" but equal to or
higher than "Baa3" from Moody's, 2% of the Aggregate Receivable Balance and (e)
with respect to each Obligor either not having an unsecured long-term debt
rating from S&P or Moody's or having an unsecured long-term debt rating (or
equivalent shadow rating) lower than "BBB-" from S&P or lower than "Baa3" from
Moody's, 1% of the Aggregate Receivable Balance. If an Obligor's unsecured
long-term debt rating (or equivalent shadow rating) results in two different
Obligor Limits (because of differences in the long-term unsecured debt ratings
assigned by each of the Rating Agencies), the Obligor Limit for such Obligor
will be the lower Obligor Limit.
"OFFICER'S CERTIFICATE" shall mean, unless otherwise specified in this
Agreement, a certificate delivered to the Indenture Trustee or BNY, as the case
may be, signed by any Authorized Officer of the Issuer, the Transferor, CMF or
the Servicer, as applicable, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 12.01.
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"OPINION OF COUNSEL" shall mean a written opinion of counsel, who may
be counsel for, or an employee of, the Person providing the opinion and who
shall be reasonably acceptable to the Indenture Trustee and each Applicable
Series Enhancer, provided that a Tax Opinion shall be an opinion of nationally
recognized tax counsel.
"ORIGINATOR" shall have the meaning set forth in the preliminary
statement to this Indenture.
"OUTSTANDING" shall mean, with respect to the Notes as of any date of
determination, all Notes authenticated and delivered under this Indenture
except:
(i) Notes previously cancelled by the Transfer Agent and Registrar or
delivered to the Transfer Agent and Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been previously deposited with the Indenture Trustee or
any Paying Agent in trust for the Holders of such Notes (provided, however,
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to the applicable Indenture Supplement or provision
therefor, satisfactory to the Indenture Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes that have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a protected purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Notes owned by the Issuer, any other
obligor on the Notes, the Transferor, the Servicer or any Affiliate of any of
the foregoing Persons shall be disregarded and deemed not to be Outstanding
(except that, in determining whether the Indenture Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Notes that a Responsible Officer of the Indenture Trustee
actually knows to be so owned shall be so disregarded). Notes so owned that have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Indenture Trustee the pledgee's right so
to act with respect to such Notes and that the pledgee is not the Issuer, any
other obligor on the Notes, the Transferor, CMF, the Servicer or any Affiliate
of any of the foregoing Persons. In making any such determination, the Indenture
Trustee may rely on the representations of the pledgee and shall not be required
to undertake any independent investigation.
"OUTSTANDING AMOUNT" shall mean the aggregate Series Outstanding Amount
of all Series of Notes Outstanding at the date of determination.
"OVERCONCENTRATION AMOUNT" shall mean, as of any date of determination,
an amount equal to the sum of:
(a) the greater of (i) the excess, if any, of (A) the aggregate
Modified Receivable Balances owing by (or, if less, the Obligor Limits of)
the Obligors in respect
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of the five largest aggregate Modified Receivable Balances as of the last
day of the Monthly Period immediately preceding the first day of the
Interest Period in which such date of determination occurs, over (B) an
amount equal to 15% of the Aggregate Receivable Balance as of such last day
of such Monthly Period and (ii) the excess, if any, of (A) the aggregate
Modified Receivable Balance owing by (or, if less, the Obligor Limits of)
the Obligors in respect of the ten largest aggregate Modified Receivable
Balances as of such last day of such Monthly Period, over (B) an amount
equal to 25% of the Aggregate Receivable Balance as of such last day of such
Monthly Period, plus
(b) the sum of the aggregate amount, with respect to each Obligor, of
the excess, if any, of (i) the aggregate Modified Receivable Balance owing
by such Obligor as of such last day of such Monthly Period over (ii) the
Obligor Limit with respect to such Obligor as of such last day of such
Monthly Period.
"PAYING AGENT" shall mean BNY and any successor thereto.
"PERSON" shall mean any person or entity, including any individual,
corporation, limited liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental entity or
other entity of any nature.
"PLEDGED ASSETS" shall have the meaning set forth in the granting
clause of this Indenture.
"POOL COLLECTIONS" shall mean CMF Collections and CMSC Collections.
"PRINCIPAL TERMS" shall mean, with respect to any Series, (a) the name
or designation; (b) the initial principal amount (or method for calculating such
amount) and the Series Outstanding Amount; (c) the Note Interest Rate for the
Notes of such Series (or method for the determination thereof); (d) the payment
date or dates and the date or dates from which interest shall accrue; (e) the
method for allocating Pool Collections to Noteholders and the method by which
the principal amount for the Notes of such Series shall amortize; (f) the
designation of any Series Accounts and the terms governing the operation of any
such Series Accounts; (g) the portion of the Servicing Fee allocable to such
Series; (h) the Series Enhancer and terms of any of Series Enhancement, if
applicable; (i) the terms on which the Notes of such Series may be exchanged for
Notes of another Series, repurchased or redeemed by the Issuer or remarketed to
other investors; (j) the maturity date; (k) the extent to which the Notes of
such Series will be issuable in temporary or permanent global form (and, in such
case, the depositary for such global note or notes, the terms and conditions, if
any, upon which such global note may be exchanged, in whole or in part, for
Definitive Notes, and the manner in which any interest payable on a temporary or
global note will be paid); (l) the priority of such Series with respect to any
other Series; (m) the Distribution Date; and (n) any other terms of such Series.
"PROCEEDING" shall mean any suit in equity, action at law or other
judicial or administrative proceeding.
"PURCHASE AGREEMENT" shall mean the purchase agreement dated as of
April 25, 2000, between CMSC and CMF, as amended from time to time.
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"QUALIFIED ACCOUNT" shall mean either (a) a segregated account with a
Qualified Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States or any one of the states thereof, including the District of Columbia (or
any domestic branch of a foreign bank), and acting as a trustee for funds
deposited in such account, so long as any of the unsecured, unguaranteed senior
debt securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic credit rating categories that signifies
investment grade.
"QUALIFIED INSTITUTION" shall mean (a) a depository institution, which
may include the Indenture Trustee (if it is a Paying Agent hereunder), organized
under the laws of the United States of America or any one of the States thereof
or the District of Columbia, the deposits in which are insured by the Federal
Deposit Insurance Corporation and that at all times has a short-term unsecured
debt rating of at least A-1 by Standard & Poor's and P-1 by Moody's or (b) a
depository institution acceptable to each Rating Agency.
"RATING AGENCY" shall mean, with respect to any outstanding Series,
each rating agency selected by the Issuer to rate the Notes of such Series, as
specified in the applicable Indenture Supplement.
"RATING AGENCY CONDITION" shall mean, with respect to any action, that
each Rating Agency shall have notified the Issuer, the Servicer, any Series
Enhancer and the Indenture Trustee in writing that such action will not result
in a reduction or withdrawal of the then existing rating of any outstanding
Series with respect to which it is a Rating Agency (both with and without giving
effect to any letter of credit, surety bond or insurance policy issued by any
Series Enhancer) or, with respect to any outstanding Series not rated by any
Rating Agency, such written consent as is specified in the Indenture Supplement
for such Series.
"RECEIVABLES PURCHASE AGREEMENT" shall mean the receivables purchase
agreement dated as of April 25, 2000, between CMF and the Transferor, as amended
from time to time.
"RECORD DATE" shall mean, with respect to any Distribution Date, the
last Business Day of the preceding Monthly Period, unless otherwise specified
for a Series in the related Indenture Supplement.
"REDEMPTION DATE" shall mean, with respect to any Series, the date the
Notes of any Series are redeemed in accordance with the related Indenture
Supplement.
"REQUIRED ASSET AMOUNT" shall mean, with respect to any Series of
Notes, the required asset amount for such Series of Notes as specified in the
related Indenture Supplement.
"REVOLVING PERIOD" shall have, with respect to each Series, the meaning
specified in the related Indenture Supplement.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
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"SERIES" shall mean any series of Notes issued pursuant to this
Indenture and the related Indenture Supplement.
"SERIES ACCOUNT" shall mean any deposit, trust, securities, escrow or
similar account maintained for the benefit of the Noteholders of any Series, as
specified in any Indenture Supplement.
"SERIES ENHANCEMENT" shall mean the rights and benefits provided to the
Issuer or the Noteholders of any Series pursuant to any letter of credit, surety
bond, cash collateral account, collateral invested amount, insurance policy,
spread account, reserve account, guaranteed rate agreement, maturity liquidity
facility, tax protection agreement, interest rate swap agreement, interest rate
cap agreement or other similar arrangement. The subordination of any Series to
another Series also shall be deemed to be a Series Enhancement.
"SERIES ENHANCER" shall mean the Person or Persons providing any Series
Enhancement, other than (except to the extent otherwise provided with respect to
any Series in the Indenture Supplement for such Series) the Noteholders of any
Series that is subordinated to another Series.
"SERIES ISSUANCE DATE" shall mean, with respect to any Series, the date
on which the Notes of such Series are to be originally issued in accordance with
Section 2.10 and the related Indenture Supplement.
"SERIES OUTSTANDING AMOUNT" shall mean, with respect to any Series of
Notes, the amount specified as the "Series Outstanding Amount" in the related
Indenture Supplement.
"SERIES PERCENTAGE" shall mean, with respect to any Series of Notes and
for any date, the percentage specified in the related Indenture Supplement.
"SERVICER" shall have the meaning set forth in the preliminary
statement to this Indenture.
"TAX OPINION" shall mean, with respect to any action, an Opinion of
Counsel to the effect that, for federal income tax purposes, (a) such action
will not adversely affect the tax characterization as debt of the Notes of any
outstanding Series that were characterized as debt at the time of their
issuance, (b) such action will not cause or constitute an event in which gain or
loss would be recognized by any Noteholder and (c) in connection with an
issuance of Notes pursuant to an Indenture Supplement, except as is otherwise
provided in the Indenture Supplement, the Notes of the Series established
pursuant to such Indenture Supplement will be properly characterized as debt.
"TRANSACTION DOCUMENTS" shall mean, with respect to any Series of
Notes, the Purchase Agreement, the Receivables Purchase Agreement, the Transfer
and Servicing Agreement, the PHH Guarantee, this Indenture, the related
Indenture Supplement and any Enhancement Agreement.
"TRANSFER AGENT AND REGISTRAR" shall mean BNY and any successor
thereto.
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"TRANSFER AND SERVICING AGREEMENT" shall mean the Transfer and
Servicing Agreement, dated as of April 25, 2000, among the Transferor, the
Servicer, CMF and the Issuer, as the same may be amended, supplemented or
otherwise modified from time to time.
"TRANSFEROR" shall have the meaning set forth in the preliminary
statement to this Indenture.
"TRUSTEE OFFICER" shall mean, with respect to the Indenture Trustee,
any officer assigned to the Corporate Trust Office, including any officer of the
Indenture Trustee having direct responsibility for the administration of the
applicable Transaction Documents, and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"UNMATURED AMORTIZATION EVENT" shall mean any occurrence or event
which, with the giving of notice, the passage of time or both, would constitute
an Amortization Event.
Section 1.02. Other Definitional Provisions
(a) With respect to any Series, all terms used herein and not otherwise
defined herein shall have meanings ascribed to them in the Purchase Agreement,
the Receivables Purchase Agreement or the Transfer and Servicing Agreement.
(b) All terms defined in this Indenture shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Indenture and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Indenture or in any such certificate or other document, and accounting
terms partly defined in this Indenture or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles and as in effect on the date
of this Indenture. To the extent that the definitions of accounting terms in
this Indenture or in any such certificate or other document are inconsistent
with the meanings of such terms under generally accepted accounting principles
in the United States, the definitions contained in this Indenture or in any such
certificate or other document shall control.
(d) Any reference to each Rating Agency shall only apply to any
specific rating agency if such rating agency is then rating any outstanding
Series.
(e) Unless otherwise specified, references to any amount as on deposit
or outstanding on any particular date shall mean such amount at the close of
business on such day.
(f) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Indenture shall refer to this Indenture as a whole and
not to any particular provision of this Indenture; references to any subsection,
Section, Schedule or Exhibit are references to subsections, Sections, Schedules
and Exhibits in or to this Indenture unless otherwise specified; and the term
"including" means "including without limitation."
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ARTICLE II
THE NOTES
Section 2.01. Form Generally.
Any Series of Notes, together with the Authentication Agent's
certificate of authentication related thereto, shall be issued in fully
registered form without coupons, and shall be substantially in the form of an
exhibit to the related Indenture Supplement with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture or such Indenture Supplement, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be determined by the officers of the Issuer executing such Notes
consistently herewith, as evidenced by their execution of such Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note. The terms of any Notes
set forth in an exhibit to the related Indenture Supplement are part of the
terms of this Indenture, as applicable.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by such officers' execution of
such Notes.
Each Note shall be dated as of the date of its authentication.
Section 2.02. Denominations.
Except as otherwise specified in the related Indenture Supplement, the
Notes of each Series shall be issued in fully registered form in minimum amounts
of $250,000 and in integral multiples of $1,000 in excess thereof (except that
one Note of each Series may be issued in a different amount, so long as such
amount exceeds the applicable minimum denomination for such Series), and shall
be issued upon initial issuance as one or more Notes in an aggregate original
principal amount equal to the initial Series Outstanding Amount for such Series.
Section 2.03. Execution, Authentication and Delivery.
Each Note shall be executed by manual or facsimile signature on behalf
of the Issuer by an Authorized Officer.
Notes bearing the manual or facsimile signature of an individual who
was authorized to sign on behalf of the Issuer at the time when such signature
was affixed shall not be rendered invalid, notwithstanding the fact that such
individual ceased to be so authorized prior to the authentication and delivery
of such Notes or does not hold such office at the date of issuance such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed by the Issuer to the
Authentication Agent
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for authentication and delivery, and the Authentication Agent shall authenticate
and deliver such Notes as provided in this Indenture (with the designation
provided in the related Indenture Supplement) and not otherwise.
No Note shall be entitled to any benefit under this Indenture or the
applicable Indenture Supplement or be valid or obligatory for any purpose,
unless there appears on such Note a certificate of authentication substantially
in the form provided for herein executed by or on behalf of the Authentication
Agent by the manual signature of a duly authorized signatory, and such
certificate of authentication on any Note shall be conclusive evidence, and the
only evidence, that such Note has been duly authenticated and delivered under
this Indenture.
Section 2.04. Authentication Agent.
(a) The Authentication Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and any Indenture
Supplement and no implied covenants or obligations shall be read into this
Indenture or such Indenture Supplement against the Authentication Agent. The
Issuer may remove the Authentication Agent if the Issuer determines in its sole
discretion that the Authentication Agent shall have failed to perform its
obligations under this Indenture or any Indenture Supplement in any material
respect or for other good reason. The Authentication Agent shall be permitted to
resign upon 30 days' written notice to the Issuer. Upon the removal or
resignation of the Authentication Agent, the Issuer shall appoint a successor to
act as Authentication Agent. The Issuer shall notify the Indenture Trustee and
the Rating Agencies of the removal or resignation of the Authentication Agent
and the identity and location of the successor Authentication Agent.
(b) Pursuant to the Transfer and Servicing Agreement, the Issuer shall
direct the Servicer to pay to BNY from time to time reasonable compensation for
its services and all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of BNY's agents, counsel,
accountants and experts. The Issuer shall cause the Servicer to indemnify BNY
against any and all loss, liability or expense (including the fees and expenses
of either in-house counsel or outside counsel, but not both) incurred by it in
connection with the performance of its duties hereunder and under any Indenture
Supplement. BNY shall notify the Issuer and the Servicer promptly of any claim
for which it may seek indemnity. Failure by BNY to so notify the Issuer and the
Servicer shall not relieve the Issuer of its obligations hereunder unless such
loss, liability or expense could have been avoided with such prompt notification
and then only to the extent of such loss, expense or liability which could have
been so avoided. Neither the Issuer nor the Servicer need reimburse any expense
or indemnify against any loss, liability or expense incurred by BNY through
BNY's own willful misconduct, negligence or bad faith.
(c) The provisions of Sections 6.01, 6.03, 6.04 and 6.05 shall be
applicable to the Authentication Agent.
(d) Pursuant to any appointment made under this Section 2.04, the Notes
may have endorsed thereon, in lieu of or in addition to the Authentication
Agent's certificate of authentication, an alternative certificate of
authentication in substantially the following form:
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"This is one of the Notes described in the within-mentioned Agreement.
THE BANK OF NEW YORK,
as Authentication Agent
By:
-----------------------------------
Authorized Signatory"
Section 2.05. Registration of and Limitations on Transfer and Exchange
of Notes.
The Transfer Agent and Registrar shall keep a register (the "NOTE
REGISTER") in which the Transfer Agent and Registrar shall provide for the
registration of Notes and the registration of transfers of Notes. Upon any
resignation of any Transfer Agent and Registrar, the Issuer shall promptly
appoint a successor or, if it elects not to make such an appointment, assume the
duties of Transfer Agent and Registrar. The Issuer shall notify the Indenture
Trustee of the identity and location of any successor Transfer Agent and
Registrar.
The Indenture Trustee shall have the right to inspect the Note Register
at all reasonable times and to obtain copies thereof, and the Indenture Trustee
shall have the right to rely upon a certificate executed on behalf of the
Transfer Agent and Registrar by an officer thereof as to the names and addresses
of the Noteholders and the principal amounts and numbers of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Transfer Agent and Registrar to be maintained as provided in
Section 3.02(j), if the requirements of Section 8-401(a) of the New York Uniform
Commercial Code (the "NYUCC") are met and any applicable requirements for
transfer set forth in the related Indenture Supplement are satisfied, the Issuer
shall execute, and upon receipt of such surrendered Note the Authentication
Agent shall authenticate and deliver to the Noteholder, in the name of the
designated transferee or transferees, one or more new Notes (of the same Series)
in any authorized denominations of like aggregate principal amount.
At the option of a Noteholder, Notes may be exchanged for other Notes
of the same Series, in any authorized denominations and of like aggregate
principal amount, upon surrender of such Notes to be exchanged at the office or
agency of the Transfer Agent and Registrar. Whenever any Notes are so
surrendered for exchange, if the requirements of Section 8-401(a) of the NYUCC
are met, the Issuer shall execute, and upon receipt of such surrendered Note the
Authentication Agent shall authenticate and deliver to the Noteholder, the Notes
that the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall evidence the same obligations, evidence the same debt, and be entitled to
the same rights and
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privileges under this Indenture and the related Indenture Supplement as the
Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in a form satisfactory to the Transfer Agent and Registrar duly
executed by, the Noteholder thereof or its attorney-in-fact duly authorized in
writing, and by such other documents as the Transfer Agent and Registrar may
reasonably require.
The registration of transfer of any Note shall be subject to the
additional requirements, if any, set forth in the related Indenture Supplement.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer or the Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of such Notes.
All Notes surrendered for registration of transfer or exchange shall be
cancelled by the Transfer Agent and Registrar and disposed of by the Transfer
Agent and Registrar in accordance with its customary procedures. The Transfer
Agent and Registrar shall dispose of any Global Note upon its exchange in full
for Definitive Notes (of the same Series) in accordance with its customary
procedures.
The preceding provisions of this section notwithstanding, the Issuer
shall not be required to make, and the Transfer Agent and Registrar need not
register, transfers or exchanges of Notes for a period of 20 days preceding the
due date for any payment with respect to the Notes.
If and so long as any Series of Notes are listed on the Luxembourg
Stock Exchange and such exchange shall so require, the Transfer Agent and
Registrar shall, at the discretion of the Issuer, appoint a co-transfer agent
and registrar in Luxembourg or another European city. Any reference in this
Agreement to the Transfer Agent and Registrar shall include any such co-transfer
agent and registrar unless the context otherwise requires. The Transfer Agent
and Registrar shall enter into any appropriate agency agreement with any
co-transfer agent and registrar not a party to this Indenture, that will
implement the provisions of this Indenture that relate to such agent.
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes.
If (a) any mutilated Note is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence to its
reasonable satisfaction of the destruction, loss or theft of any Note and (b) in
the case of a destroyed, lost or stolen Note there is delivered to the Transfer
Agent and Registrar such security or indemnity as may be required by it to hold
the Issuer and the Transfer Agent and Registrar harmless and the requirements of
Section 8-405 of the NYUCC are met, then the Issuer shall execute, and the
Authentication Agent shall authenticate and deliver, a replacement Note of like
tenor (including the same date of issuance) and principal amount, bearing a
number not contemporaneously outstanding in
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exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note;
provided, however, that if any such mutilated, destroyed, lost or stolen Note
shall have become, or within seven days shall be, due and payable, or shall have
been selected or called for redemption, the Issuer may pay such Note without
surrender thereof instead of issuing a replacement Note, except that any
mutilated Note shall be surrendered. After the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, if a protected purchaser of the original Note in lieu of
which such replacement Note was issued presents such original Note for payment,
the Issuer and the Transfer Agent and Registrar shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person other than a
protected 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 Transfer Agent and Registrar in connection
therewith.
Upon the issuance of any replacement Note under this Section 2.06, the
Issuer or the Transfer Agent and Registrar may require the payment by the Holder
of such Note of a sum sufficient to cover any tax or other governmental charge
that may be imposed with respect thereto and any other reasonable expenses
(including the fees and expenses of the Transfer Agent and Registrar) in
connection therewith.
Every replacement Note issued in replacement of any mutilated,
destroyed, lost or stolen Note pursuant to this Section 2.06 shall constitute
complete and indefeasible evidence of an obligation of the Issuer as if
originally issued, whether or not the mutilated, destroyed, lost or stolen Note
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section 2.06 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 2.07 Persons Deemed Owners.
Unless otherwise specified in the applicable Indenture Supplement,
prior to due presentment for registration of transfer of any Note, the Issuer,
the Indenture Trustee, the Paying Agent, the Authentication Agent, the Transfer
Agent and Registrar and any agent of the foregoing shall treat the Person in
whose name any Note is registered as the owner of such Note for all purposes of
this Indenture and the applicable Indenture Supplement, whether or not such Note
is overdue, and neither the Issuer, the Indenture Trustee, the Paying Agent, the
Authentication Agent, the Transfer Agent and Registrar nor any agent of the
foregoing shall be affected by any notice to the contrary.
Section 2.08. Paying Agent.
(a) The Paying Agent shall have the revocable power to withdraw funds
and make distributions to Noteholders from the appropriate account or accounts
maintained for the benefit of Noteholders as specified in this Indenture or the
related Indenture Supplement for any Series. The Issuer may revoke such power
and remove the Paying Agent if the Issuer determines
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in its sole discretion that the Paying Agent shall have failed to perform its
obligations under this Indenture in any material respect or for other good
cause. The Paying Agent shall be permitted to resign upon 30 days' written
notice to the Issuer. Upon the removal or resignation of the Paying Agent, the
Issuer shall appoint a successor to act as Paying Agent (which successor shall
be a bank or trust company). Any reference in this Indenture to the Paying Agent
shall include any co-paying agent unless the context requires otherwise. The
Issuer shall notify the Indenture Trustee, each Applicable Series Enhancer and
the Rating Agencies of the removal or the resignation of any Paying Agent and
the identity and location of the successor Paying Agent.
(b) If and so long as any Series of Notes are listed on the Luxembourg
Stock Exchange or other stock exchange and such exchange shall so require, the
Paying Agent shall, at the discretion of the Issuer, appoint a co-paying agent
in Luxembourg or other city or country as may be required by such other stock
exchange. The Paying Agent shall enter into an appropriate agency agreement with
any co-paying agent not a party to this Indenture, which will implement the
provisions of this Indenture that relate to such agent.
(c) The Paying Agent agrees that it will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer (or
any other obligor upon the Notes) of which it has actual knowledge in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent; and
(iv) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
(d) 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 the Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which such sums were held by such Paying Agent
and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Section 2.09 Cancellation.
All Notes surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Transfer Agent
and Registrar, be
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delivered to the Transfer Agent and Registrar and shall be promptly cancelled by
it. The Issuer may at any time deliver to the Transfer Agent and Registrar for
cancellation any Notes previously authenticated and delivered hereunder that the
Issuer may have acquired in any lawful manner whatsoever, and all Notes so
delivered shall be promptly cancelled by the Transfer Agent and Registrar. No
Notes shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section 2.09, except as expressly permitted by this
Indenture. All cancelled Notes held by the Transfer Agent and Registrar shall be
disposed of by the Transfer Agent and Register in accordance with its customary
procedures.
Section 2.10. New Issuances.
(a) Pursuant to one or more Indenture Supplements, the Issuer may from
time to time issue one or more new Series of Notes (a "NEW ISSUANCE"). The Notes
of all outstanding Series shall be equally and ratably entitled to the benefits
of this Indenture without preference, priority or distinction, all in accordance
with the terms and provisions of this Indenture and the applicable Indenture
Supplement, except as provided in the related Indenture Supplement with respect
to any Series. Interest on the Notes of all outstanding Series shall be paid on
each Distribution Date therefor as specified in the Indenture Supplement
relating to such outstanding Series. Principal of the Notes of each outstanding
Series shall be paid as specified in the Indenture Supplement relating to such
outstanding Series.
(b) On or before the Series Issuance Date for any new Series of Notes,
the parties hereto shall execute and deliver an Indenture Supplement specifying
the Principal Terms of such Series. The terms of such Indenture Supplement may
modify or amend the terms of this Indenture solely as applied to such new
Series. The obligation of the Authentication Agent to authenticate and deliver
the Notes of any Series to or upon the order of the Issuer (other than any
Series issued pursuant to an Indenture Supplement dated as of the date hereof)
and the obligation of the Authentication Agent and the Indenture Trustee to
execute and deliver the related Indenture Supplement is subject to the
satisfaction of the following conditions:
(i) on or before the fifth day immediately preceding the Series
Issuance Date, the Issuer shall have given the Indenture Trustee, the
Servicer, the Paying Agent, the Authentication Agent, the Transfer Agent and
Registrar, each Applicable Series Enhancer and each Rating Agency notice
(unless such notice requirement is otherwise waived) of such issuance and
the applicable Series Issuance Date;
(ii) the Issuer shall have delivered to the Authentication Agent and
the Indenture Trustee any related Indenture Supplement, in form satisfactory
to the Authentication Agent and the Indenture Trustee, executed by each
party hereto other than the Authentication Agent and the Indenture Trustee;
(iii) the Issuer shall have delivered to the Indenture Trustee any
related Enhancement Agreement executed by each of the parties thereto other
than the Indenture Trustee;
(iv) the Rating Agency Condition shall have been satisfied with respect
to such issuance;
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(v) there shall have been delivered to the Indenture Trustee (with a
copy to each Rating Agency) (A) the opinion required pursuant to Section
3.05(a) and (B) a Tax Opinion with respect to such issuance, dated the
applicable Series Issuance Date.
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate of the Issuer to the effect that on the Series
Issuance Date after giving effect to the issuance of such new Series of
Notes, (A) neither an Amortization Event nor an Unmatured Amortization Event
with respect to any Series of Notes nor an Asset Deficiency is continuing or
will occur as the result of the issuance of such Series of Notes and (B) all
conditions precedent provided in this Indenture and the related Indenture
Supplement with respect to the authentication and delivery of the new Series
of Notes have been complied with; and
(vii) the Issuer shall have delivered to the Authentication Agent a
written order or request signed in the name of the Issuer by any one of its
Authorized Officers and delivered to the Authentication Agent authorizing
and directing the authentication and delivery of the Notes of such Series by
the Authentication Agent.
(c) Upon satisfaction of the above conditions, the Issuer shall
execute, and the Authentication Agent shall authenticate and deliver, the Notes
of such Series as provided in this Indenture and the applicable Indenture
Supplement. Neither the Authentication Agent nor the Indenture Trustee shall be
obligated to enter into any such Indenture Supplement that adversely affects the
Authentication Agent's or the Indenture Trustee's own rights, duties or
immunities under this Indenture.
Section 2.11. Book-Entry Notes.
Unless otherwise provided in any related Indenture Supplement, upon
original issuance, each Series of Notes shall be issued in the form of
typewritten Notes representing the Book-Entry Notes to be delivered to the
depository specified in such Indenture Supplement (which shall be the Clearing
Agency or Foreign Clearing Agency), by or on behalf of such Series.
Unless otherwise provided in the related Indenture Supplement, the
Notes of each Series initially shall be registered in the Note Register in the
name of the nominee of the Clearing Agency or Foreign Clearing Agency, as
applicable, for such Book Entry Notes and shall be delivered to the
Authentication Agent or, pursuant to such Clearing Agency's or Foreign Clearing
Agency's instructions, held by the Authentication Agent's agent as custodian for
the Clearing Agency or Foreign Clearing Agency.
Unless and until Definitive Notes are issued under the limited
circumstances described in Section 2.13, no Beneficial Owner shall be entitled
to receive a Definitive Note representing such Beneficial Owner's interest in
such Note. Unless and until Definitive Notes have been issued to the Beneficial
Owners pursuant to Section 2.13:
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(a) the provisions of this Section 2.11 shall be in full force and
effect with respect to each such Series;
(b) the Indenture Trustee shall be entitled to deal with the Clearing
Agency or Foreign Clearing Agency and the Clearing Agency Participants for all
purposes of this Indenture and any related Indenture Supplement (including the
payment of principal of and interest on the Notes of each such Series) as the
authorized representatives of the Beneficial Owners;
(c) to the extent that the provisions of this Section 2.11 conflict
with any other provisions of this Indenture, the provisions of this Section 2.11
shall control with respect to each such Series;
(d) the rights of Beneficial Owners of each such Series shall be
exercised only through the Clearing Agency or Foreign Clearing Agency and the
applicable Clearing Agency Participants and shall be limited to those
established by law and agreements between such Beneficial Owners and the
Clearing Agency or Foreign Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the depository agreement applicable to a Series,
unless and until Definitive Notes of such Series are issued pursuant to Section
2.13, the initial Clearing Agency shall make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of principal
and interest on the Notes to such Clearing Agency Participants; and
(e) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of the Holders of Notes evidencing a
specified percentage of the Outstanding Amount, the Clearing Agency or Foreign
Clearing Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from the Beneficial Owners
and/or Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has delivered
such instructions to the Indenture Trustee.
Section 2.12. Notices to Clearing Agency or Foreign Clearing Agency.
Unless and until Definitive Notes shall have been issued to Beneficial
Owners pursuant to Section 2.13, whenever a notice or other communication to the
Noteholders is required under this Indenture, the Indenture Trustee shall give
such notice or communication to the Clearing Agency or Foreign Clearing Agency,
as applicable, for distribution to Beneficial Owners and shall have no
obligation to distribute such notice or other communication directly to the
Beneficial Owners.
Section 2.13. Definitive Notes.
If (i) (a) the Issuer advises the Indenture Trustee in writing that the
Clearing Agency or Foreign Clearing Agency is no longer willing or able to
properly discharge its responsibilities as Clearing Agency or Foreign Clearing
Agency with respect to the Book-Entry Notes of a given Series and (b) the Issuer
is unable to locate and reach an agreement on satisfactory terms with a
qualified successor, (ii) the Issuer, at its option, advises the Indenture
Trustee in writing that it elects to terminate the book-entry system through the
Clearing Agency
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or Foreign Clearing Agency with respect to such Series or (iii) after the
occurrence of an Event of Default, Beneficial Owners aggregating a majority of
the Outstanding Amount of the Notes of such Series advise the Indenture Trustee
and the applicable Clearing Agency or Foreign Clearing Agency through the
applicable Clearing Agency Participants in writing that the continuation of a
book-entry system is no longer in the best interests of the Beneficial Owners of
such Series, the Indenture Trustee shall notify (with a copy to the Transfer
Agent and Registrar) all Beneficial Owners of such Series of the occurrence of
such event and of the availability of Definitive Notes to Beneficial Owners of
such Series requesting the same. Upon surrender to the Transfer Agent and
Registrar of the Notes of such Series accompanied by registration instructions
from the applicable Clearing Agency or Foreign Clearing Agency, the Issuer shall
execute, and the Authentication Agent shall authenticate and deliver, Definitive
Notes of such Series and shall recognize the registered holders of such
Definitive Notes as Noteholders under this Indenture. Neither the Issuer nor the
Indenture Trustee shall be liable for any delay in delivery of such
instructions, and the Issuer and the Indenture Trustee may conclusively rely on,
and shall be protected in relying on, such instructions. Upon the issuance of
Definitive Notes of such Series, all references herein to obligations imposed
upon or to be performed by the applicable Clearing Agency or Foreign Clearing
Agency shall be deemed to be imposed upon and performed by the Indenture Trustee
to the extent applicable with respect to such Definitive Notes, and the
Indenture Trustee and the Paying Agent shall recognize the registered holders of
the Definitive Notes of such Series as Noteholders of such Series hereunder.
Definitive Notes will be transferable and exchangeable at the offices of the
Transfer Agent and Registrar.
Section 2.14. Global Note; Euro-Note Exchange Date.
If specified in the related Indenture Supplement for any Series, Notes
initially may be issued in the form of a single temporary Global Note (each, a
"GLOBAL NOTE") in the denomination of the initial Series Outstanding Amount and
substantially in the form attached to the related Indenture Supplement. Unless
otherwise specified in the related Indenture Supplement, the provisions of this
Section 2.14 shall apply to such Global Note. Global Notes shall be
authenticated by the Authentication Agent upon the same conditions, in
substantially the same manner and with the same effect as the Definitive Notes.
Global Notes may be exchanged in the manner described in the related Indenture
Supplement for Definitive Notes.
Section 2.15. Representations and Covenants of Paying Agent,
Authentication Agent and Transfer Agent and Registrar.
BNY, as Paying Agent, Authentication Agent and Transfer Agent and
Registrar, represents, warrants and covenants that:
(a) BNY is a banking corporation duly organized and validly existing
under the laws of the State of New York;
(b) BNY has full power and authority to deliver and perform this
Indenture and has taken all necessary action to authorize the execution,
delivery and performance by it of this Indenture and any Indenture Supplement;
and
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(c) Each of this Indenture and other Transaction Documents to which it
is a party has been duly executed and delivered by BNY and constitutes its
legal, valid and binding obligation in accordance with its terms.
ARTICLE III
REPRESENTATIONS AND COVENANTS OF THE ISSUER
Section 3.01. Representations and Warranties of the Issuer. The Issuer
hereby makes the representations and warranties set forth in this Section 3.01,
in each case as of the date hereof, as of the Effective Date, as of each Series
Issuance Date and as of any other date specified in such representation and
warranty.
(a) Organization and Good Standing. The Issuer is a limited liability
company duly formed and validly existing in good standing under the laws of the
State of Delaware and has full power and authority to own its properties and to
conduct its business as such properties are presently owned and such business is
presently conducted.
(b) Due Qualification. The Issuer is duly qualified to do business, is
in good standing as a foreign limited liability company and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such qualification,
licenses or approvals and in which the failure so to qualify or to obtain such
licenses and approvals or to preserve and maintain such qualification, licenses
or approvals could reasonably be expected to give rise to a Material Adverse
Effect.
(c) Power and Authority: Due Authorization. The Issuer (i) has all
necessary limited liability company power and authority (A) to execute and
deliver this Indenture and the other Transaction Documents to which it is a
party, (B) to perform its obligations under this Indenture and the other
Transaction Documents to which it is a party and (C) to make a Grant of the
Pledged Assets to the Indenture Trustee on the terms and subject to the
conditions herein provided and (ii) has duly authorized by all necessary action
such Grant and the execution, delivery and performance of, and the consummation
of the transactions provided for in, this Indenture and the other Transaction
Documents to which it is a party.
(d) Binding Obligations. This Indenture (i) constitutes a Grant of a
security interest (as defined in the NYUCC) in all of the Issuer's right, title
and interest in, to and under the Pledged Assets, free and clear of any Lien
(other than Permitted Liens) to the Indenture Trustee, which is enforceable with
respect to the existing Receivables owned by the Issuer and the proceeds thereof
upon execution and delivery of this Agreement and which will be enforceable with
respect to the Receivables hereafter acquired by the Issuer and the proceeds
thereof upon such acquisition by the Issuer and (ii) constitutes, and each other
Transaction Document to which the Issuer is a party when duly executed and
delivered will constitute, a legal, valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (B) as such enforceability may be limited by
general principles of
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equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(e) No Conflict or Violation. The execution, delivery and performance
of, and the consummation of the transactions contemplated by, this Indenture and
the other Transaction Documents to be signed by the Issuer, and the fulfillment
of the terms hereof and thereof, will not (i) conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a material default under (A) the certificate of
formation or the limited liability company agreement of the Issuer or (B) any
material indenture, loan agreement, mortgage, deed of trust, or other agreement
or instrument to which the Issuer is a party or by which it or any of its
respective properties is bound, (ii) result in the creation or imposition of any
Lien (other than Permitted Liens) on any of the Pledged Assets pursuant to the
terms of any such material indenture, loan agreement, mortgage, deed of trust,
or other material agreement or instrument other than this Agreement and the
other Transaction Documents or (iii) conflict with or violate any federal,
state, local or foreign law (including without limitation, Environmental Laws)
or any decision, decree, order, rule or regulation applicable to the Issuer or
of any Governmental Authority having jurisdiction over the Issuer, which
conflict or violation described in this clause (iii), individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(f) Litigation and Other Proceedings. (i) There is no action, suit,
proceeding or investigation pending or, to the best knowledge of the Issuer,
threatened, against the Issuer before any Governmental Authority and (ii) the
Issuer is not subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any Governmental Authority that, in the case of either
of the foregoing clauses (i) and (ii), (A) asserts the invalidity of this
Agreement or any other Transaction Document, (B) seeks to prevent the Grant of
any Pledged Asset by the Issuer to the Indenture Trustee, the ownership or
acquisition by the Issuer of a material amount of Receivables or the
consummation of any of the transactions contemplated by this Agreement or any
other Transaction Document, (C) seeks any determination or ruling that, in the
reasonable judgment of the Issuer, would materially and adversely affect the
performance by the Issuer of its obligations under this Agreement or any other
Transaction Document or the validity or enforceability of this Agreement or any
other Transaction Document or (D) individually or in the aggregate for all such
actions, suits, proceedings and investigations could reasonably be expected to
have a Material Adverse Effect.
(g) Governmental Approvals. Except where the failure to obtain or make
such authorization, consent, order, approval or action could not reasonably be
expected to have a Material Adverse Effect, all authorizations, consents, orders
and approvals of, or other actions by, any Governmental Authority that are
required to be obtained by the Issuer in connection with the Grant of the
Pledged Assets or the due execution, delivery and performance by the Issuer of
this Indenture or any other Transaction Document to which it is a party and the
consummation by the Issuer of the transactions contemplated by this Indenture
and the other Transaction Documents to which it is a party have been obtained or
made and are in full force and effect; provided, however, that prior to
recordation pursuant to Section 8.3 of the Purchase Agreement or the sale of a
Home to an Ultimate Buyer, record title to such Home may remain in the name of
the related Transferred Employee and no recordation in real estate records of
the conveyance of
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the related Home Purchase Contract or Home Sale Contract shall be made except as
otherwise required under Section 2.01(d)(i) of the Transfer and Servicing
Agreement.
(h) Margin Regulations. The Issuer is not engaged, principally or as
one its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meanings of
Regulations T, U and X of the Board of Governors of the Federal Reserve System).
The Issuer has not taken and will not take any action to cause the use of
proceeds of the Notes to purchase or carry margin stock.
(i) Taxes. The Issuer has filed (or there have been filed on its behalf
as a member of a consolidated group) all tax returns and reports required by law
to have been filed by it and has paid all taxes, assessments and governmental
charges thereby shown to be owing by it, other than any such taxes, assessments
or charges that are being diligently contested in good faith by appropriate
proceedings, for which adequate reserves in accordance with GAAP have been set
aside on its books and that have not given rise to any Liens (other than
Permitted Liens); provided, however, that as of the date of this Indenture, the
Issuer is a newly established entity and as such has not been required to file
any tax returns.
(j) Solvency. After giving effect to the transactions contemplated by
this Indenture and the other Transaction Documents, the Issuer is solvent and
able to pay its debts as they come due and has adequate capital to conduct its
business as presently conducted.
(k) Offices. The principal place of business and chief executive office
of the Issuer is located at 40 Apple Ridge Road, Suite 4000, Danbury,
Connecticut 06810.
(l) Investment Company Act. The Issuer is not, and is not controlled
by, an "investment company" registered or required to be registered under the
Investment Company Act.
(m) Accuracy of Financial Information and Other Information. All
balance sheets, all statements of operations and of cash flow and other
financial data that have been or shall hereafter be furnished by the Issuer to
the Indenture Trustee pursuant to Section 3.02 have been prepared in accordance
with generally accepted accounting principles (to the extent applicable) and
fairly present the financial condition of the Issuer as of the dates thereof.
All certificates, reports, statements, documents and other information furnished
to the Indenture Trustee by or on behalf of the Issuer pursuant to any provision
of this Indenture or any other Transaction Document, or in connection with or
pursuant to any amendment or modification of, or waiver under, this Indenture or
any other Transaction Document, shall, at the time the same are so furnished, be
complete and correct in all material respects on the date the same are furnished
to the Indenture Trustee.
(n) Security Interests. No security agreement, financing statement or
equivalent security or lien instrument listing the Issuer as debtor covering all
or any part of the Pledged Assets is on file or of record in any jurisdiction,
except such as may have been filed, recorded or made by the Issuer in favor of
the Indenture Trustee on behalf of the Noteholders in connection with this
Indenture. This Indenture constitutes a valid and continuing Lien on the
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Pledged Assets in favor of the Indenture Trustee on behalf of the Noteholders,
which Lien will be prior to all other Liens (other than Permitted Liens), will
be enforceable as such as against creditors of and purchasers from the Issuer in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally or by general equitable
principles, whether considered in a proceeding at law or in equity and by an
implied covenant of good faith and fair dealing. The Issuer has taken all action
necessary to perfect such security interest.
Section 3.02. Affirmative Covenants of the Issuer. From the Effective
Date until the termination of this Indenture, the Issuer hereby agrees that it
will perform the covenants and agreements set forth in this Section 3.02.
(a) Financial Reports by the Issuer. As soon as available, but in any
event within 120 days after the end of each fiscal year of the Issuer, the
Issuer shall deliver to the Indenture Trustee and each Applicable Series
Enhancer and the Indenture Trustee shall forward to each Noteholder a copy of
the audited financial statements of the Issuer at the end of such year, prepared
by independent certified public accountants of nationally recognized standing.
(b) Books and Records. The Issuer shall keep proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to the Pledged Assets and its business activities
in accordance with generally accepted accounting principles, and shall permit
the Indenture Trustee and each Applicable Series Enhancer to visit and inspect
any of its properties, to examine and make abstracts from any of its books and
records and to discuss its affairs, finances and accounts with its officers,
directors, employees and independent public accountants, all at such reasonable
times upon reasonable notice and as often as may reasonably be requested.
(c) Notice of Defaults and Events of Default. The Issuer shall give the
Indenture Trustee, each Applicable Series Enhancer and the Rating Agencies
prompt written notice of each Default and Event of Default hereunder and the
occurrence of any Unmatured Amortization Event or Amortization Event with
respect to any Series of Notes and, immediately after obtaining knowledge of any
of the following occurrences, written notice of each default on the part of the
Servicer or the Transferor of its obligations under the Transfer and Servicing
Agreement and each default on the part of CMSC of its obligations under the
Purchase Agreement or CMF of its obligations under the Receivables Purchase
Agreement, as appropriate, and, in each case, the action, if any, being taken
with respect to such default.
(d) Maintenance of Existence. The Issuer shall keep in full effect its
existence, rights and franchises as a limited liability company under the laws
of the State of Delaware (unless it becomes, or any successor Issuer hereunder
is or becomes, organized under the laws of any other State or of the United
States of America, in which case the Issuer will keep in full effect its
existence, rights and franchises under the laws of such other jurisdiction) and
shall 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 Pledged Assets and each other
related instrument or agreement.
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(e) Compliance with Laws. The Issuer will comply with the requirements
of all applicable laws, rules, regulations and orders of all Governmental
Authorities including without limitation Environmental Laws, a violation of
which, individually or in the aggregate for all such violations, is reasonably
likely to have a Material Adverse Effect.
(f) Rule 144A Information. For so long as any of the Notes are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act of 1933, as amended, the Issuer agrees to provide to any
Noteholder or Beneficial Owner, and to any prospective purchaser of Notes
designated by such Noteholder or Beneficial Owner upon the request of such
Noteholder or Beneficial Owner or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
conditions set forth in Rule 144A(d)(4) under the Securities Act of 1933, as
amended.
(g) Annual Tax Information. Unless otherwise specified in the related
Indenture Supplement, on or before January 31 of each calendar year, beginning
with calendar year 2001, the Indenture Trustee or the Paying Agent shall furnish
to each Person who at any time during the preceding calendar year was a
Noteholder of a Series of Notes a statement prepared by or on behalf of the
Issuer containing the information that is necessary or desirable to enable the
Noteholders to prepare their tax returns. The obligations of the Issuer to
prepare and the Indenture Trustee or the Paying Agent to distribute such
information shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Indenture Trustee
or the Paying Agent pursuant to any requirements of the Code as from time to
time in effect.
(h) Statements as to Compliance. The Issuer shall deliver to the
Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing within 120 days after the end of the fiscal year 2000), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Issuer during the 12-month
period ending at the end of such fiscal year (or in the case of the fiscal
year ending December 31, 2000, the period from the initial Series Issuance
Date to December 31, 2000) and of performance under this Indenture has been
made under such Authorized Officer's supervision, and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year or, if there has been a default in its
compliance with any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof.
(i) Maintenance of Office or Agency. The Issuer shall maintain an
office or agency within the Borough of Manhattan, City of New York where Notes
may be presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Issuer in respect of the Notes and this
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Indenture may be served. The Issuer hereby initially appoints the Transfer Agent
and Registrar at its office currently located at 101 Barclay Street, Floor 21
West, New York, New York 10286 (or at such other address as the Transfer Agent
and Registrar may designate from time to time by notice to the Issuer, the
Indenture Trustee and the Noteholders) to serve as its agent for the foregoing
purposes.
(j) Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.03. Negative Covenants of the Issuer. From the Effective Date
until the termination of this Indenture, the Issuer hereby agrees that it shall
not:
(a) Amendment of Limited Liability Company Agreement. Amend its limited
liability company agreement unless, prior to such amendment, each Rating Agency
confirms that after such amendment the Rating Agency Condition will be met and
each Applicable Series Enhancer consents thereto;
(b) Change in Location of Chief Executive Office. (a) Change the
location of its chief executive office or principal place of business (within
the meaning of the applicable Uniform Commercial Code) without sixty (60) days'
prior written notice to the Indenture Trustee or (b) change its name or the
jurisdiction of its formation without prior written notice to the Indenture
Trustee sufficient to allow the Indenture Trustee to execute all filings
prepared by the Issuer (including filings of financing statements on form UCC-
1) and recordings necessary to maintain the perfection of the interest of the
Indenture Trustee on behalf of the Noteholders in the Pledged Assets pursuant to
this Indenture. If the Issuer desires to so change its office or change its name
or the jurisdiction of its formation, the Issuer will make any required filings
and prior to actually changing its office or its name or the jurisdiction of its
formation the Issuer shall deliver to the Indenture Trustee (i) an Officer's
Certificate and (ii) copies of all such required filings with the filing
information duly noted thereon by the office in which such filings were made;
(c) Capital Expenditures. Make any expenditure (by long-term or
operating lease or otherwise) for capital assets (either realty or personalty);
(d) No Other Business or Agreements. Engage in any business other than
financing, purchasing, owning and selling and managing the Pledged Assets in the
manner contemplated by this Indenture and the other Transaction Documents and
all activities incidental thereto, or enter into or be a party to any agreement
or instrument other than any Transaction Document or documents and agreements
incidental thereto;
(e) Consolidation, Merger or Other Form of Combination and Sale of
Assets. Enter into any consolidation, merger, joint venture, syndicate or other
form of combination with any Person or sell, lease or transfer of otherwise
dispose of any assets, including without limitation the Pledged Assets, other
than as expressly provided for in the Transaction
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Documents, or engage in any other transaction, that would result in a change of
control of the Issuer;
(f) Guarantees, Loans, Advances and other Liabilities. Except as
contemplated by this Indenture or the other Transaction Documents, make any loan
or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person;
(g) Indebtedness. Issue, incur, assume, guarantee or otherwise become
liable, directly or indirectly, for any indebtedness except as expressly
provided for pursuant to the terms of the Transaction Documents and the Notes;
(h) Deduction from Principal and Interest. Claim any credit on, or make
any deduction from, the principal and interest payable in respect of the Notes
(other than amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of any taxes levied or assessed upon any
part of the Pledged Assets;
(i) Effectiveness of Indenture, Liens. (i) Permit the validity or
effectiveness of this Indenture to be impaired, or permit the lien of this
Indenture to be amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly permitted
hereby, (ii) permit any Lien, charge, excise, claim, security interest, mortgage
or other encumbrance (other than the lien of this Indenture) to be created on or
extend to or otherwise arise upon or burden the Pledged Assets or any part
thereof or any interest therein or the proceeds thereof or (iii) permit the lien
of this Indenture not to constitute a valid first priority perfected security
interest in the Pledged Assets; or
(j) Dissolve or Liquidate. Dissolve or liquidate in whole or in part.
Section 3.04. Protection of Pledged Assets.
The Issuer shall from time to time prepare (or cause to be prepared),
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and shall take such other action necessary or advisable
to:
(a) Grant more effectively all or any portion of the Pledged Assets for
the Notes;
(b) maintain or preserve the lien (and the priority thereof) of this
Indenture or to carry out more effectively the purposes hereof;
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(c) perfect, publish notice of, or protect the validity of, any Grant
made or to be made by this Indenture;
(d) enforce any of the Pledged Assets; or
(e) preserve and defend title to the Pledged Assets securing the Notes
and the rights therein of the Indenture Trustee and the Noteholders secured
thereby against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Section 3.04.
Section 3.05. Opinions as to Pledged Assets.
(a) On the Series Issuance Date relating to any new Series of Notes,
the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken as is
necessary to perfect the lien and security interest of this Indenture, including
without limitation with respect to the recording and filing of this Indenture,
any indentures supplemental hereto and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to maintain the perfection
of such lien and security interest.
(b) On or before April 30 in each calendar year, beginning in the year
2001, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
as is necessary to perfect the lien and security interest of this Indenture,
including without limitation with respect to the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain the perfection of such lien and security interest. Such
Opinion of Counsel also shall describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that, in the opinion of such counsel, will be required
to maintain the perfection of the lien and security interest of this Indenture
until April 30 in the following calendar year.
Section 3.06. Obligations Regarding Servicing of Receivables.
(a) The Issuer shall not take any action, and shall use its best
efforts not to permit any action to be taken by others, that would release any
Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Pledged Assets or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as expressly provided in this Indenture, the Transfer and Servicing
Agreement, the Receivables Purchase Agreement, the Purchase Agreement or such
other instrument or agreement.
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(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by such Person shall be deemed to be action taken by the Issuer. The Issuer
shall cause the Servicer to comply with all the Servicer's obligations under the
Transaction Documents to which the Servicer is a party and shall not agree to
the resignation of the Servicer from its obligations and duties imposed by the
Transfer and Servicing Agreement unless the Majority Investors have consented to
such resignation.
(c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and in the instruments and agreements relating to the Pledged Assets,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the Transfer and Servicing Agreement in accordance with and within
the time periods provided for herein and therein.
(d) If a Servicer Default shall arise from the failure of the Servicer
to perform any of its duties or obligations under the Transfer and Servicing
Agreement with respect to the Receivables, the Issuer shall take all reasonable
steps available to it to remedy such failure.
(e) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee or the rights of the Indenture Trustee under
this Indenture, the Issuer agrees (i) that it will not, without the prior
written consent of the Indenture Trustee and the Majority Investors, amend,
modify, waive, supplement, terminate or surrender, or agree to any amendment,
modification, supplement, termination, waiver or surrender of, the terms of any
Pledged Assets (except to the extent otherwise provided in the Transfer and
Servicing Agreement) or the Transaction Documents (except to the extent
otherwise provided in the Transaction Documents), or waive timely performance or
observance by the Servicer or the Transferor of its obligations under the
Transfer and Servicing Agreement, or CMSC of its obligations under the Purchase
Agreement or CMF of its obligations under the Receivables Purchase Agreement or
the Performance Guarantor of its obligations under the PHH Guarantee; and (ii)
that any such amendment shall not (A) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, Pool Collections of payments on
the Pledged Assets or distributions that are required to be made for the benefit
of the Noteholders or (B) change the definition of Majority Investors, without
the consent of the Holders of all the Outstanding Notes. If any such amendment,
modification, supplement or waiver shall be so consented to by the Indenture
Trustee and the Majority Investors or the Holders of all the Outstanding Notes,
as required, the Issuer agrees to execute and deliver, in its own name and at
its own expense, such agreements, instruments, consents and other documents as
the Indenture Trustee may deem necessary or appropriate in the circumstances.
Section 3.07 Separate Corporate Existence of the Issuer. The Issuer
hereby acknowledges that the parties to the Transaction Documents are entering
into the transactions contemplated by the Transaction Documents in reliance on
the Issuer's identity as a legal entity separate from the Originator, the
Transferor and the other CMS Persons. From and after the date
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hereof until the date of which there are no Notes of any Series Outstanding, the
Issuer shall take such actions as shall be required in order that:
(a) The Issuer will conduct its business in office space allocated to
it and for which it pays an appropriate rent and overhead allocation;
(b) The Issuer will maintain corporate records and books of account
separate from those of each CMS Person and telephone numbers and stationery that
are separate and distinct from those of each CMS Person;
(c) The Issuer's assets will be maintained in a manner that facilitates
their identification and segregation from those of any CMS Person;
(d) The Issuer will strictly observe limited liability company
formalities in its dealings with the public and with each CMS Person, and funds
or other assets of the Issuer will not be commingled with those of any CMS
Person, except as may be permitted by the Transaction Documents. The Issuer will
at all times, in its dealings with the public and with each CMS Person, hold
itself out and conduct itself as a legal entity separate and distinct from each
CMS Person. The Issuer will not maintain joint bank accounts or other depository
accounts to which any CMS Person (other than the Servicer) has independent
access;
(e) The duly admitted members of the Issuer and duly appointed managers
or officers of the Issuer will at all times have sole authority to control
decisions and actions with respect to the daily business affairs of the Issuer;
(f) Not less than two members of the Issuer's board of directors will
be an Independent Director. The Issuer will observe those provisions in its
limited liability company agreement that provide that the Issuer's board of
directors will not approve, or take any other action to cause the filing of, a
voluntary bankruptcy petition with respect to the Issuer unless each Independent
Director and all other members of the Issuer's board of directors unanimously
approve the taking of such action in writing prior to the taking of such action;
(g) The Issuer will compensate each of its employees, consultants and
agents from the Issuer's own funds for services provided to the Issuer; and
(h) The Issuer will not hold itself out to be responsible for the debts
of any CMS Person.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of this Indenture.
This Indenture shall cease to be of further effect with respect to the
Notes (except as to (a) rights of registration of transfer and exchange, (b)
substitution of mutilated, destroyed, lost or stolen Notes, (c) the rights of
Noteholders to receive payments of principal thereof and
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interest thereon, (d) Sections 3.02(j), 3.03, 3.05, 3.06 and 12.14, (e) the
rights and immunities of the Indenture Trustee hereunder, including the rights
of the Indenture Trustee under Section 6.07 and the obligations of the Indenture
Trustee under Section 4.02, the rights and immunities of BNY hereunder,
including the rights of BNY under Section 2.04(b) and the obligations of BNY
under Section 2.05, 2.06, 2.08 and 2.09 and (g) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee and payable to all or any of them) and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes when:
(i) either
(A) all Notes theretofore authenticated and delivered (other than
(1) Notes that have been destroyed, lost or stolen and that have been
replaced, or paid as provided in Section 2.06 and (2) Notes for whose full
payment money has theretofore been deposited in trust or segregated and held
in trust by the Issuer and thereafter repaid to the Issuer or discharged
from such trust, as provided in Section 8.07) have been delivered to the
Indenture Trustee for cancellation; or
(B) all Notes not theretofore delivered to the Indenture Trustee
for cancellation:
(1) have become due and payable; or
(2) will become due and payable at the maturity date for such
Series of Notes;
(ii) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer;
(iii) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate, an Opinion of Counsel and (if required by the
Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section
12.01(a) and each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with; and
(iv) the Rating Agency Condition is satisfied with respect to each
Series of Outstanding Notes.
Section 4.02. Application of Trust Money.
All monies deposited with the Indenture Trustee pursuant to Section
4.01 shall be held in trust and applied by it in accordance with the provisions
of the Notes, this Indenture and the applicable Indenture Supplement, to make
payments, through the Paying Agent, to the Noteholders and for the payment in
respect of which such monies have been deposited with the Indenture Trustee, of
all sums due and to become due thereon for principal and interest; but such
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monies need not be segregated from other funds except to the extent required
herein or required by law.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5.01. Events of Default.
Each of the following events shall be an "Event of Default" with
respect to any Series of Notes hereunder:
(a) The Issuer shall fail to make any payment of interest on any Note
of such Series when due (without giving effect to payments under any Series
Enhancement that is a letter of credit, surety bond or financial guaranty
insurance policy) and such failure shall remain unremedied for five Business
Days; or
(b) The Issuer shall fail to make any payment of the principal of any
Note of such Series when due (without giving effect to any payments under any
Series Enhancement that is a letter of credit, surety bond or financial guaranty
insurance policy); or
(c) (i) The Issuer shall fail to perform or observe, as and when
required, any term, covenant or agreement contained in this Indenture or any of
the other Transaction Documents on its part to be performed or observed (other
than as referred to in Section 5.01(a) or (b) above), (ii) such failure
materially and adversely affects the rights of the Noteholders of such Series
(determined without giving effect to any Series Enhancement) and (iii) such
failure shall remain unremedied for 30 days after written notice thereof
(specifying such failure and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder) shall have been given (A) to the
Issuer by the Indenture Trustee or (B) to the Issuer and the Indenture Trustee
by Noteholders of such Series holding Notes evidencing at least 25% of the
Series Outstanding Amount of such Series; or
(d) (i) any representation or warranty made by the Issuer in this
Indenture or any of the other Transaction Documents shall prove to have been
untrue and incorrect in any material respect when made or deemed to have been
made, (ii) such occurrence materially and adversely affects the rights of the
Noteholders of such Series (determined without giving effect to any Series
Enhancement) and (iii) such occurrence remains unremedied for 30 days after
written notice thereof (specifying such failure and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder) shall have been
(A) given to the Issuer by the Indenture Trustee or (B) to the Issuer and the
Indenture Trustee by Noteholders of such Series holding Notes evidencing at
least 25% of the Series Outstanding Amount of such Series; or
(e) An Insolvency Event shall have occurred with respect to the Issuer;
or
(f) The Commission or other regulatory body having jurisdiction reaches
a final determination that the Issuer is required to be registered under the
Investment Company Act.
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The Issuer shall deliver to the Indenture Trustee, within five days
after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event that with the giving of notice and the lapse of time
would become an Event of Default, its status and what action the Issuer is
taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default referred to in clause (e) or (f) of Section 5.01
has occurred, the unpaid principal amount of all Series of Notes, together with
interest accrued but unpaid thereon, and all other amounts due to the
Noteholders under this Agreement shall immediately and without further act
become due and payable. If an Event of Default referred to in clause (a), (b),
(c) or (d) of Section 5.01 shall occur and be continuing with respect to any
Series of Notes, then and in every such case the Indenture Trustee or
Noteholders holding Notes evidencing a majority of the Series Outstanding Amount
of such Series of Notes may declare all the Notes of such Series to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by the Noteholders), and upon any such declaration
the unpaid principal amount of such Notes, together with accrued and unpaid
interest thereon through the date of acceleration, shall become immediately due
and payable.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
the Indenture Trustee.
The Issuer covenants that if (i) a default occurs in the payment of any
interest on any Note when the same becomes due and payable, and such default
continues for a period of five Business Days or (ii) a default is made in the
payment of the principal of any Note when the same becomes due and payable, by
acceleration or at stated maturity, the Issuer will, upon demand of the
Indenture Trustee, pay to the Indenture Trustee, for the benefit of the Holders
of such Notes, the entire amount then due and payable on such Notes for
principal and interest, with interest on the overdue principal, and to the
extent payment at such rate of interest shall be legally enforceable, on overdue
installments of interest, at the Note Interest Rate borne by the Notes and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
If the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and on behalf of the Noteholders
of such Series, may institute a proceeding for the collection of the sums so due
and unpaid, and may prosecute such proceeding to judgment or final decree, and
may enforce the same against the Issuer or other obligor upon such Notes and
collect in the manner provided by law out of the property of the Issuer the
moneys adjudged or decreed to be payable.
If an Event of Default occurs and is continuing, the Indenture Trustee
may in its discretion, as more particularly provided in Section 5.04, proceed to
protect and enforce its rights and the rights of the Noteholders by such
appropriate proceedings as the Indenture Trustee deems most effective to protect
and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or any Indenture Supplement or in aid of
the exercise of any power granted herein or therein, or to enforce any other
proper remedy
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or legal or equitable right vested in the Indenture Trustee by this Indenture,
any Indenture Supplement or by law.
If there shall be pending, relative to the Issuer or any Person having
or claiming an ownership interest in the Pledged Assets, proceedings under the
Bankruptcy Code or any other applicable Federal or State bankruptcy, insolvency
or other similar law, or in case a receiver, assignee or trustee in bankruptcy
or reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in the event of any other comparable judicial proceedings
relative to the Issuer or to the creditors or property of the Issuer, then the
Indenture Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise and whether or not the principal of any Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
whether or not the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section 5.03:
(i) to file and prove a claim or claims 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 Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor Indenture
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred and all advances made
by the Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of the Notes in any election of a trustee, a standby
trustee or person performing similar functions in any such proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of the Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, if the Indenture Trustee consents to the
making of payments directly to such Noteholders, to pay to the Indenture Trustee
such amounts as shall be sufficient to cover reasonable compensation to the
Indenture Trustee, each predecessor Indenture Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or bad faith.
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Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to, or vote for or accept or adopt on behalf of
any Noteholder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except to vote for the election of a trustee
in bankruptcy or similar person as aforesaid.
All rights of action and of asserting claims under this Indenture or
any Indenture Supplement or under any of the Notes may be enforced by the
Indenture Trustee without the possession of any of the Notes or the production
thereof in any trial or other proceedings relative thereto, and any such action
or proceedings instituted by the Indenture Trustee shall be brought in its own
name as trustee, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders of the Notes.
In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
any Indenture Supplement to which the Indenture Trustee shall be a party), the
Indenture Trustee shall be held to represent all the Holders of the Notes, and
it shall not be necessary to make any Noteholder a party to any such
proceedings.
Section 5.04. Remedies; Priorities.
(a) If an Event of Default shall have occurred and be continuing with
respect to any Series of Outstanding Notes and such Series of Notes has been
accelerated under Section 5.02, the Indenture Trustee may institute proceedings
to enforce the obligations of the Issuer hereunder and under the Indenture
Supplement with respect to such Series of Notes in its own name and on behalf of
the Noteholders of such Series for the collection of all amounts then payable on
the Notes of such Series or under this Indenture or such Indenture Supplement
with respect thereto, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Issuer moneys adjudged due.
(b) If an Event of Default shall have occurred and be continuing with
respect to all Series of Outstanding Notes and all Series of Outstanding Notes
have been accelerated under Section 5.02, the Indenture Trustee may or, if so
directed by the Majority Investors, the Indenture Trustee shall, do one or more
of the following:
(i) institute proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Pledged Assets;
(ii) exercise any remedies of a secured party under the NYUCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Holders of the Notes; and
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(iii) in the case of an Event of Default referred to in clause (a)
or (b) of Section 5.01, sell the Pledged Assets or rights or interest
therein, at one or more public or private sales called and conducted in
accordance with Section 5.05;
provided that the Indenture Trustee may not sell or otherwise liquidate the
Pledged Assets following an Event of Default referred to in clause (a) or (b) of
Section 5.01 unless (A) the proceeds of the sale or liquidation of the Pledged
Assets are sufficient to discharge in full all amounts due and unpaid with
respect to the Notes, (B) if the Indenture Trustee has determined that the
Pledged Assets will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes, Holders of Notes evidencing 66 2/3% of
the Outstanding Amount, voting as a single class, consent to such sale or
liquidation or (C) Holders of Notes evidencing 100% of the Outstanding Amount
consent to such sale or liquidation. In determining such sufficiency or
insufficiency with respect to clause (A) and (B), the Indenture Trustee may, but
is not required to, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Pledged Assets for such
purpose.
(c) If the Indenture Trustee collects any money or property pursuant to
this Article V, such money or property shall be held by the Indenture Trustee as
additional collateral hereunder and the Indenture Trustee shall pay out such
money or property to the Collection Account for distribution in accordance with
the provisions of Article VIII.
Section 5.05. Sale of Assets.
(a) The method, manner and time, place and terms of any sale of all of
the Pledged Assets pursuant to Section 5.04(b) shall be commercially reasonable.
The Indenture Trustee may from time to time postpone any sale by public
announcement made at the time and place of such sale. The Indenture Trustee
hereby expressly waives its right to any amount fixed by law as compensation for
such sale.
(b) In connection with a sale of all of the Pledged Assets pursuant to
Section 5.04(b), any Noteholder may bid for and purchase the property offered
for sale, and upon compliance with the terms of such sale may hold, retain and
possess and dispose of such property, without further accountability, and may,
in paying the purchase money therefor, deliver any Outstanding Notes or claims
for interest thereon in lieu of cash up to the amount that shall, upon
distribution of the net proceeds of such sale, be payable thereon.
(c) The Indenture Trustee may bid for and acquire any portion of the
Pledged Assets securing the Notes in connection with a public sale thereof, and
may pay all or part of the purchase price by crediting against amounts owing to
the Indenture Trustee under this Indenture, including without limitation the
costs, charges and expenses incurred by the Indenture Trustee in connection with
such sale.
(d) The Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Pledged
Assets in connection with a sale thereof. In addition, the Indenture Trustee is
hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to
transfer and convey its interest in any portion of the Pledged
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Assets in connection with a sale thereof, and to take all action necessary to
effect such sale. No purchaser or transferee at such a sale shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any monies.
Section 5.06. Limitations on Suits.
No Noteholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture or any Indenture
Supplement, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) Noteholders holding Notes evidencing at least 25% of the Series
Outstanding Amount of each Series of Outstanding Notes have made written request
to the Indenture Trustee to institute such proceeding in respect of such Event
of Default in its own name as the Indenture Trustee hereunder;
(c) such Noteholder or Noteholders have offered to the Indenture
Trustee indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(d) the Indenture Trustee has failed to institute such proceedings for
60 days after its receipt of such notice, request and offer of indemnity; and
(e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Majority Investors;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.
If the Indenture Trustee receives conflicting or inconsistent requests
and indemnity from two or more groups of Noteholders holding Notes, each
evidencing less than a majority of the Series Outstanding Amount of each Series
of Outstanding Notes, the Indenture Trustee shall act at the direction of the
group of Noteholders holding Notes evidencing the greater amount of Notes;
provided, however, that, notwithstanding any other provisions of this Indenture,
if the Indenture Trustee receives conflicting or inconsistent requests and
indemnity
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from two or more groups of Noteholders holding an equal amount of Notes, the
Indenture Trustee in its sole discretion may determine what, if any, action
shall be taken.
Section 5.07. Unconditional Right of Noteholders to Receive Principal
and Interest.
Notwithstanding any other provision of this Indenture, other than
provisions hereof limiting the right to recover amounts due on the Notes to
recoveries from the Pledged Assets, the holder of any Note shall have the
absolute and unconditional right to receive payment of the principal of and
interest on such Note as such principal and interest becomes due and payable and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Noteholder.
Section 5.08. Restoration of Rights and Remedies.
If the Indenture Trustee or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture or any Indenture
Supplement and such Proceeding has been discontinued or abandoned for any reason
or has been determined adversely to the Indenture Trustee or to such Noteholder,
then and in every such case the Issuer, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee or to the Noteholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver.
No delay or omission of the Indenture Trustee or any Noteholder to
exercise any right or remedy accruing upon any Default or Event of Default shall
impair any such right or remedy or constitute a waiver of any such Default or
Event of Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
Section 5.11. Control by Noteholders.
Except as specifically set forth herein, the Majority Investors shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to
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the Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) if an Event of Default occurs with respect to less than all Series
of Outstanding Notes, then the Indenture Trustee's rights and remedies shall be
limited to the rights and remedies pertaining only to those Series of Notes with
respect to which such Event of Default has occurred, and the Indenture Trustee
shall exercise such rights and remedies at the direction of the Noteholders
holding Notes evidencing a majority of the Series Outstanding Amount of all such
Series of Notes;
(c) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction; and
(d) such direction shall be in writing;
and provided, further, that subject to Section 6.01, the Indenture Trustee need
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
Section 5.12. Waiver of Past Defaults.
Prior to the declaration of the acceleration of the maturity of the
Notes of any Series as provided in Section 5.02, Noteholders holding Notes
evidencing a majority of the Series Outstanding Amount of such Series of Notes
may, on behalf of all such Noteholders, waive any past Default or Event of
Default with respect to such Series of Notes and its consequences except a
Default (a) in payment of principal of or interest on any of the Notes of such
Series or (b) in respect of a covenant or provision hereof that cannot be
modified or amended without the consent of the Holder of each Note of such
Series. In the event of any such waiver, the Issuer, the Indenture Trustee and
the Noteholders of such outstanding Series shall be restored to their former
positions and rights hereunder, respectively, but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto. The
Issuer shall give prompt written notice of any waiver to the Rating Agencies.
Section 5.13. Undertaking for Costs.
All parties to this Indenture agree, and each Noteholder by such
Noteholder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against
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the Indenture Trustee for any action taken, suffered or omitted by it as the
Indenture Trustee, the filing by any party litigant in such Proceeding of an
undertaking to pay the costs of such Proceeding, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such Proceeding, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; provided,
however, the provisions of this Section 5.13 shall not apply to (a) any suit
instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder
or group of Noteholders, in each case holding Notes evidencing in the aggregate
more than 10% of the Series Outstanding Amount of any Series of Notes, or (c)
any suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on or after the respective due dates
expressed in such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead or in any manner whatsoever, claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture, and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15. Action on Notes.
The Indenture Trustee's right to seek and recover judgment on the Notes
or under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither
the Lien of this Indenture nor any rights or remedies of the Indenture Trustee
or the Noteholders shall be impaired by the recovery of any judgment by the
Indenture Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Pledged Assets or upon any of the assets of the
Issuer.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of the Indenture Trustee.
(a) If an Event of Default has occurred and is continuing and a Trustee
Officer shall have actual knowledge or written notice of such Event of Default,
the Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee; and
(ii) in the absence of bad faith or negligence on its part, the
Indenture Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions and calculations expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and conforming
to the requirements of this Indenture; provided, however, that the Indenture
Trustee, upon receipt of any resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Indenture Trustee that are specifically required to be furnished pursuant to
any provision of this Indenture or any Indenture Supplement, shall examine
them to determine whether they substantially conform, without verification
of the accuracy of any computations therein, to the requirements of this
Indenture or any Indenture Supplement. The Indenture Trustee shall give
prompt written notice to the Noteholders and each Rating Agency of any
material lack of conformity of any such instrument to the applicable
requirements of this Indenture or any Indenture Supplement discovered by the
Indenture Trustee that would entitle the Majority Investors to take any
action pursuant to this Indenture or any Indenture Supplement if such lack
of conformity cannot be cured.
(c) No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) this Section 6.01(c) shall not be construed to limit the
effect of Section 6.01(a);
(ii) permissive rights of the Indenture Trustee shall not be
construed as duties;
(iii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Trustee Officer unless it is proved that
the Indenture Trustee was negligent in ascertaining the pertinent facts;
(iv) the Indenture Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the Indenture and at the direction of the Majority Investors
relating to the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or for exercising any trust or
power conferred upon the Indenture Trustee under this Indenture; and
(v) no provision of this Indenture or of any Transaction Document
shall require the Indenture Trustee to be responsible for the acts or
omissions of the Servicer or to act as Successor Servicer until such time as
it is required to act as Successor Servicer under this Indenture.
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(d) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers 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.
(e) Each provision of this Indenture that in any way relates to the
Indenture Trustee is subject to Sections 6.01(a) and (b).
(f) The Indenture Trustee shall have no responsibility or liability for
investment losses on Eligible Investments, except to the extent that the
institution acting as Indenture Trustee is an obligor on such Eligible
Investment.
(g) The Indenture Trustee shall notify each Rating Agency of any change
in any rating of the Notes of any other Rating Agency of which the Indenture
Trustee has received written notice pursuant to any of the Transaction
Documents.
(h) For all purposes under this Indenture, the Indenture Trustee shall
not be deemed to have notice or knowledge of any Event of Default, Servicer
Default or Amortization Event unless a Trustee Officer assigned to and working
in the Corporate Trust Office of the Indenture Trustee has actual knowledge
thereof or has received written notice thereof. For purposes of determining the
Indenture Trustee's responsibility and liability hereunder, any reference to an
Event of Default, Servicer Default or Amortization Event shall be construed to
refer only to such event of which the Indenture Trustee is deemed to have notice
as described in this Section 6.01(h).
Section 6.02. Notice of Event of Default.
Upon the occurrence of any Event of Default of which a Trustee Officer
has actual knowledge or has received notice, the Indenture Trustee shall
transmit by mail to all Noteholders as their names and addresses appear on the
Note Register and to the Rating Agencies, notice of such Event of Default known
to the Indenture Trustee within the later of (i) 30 days after such Event of
Default occurs or (ii) ten Business Days after the Indenture Trustee receives
such notice or obtains actual notice, if later.
Section 6.03. Rights of Indenture Trustee.
Except as otherwise provided in Section 6.01:
(a) The Indenture Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting on any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(b) Whenever in the administration of this Indenture the Indenture
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or
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omitting any action hereunder, the Indenture Trustee may (unless other evidence
be herein specifically prescribed), in the absence of bad faith on its part,
rely on an Officer's Certificate of the Issuer.
(c) The Indenture Trustee may consult with counsel with respect to any
action to be taken, suffered or omitted by it hereunder and the written advice
of such counsel, obtained in good faith, or any Opinion of Counsel or any Tax
Opinion shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith reliance
thereon.
(d) The Indenture Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or to honor the request
or direction of any of the Noteholders pursuant to this Indenture, or a Series
Enhancer if so authorized by an Indenture Supplement unless such Noteholders or
Series Enhancer shall have offered to the Indenture Trustee reasonable security
or indemnity against the costs, expenses and liabilities that might be incurred
by it in compliance with such request or direction.
(e) The Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Indenture Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit and, if the Indenture Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books, records and
premises of the Issuer, personally or by agent or attorney.
(f) Subject to Section 6.13 hereof, the Indenture Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, Affiliates, attorneys, custodians or nominees;
provided, however, that the Indenture Trustee shall continue to be responsible
for any (i) misconduct or negligence on the part of any agent, Affiliates,
attorney, custodians or nominees appointed by it hereunder and (ii) the
supervision of such agents, Affiliates, attorneys, custodians or nominees after
such appointment.
(g) The Indenture Trustee shall not be liable for any actions taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights conferred upon the Indenture Trustee by this
Indenture.
(h) If the Indenture Trustee is also acting as Paying Agent,
Authentication Agent and Transfer Agent and Registrar, the rights and
protections afforded to the Indenture Trustee pursuant to this Article VI shall
also be afforded to such Paying Agent, Authentication Agent and Transfer Agent
and Registrar.
Section 6.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes shall be taken as the
statements of the Issuer, and the Indenture Trustee assumes no responsibility
for their correctness. The Indenture Trustee makes no representation as to the
validity or sufficiency of this Indenture, the other Transaction Documents, the
Pledged Assets, the Notes or any related document. The
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Indenture Trustee shall not be accountable for the use or application by the
Issuer of the proceeds from the Notes.
Section 6.05. May Hold Notes.
The Indenture Trustee and any Affiliates, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Issuer, any CMS Person and their Affiliates, any Series Enhancer, any
underwriter or any of the other parties to the Transaction Documents with the
same rights it would have if it were not the Indenture Trustee or an Affiliate
of the Indenture Trustee.
Section 6.06. Money Held in Trust.
Money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds held by the Indenture Trustee in trust hereunder
except to the extent required herein or required by law. The Indenture Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed upon in writing by the Indenture Trustee and the
Issuer.
Section 6.07. Compensation, Reimbursement and Indemnification.
Pursuant to the Transfer and Servicing Agreement, the Issuer shall
direct the Servicer to pay to the Indenture Trustee from time to time reasonable
compensation for its services. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall cause the Servicer to reimburse the Indenture Trustee for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall
cause the Servicer to indemnify the Indenture Trustee against any and all loss,
liability or expense (including the fees of either in-house counsel or outside
counsel, but not both) incurred by it in connection with the administration of
this trust and the performance of its duties hereunder and under any other
Transaction Document. The Indenture Trustee shall notify the Issuer and the
Servicer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer and the Servicer shall not relieve the
Issuer of its obligations hereunder unless such loss, liability or expense could
have been avoided with such prompt notification and then only to the extent of
such loss, expense or liability which could have been so avoided. Neither the
Issuer nor the Servicer need reimburse any expense or indemnify against any
loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
When the Indenture Trustee incurs expenses after the occurrence of a
Default specified in subsection 5.02(d) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
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Section 6.08. Replacement of Indenture Trustee.
No resignation or removal of the Indenture Trustee and no appointment
of a successor Indenture Trustee shall become effective until the acceptance of
appointment by the successor Indenture Trustee pursuant to this Section 6.08.
The Indenture Trustee may resign at any time by giving 30 days' written notice
to the Issuer. The Majority Investors may remove the Indenture Trustee by so
notifying the Indenture Trustee. The Issuer shall remove the Indenture Trustee
if:
(a) the Indenture Trustee fails to comply with Section 6.11;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent; or
(c) the Indenture Trustee otherwise becomes legally unable to act.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee (who satisfies the requirements
of Section 6.11) subject to the consent of the Majority Investors.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Issuer and the Servicer.
Thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The successor
Indenture Trustee shall mail a notice of its succession to each Series Enhancer
and all Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Majority Investors may petition any court
of competent jurisdiction for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section 6.08, the Issuer's obligations under Section 6.07 shall continue
for the benefit of the retiring Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Merger.
If the Indenture Trustee consolidates with, merges or converts into, or
transfers all or substantially all its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor Indenture
Trustee, provided that such corporation or banking association is otherwise
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qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Rating Agencies and each Series Enhancer with prior written notice of any
such transaction.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provisions of this Indenture, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Pledged Assets may at the time be located, the Indenture Trustee shall
have the power and may execute and deliver at any time all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Pledged Assets, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Pledged Assets or any part thereof and, subject
to the other provisions of this Section 6.10, such powers, duties, obligations,
rights and trusts as the Indenture Trustee may consider necessary or desirable.
No co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 6.11, and no notice to
Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 but notice shall be given to each Applicable Series
Enhancer.
(b) Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed on the Indenture Trustee shall be conferred or imposed on, and
exercised or performed by, the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Pledged Assets or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every
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provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Every such instrument
shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification.
The Indenture Trustee shall at all times be a corporation organized and
doing business under the laws of the United States or any State thereof
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and having long-term unsecured debt with a
rating of at least Baa3 by Moody's and BBB- by Standard & Poor's and subject to
supervision or examination by federal or state authority, and shall satisfy the
requirements for a trustee set forth in paragraph (a)(4)(i) of Rule 3a-7 under
the Investment Company Act.
If at any time the Indenture Trustee ceases to be eligible in
accordance with the provisions of this Section 6.11, the Indenture Trustee shall
resign immediately in the manner and with the effect specified in Section 6.08.
Section 6.12. Representations and Covenants of the Indenture Trustee.
The Indenture Trustee represents, warrants and covenants that:
(a) The Indenture Trustee is duly organized and validly existing under
the laws of the jurisdiction of its organization;
(b) The Indenture Trustee has full power and authority to deliver and
perform this Indenture and has taken all necessary action to authorize the
execution, delivery and performance by it of this Indenture and other
Transaction Documents to which it is a party; and
(c) Each of this Indenture and other Transaction Documents to which it
is a party has been duly executed and delivered by the Indenture Trustee and
constitutes its legal, valid and binding obligation in accordance with its
terms.
Section 6.13. Custody of Pledged Assets and Other Collateral.
The Indenture Trustee shall hold such of the Pledged Assets (and any
other collateral that may be granted to the Indenture Trustee) as consists of
instruments, deposit accounts, negotiable documents, money, goods, letters of
credit, and advices of credit in the State of Illinois. The Indenture Trustee
shall hold such of the Pledged Assets as constitute investment
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property through a securities intermediary, which securities intermediary shall
agree with the Indenture Trustee that (a) such investment property shall at all
times be credited to a securities account of the Indenture Trustee, (b) such
securities intermediary shall treat the Indenture Trustee as entitled to
exercise the rights that comprise each financial asset credited to such
securities account, (c) all property credited to such securities account shall
be treated as a financial asset, (d) such securities intermediary shall comply
with entitlement orders originated by the Indenture Trustee without the further
consent of any other person or entity, (e) such securities intermediary will not
agree with any person other than the Indenture Trustee to comply with
entitlement orders originated by such other person, (f) such securities accounts
and the property credited thereto shall not be subject to any lien, security
interest, right of set-off in favor of such securities intermediary or anyone
claiming through it (other than the Indenture Trustee), and (g) such agreement
shall be governed by the laws of the State of New York. Terms used in the
preceding sentence that are defined in the NYUCC and not otherwise defined
herein shall have the meaning set forth in the NYUCC. Except as permitted by
this Section 6.13, the Indenture Trustee shall not hold Pledged Assets through
an agent or a nominee.
ARTICLE VII
NOTEHOLDERS' LIST AND REPORTS BY INDENTURE TRUSTEE
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders.
The Issuer shall furnish or cause the Transfer Agent and Registrar to
furnish to the Indenture Trustee (a) upon each transfer of a Note, a list of the
names, addresses and taxpayer identification numbers of the Noteholders as they
appear on the Note Register as of such Record Date, in such form as the
Indenture Trustee may reasonably require, and (b) at such other times as the
Indenture Trustee may request in writing, within 10 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 if the Indenture Trustee is the Transfer Agent and Registrar, the Indenture
Trustee shall furnish to the Issuer such list in the same manner prescribed in
clause (b) above.
Section 7.02. Preservation of Information.
If the Indenture Trustee is not the Transfer Agent and Registrar, the
Indenture Trustee shall preserve the names, addresses and taxpayer
identification numbers of the Noteholders contained in the most recent list
furnished to the Indenture Trustee as provided in Section 7.01. The Indenture
Trustee may destroy any list furnished to it as provided in Section 7.01 upon
receipt of a new list so furnished.
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ARTICLE VIII
ALLOCATION AND APPLICATION OF POOL COLLECTIONS
Section 8.01. Collection of Money.
Except as otherwise expressly provided herein and in each related
Indenture Supplement, the Indenture Trustee may demand payment or delivery of,
and shall receive and collect, directly and without intervention or assistance
of any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall hold all such money and property received by it in trust
for the Noteholders 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 Transfer and Servicing Agreement
or any other Transaction Document, the Indenture Trustee may, and upon the
request of the Majority Investors 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 an Event of Default under this Indenture and to
proceed thereafter as provided in Article V hereof.
Section 8.02. Rights of Noteholders.
The Notes shall represent limited recourse obligations of the Issuer
secured by the Pledged Assets, including the benefits of any Series Enhancement
issued with respect to any Series of Notes and the right to receive Pool
Collections and other amounts at the times and in the amounts specified in this
Article VIII or in the applicable Indenture Supplement to be deposited in
Collection Account and any Series Accounts (if so specified in the related
Indenture Supplement). The Notes do not represent obligations of, or interests
in, CMSC, CMF, the Transferor or the Servicer. The Notes are limited in right of
payment to Pool Collections on the Pledged Assets and other assets of the Issuer
allocable to the Notes as provided herein and in the applicable Indenture
Supplement.
Section 8.03. Establishment of Accounts.
(a) Establishment of Collection Account. The Collection Account shall
be established and maintained in accordance with the provisions of the Transfer
and Servicing Agreement. An Indenture Supplement may establish sub-accounts to
the Collection Account as specified in such Indenture Supplement to effect
allocations to a Series in accordance with such Indenture Supplement. Funds on
deposit in any subaccount of the Collection Account shall not be commingled with
(i) funds on deposit in any other subaccount of the Collection Account or (ii)
funds on deposit in the Collection Account which have not been allocated to any
subaccount of the Collection Account.
(b) Establishment of Distribution Account. The Paying Agent, for the
benefit of the Noteholders, shall cause to be established and maintained with
the Paying Agent, a non-interest bearing segregated trust account that is a
Qualified Account (the "DISTRIBUTION ACCOUNT") bearing a designation clearly
indicating that the funds deposited therein are held in
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trust for the benefit of Noteholders. The Paying Agent shall possess all right,
title and interest in all funds on deposit from time to time in the Distribution
Account and in all proceeds thereof. The Distribution Account shall be under the
sole dominion and control of the Paying Agent for the benefit of Noteholders. If
the Distribution Account ceases at any time to be a Qualified Account, the
Indenture Trustee shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days) establish a new Distribution Account which is a
Qualified Account, transfer any funds on deposit in the existing Distribution
Account to such new Distribution Account and from the date such new Distribution
Account is established, it shall be the "DISTRIBUTION ACCOUNT."
(c) Establishment of Series Accounts. If so provided in the related
Indenture Supplement, the Issuer, for the benefit of the Noteholders and other
Person as may be identified in such Indenture Supplement, shall establish and
maintain with the Indenture Trustee or its nominee in the name of the Indenture
Trustee one or more Series Accounts, which Series Accounts also shall be
Qualified Accounts (unless such requirement is waived in the related Indenture
Supplement). Each such Series Account shall bear a designation clearing
indicating that the funds deposited therein are held for the benefit of
Noteholders of such Series.
Section 8.04. Pool Collections and Allocations.
(a) The Issuer shall cause the Servicer to deposit Pool Collections
into the Collection Account as promptly as possible after the receipt in a
Lockbox Account of such Pool Collections, but in no event later than the second
Business Day following the receipt in a Lockbox Account of such Pool
Collections.
(b) The Issuer agrees that if any Pool Collections are received by the
Issuer in an account other than the Collection Account, such monies,
instruments, cash and other proceeds will not be commingled by the Issuer with
any of its other funds or property, if any, but will be held separate and apart
therefrom and will be held in trust by the Issuer for, and immediately remitted
to, the Indenture Trustee, with any necessary endorsement.
(c) (i) Prior to the allocation of funds as set forth in clause
(ii), the Indenture Trustee shall make the distributions set forth in
Sections 3.02(c)(vi), 3.12 and 3.14(b) of the Transfer and Servicing
Agreement.
(ii) After making the distributions set forth in clause (i), the
Indenture Trustee shall allocate all funds on deposit in the Collection
Account to each Series based on the Series Percentage of such Series as set
forth in the Indenture Supplement related to such Series. Amounts allocated
to any Series shall not, except as specified in the related Indenture
Supplement, be available to the Noteholders of any other Series. The
Indenture Supplement shall specify how amounts allocated to such Series will
be applied.
(d) At any time a Series is in its Amortization Period, the Issuer
agrees that any Pool Collections that would otherwise be released to the Issuer
under the terms of any Indenture Supplement related to any other Series which is
not in its Amortization Period, will be allocated to such amortizing Series and
used to pay the principal of such amortizing Series. To the extent more than one
Series is in its Amortization Period, such funds will be allocated ratably
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among each amortizing Series based on their respective Series Percentages.
Notwithstanding anything to the contrary, no Pool Collections that would
otherwise be released to the Issuer shall be paid to an amortizing Series unless
the terms of the related Indenture Supplement specifically require the
allocation of such funds to such amortizing Series.
(e) On each Deposit Date, except as otherwise provided in an Indenture
Supplement, the Indenture Trustee shall pay to the Issuer the remaining funds,
if any, on deposit in the Collection Account on such Deposit Date after giving
effect to transfers to be made pursuant to Section 8.04(c).
Section 8.05. Release of Pledged Assets.
(a) The Indenture Trustee may, and when required by the provisions of
this Indenture or the other Transaction Documents shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture or the Transaction Documents.
No party relying on an instrument executed by the Indenture Trustee as provided
in this Article VIII shall be bound to ascertain the Indenture Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding, release and transfer, without recourse, representation or warranty,
all of the Pledged Assets that secured the Notes (other than any cash held for
the payment of the Notes pursuant to Section 4.02) to the Issuer.
Section 8.06. Officer's Certificate.
The Issuer shall provide the Indenture Trustee with at least seven
days' notice when requesting the Indenture Trustee to take any action pursuant
to Section 8.05(a), which notice shall be accompanied by copies of any
instruments involved, and the Indenture Trustee shall also require, as a
condition to such action, an Officer's Certificate stating that such action is
authorized hereunder and under the Transaction Documents and will not materially
and adversely impair the security for the Notes or the rights of the Noteholders
under this Indenture. The Indenture Trustee may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.07. Money for Note Payments to Be Held in Trust.
All payments of amounts due and payable with respect to the Notes that
are to be made from amounts withdrawn from the Collection Account shall be made
on behalf of the Issuer by the Indenture Trustee or by the Paying Agent, and no
amounts so withdrawn from the Collection Account shall be paid over to or at the
direction of the Issuer except as provided in this Section 8.07, Section 8.04(d)
or in the related Indenture Supplement.
On or before each Distribution Date, in accordance with the
instructions of the Servicer, the Indenture Trustee shall deposit or cause to be
deposited in the Distribution Account
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for each outstanding Series an aggregate sum sufficient to pay the amounts then
becoming due under the Notes of such outstanding Series, such sum to be held in
trust for the benefit of the Persons entitled thereto.
ARTICLE IX
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
Distributions shall be made to, and reports shall be provided to,
Noteholders as set forth in the applicable Indenture Supplement. The identity of
the Noteholders with respect to distributions and reports shall be determined
according to the immediately preceding Record Date.
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies and each Applicable Series Enhancer and upon
satisfaction of the Rating Agency Condition with respect to the Notes of all
Series, the Issuer, the Indenture Trustee, the Paying Agent, the Authentication
Agent and the Transfer Agent and Registrar, at any time and from time to time,
may enter into an indenture or indentures supplemental hereto for any of the
following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm to the Indenture Trustee any property subject, or required to be
subjected, to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iii) to convey, transfer, assign, mortgage or pledge any property
to or with the consent of the Indenture Trustee;
(iv) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any other
provisions with respect to matters or questions arising under this Indenture
or in any supplemental indenture;
(v) to evidence and provide for the acceptance of the appointment
hereunder by a successor indenture trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall be
necessary to facilitate
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the administration of the Pledged Assets hereunder by more than one trustee,
pursuant to the requirements of Article VI;
(vi) to provide for the issuance of one or more new Series of
Notes, in accordance with the provisions of Section 2.10; or
(vii) to provide for the termination of any Series Enhancement in
accordance with the provisions of the related Indenture Supplement;
provided, however, that such action shall not adversely affect in any
material respect the interests of any Noteholder, as evidenced by an
Officer's Certificate of an Authorized Officer delivered to the Indenture
Trustee (at the Issuer's expense).
The Indenture Trustee, the Paying Agent, the Authentication Agent and the
Transfer Agent and Registrar are hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer, the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar also, without the
consent of any Noteholders of any outstanding Series but with prior notice to
the Rating Agencies and each Applicable Series Enhancer and upon satisfaction of
the Rating Agency Condition and the written consent of each Applicable Series
Enhancer with respect to the Notes of all outstanding Series, may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that the Issuer shall have
delivered to the Indenture Trustee, the Paying Agent, the Authentication Agent
and the Transfer Agent and Registrar an Officer's Certificate, dated the date of
any such action, stating that the Issuer reasonably believes that such action
will not have a Material Adverse Effect. Additionally, notwithstanding the
preceding sentence, the Issuer, the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar also, without the
consent of any Noteholders of any outstanding Series, may enter into an
indenture or indentures supplemental hereto to add, modify or eliminate such
provisions as may be necessary or advisable in order to enable the Issuer (i) to
qualify as, and to permit an election to be made to cause the Issuer to be
treated as, a "financial asset securitization investment trust" as described in
the provisions of Section 860L of the Code, (ii) to avoid the imposition of
state or local income or franchise taxes imposed on the Issuer's property or its
income and (iii) to add, modify or eliminate such provisions as may be necessary
and desirable to implement any revisions to the Uniform Commercial Code as in
force in the applicable jurisdiction; provided, however, that the Issuer, the
Indenture Trustee, the Paying Agent, the Authentication Agent and the Transfer
Agent and Registrar shall not enter into any such indenture or supplement unless
(w) the Issuer delivers to the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar and each Applicable
Series Enhancer an Officer's Certificate dated the date of such supplemental
indenture, stating that the Issuer reasonably believes that such supplemental
indenture will not have a Material Adverse Effect, (x) each Rating Agency has
notified the Issuer, the Servicer, the Indenture Trustee and each Applicable
Series Enhancer in writing that the Rating Agency Condition with respect to each
outstanding Series has been satisfied, (y) such amendment does not (without the
consent of the Indenture Trustee) affect the rights, duties or
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obligations of the Indenture Trustee hereunder and (z) such amendment does not
(without the consent of the Paying Agent, the Authentication Agent or the
Transfer Agent and Registrar, as the case may be) affect the rights, duties or
obligations of the Paying Agent, the Authentication Agent or the Transfer Agent
and Registrar, as the case may be hereunder.
Section 10.02. Supplemental Indentures with Consent of Noteholders.
The Issuer, the Indenture Trustee, the Paying Agent, the Authentication
Agent and the Transfer Agent and Registrar also, with prior notice to the Rating
Agencies and with the consent of the Majority Investors, by Act of such Holders
delivered to the Issuer and the Indenture Trustee, may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Noteholders of all Series under
this Indenture. If an indenture or indentures supplemental hereto affects only
the Noteholders of a particular Series of Notes, then the consent of the Holders
of a majority of the Series Outstanding Amount of such Series shall be required
to such indenture or indenture supplemental. Notwithstanding the foregoing, no
supplemental indenture shall, without the consent of Holders of 100% of the
Series Outstanding Amount of the Outstanding Notes affected thereby:
(a) change the due date of any payment of principal of or interest on
any Note, or reduce the principal amount thereof, the interest rate specified
thereon or the redemption price with respect thereto or change any place of
payment where, or the coin or currency in which, any Note or any interest
thereon is payable;
(b) impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor to the payment of any such amount due on the Notes on or after the
respective due dates thereof, as provided in Article V (or, in the case of
redemption, on or after the Redemption Date);
(c) reduce the percentage that constitutes a majority of the Series
Outstanding Amount of the Notes of any Series the consent of the Holders of
which is required for any such supplemental indenture, or the consent of the
Holders of which is required for any waiver of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences as provided for in this Indenture;
(d) reduce the percentage of the Outstanding Amount of the Notes which
is required to direct the Indenture Trustee to sell or liquidate the Pledged
Assets if the proceeds of such sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the Outstanding Notes;
(e) decrease the percentage of the aggregate principal amount of the
Notes required to amend the sections of this Indenture that specify the
applicable percentage of the aggregate principal amount of the Notes of such
Series necessary to amend the Indenture or any Transaction Documents that
require such consent;
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(f) modify or alter the provisions of this Indenture regarding the
voting of Notes held by the Issuer, any other obligor on the Notes, the
Transferor, the Servicer or any Affiliate of any of the foregoing Persons; or
(g) permit the creation of any Lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Pledged Assets
for any Notes or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any such Pledged Assets at any time
subject hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture.
It shall not be necessary for any Act of Noteholders under this Section
10.02 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, the Indenture Trustee, the
Paying Agent, the Authentication Agent and the Transfer Agent and Registrar of
any Supplement Indenture pursuant to this Section 10.02, the Paying Agent shall
mail to the Holders of the Notes to which such supplemental indenture relates
written notice setting forth in general terms the substance of such supplement
indenture; provided, however, that any failure of the Paying Agent to mail such
notice, or any defect therein, shall not in any way impair or affect the
validity of any such supplemental indenture.
Section 10.03. Execution of Supplemental Indentures.
In executing, or permitting the additional trusts created by any
supplemental indenture permitted by this Article X or the modification thereby
of the trusts created by this Indenture, the Indenture Trustee, the Paying
Agent, the Authentication Agent and the Transfer Agent and Registrar shall be
entitled to receive, and subject to Section 6.01, shall be fully protected in
relying on, an Officer's Certificate stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise. The Paying Agent,
the Authentication Agent and the Transfer Agent and Registrar, as the case may
be, may, but shall not be obligated to, enter into any such supplemental
indenture that affects their respective rights, duties, liabilities or
immunities under this Indenture or otherwise.
Section 10.04. Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture under this Article X,
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 theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
Section 10.05. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article X may, and if required by the
Authentication Agent shall, bear
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a notation in form approved by the Indenture Trustee and the Authentication
Agent as to any matter provided for in such supplemental indenture. If the
Issuer shall so determine, new Notes modified so as to conform, in the opinion
of the Indenture Trustee and the Authentication Agent and the Issuer, to any
such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Authentication Agent in exchange for the
Outstanding Notes.
ARTICLE XI
DEFEASANCE
Section 11.01. Defeasance.
Notwithstanding anything to the contrary in this Indenture or any
Indenture Supplement:
(a) The Issuer may at its option be discharged from its obligations
hereunder with respect to any Series or all outstanding Series (each, a
"DEFEASED SERIES") on the date the applicable conditions set forth in subsection
11.01(c) are satisfied (a "DEFEASANCE"); provided, however, that the following
rights, obligations, powers, duties and immunities shall survive with respect to
each Defeased Series until otherwise terminated or discharged hereunder: (i) the
rights of the Holders of Notes of the Defeased Series to receive payments in
respect of principal of and interest on such Notes when such payments are due;
(ii) the Issuer's obligations with respect to such Notes under Sections 2.05 and
2.06; (iii) the rights, powers, trusts, duties, and immunities of the Indenture
Trustee, the Paying Agent and the Transfer Agent and Registrar hereunder; and
(iv) this Section 11.01 and Section 12.14.
(b) Subject to Section 11.01(c), no Pool Collections shall be allocated
to any Defeased Series.
(c) The following shall be the conditions precedent to any Defeasance
under Section 11.01(a):
(i) the Issuer irrevocably shall have deposited or caused to be
deposited with the Indenture Trustee, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the Indenture Trustee
and any Applicable Series Enhancer, as trust funds in trust for making the
payments described below, (A) Dollars in an amount equal to, or (B) Eligible
Investments which through the scheduled payment of principal and interest in
respect thereof will provide, not later than the due date of payment
thereon, money in an amount equal to, or (C) a combination thereof, in each
case sufficient to pay and discharge, and which shall be applied by the
Indenture Trustee to pay and discharge, all remaining scheduled interest and
principal payments on all Outstanding Notes of each Defeased Series and all
other amounts owing in respect of such Defeased Series (including all
amounts owing under any related Enhancement Agreement to any Series
Enhancer) on the dates scheduled for such payments in this Indenture and the
applicable Indenture Supplements;
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(ii) a statement from a firm of nationally recognized independent
public accountants (who also may render other services to the Issuer) to the
effect that such deposit is sufficient to pay the amounts specified in
clause (i) above;
(iii) prior to its first exercise of its right pursuant to this
Section 11.01 with respect to a Defeased Series to substitute money or
Eligible Investments for Receivables, the Issuer shall have delivered to the
Indenture Trustee an Opinion of Counsel to the effect that such deposit and
termination of obligations will not result in the Issuer being required to
register as an "investment company" within the meaning of the Investment
Company Act;
(iv) the Issuer shall have delivered to the Indenture Trustee and
each Applicable Series Enhancer an Officer's Certificate of the Issuer
stating that the Issuer reasonably believes that such deposit and
termination of obligations will not, based on the facts known to such
officer at the time of such certification, then cause an Event of Default or
Amortization Event with respect to any Series or any event that, with the
giving of notice or the lapse of time, would result in the occurrence of a
Event of Default or Amortization Event with respect to any Series;
(v) the Rating Agency Condition shall have been satisfied and the
Issuer shall have delivered copies of such written notice to the Servicer,
the Indenture Trustee and each Applicable Series Enhancer; and
(vi) the Issuer shall have delivered to the Indenture Trustee and
each Applicable Series Enhancer a Tax Opinion.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture or any other
Transaction Document, the Issuer shall furnish to the Indenture Trustee (i) an
Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with,
(ii) an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section 12.01, except that, in the case of any such
application or request as to which the furnishing of specific documents is
required by any provision of this Indenture, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
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(i) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Pledged Assets or other
property or securities with the Indenture Trustee that is to be made the
basis for the release of any property or securities subject to the lien of
this Indenture, the Issuer shall, in addition to any obligation imposed in
Section 12.01(a) or elsewhere in this Indenture, furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
deposit) to the Issuer of the Pledged Assets or other property or securities
to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
also shall deliver to the Indenture Trustee an Independent Certificate as to
the same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal year
of the Issuer, as set forth in the certificates delivered pursuant to clause
(i) above and this clause (ii), is 10% or more of the Outstanding Amount of
the Notes, but such a certificate need not be furnished with respect to any
securities so deposited if the fair value thereof to the Issuer as set forth
in the related Officer's Certificate is less than 10% of the Outstanding
Amount of the Notes.
(iii) Other than as provided in the Granting Clause, whenever any
property or securities are to be released from the lien of this Indenture,
the Issuer also shall furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the
opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
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(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Issuer
also shall furnish to the Indenture Trustee an Independent Certificate as to
the same matters if the fair value of the property or securities and of all
other property, other than as provided in the Granting Clause, or securities
released from the lien of this Indenture since the commencement of the then
current calendar year, as set forth in the certificates required by clause
(iii) above and this clause (iv), equals 10% or more of the Outstanding
Amount of the Notes, but such certificate need not be furnished in the case
of any release of property or securities if the fair value thereof as set
forth in the related Officer's Certificate is less than 10% of the then
Outstanding Amount of the Notes.
(v) Notwithstanding any provision of this Section 12.01, the
Issuer may (A) collect, liquidate, sell or otherwise dispose of Receivables
as and to the extent permitted or required by the Transaction Documents and
(B) make cash payments out of the Series Accounts as and to the extent
permitted or required by the Transaction Documents, and the provisions of
the Granting Clause shall apply.
Section 12.02. Form of Documents Delivered to Indenture Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of a Responsible Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of a
Responsible Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer or the Issuer, stating that the information
with respect to such factual matters is in the possession of the Servicer or the
Issuer, unless such Responsible 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.
In any case in which any Person is required to make, give or execute
two or more applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application or
as evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such
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application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Indenture Trustee's right to rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.
Section 12.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an agent
duly appointed in writing and satisfying any requisite percentages as to the
minimum number or Dollar value of outstanding principal amount represented by
such Noteholders; and except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, to the extent 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 conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section 12.03.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder (and any
transferee thereof) of every Note issued upon the registration thereof in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Indenture Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Note.
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Section 12.04. Notices to Issuer, Indenture Trustee, Paying Agent,
Authentication Agent and Transfer Agent and Registrar.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at, sent by
facsimile to, sent by courier at or mailed by certified or registered mail,
return receipt requested, to (a) in the case of the Issuer, to 40 Apple Ridge
Road, Suite 4000, Danbury, Connecticut 06810, Attention: Controller, (b) in the
case of the Indenture Trustee, to the Corporate Trust Office, (c) in the case of
the Paying Agent, the Authentication Agent or the Transfer Agent and Registrar,
to 101 Barclay Street, Floor 21 West, New York, New York 10286 and (d) in the
case of the Rating Agency for a particular Series, the address, if any,
specified in the Indenture Supplement relating to such Series; or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party.
Section 12.05. Notices to Noteholders; Waiver.
In any case in which this Indenture provides for notice to Noteholders
or a Series Enhancer of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed by
registered or certified mail or first class postage prepaid or national
overnight courier service to each Noteholder or Series Enhancer affected by such
event, at the Noteholder's address as it appears on the Note Register or at the
Series Enhancer's address for notices set forth in the relevant agreement
relating to Series Enhancement, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. If notice to
Noteholders or a Series Enhancer is given by mail, neither the failure to mail
such notice nor any defect in any notice so mailed to any particular Person
shall affect the sufficiency of such notice with respect to other Persons, and
any notice that is mailed in the manner herein provided shall conclusively be
presumed to have been duly given.
In any case in which this Indenture provides for notice in any manner,
such notice may be waived in writing by any Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Noteholders shall be filed with
the Indenture Trustee (with a copy to the Paying Agent), but such filing shall
not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
If, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee or the Paying Agent, as
the case may be, shall be deemed to be a sufficient giving of such notice.
Section 12.06. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to
the contrary, the Issuer, with the consent of the Paying Agent, may enter into
any agreement with any Holder of a Note providing for a method of payment, or
notice by the Indenture Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices. The Issuer shall furnish to the Indenture Trustee or/and
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the Paying Agent a copy of each such agreement and the Paying Agent or the
Indenture Trustee, as the case may be, shall cause payments to be made and
notices to be given in accordance with such agreements.
Section 12.07. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 12.08. 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 12.09. Separability.
If 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 12.10. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person other than the parties hereto and their successors hereunder,
any Series Enhancer and the Noteholders, any benefit.
Section 12.11. Legal Holidays.
If the date on which any payment is due shall not be a Business Day,
then (notwithstanding any other provision of the Notes or this Indenture)
payment need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date on which
nominally due, and no interest shall accrue for the period from and after any
such nominal date.
Section 12.12. GOVERNING LAW.
THE INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ss.5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
Section 12.13. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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Section 12.14. No Petition.
The Indenture Trustee, the Paying Agent, the Authentication Agent and
the Transfer Agent and Registrar, by entering into this Indenture, and each
Noteholder, by accepting a Note, hereby covenant and agree that they will not at
any time institute against the Issuer, the Transferor or CMF, or join in any
institution against the Issuer, the Transferor or CMF, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Transaction Documents until the expiration of one year and one day after
payment in full of the latest maturing Note issued by the Issuer under this
Indenture. This Section shall survive termination of the Indenture.
Section 12.15 Provision of Information to Rating Agencies.
At the request of a Rating Agency, the Indenture Trustee will provide
such Rating Agency with any reports and other written information it has
received from the Servicer for distribution to Noteholders.
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<PAGE>
IN WITNESS WHEREOF, the Issuer, the Indenture Trustee, the Paying
Agent, the Authentication Agent and the Transfer Agent and Registrar have caused
this Indenture to be duly executed by their respective officers thereunto duly
authorized and attested, all as of the day and year first above written.
APPLE RIDGE FUNDING LLC,
as Issuer
By:
--------------------------------------
Name:
Title:
BANK ONE, NATIONAL ASSOCIATION
as Indenture Trustee
By:
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Paying Agent, Authentication Agent
and Transfer Agent and Registrar
By:
--------------------------------------
Name:
Title:
[Signature Page to Master Indenture]
<PAGE>
DISTRICT OF COLUMBIA )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared _____________________________
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of the
said Delaware limited liability company and that she/he executed the same as the
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
2000.
-----------------------------------------
Notary Public
[Seal]
My commission expires:
- ---------------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared Steve M. Husbands known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said national
banking organization and that she/he executed the same as the corporation for
the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
2000.
-----------------------------------------
Notary Public
[Seal]
My commission expires:
- ---------------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said New York banking
corporation and that she/he executed the same as the corporation for the purpose
and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
2000.
-----------------------------------------
Notary Public
[Seal]
My commission expires:
- ---------------------------------------
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
INDENTURE SUPPLEMENT
- --------------------------------------------------------------------------------
APPLE RIDGE FUNDING LLC,
as Issuer,
BANK ONE, NATIONAL ASSOCIATION,
as Indenture Trustee,
and
THE BANK OF NEW YORK
as Paying Agent, Authentication Agent and
Transfer Agent and Registrar
SERIES 2000-1 INDENTURE SUPPLEMENT
Dated as of April 25, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
CREATION OF THE SERIES 2000-1 NOTES
Section 1.01. Designation....................................................................................2
ARTICLE II
DEFINITIONS
Section 2.01. Definitions....................................................................................3
ARTICLE III
SERVICING FEE
Section 3.01. Servicing Fee.................................................................................14
ARTICLE IV
RIGHTS OF SERIES 2000-1
NOTEHOLDERS AND ALLOCATION AND
APPLICATION OF POOL COLLECTIONS
Section 4.01. Pool Collections and Allocations..............................................................15
Section 4.02. Determination of Monthly Interest.............................................................16
Section 4.03. Determination of Principal Distribution.......................................................17
Section 4.04. Determination of Liquidity Reserve Withdrawal Amount..........................................17
Section 4.05. Application of Series 2000-1 Collections......................................................17
Section 4.06. Claims upon the Policy; Policy Payments Account...............................................18
Section 4.07. Series 2000-1 Expense Subaccount..............................................................20
Section 4.08. Series 2000-1 Principal Subaccount............................................................21
Section 4.09. Liquidity Reserve Account.....................................................................22
Section 4.10. Determination of LIBOR........................................................................23
Section 4.11. Investment Instructions.......................................................................23
ARTICLE V
DELIVERY OF SERIES 2000-1 NOTES; DISTRIBUTIONS;
REPORTS TO SERIES 2000-1 NOTEHOLDERS
Section 5.01. Delivery and Payment for the Series 2000-1 Notes; Denominations..............................24
Section 5.02. Registration; Registration of Transfer and Exchange; Transfer Restrictions....................24
Section 5.03. Global Notes..................................................................................28
Section 5.04. Regulation S Global Notes.....................................................................28
Section 5.05. Special Transfer Provisions...................................................................30
Section 5.06. CUSIP Numbers.................................................................................31
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Section 5.07. Distributions.................................................................................32
Section 5.08. Reports and Statements to Series 2000-1 Noteholders..........................................32
ARTICLE VI
AMORTIZATION EVENTS
Section 6.01. Series 2000-1 Amortization Events.............................................................33
ARTICLE VII
OPTIONAL REDEMPTION OF SERIES 2000-1 NOTES
Section 7.01. Optional Redemption of Series 2000-1 Notes....................................................36
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Ratification of Agreement.....................................................................37
Section 8.02. Counterparts..................................................................................37
Section 8.03. Governing Law.................................................................................37
Section 8.04. Series Enhancer Deemed Series 2000-1 Noteholder...............................................37
Section 8.05. Subrogation...................................................................................37
Section 8.06. Certain Rights of the Series Enhancer.........................................................38
</TABLE>
-ii-
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT A-1 FORM OF RULE 144A GLOBAL NOTE
EXHIBIT A-2 FORM OF TEMPORARY REGULATION S GLOBAL NOTE
EXHIBIT A-3 FORM OF PERMANENT REGULATION S GLOBAL NOTE
EXHBIT B FORM OF MONTHLY PAYMENT INSTRUCTIONS AND NOTIFICATION TO THE INDENTURE TRUSTEE
EXHIBIT C FORM OF MONTHLY STATEMENT
EXHIBIT D FORM OF MONTHLY SERVICER'S CERTIFICATE
EXHIBIT E-1 FORM OF EUROCLEAR AND CLEARSTREAM BANKING
CERTIFICATES
EXHIBIT E-2 FORM OF CERTIFICATE TO BE GIVEN BY HOLDER OF BENEFICIAL INTEREST IN A TEMPORARY REGULATION S
GLOBAL NOTE
</TABLE>
iii
<PAGE>
SERIES 2000-1 INDENTURE SUPPLEMENT, dated as of April 25, 2000 (as
amended, modified, restated or supplemented from time to time, the "INDENTURE
SUPPLEMENT"), by and between APPLE RIDGE FUNDING LLC, a limited liability
company organized under the laws of the State of Delaware, as Issuer (together
with its permitted successors and assigns, the "ISSUER"), BANK ONE, NATIONAL
ASSOCIATION, a national banking organization, as Indenture Trustee (together
with its permitted successors and assigns, the "INDENTURE TRUSTEE"), and THE
BANK OF NEW YORK, a New York state banking corporation, as paying agent,
authentication agent and transfer agent and registrar (together with its
permitted successors and assigns, "BNY").
Pursuant to Section 2.10 of the Master Indenture, dated as of April 25,
2000 (as amended, modified, restated or supplemented from time to time, the
"INDENTURE" and together with the Indenture Supplement, the "AGREEMENT"), by and
between the Issuer, the Indenture Trustee and BNY, the Issuer may issue one or
more Series of Notes the Principal Terms of which shall be set forth in an
indenture supplement to the Indenture. In accordance with the terms of the
Indenture, the Issuer hereby creates a Series of Notes and specifies the
Principal Terms of such Series of Notes in this Indenture Supplement.
GRANTING CLAUSES
The Issuer hereby Grants to the Indenture Trustee, for the benefit of
the Holders of the Series 2000-1 Notes, all of the Issuer's right, title and
interest, whether now owned or hereafter acquired, in, to and under: (i) the
Series 2000-1 Principal Subaccount, (ii) the Policy Payments Account, (iii) all
accounts, money, chattel paper, investment property, instruments, documents,
deposit accounts, certificates of deposit, letters of credit, advices of credit,
general intangibles and goods consisting of, arising from or relating to any of
the foregoing and (iv) all proceeds of the foregoing.
The Issuer hereby Grants to the Indenture Trustee, for the benefit of
the Holders of the Series 2000-1 Notes and the Series Enhancer, all of the
Issuer's right, title and interest, whether now owned or hereafter acquired, in,
to and under: (i) the Series 2000-1 Expense Subaccount, (ii) the Liquidity
Reserve Account, (iii) all accounts, money, chattel paper, investment property,
instruments, documents, deposit accounts, certificates of deposit, letters of
credit, advices of credit, general intangibles and goods consisting of, arising
from or relating to any of the foregoing and (iv) all proceeds of the foregoing.
<PAGE>
ARTICLE I
Creation of the Series 2000-1 Notes
Section 1.01. Designation
(a) There is hereby created a Series of Notes to be issued pursuant to
the Indenture and this Indenture Supplement to be known as the "APPLE RIDGE
FUNDING LLC SECURED TERM NOTES, SERIES 2000-1" or the "SERIES 2000-1 NOTES."
(b) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Indenture, the terms and provisions of this Indenture Supplement shall be
controlling.
[END OF ARTICLE I]
2
<PAGE>
ARTICLE II
Definitions
Section 2.01. Definitions.
(a) Whenever used in this Indenture Supplement, the following words and
phrases shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"ADDITIONAL INTEREST" shall have the meaning set forth in Section
4.02(b).
"AMORTIZATION EVENT" shall have the meaning set forth in Section 6.01.
"AMORTIZATION MONTHLY PRINCIPAL" shall have the meaning set forth in
Section 4.03.
"AMORTIZATION PERIOD" shall mean the period commencing at the earlier
to occur of (a) the close of business on January 31, 2005 and (b) the close of
business on the Business Day immediately preceding the day on which an
Amortization Event has occurred, and ending on the date on which (x) the Series
Outstanding Amount shall have been paid in full, together with all accrued
interest thereon, and (y) all amounts owed to the Series Enhancer under the
Insurance Agreement shall have been paid in full.
"APPLICABLE STRESS FACTOR" shall mean, as of any date of determination,
1.5; provided that (i) if the Default Ratio exceeded 5.0%, or the Three Month
Average Default Ratio exceeded 4.0%, for the Monthly Period preceding the first
day of the Interest Period in which such date occurs, then the Applicable Stress
Factor used in the calculation of the Loss Reserve Ratio shall be 2.5, or (ii)
if the Dilution Ratio exceeded 1.25%, or the Three Month Average Dilution Ratio
exceeded 0.75%, for the Monthly Period preceding the first day of the Interest
Period in which such date occurs, then the Applicable Stress Factor used in the
calculation of the Dilution Reserve Ratio shall be 2.5.
"APPRAISED VALUE HOME" shall mean a Home purchased by an Originator if
the owner of the Home is unsuccessful at contracting to sell the Home prior to
the purchase of the Home by the applicable Originator and as to which the
purchase price is generally determined by the average of two or more independent
appraisals.
"AVERAGE DAYS IN INVENTORY" shall mean, for any Monthly Period, the
average number of days the Homes have been owned by each Originator as of the
close of business on the last day of such Monthly Period.
"AVERAGE DAYS OUTSTANDING" shall mean, as of the end of any Monthly
Period, the sum of
(a) the product of (i) a fraction, the numerator of which is the
aggregate Unpaid Balance of Unsold Home Receivables (net of Advance Payments
relating thereto) as of the end
3
<PAGE>
of such Monthly Period and the denominator of which is the Aggregate Receivable
Balance as of the end of such Monthly Period, multiplied by (ii) the Average
Days in Inventory for such Monthly Period, plus
(b) the product of (i) a fraction, the numerator of which is the
aggregate Unpaid Balance of Billed Receivables and Unbilled Receivables (net of
Advance Payments relating thereto) as of the end of such Monthly Period, and the
denominator of which is the Aggregate Receivable Balance as of the end of such
Monthly Period, multiplied by (ii) the sum of (A) the average number of days as
of the end of such Monthly Period it took to bill Unbilled Receivables once they
became billable plus (B) the average number of days Billed Receivables have been
outstanding as of the end of such Monthly Period.
For the purposes of the foregoing calculation, Unbilled Receivables are
deemed to be billable (x) if the Receivable was previously an Unsold Home
Receivable, upon the subsequent sale of the Home by the applicable Originator
and (y) if such Receivable relates to services that are not related to Home
sales, upon disbursement.
"CUSTODIAN" shall mean the entity maintaining possession of the Global
Notes for the Clearing Agency.
"DEFAULT RATIO" shall mean, for any Monthly Period, the quotient,
expressed as a percentage, of (a) the sum of (i) the aggregate Unpaid Balance of
the Receivables that have become Defaulted Receivables in accordance with clause
(i) or (iii) of the definition of Defaulted Receivable during such Monthly
Period plus (ii) the Aggregate Employer Balance of each Employer whose
Receivables have become Defaulted Receivables in accordance with clause (ii) of
the definition of Defaulted Receivables during such Monthly Period, divided by
(b) the aggregate Unpaid Balance of the Billed Receivables generated during the
fifth Monthly Period preceding such Monthly Period.
"DILUTION RATIO" shall mean, for any Monthly Period, the quotient,
expressed as a percentage, of (a) the aggregate amount of reductions to the
Unpaid Balances of the Billed Receivables due to offsets, chargebacks, credits,
adjustments, rebates and other Originator Dilution Adjustments, Seller Dilution
Adjustments and Servicer Dilution Adjustments occurring during such Monthly
Period divided by (b) the aggregate Unpaid Balance of the Billed Receivables
generated during the fifth Monthly Period preceding such Monthly Period.
"DILUTION RESERVE RATIO" shall mean, as of any date of determination,
the product, expressed as a percentage, of
(a) the greater of:
(i) the product of (A) the Applicable Stress Factor multiplied
by (B) the average of the Dilution Ratios for the three Monthly Periods
preceding the first day of the Interest Period in which such date occurs and
(ii) the highest Dilution Ratio for any Monthly Period over
the 12 Monthly Periods preceding the first day of the Interest Period in
which such date occurs, multiplied by
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<PAGE>
(b) a fraction, the numerator of which is the sum of:
(i) the aggregate Unpaid Balance of the Billed Receivables
generated over the five Monthly Periods preceding the first day of the
Interest Period in which such date occurs plus
(ii) the aggregate Unpaid Balance of the Unbilled Receivables
as of the end of the Monthly Period preceding the first day of the Interest
Period in which such date occurs, and the denominator of which is the
aggregate Unpaid Balance of the Billed Receivables as of the end of such
Monthly Period, multiplied by
(c) a fraction, the numerator of which is equal to the sum of:
(i) the aggregate Unpaid Balance of the Billed Receivables as
of the end of such Monthly Period plus
(ii) the aggregate Unpaid Balance of the Unbilled Receivables
as of the end of such Monthly Period plus
(iii) the greater of (A) the product of 3.5 multiplied by the
average of the Monthly Loss on Sale for such Monthly Period and the two
immediately preceding Monthly Periods and (B) 10% of the aggregate Unpaid
Balance of Unsold Home Receivables relating to Appraised Value Homes as of
the end of such Monthly Period, and the denominator of which is equal to the
aggregate Unpaid Balance of Eligible Receivables as of the end of such
Monthly Period minus the Aggregate Adjustment Amount on such date.
"DISTRIBUTION COMPLIANCE PERIOD" shall have the meaning set forth in
Rule 902 of Regulation S.
"DISTRIBUTION DATE" shall mean June 15, 2000 and the fifteenth day of
each calendar month thereafter, or if such fifteenth day is not a Business Day,
the next succeeding Business Day.
"DWAC" shall mean Deposit and Withdrawal At Custodian Service.
"FINAL STATED MATURITY DATE" shall mean the earlier of (a) the
Distribution Date occurring in March 2007 and (b) the Distribution Date
occurring in the 25th Monthly Period following the Monthly Period in which the
Amortization Period commenced.
"GUARANTEED DISTRIBUTION" shall mean (a) with respect to any
Distribution Date other than the Final Stated Maturity Date, the Monthly
Interest and (b) with respect to the Final Stated Maturity Date, the sum of (i)
the Series Outstanding Amount plus (ii) the Monthly Interest.
"GUARANTEED INTEREST DISTRIBUTION AMOUNT" shall mean, with respect to
any Distribution Date, the excess of (a) the Monthly Interest payable on such
Distribution Date over (b) the sum of (i) the amount on deposit in the Series
2000-1 Expense Subaccount available for
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<PAGE>
payment of such Monthly Interest plus (ii) the amount on deposit in the
Liquidity Reserve Account available for payment of such Monthly Interest.
"GUARANTEED PRINCIPAL DISTRIBUTION AMOUNT" shall mean, with respect to
the Distribution Date which is also the Final Stated Maturity Date, the excess
of (a) Series Outstanding Amount over (b) the sum of (i) the amount on deposit
in the Series 2000-1 Principal Subaccount, plus (ii) the amount on deposit in
the Liquidity Reserve Account available to be transferred to the Series 2000-1
Principal Subaccount pursuant to Section 4.05(a).
"INITIAL PURCHASERS" shall mean Lehman Brothers Inc., Banc of America
Securities LLC, Banc One Capital Markets, Inc., Chase Securities Inc., First
Union Securities, Inc., RBC Dominion Securities Corporation and Scotia Capital
(USA) Inc., collectively.
"INITIAL SERIES OUTSTANDING AMOUNT" shall mean, with respect to the
Series 2000-1 Notes, $400,000,000.
"INSURANCE AGREEMENT" shall mean the Insurance Agreement dated as of
the Series 2000-1 Closing Date by and between the Series Enhancer, the Indenture
Trustee, the Servicer, the Originators, the Transferor and the Issuer, which
shall constitute an "Enhancement Agreement" with respect to the Series 2000-1
Notes for all purposes under the Indenture.
"INSURANCE PREMIUM RATE" shall have the meaning set forth in the
Premium Letter Agreement.
"INTEREST PERIOD" shall mean, with respect to any Distribution Date,
the period beginning on and including the Distribution Date immediately
preceding such Distribution Date (or, in the case of the first Distribution
Date, beginning on and including the Series 2000-1 Closing Date) and ending on
and excluding such Distribution Date.
"INTEREST SHORTFALL" shall have the meaning set forth in Section
4.02(b).
"LIBOR" shall mean, for any Interest Period, as of any LIBOR
Determination Date, the London interbank offered rate for deposits in United
States dollars for a one-month period determined by the Paying Agent for each
Interest Period in accordance with the provisions of Section 4.10.
"LIBOR DETERMINATION DATE" shall mean the second London Business Day
prior to the commencement of the second and each subsequent Interest Period.
"LIQUIDITY RESERVE ACCOUNT" shall have the meaning set forth in Section
4.09(a).
"LIQUIDITY RESERVE ACCOUNT AMOUNT" shall mean, on any Business Day, the
amount on deposit in the Liquidity Reserve Account (including the principal
amount of any investments made with funds previously deposited in the Liquidity
Reserve Account and after giving effect to any deposits thereto and withdrawals
and releases therefrom on such Business Day).
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"LIQUIDITY RESERVE WITHDRAWAL AMOUNT" shall have the meaning set forth
in Section 4.04.
"LONDON BUSINESS DAY" shall mean any Business Day on which dealings in
deposits in U.S. dollars are transacted in the London interbank market and
banking institutions in London are not authorized or obligated by law or
regulation to close.
"LOSS RESERVE RATIO" shall mean, as of any date of determination, the
greatest of:
(a) the percentage equivalent of the product of:
(i) the Applicable Stress Factor, multiplied by
(ii) the highest Three Month Average Default Ratio for any
Monthly Period over the 12 Monthly Periods preceding the first day of the
Interest Period in which such date occurs, multiplied by
(iii) a fraction, the numerator of which is the sum of (A) the
aggregate Unpaid Balance of the Billed Receivables generated over the five
Monthly Periods preceding the first day of the Interest Period in which such
date occurs plus (B) the aggregate Unpaid Balance of the Unbilled
Receivables as of the end of the Monthly Period preceding the first day of
the Interest Period in which such date occurs, and the denominator of which
is the aggregate Unpaid Balance of the Billed Receivables as of the end of
such Monthly Period, multiplied by
(iv) a fraction, the numerator of which is equal to the sum of
(A) the aggregate Unpaid Balance of Billed Receivables as of the end of the
Monthly Period preceding the first day of the Interest Period in which such
date occurs plus (B) the aggregate Unpaid Balance of Unbilled Receivables as
of the end of such Monthly Period plus (C) the greater of (1) the product of
3.5 multiplied by the average of the Monthly Loss on Sale for such Monthly
Period and the two immediately preceding Monthly Periods and (2) 10% of the
aggregate Unpaid Balance of Unsold Home Receivables relating to Appraised
Value Homes as of the end of such Monthly Period, and the denominator of
which is equal to the aggregate Unpaid Balance of Eligible Receivables as of
the end of such Monthly Period minus the Aggregate Adjustment Amount on such
date;
(b) the product of (i) the Applicable Stress Factor multiplied by (ii)
the highest Default Ratio for any Monthly Period over the three Monthly
Periods preceding the first day of the Interest Period in which such date
occurs; and
(c) 2.5%.
"MONTHLY INSURANCE PREMIUM" shall mean for any Distribution Date, the
premium payable in respect of the Policy in accordance with the Insurance
Agreement and the Premium Letter Agreement.
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"MONTHLY LOSS ON SALE" shall equal, for any Monthly Period, for all
Homes sold during such Monthly Period, the aggregate of the amounts, if any, by
which the purchase price of each such Home paid by CMF or CMSC, as applicable,
exceeded the sale price for such Home received by the Servicer (the amount of
any such excess with respect to a Home being a "Loss"). The Monthly Loss on Sale
for any Monthly Period shall be based on the gross Losses for such Monthly
Period without regard to any gains on the sale of other Homes during such
Monthly Period.
"MONTHLY INTEREST" shall have the meaning set forth in Section 4.02(a).
"MONTHLY PERIOD" shall mean the period from and including the first day
of a calendar month to and including the last day of such calendar month (other
than the initial Monthly Period, which will commence on and include the Series
2000-1 Closing Date and end on and include May 31, 2000).
"MONTHLY SERVICING FEE" shall have the meaning set forth in Section
3.01.
"NET CREDIT LOSSES" shall mean, for any Monthly Period, an amount equal
to the excess, if any, of the estimated losses to be incurred in respect of all
Receivables written off by the Servicer in accordance with the Credit and
Collection Policy during such Monthly Period over an amount equal to all amounts
recovered during such Monthly Period in respect of Receivables written off by
the Servicer in accordance with the Credit and Collection Policy during prior
Monthly Periods, which amounts exceed the amounts that the Servicer estimated
would be recovered in respect of such Receivables.
"NON-U.S. CERTIFICATE" shall have the meaning set forth in Section
5.04(b).
"NOTE INTEREST RATE" shall mean, for each Interest Period (other than
the first Interest Period), a rate of 0.28% per annum in excess of LIBOR as
determined on the related LIBOR Determination Date. The Note Interest Rate for
the first Interest Period will equal 6.49% per annum.
"OFFERING MEMORANDUM" shall mean the Offering Memorandum relating to
the Series 2000-1 Notes dated April 12, 2000.
"PERMANENT REGULATION S GLOBAL NOTE" shall have the meaning set forth
in Section 5.04.
"POLICY" shall mean the financial guaranty insurance policy number
32011(1), dated as of the Series 2000-1 Closing Date, issued by the Series
Enhancer to the Indenture Trustee for the benefit of the Series 2000-1
Noteholders.
"POLICY PAYMENTS ACCOUNT" shall have the meaning set forth in Section
4.06(b).
"PREFERENCE CLAIM" shall have the meaning set forth in Section 4.06(d).
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"PREMIUM LETTER AGREEMENT" shall mean the Premium Letter Agreement
dated as of the Series 2000-1 Closing Date between the Issuer, the Indenture
Trustee and the Series Enhancer.
"QIB" shall have the meaning set forth in Section 5.02(b).
"RATING AGENCY" shall mean each of Standard & Poor's Ratings Services
and Moody's Investors Service, Inc.
"REDEMPTION PRICE" shall mean, with respect to any Distribution Date,
after giving effect to any deposits and distributions otherwise to be made on
such Distribution Date, the sum of (i) the Series Outstanding Amount on such
Distribution Date plus (ii) Monthly Interest for such Distribution Date and any
Monthly Interest previously due but not distributed to the Series 2000-1
Noteholders plus (iii) any amounts due to the Series Enhancer pursuant to the
Insurance Agreement.
"REFERENCE BANKS" shall mean four major banks in the London interbank
market selected by the Paying Agent.
"REGULATION S" shall mean Regulation S under the Securities Act.
"REGULATION S CERTIFICATE" shall have the meaning set forth in Section
5.02(e).
"REGULATION S GLOBAL NOTE" shall mean each of the Temporary Regulation
S Global Note and the Permanent Regulation S Global Note.
"REIMBURSEMENT AMOUNT" shall mean, as of any date of determination, the
sum of (i) the aggregate amount due as of such date to the Series Enhancer
pursuant to the Insurance Agreement in respect of unreimbursed draws under the
Policy, including interest thereon determined in accordance with the Insurance
Agreement, and (ii) an amount equal to the aggregate of any other amounts due as
of such date to the Series Enhancer pursuant to the Insurance Agreement (other
than the Monthly Insurance Premium).
"RELEASE DATE" shall have the meaning set forth in Section 5.02(e).
"REQUIRED AMOUNT" shall mean, as of any date of determination, the sum
of (a) (i) the Monthly Interest to be distributed on the Distribution Date
falling in the Monthly Period succeeding the Monthly Period in which such date
occurs plus (ii) any Interest Shortfall previously accrued and not reimbursed
plus (iii) any Additional Interest previously accrued and not reimbursed, (b)
the sum of (i) the Monthly Insurance Premium to be distributed on such
Distribution Date plus (ii) any Monthly Insurance Premium previously accrued and
not paid, plus (c) the sum of (i) the Monthly Servicing Fee to be distributed on
such Distribution Date plus (ii) any Monthly Servicing Fee previously accrued
and not paid; provided that for the purpose of determining the Required Amount
for the allocation set forth in Section 4.01(c), (a) the Monthly Interest for
any day prior to the first day of the Interest Period commencing in such Monthly
Period shall equal the Monthly Interest as determined for the Interest Period
ending in such Monthly Period and (b) the Monthly Interest for any day on or
after the first day of the Interest Period commencing in such Monthly Period
shall equal such Monthly Interest as determined for
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<PAGE>
such Interest Period; provided further that for the purpose of determining the
Required Amount for the allocation set forth in Section 4.01(c), (a) the Monthly
Insurance Premium for any day prior to the first day of the Interest Period
commencing in such Monthly Period shall equal the Monthly Insurance Premium as
determined for the Interest Period ending in such Monthly Period and (b) the
Monthly Insurance Premium for any day on or after the first day of the Interest
Period in such Monthly Period shall equal the Monthly Insurance Premium as
determined for such Interest Period.
"REQUIRED LIQUIDITY RESERVE ACCOUNT AMOUNT" shall mean, as of any date
of determination during an Interest Period, an amount equal to 125% of the
Monthly Interest payable on the first day of such Interest Period; provided,
however, that during the initial Interest Period, the Required Liquidity Reserve
Account Amount will equal 125% of the interest that will accrue on the Series
2000-1 Notes during the first Interest Period.
"REQUIRED OVERCOLLATERALIZATION AMOUNT" shall mean, as of any date of
determination, the amount by which the Series 2000-1 Required Enhancement Amount
exceeds the sum of (a) the amount on deposit in the Liquidity Reserve Account on
such date plus (b) the amount on deposit in the Series 2000-1 Principal
Subaccount.
"REVOLVING PERIOD" shall mean the period beginning on the Series 2000-1
Closing Date and ending upon the commencement of the Amortization Period.
"RULE 144A" shall mean Rule 144A under the Securities Act.
"RULE 144A GLOBAL NOTE" shall have the meaning set forth in Section
5.03.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES ENHANCER" shall mean MBIA Insurance Corporation, a New York
domiciled insurance company, or any successor thereto.
"SERIES ENHANCER DEFAULT" shall mean (i) the failure of the Series
Enhancer to make a payment required under the Policy in accordance with the
terms thereof (and such failure continues unremedied for two Business Days),
(ii) the occurrence of an Insolvency Event with respect to the Series Enhancer
or (iii) the appointment of a receiver, conservator, liquidation or similar
official for the Series Enhancer or its property.
"SERIES ENHANCER DRAW AMOUNT" shall mean, for any Distribution Date, an
amount equal to the sum of (a) the Guaranteed Interest Distribution Amount plus
(b) if such Distribution Date is the Final Stated Maturity Date, the Guaranteed
Principal Distribution Amount.
"SERIES OUTSTANDING AMOUNT" shall mean, as of any date of
determination, an amount equal to the Initial Series Outstanding Amount minus
the amount of Amortization Monthly Principal previously paid to Series 2000-1
Noteholders (other than any such payment made from the proceeds of the Policy).
"SERIES PERCENTAGE" shall mean, with respect to any date of
determination, the
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<PAGE>
percentage equivalent (which percentage shall never exceed 100%) of a fraction
calculated as follows:
(a) during the Revolving Period, the numerator of the fraction will be
the Series 2000-1 Required Asset Amount as of the close of business on the
immediately preceding day, and the denominator of the fraction will be the
greater of (i) the Adjusted Aggregate Receivable Balance as of the close of
business on the immediately preceding day and (ii) the sum of the numerators
used to determine the Series Percentage for each Series of Notes (including the
Series 2000-1 Notes) Outstanding at the close of business on the immediately
preceding day; and
(b) during the Amortization Period, the numerator of the fraction will
be the Series 2000-1 Required Asset Amount as of the close of business on the
last day of the Revolving Period, and the denominator of the fraction will be
the sum of the numerators used to determine the Series Percentage for each
Series of Notes (including the Series 2000-1 Notes) Outstanding at the close of
business on the immediately preceding day.
"SERIES 2000-1" shall mean the Series of Notes the terms of
which are specified in this Indenture Supplement.
"SERIES 2000-1 ALLOCATED ADJUSTED AGGREGATE RECEIVABLE BALANCE" shall
mean, as of any date of determination, the lower of (a) the Series 2000-1
Required Asset Amount as of such date and (b) the product of (i) the Adjusted
Aggregate Receivable Balance as of such date multiplied by (ii) the percentage
equivalent of a fraction, the numerator of which is the Series 2000-1 Required
Asset Amount as of such date and the denominator of which is the sum of (x) the
Series 2000-1 Required Asset Amount as of such date plus (y) the aggregate
Required Asset Amount with respect to each other Series of Notes as of such
date.
"SERIES 2000-1 ASSET AMOUNT DEFICIENCY" shall occur if and to the
extent the Series 2000-1 Allocated Adjusted Aggregate Receivable Balance is less
than the Series 2000-1 Required Asset Amount as of such date.
"SERIES 2000-1 CLOSING DATE" shall mean April 25, 2000.
"SERIES 2000-1 COLLECTIONS" shall have the meaning set forth in Section
4.01(b).
"SERIES 2000-1 EXPENSE SUBACCOUNT" shall have the meaning set forth in
Section 4.07(a).
"SERIES 2000-1 NOTEHOLDER" shall mean the Person in whose name a Series
2000-1 Note is registered in the Note Register.
"SERIES 2000-1 NOTES" shall mean any one of the Notes executed by the
Issuer and authenticated by the Authentication Agent, substantially in the form
of Exhibit A.
"SERIES 2000-1 PRINCIPAL SUBACCOUNT" shall have the meaning set forth
in Section 4.08(a).
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"SERIES 2000-1 REQUIRED ASSET AMOUNT" shall mean, as of any date of
determination, an amount equal to the sum of (a) the Series Outstanding Amount
plus (b) the Required Overcollateralization Amount.
"SERIES 2000-1 REQUIRED ENHANCEMENT AMOUNT" shall mean, as of any date
of determination, an amount equal to the sum of (a) the greater of (i) 7% of the
Series Outstanding Amount and (ii) an amount equal to the product of (A) the
Series Outstanding Amount multiplied by (B) the quotient of (1) the sum of (w)
the Loss Reserve Ratio plus (x) the Dilution Reserve Ratio plus (y) the Yield
Reserve Ratio plus (z) the Servicing Reserve Ratio divided by (2) one minus the
sum of (w) the Loss Reserve Ratio plus (x) the Dilution Reserve Ratio plus (y)
the Yield Reserve Ratio plus (z) the Servicing Reserve Ratio plus (b) the
excess, if any, of accrued and unpaid interest on the Series 2000-1 Notes over
the amount on deposit in the Liquidity Reserve Account; provided, however, that
after the declaration or occurrence of an Amortization Event, the Series 2000-1
Required Enhancement Amount shall equal the Series 2000-1 Required Enhancement
Amount in effect on the date of the declaration or occurrence of such
Amortization Event.
"SERVICING FEE" shall have the meaning set forth in the Transfer and
Servicing Agreement.
"SERVICING RESERVE RATIO" shall mean, as of any date of determination,
the quotient, expressed as a percentage, of (a) the product of (i) 1.5
multiplied by (ii) 0.75% multiplied by (iii) Average Days Outstanding as of the
end of the Monthly Period preceding the first day of the Interest Period in
which such date occurs, divided by (b) 360.
"TELERATE PAGE 3750" shall mean the display page currently so
designated on the Bridge Telerate Market Report (or such other page as may
replace that page in that service for the purpose of displaying comparable rates
or prices).
"TEMPORARY REGULATION S GLOBAL NOTE" shall have the meaning set forth
in Section 5.03.
"THREE MONTH AVERAGE DEFAULT RATIO" shall mean, for any Monthly Period,
the average of the Default Ratios for that Monthly Period and each of the two
immediately preceding Monthly Periods.
"THREE MONTH AVERAGE DILUTION RATIO" shall mean, for any Monthly
Period, the average of the Dilution Ratios for that Monthly Period and each of
the two immediately preceding Monthly Periods.
"YIELD RESERVE RATIO" shall mean, as of any date of determination
during an Interest Period, the quotient expressed as a percentage, of (a) the
product of (i) the sum of (A) the Insurance Premium Rate plus (B) the product of
(1) 1.5 multiplied by (2) the Note Interest Rate for the Interest Period in
which such date occurs multiplied by (ii) 1.5 multiplied by the Average Days
Outstanding as of the end of the Monthly Period preceding the first day of such
Interest Period divided by (b) 360.
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(b) Each capitalized term defined herein shall relate to the Series
2000-1 Notes and no other Series of Notes issued by the Issuer, unless the
context otherwise requires. All capitalized terms used herein and not otherwise
defined herein have the meanings ascribed to them in the Indenture, the Transfer
and Servicing Agreement, the Receivables Purchase Agreement or the Purchase
Agreement.
(c) The words "HEREOF," "HEREIN" and "HEREUNDER" and words of similar
import when used in this Indenture Supplement shall refer to this Indenture
Supplement as a whole and not to any particular provision of this Indenture
Supplement; references to any Article, subsection, Section or Exhibit are
references to Articles, subsections, Sections and Exhibits in or to this
Indenture Supplement unless otherwise specified; and the term "INCLUDING" means
"INCLUDING WITHOUT LIMITATION."
[END OF ARTICLE II]
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ARTICLE III
Servicing Fee
Section 3.01. Servicing Fee.
The Transfer and Servicing Agreement sets forth the full compensation
that the Servicer is entitled to receive for its servicing activities. The share
of the Servicing Fee allocable to the Series 2000-1 Noteholders with respect to
any Distribution Date (the "MONTHLY SERVICING FEE") shall be equal to the
product of (a) 0.75% multiplied by (b) the weighted average over the related
Monthly Period of the daily sums of the Aggregate Employer Balances for each
Employer under the Pool Relocation Agreements multiplied by (c) the average
Series Percentage during such Monthly Period. The remainder of the Servicing Fee
shall be paid by the noteholders of other Series (as provided in the Indenture
Supplement related to such other Series) or the Issuer and in no event shall the
Indenture Trustee or the Series 2000-1 Noteholders be liable for the share of
the Servicing Fee to be paid by the Noteholders of such other Series or the
Issuer. To the extent that the Monthly Servicing Fee is not paid in full
pursuant to the preceding provisions of this Section 3.01, and Section 4.05, it
shall be paid by the Issuer. The Monthly Servicing Fee shall be payable from
Series 2000-1 Collections pursuant to, and subject to the priority of payments
set forth in, Section 4.05.
[END OF ARTICLE III]
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ARTICLE IV
Rights of Series 2000-1 Noteholders
and Allocation and Application of Pool Collections
Section 4.01. Pool Collections and Allocations.
(a) Allocation of Pool Collections. Funds on deposit in the Collection
Account in accordance with Section 8.04 of the Indenture shall be allocated and
distributed to Series 2000-1 as set forth in the Indenture and this Article IV.
(b) Allocation of Pool Collections to Series 2000-1. Prior to the close
of business on each Deposit Date, the Servicer shall allocate to Series 2000-1
an amount (such amount, the "SERIES 2000-1 COLLECTIONS") equal to the product of
(i) the amount of Collections deposited in the Collection Account on such
Deposit Date (less any amounts permitted to be withdrawn pursuant to Sections
3.02(c)(vi), 3.12 and 3.14(b) of the Transfer and Servicing Agreement)
multiplied by (ii) the Series Percentage for such Deposit Date.
(c) Allocation of Series 2000-1 Collections. Prior to the close of
business on each Deposit Date, the Servicer shall direct the Indenture Trustee
to allocate Series 2000-1 Collections in the amounts and according to the
priority set forth below pursuant to Section 8.04 of the Indenture:
(i) (A) If the amount of funds on deposit in the Series 2000-1
Expense Subaccount on such Deposit Date is less than the Required Amount for
such Deposit Date (excluding such amounts as were deposited in the Series
2000-1 Expense Subaccount during the preceding Monthly Period and are being
held for distribution on the next Distribution Date), from the Collection
Account to the Series 2000-1 Expense Subaccount an amount equal to the
lesser of (A) the amount of such deficiency or (B) the Series 2000-1
Collections on such Deposit Date;
(B) If the amount of funds on deposit in the Series 2000-1
Expense Subaccount on such Deposit Date (excluding such amounts as were
deposited in the Series 2000-1 Expense Subaccount during the preceding
Monthly Period and are being held for distribution on the next succeeding
Distribution Date) exceeds the Required Amount for such Deposit Date, from
the Series 2000-1 Expense Subaccount an amount equal to such excess TO BE
TREATED AS Series 2000-1 Collections for distribution in accordance with
this Section 4.01(c);
(ii) If the amount of funds on deposit in the Liquidity
Reserve Account on such Deposit Date is less than the Required Liquidity
Reserve Account Amount for such Deposit Date, from the Collection Account to
the Liquidity Reserve Account an amount equal to the lesser of (A) the
amount of such deficiency or (B) the Series 2000-1 Collections on such
Deposit Date (after giving effect to the transfer set forth in clause (i)(A)
above);
(iii) During the Revolving Period, and during the Amortization
Period after the Series 2000-1 Notes have been paid in full, to the Series
Enhancer, an amount
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<PAGE>
equal to any amounts owed to it pursuant to the Insurance Agreement (other
than as reimbursement for payments made by the Series Enhancer under the
Policy in respect of interest on the Series 2000-1 Notes);
(iv) (A) During the Revolving Period, all remaining Series
2000-1 Collections (A) if any other Series of Notes is in its Amortization
Period and the Indenture Supplement related to such amortizing Series of
Notes requires the Issuer to transfer such remaining Series 2000-1
Collections to pay the principal of such other Series of Notes, to the
applicable Series Account with respect to such amortizing Series of Notes;
provided that if more than one other Series of Notes is amortizing and the
related Indenture Supplement of each such amortizing Series of Notes
requires the Issuer to transfer such remaining Series 2000-1 Collections to
pay the principal of such other Series of Notes, pro rata to the applicable
Series Account of each such other amortizing Series of Notes based on their
respective Series Percentages;
(B) If no transfer of the remaining Series 2000-1
Collections is required pursuant to clause (A), all remaining Series 2000-1
Collections to the Issuer free and clear of the lien of the Indenture and
without compliance with Section 12.01(b) of the Indenture;
provided, however, with respect to clause (A) and (B), if a Series 2000-1
Asset Amount Deficiency has occurred and is continuing, or if the
application of funds to the payment of the principal of another Series of
Notes or the release of funds to the Issuer would result in a Series 2000-1
Asset Amount Deficiency or would otherwise result in the occurrence of an
event that, with the passage of time or the giving of notice or both, would
become an Amortization Event, all remaining Series 2000-1 Collections shall
be transferred to the Series 2000-1 Principal Subaccount.
(v) During the Amortization Period, to the Series 2000-1
Principal Subaccount, the Series 2000-1 Collections on such Deposit Date
(after giving effect to the transfers set forth in clauses (i) and (ii)
above); provided, however, that the aggregate amount deposited into the
Series 2000-1 Principal Subaccount pursuant to this clause shall not exceed
the Series Outstanding Amount on the immediately preceding Distribution
Date.
(d) Prior to the close of business on each Deposit Date during the
Amortization Period, the Issuer shall deposit Collections allocated to other
Series in the Series 2000-1 Principal Subaccount to the extent those Collections
would otherwise have been released to the Issuer under the terms of the
Indenture Supplement related to such Series. If Series 2000-1 and any other
Series are simultaneously in their respective Amortization Periods, such
Collections shall be allocated ratably between each such amortizing Series of
Notes (including Series 2000-1) based on their respective Series Percentages.
Section 4.02. Determination of Monthly Interest.
(a) The amount of interest ("MONTHLY INTEREST") distributable from the
Series 2000-1 Expense Subaccount with respect to the Series 2000-1 Notes on any
Distribution Date
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shall be an amount equal to the product of (i) a fraction, the numerator of
which is the actual number of days in the related Interest Period and the
denominator of which is 360, multiplied by (ii) the Note Interest Rate in effect
with respect to the related Interest Period and multiplied by (iii) the Series
Outstanding Amount as of the close of business on the last day of the related
Interest Period.
(b) On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess (the "INTEREST SHORTFALL"), if any, of (x)
the Monthly Interest for such Distribution Date over (y) the aggregate amount of
funds allocated and available to pay such Monthly Interest on such Distribution
Date (excluding the proceeds of a draw under the Policy). If the Interest
Shortfall with respect to any Distribution Date is greater than zero, then on
each subsequent Distribution Date until such Interest Shortfall is fully paid,
an additional amount ("ADDITIONAL INTEREST") equal to the product of (i) (A) a
fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360, multiplied by (B) the sum
of (x) the Note Interest Rate and (y) 2.0% per annum and (ii) such Interest
Shortfall (or the portion thereof that has not been paid to the Series 2000-1
Noteholders from funds other than the proceeds of a draw under the Policy) shall
be payable as provided herein with respect to the Series 2000-1 Notes.
Notwithstanding anything herein to the contrary, Additional Interest shall be
payable or distributed only to the extent permitted by applicable law.
Section 4.03. Determination of Principal Distribution. The amount
of principal distributable from the Series 2000-1 Principal Subaccount on each
Distribution Date (the "AMORTIZATION MONTHLY PRINCIPAL"), beginning with the
Distribution Date in the month following the month in which the Amortization
Period begins, shall equal the lesser of (i) the amount on deposit in the Series
2000-1 Principal Subaccount that was deposited therein during the preceding
Monthly Period (including amounts deposited in the Series 2000-1 Principal
Subaccount pursuant to Section 4.01(d)) for distribution on such Distribution
Date and (ii) the Series Outstanding Amount.
Section 4.04. Determination of Liquidity Reserve Withdrawal Amount.
On or before each Distribution Date, the Issuer shall determine or cause the
Servicer to determine the amount (the "LIQUIDITY RESERVE WITHDRAWAL AMOUNT"), if
any, by which the amount distributable pursuant to Section 4.05 on such
Distribution Date exceeds the amount deposited in the Series 2000-1 Expense
Subaccount during the related Monthly Period.
Section 4.05. Application of Series 2000-1 Collections. On each
Distribution Date or Deposit Date, as applicable, the Servicer shall instruct
the Indenture Trustee in writing to apply amounts on deposit in the Collection
Account (and any subaccount thereof) and the Liquidity Reserve Account as
follows:
(a) On each Distribution Date for which the Liquidity Reserve
Withdrawal Amount is greater than zero, to withdraw the lesser of (i) the
Liquidity Reserve Withdrawal Amount and (ii) amounts on deposit in the Liquidity
Reserve Account from the Liquidity Reserve Account and transfer such amount to
the Series 2000-1 Expense Subaccount for distribution in accordance with clause
(b) below. If funds remain on deposit in the Liquidity Reserve Account on the
Final Stated Maturity Date (after giving effect to withdrawal of the Liquidity
Reserve Withdrawal Amount, if any, on such date) and the Series Outstanding
Amount
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<PAGE>
exceeds the amount on deposit on the Series 2000-1 Principal Subaccount, to
withdraw an amount equal to the lesser of (x) such excess and (y) the amount on
deposit in the Liquidity Reserve Account from the Liquidity Reserve Account and
transfer such amount to the Series 2000-1 Principal Subaccount for distribution
in accordance with clause (c) below.
(b) On each Distribution Date, to transfer amounts on deposit in the
Series 2000-1 Expense Subaccount of the Collection Account in the following
order of priority:
(i) An amount equal to the sum of (A) Monthly Interest for
such Distribution Date plus (B) any Interest Shortfall previously accrued
and not reimbursed plus (c) any Additional Interest previously accrued and
not reimbursed shall be distributed to the Distribution Account for payment
to Series 2000-1 Noteholders on such Distribution Date pursuant to Section
5.07; provided that no Interest Shortfall or Additional Interest shall be
paid to the Series 2000-1 Noteholders to the extent that the Series 2000-1
Noteholders received timely payment of interest on the Series 2000-1 Notes
because of a payment by the Series Enhancer under the Policy;
(ii) If the Series Enhancer has made a payment under the
Policy to fund the payment of Monthly Interest on any Distribution Date, an
amount equal to the sum of (A) Interest Shortfall previously accrued and not
reimbursed plus (B) Additional Interest previously accrued and not
reimbursed which is related to such payment shall be distributed to the
Series Enhancer;
(iii) An amount equal to the sum of (A) the Monthly Insurance
Premium for such Distribution Date plus (B) any Monthly Insurance Premium
previously accrued and not reimbursed shall be distributed to the Series
Enhancer; and
(iv) An amount equal to the sum of (A) the Monthly Servicing
Fee for such Distribution Date plus (B) any Monthly Servicing Fee previously
accrued and not paid pursuant to this Section 4.05(b)(iv) shall be
distributed to the Servicer.
(c) On each Distribution Date during the Amortization Period, to
transfer an amount equal to the Amortization Monthly Principal for such
Distribution Date from the Series 2000-1 Principal Subaccount to the
Distribution Account for payment to the Series 2000-1 Noteholders on such
Distribution Date pursuant to Section 5.07.
Section 4.06. Claims upon the Policy; Policy Payments Account.
(a) If, by the close of business on the fourth Business Day prior to a
Distribution Date, the Servicer notifies the Indenture Trustee that on such
Distribution Date the funds that are or will be on deposit in the Series 2000-1
Expense Subaccount, Liquidity Reserve Account and the Series 2000-1 Principal
Subaccount on such Distribution Date that are available to pay the Guaranteed
Distribution on such day will be insufficient to pay such Guaranteed
Distribution on such Distribution Date, then the Indenture Trustee shall give
notice to the Series Enhancer by telephone or telecopy of the amount of such
insufficiency. Such notice shall be confirmed in writing in the form set forth
as Exhibit A to the Policy, to the Series Enhancer at or before 11:00 a.m., New
York City time, on the third Business Day prior to such Distribution Date.
Following receipt by the Series Enhancer of such notice in such form, the Series
Enhancer
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will pay the Series Enhancer Draw Amount to the Indenture Trustee on the later
to occur of (i) 11:00 a.m., New York City time, on the third Business Day next
succeeding presentation to the Series Enhancer and (ii) 11:00 a.m., New York
City time, on the Distribution Date to which such deficiency relates, as
provided in the Policy.
(b) The Indenture Trustee shall establish a separate special purpose
trust account, which account shall be an Eligible Account, for the benefit of
the Series 2000-1 Noteholders (the "POLICY PAYMENTS ACCOUNT") over which the
Indenture Trustee shall have exclusive control and sole right of withdrawal. The
Indenture Trustee shall deposit the Series Enhancer Draw Amount in the Policy
Payments Account and distribute such amount only for purposes of payment to the
Series 2000-1 Noteholders of the Guaranteed Distribution for which a claim was
made, and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Indenture Trustee or the Issuer. The Series
Enhancer Draw Amount shall be transferred to the Distribution Account in
accordance with the next succeeding paragraph and disbursed by the Paying Agent
to the Series 2000-1 Noteholders in accordance with Section 5.07. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Guaranteed Distribution with
other funds available to make such payment. However, the amount of any payment
of Monthly Interest or of the Series Outstanding Amount to be paid from funds
transferred from the Policy Payments Account shall be noted as provided in
paragraph (c) below and in the statement to be furnished to the Series 2000-1
Noteholders pursuant to Section 5.08(a). Funds held in the Policy Payments
Account shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the Series Enhancer Draw Amount shall be withdrawn from the
Policy Payments Account and deposited in the Distribution Account and applied by
the Paying Agent, together with the other funds to be withdrawn from the
Collection Account pursuant to Section 4.05, directly to the payment in full of
the Guaranteed Distribution. Any funds remaining in the Policy Payments Account
on the first Business Day following a Distribution Date shall be remitted to the
Series Enhancer by the end of such Business Day pursuant to the instructions of
the Series Enhancer.
(c) The Indenture Trustee shall keep a complete and accurate record of
the amount of Monthly Interest and of the Series Outstanding Amount paid from
moneys received under the Policy. The Series Enhancer shall have the right to
inspect such records at reasonable times during normal business hours upon one
Business Day's prior notice to the Indenture Trustee.
(d) The Indenture Trustee shall promptly notify the Series Enhancer of
any proceeding or the institution of any action, of which a Responsible Officer
of the Indenture Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law with respect to a proceeding against or by either Originator, the
Transferor, the Servicer, the Issuer or PHH (a "PREFERENCE CLAIM") of any
distribution made with respect to the Series 2000-1 Notes. Each Series 2000-1
Noteholder by its purchase of Series 2000-1 Notes, the Issuer and the Indenture
Trustee hereby agree that the Series Enhancer (so long as no Series Enhancer
Default exists) may at any time during the continuation of any proceeding
relating to a Preference Claim direct all matters relating to such
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Preference Claim, including without limitation (i) the direction of any appeal
of any order relating to such Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition and
without limiting the foregoing, the Series Enhancer shall be subrogated to the
rights of the Issuer, the Indenture Trustee and each Series 2000-1 Noteholder in
the conduct of any such Preference Claim, 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 Preference Claim.
(e) Anything in the Indenture, this Indenture Supplement or any other
Transaction Document to the contrary notwithstanding, any payment with respect
to amounts due in respect of the Series 2000-1 Notes that is made with monies
received pursuant to the terms of the Policy shall not be considered payment on
the Series 2000-1 Notes by the Issuer, shall not discharge any obligations of
the Issuer to make such payment and shall not result in payment of (or the
provision for the payment of) any amounts due in respect of Series 2000-1 Notes
for purposes of Section 4.01 of the Indenture. To the extent any Series 2000-1
Notes have been paid with the proceeds of the Policy, such Series 2000-1 Notes
shall continue to remain Outstanding for purposes of the Indenture and this
Indenture Supplement until the Series Enhancer has been paid as subrogee
hereunder, and the Series Enhancer shall be deemed to be the Holder thereof to
the extent of any payments thereon made by the Series Enhancer.
(f) The Indenture Trustee shall hold the Policy in trust solely for the
use and benefit of the Holders of the Series 2000-1 Notes.
(g) The Indenture Trustee agrees to furnish to the Series Enhancer upon
its reasonable request the Indenture Trustee's records evidencing the payment of
amounts due on the Series 2000-1 Notes that have been made by the Indenture
Trustee and subsequently recovered from Holders of Series 2000-1 Notes, and the
dates on which such payments were made.
(h) The Indenture Trustee shall be entitled to enforce on behalf of the
Holders of the Series 2000-1 Notes the obligations of the Series Enhancer under
the Policy. Notwithstanding any other provision of the Indenture, this Indenture
Supplement or any other Transaction Document to the contrary, the Holders of the
Series 2000-1 Notes are not entitled to make any claims under the Policy or
institute proceedings directly against the Series Enhancer.
(i) Upon the expiration of the Policy in accordance with the terms
thereof, the Indenture Trustee shall surrender the Policy to the Series Enhancer
for cancellation.
Section 4.07. Series 2000-1 Expense Subaccount.
(a) The Issuer, for the benefit of the Series 2000-1 Noteholders and
the Series Enhancer, shall establish and maintain with the Indenture Trustee or
its nominee in the name of the Indenture Trustee, the Series 2000-1 Expense
Subaccount, which shall be a subaccount of the Collection Account (the "SERIES
2000-1 EXPENSE SUBACCOUNT"). The Indenture Trustee shall possess all right,
title and interest in all monies, instruments, investment property and other
property credited from time to time to the Series 2000-1 Expense Subaccount (and
any subaccount thereof) and in all proceeds, earnings, income, revenue,
dividends and distributions
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thereof for the benefit of the Series 2000-1 Noteholders and the Series
Enhancer. The Series 2000-1 Expense Subaccount shall be under the sole dominion
and control of the Indenture Trustee for the benefit of the Series 2000-1
Noteholders and the Series Enhancer. Pursuant to the authority granted to the
Servicer in Article III of the Transfer and Servicing Agreement, the Servicer
shall have the power, revocable by the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Series 2000-1
Expense Subaccount for the purposes of making the payments required under
Section 4.05.
(b) Funds on deposit in the Series 2000-1 Expense Subaccount shall be
invested in accordance with Section 4.01 of the Transfer and Servicing Agreement
and Section 6.13 of the Indenture. The Indenture Trustee shall bear no
responsibility or liability for any losses resulting from investment or
reinvestment of any funds in accordance with this Section 4.07(b) nor for the
selection of Eligible Investments, except with respect to investments on which
the institution acting as Indenture Trustee is an obligor.
Section 4.08. Series 2000-1 Principal Subaccount.
(a) The Issuer, for the benefit of the Noteholders, shall establish and
maintain with the Indenture Trustee or its nominee in the name of the Indenture
Trustee, the Series 2000-1 Principal Subaccount, which shall be a subaccount of
the Collection Account (the "SERIES 2000-1 PRINCIPAL SUBACCOUNT"). The Indenture
Trustee shall possess all right, title and interest in all monies, instruments,
investment property and other property credited from time to time to the Series
2000-1 Principal Subaccount (and any subaccount thereof) and in all proceeds,
earnings, income, revenue, dividends and distributions thereof for the benefit
of the Series 2000-1 Noteholders. The Series 2000-1 Principal Subaccount shall
be under the sole dominion and control of the Indenture Trustee for the benefit
of the Noteholders. Pursuant to the authority granted to the Servicer in Article
III of the Transfer and Servicing Agreement, the Servicer shall have the power,
revocable by the Indenture Trustee, to instruct the Indenture Trustee to make
withdrawals and payments from the Series 2000-1 Principal Subaccount for the
purposes of making the payments required under Section 4.05.
(b) Funds on deposit in the Series 2000-1 Principal Subaccount shall be
invested in accordance with Section 4.01 of the Transfer and Servicing Agreement
and Section 6.13 of the Indenture. The Indenture Trustee shall bear no
responsibility or liability for any losses resulting from investment or
reinvestment of any funds in accordance with this Section 4.08(b) nor for the
selection of Eligible Investments, except with respect to investments on which
the institution acting as Indenture Trustee is an obligor.
(c) The Indenture Trustee shall withdraw and transfer funds on deposit
in the Series 2000-1 Principal Subaccount on each Business Day during the
Revolving Period to, or at the direction of, the Issuer if no Series 2000-1
Asset Amount Deficiency has occurred and is continuing and no event that with
the passage of time or the giving of notice could become an Amortization Event,
including a Series 2000-1 Asset Amount Deficiency, would result from such
withdrawal. Any such transfer to the Issuer shall be made free and clear of the
lien of the Indenture and without compliance with Section 12.01(b) of the
Indenture.
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Section 4.09. Liquidity Reserve Account.
(a) The Issuer, for the benefit of the Series 2000-1 Noteholders and
the Series Enhancer, shall establish and maintain with the Indenture Trustee in
the name of the Indenture Trustee or its nominee, a Qualified Account (including
any subaccounts thereof) bearing a designation clearly indicating that the funds
and other property credited thereto are held for the benefit of the Series
2000-1 Noteholders and the Series Enhancer (the "LIQUIDITY RESERVE ACCOUNT").
The Indenture Trustee shall possess all right, title and interest in all monies,
instruments, investment property and other property credited from time to time
to the Liquidity Reserve Account and in all proceeds, earnings, income, revenue,
dividends and distributions thereof for the benefit of the Series 2000-1
Noteholders and the Series Enhancer. The Liquidity Reserve Account shall be
under the sole dominion and control of the Indenture Trustee for the benefit of
the Series 2000-1 Noteholders and the Series Enhancer. If, at any time, the
Liquidity Reserve Account ceases to be a Qualified Account, the Issuer (or the
Indenture Trustee on its behalf) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency and the
Series Enhancer may consent) establish a new Liquidity Reserve Account meeting
the conditions specified above, transfer any monies, instruments, investment
property and other property to such new Liquidity Reserve Account and from the
date such new Liquidity Reserve Account is established, it shall be deemed to be
the Liquidity Reserve Account. Pursuant to the authority granted to the Servicer
in Article III of the Transfer and Servicing Agreement, the Servicer shall have
the power, revocable by the Indenture Trustee, to instruct the Indenture Trustee
to make withdrawals and payments from the Series 2000-1 Liquidity Reserve
Account for the purposes of making the payments required under Section 4.05.
(b) On the Series 2000-1 Closing Date, the Issuer deposited $4,597,084
into the Liquidity Reserve Account. Funds on deposit in the Liquidity Reserve
Account shall at the written direction of the Servicer be invested by the
Indenture Trustee in Eligible Investments selected by the Servicer. All such
Eligible Investments shall be held by the Indenture Trustee for the benefit of
the Series 2000-1 Noteholders in accordance with Section 6.13 of the Indenture.
Funds on deposit in the Liquidity Reserve Account will be invested in Eligible
Investments that will mature so that such funds will be available no later than
the close of business on the succeeding Transfer Date. No such Eligible
Investment shall be disposed of prior to its maturity; provided, however, that
the Indenture Trustee may sell, liquidate or dispose of an Eligible Investment
before its maturity, at the written direction of the Issuer, if such sale,
liquidation or disposal would not result in a loss of all or part of the
principal portion of such Eligible Investment or if, prior to the maturity of
such Eligible Investment, a default occurs in the payment of principal, interest
or any other amount with respect to such Eligible Investment. Unless directed by
the Servicer, funds deposited in the Liquidity Reserve Account on a Transfer
Date with respect to the immediately succeeding Distribution Date are not
required to be invested overnight. On each Distribution Date, all interest and
other investment earnings (net of losses and investment expenses) on funds on
deposit in the Liquidity Reserve Account shall be withdrawn and applied as
Series 2000-1 Collections in accordance with the priority of distribution set
forth in Section 4.01(c). The Indenture Trustee shall bear no responsibility or
liability for any losses resulting from investment or reinvestment of any funds
in accordance with this Section 4.09(c) nor for the selection of Eligible
Investments in accordance with the
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provisions of this Indenture and any Indenture Supplement, except with respect
to investments on which the institution acting as Indenture Trustee is an
obligor.
Section 4.10. Determination of LIBOR.
(a) On each LIBOR Determination Date, the Paying Agent shall determine
LIBOR on the basis of the rate for deposits in United States dollars for a
one-month period which appears on Telerate Page 3750 as of 11:00 a.m., London
time, on such date. If such rate does not appear on Telerate Page 3750, the rate
for that LIBOR Determination Date shall be determined on the basis of the rates
quoted by the Reference Banks to the Paying Agent as the rates at which deposits
in United States dollars are offered by the Reference Banks to the Paying Agent
at approximately 11:00 a.m., London time, on that day to prime banks in the
London interbank market for a one-month period. The Paying Agent shall request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Date shall be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate for
that LIBOR Determination Date will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the Paying Agent, at approximately
11:00 a.m., New York City time, on that day for loans in United States dollars
to leading European banks for a one-month period.
(b) The Note Interest Rate applicable to the then current and the
immediately preceding Interest Periods may be obtained by telephoning the Paying
Agent at its corporate trust office at (212) 815-5192 or such other telephone
number as shall be designated by the Paying Agent for such purpose by prior
written notice by the Paying Agent to each Series 2000-1 Noteholder and the
Series Enhancer from time to time.
Section 4.11. Investment Instructions. Any investment instructions
required to be given to the Indenture Trustee pursuant to the terms hereof must
be given to the Indenture Trustee no later than 11:00 a.m. (New York City time)
on the date such investment is to be made. If the Indenture Trustee receives
such investment instruction later than such time, the Indenture Trustee may, but
shall have no obligation to, make such investment. If the Indenture Trustee is
unable to make an investment required in an investment instruction received by
the Indenture Trustee after 11:00 a.m. (New York City time) on such day, such
investment shall be made by the Indenture Trustee on the next succeeding
Business Day. In no event shall the Indenture Trustee be liable for any
investment not made pursuant to investment instructions received after 11:00
a.m. (New York City time) on the day such investment is requested to be made.
[END OF ARTICLE IV]
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ARTICLE V
Delivery of Series 2000-1 Notes;
Distributions; Reports to Series 2000-1 Noteholders
Section 5.01. Delivery and Payment for the Series 2000-1 Notes;
Denominations.
The Issuer shall execute and the Authentication Agent shall
authenticate the Series 2000-1 Notes in accordance with Section 2.03 of the
Indenture. The Indenture Trustee shall deliver the Series 2000-1 Notes to or
upon the order of the Issuer when so authenticated.
The Series 2000-1 Notes shall be issuable in the minimum denomination
of $250,000 and in integral multiples of $1,000 in excess thereof.
Section 5.02. Registration; Registration of Transfer and Exchange;
Transfer Restrictions.
(a) The Series 2000-1 Notes have not been registered under the
Securities Act or any state securities law. None of the Issuer, the Registrar or
the Indenture Trustee is obligated to register the Series 2000-1 Notes under the
Securities Act or any other securities or "Blue Sky" laws or to take any other
action not otherwise required under the Agreement to permit the transfer of any
Series 2000-1 Note without registration.
(b) No transfer of any Series 2000-1 Note or any interest therein
(including, without limitation, by pledge or hypothecation) shall be made except
in compliance with the restrictions on transfer set forth in this Section 5.02
(including the applicable legend to be set forth on the face of each Series
2000-1 Note as provided in Exhibits A-1, A-2 and A-3, as applicable) and in
Section 5.04 and Section 5.06 in a transaction exempt from the registration
requirements of the Securities Act and applicable state securities or "Blue Sky"
laws (i) to a person (A) who the transferor reasonably believes is a "qualified
institutional buyer" within the meaning thereof in Rule 144A (a "QIB") in the
form of beneficial interest in the Rule 144A Global Note, and (B) that is aware
that the resale or other transfer is being made in reliance on Rule 144A or (ii)
in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation
S, in the form of beneficial interests in the applicable Regulation S Global
Note.
(c) Each Beneficial Owner of a Series 2000-1 Note, by its acceptance
thereof, will be deemed to have acknowledged, represented to and agreed with the
Issuer and the Initial Purchasers as follows:
(i) It understands that the Series 2000-1 Notes will be offered
and may be resold by an Initial Purchaser (A) in the United
States to QIBs pursuant to Rule 144A in the form of beneficial
interests in the Rule 144A Global Note or (B) outside the
United States pursuant to Regulation S, initially in the form
of beneficial interests in the Temporary Regulation S Global
Note. As set forth in Section 5.04(a), beneficial interests in
the Temporary Regulation S Global Note may be exchanged for
beneficial interests in the Permanent Regulation S Global
Note.
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(ii) It understands that the Series 2000-1 Notes have not been and
will not be registered under the Securities Act or any state
or other applicable securities law and that the Series 2000-1
Notes, or any interest or participation therein, may not be
offered, sold, pledged or otherwise transferred unless
registered pursuant to, or exempt from registration under, the
Securities Act and any other applicable securities law.
(iii) It acknowledges that none of the Issuer or any Initial
Purchaser or any person representing the Issuer or any Initial
Purchaser has made any representation to it with respect to
the Issuer or the offering or sale of any Series 2000-1 Notes,
other than the information contained in the Offering
Memorandum, which has been delivered to it and upon which it
is relying in making its investment decision with respect to
the Series 2000-1 Notes. It has had access to such financial
and other information concerning the Issuer and the Series
2000-1 Notes as it has deemed necessary in connection with its
decision to purchase the Series 2000-1 Notes.
(iv) It acknowledges that the Series 2000-1 Notes will bear a
legend to the following effect unless the Issuer determines
otherwise, consistent with applicable law:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER
HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE OR ANY
INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE
ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO
A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT (A "QIB") PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS
INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
THE SECURITIES ACT OR (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL
INTEREST IN THIS NOTE, UNLESS SUCH PERSON ACQUIRED THIS NOTE
IN A TRANSFER DESCRIBED IN CLAUSE (3) ABOVE, IS DEEMED TO
REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN
ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT
COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF
EXEMPTION FROM THE RESTRICTION ON RESALE OR TRANSFER. THE
ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE
SECURITIES ACT, TO QUALIFY THE NOTES
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UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE
REGISTRATION RIGHTS TO ANY PURCHASER.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF."
(v) If it is acquiring any Series 2000-1 Note, or any interest or
participation therein, as a fiduciary or agent for one or more
investor accounts, it represents that it has sole investment
discretion with respect to such account and that it has full
power to make the acknowledgements, representations and
agreements contained herein on behalf of each such account.
(vi) It (A)(1) is a QIB, (2) is aware that the sale to it is being
made in reliance on Rule 144A and if it is acquiring such
Series 2000-1 Notes or any interest or participation therein
for the account of another QIB, such other QIB is aware that
the sale is being made in reliance on Rule 144A and (3) is
acquiring such Series 2000-1 Notes or any interest or
participation therein for its own account or for the account
of a QIB, or (B) is not a U.S. person and is purchasing such
Series 2000-1 Notes or any interest or participation therein
in an offshore transaction meeting the requirements of Rule
903 or 904 of Regulation S.
(vii) It is purchasing the Series 2000-1 Notes for its own account,
or for one or more investor accounts for which it is acting as
fiduciary or agent, in each case for investment, and not with
a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act,
subject to any requirements of law that the disposition of its
property or the property of such investor account or accounts
be at all times within its or their control and subject to its
or their ability to resell such Series 2000-1 Notes, or any
interest or participation therein, as described in the
Offering Memorandum and as provided in the Agreement.
(viii) It agrees that if in the future it should offer, sell or
otherwise transfer such Series 2000-1 Note or any interest or
participation therein, it will do so only (A) to the Issuer,
(B) pursuant to Rule 144A to a person who it reasonably
believes is a QIB in a transaction meeting the requirements of
Rule 144A, purchasing for its own account or for the account
of a QIB, whom it has informed that such offer, sale or other
transfer is being made in reliance on Rule 144A or (C) in an
offshore transaction meeting the requirements of Rule 903 or
Rule 904 of Regulation S.
(ix) If it is acquiring such Series 2000-1 Note or any interest or
participation therein in an "offshore transaction" (as defined
in Regulation S), it acknowledges that the Series 2000-1 Notes
initially will be represented by the Temporary Regulation S
Global Note and that transfers thereof or any interest or
participation therein are restricted as described in the
Offering
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Memorandum and as provided in the Agreement. If it is a QIB,
it acknowledges that the Series 2000-1 Notes offered in
reliance on Rule 144A will be represented by a Rule 144A
Global Note and that transfers thereof or any interest or
participation therein are restricted as described in the
Offering Memorandum and as provided in the Agreement.
(x) It understands that the Temporary Regulation S Global Note
will bear a legend to the following effect unless the Issuer
determines otherwise, consistent with applicable law:
"THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF
REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS TEMPORARY
GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR
DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO
BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON
UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED
PURSUANT TO THE TERMS OF THE INDENTURE."
(xi) It acknowledges that the Issuer, the Initial Purchasers and
others will rely on the truth and accuracy of the foregoing
acknowledgments, representations and agreements, and agrees
that if any of the foregoing acknowledgments, representations
and agreements deemed to have been made by it are no longer
accurate, it shall promptly notify the Issuer and the Initial
Purchasers.
(xii) With respect to any foreign purchaser claiming an exemption
from United States income or withholding tax, that it has
delivered to the Paying Agent a true and complete Form W-8,
Form 1001 or Form 4224, indicating such exemption.
(xiii) It acknowledges that transfers of the Series 2000-1 Notes or
any interest or participation therein shall otherwise be
subject in all respects to the restrictions applicable thereto
contained in the Agreement.
Any transfer, resale, pledge or other transfer of the Series 2000-1
Notes contrary to the restrictions set forth above and in the Indenture shall be
deemed void ab initio by the Transfer Agent and Registrar. As used in this
Section 5.02, the terms "United States" and "U.S. persons" have the meaning
given them in Regulation S.
(d) Notwithstanding anything to the contrary contained herein, each
Series 2000-1 Note and the Agreement may, with prior written notice to the
Series Enhancer, be amended or supplemented to modify the restrictions on and
procedures for resale and other transfers of the Series 2000-1 Notes to reflect
any change in applicable law or regulation (or the interpretation thereof) or in
practices relating to the resale or transfer of restricted securities
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generally. Each Noteholder shall by its acceptance of a Series 2000-1 Note have
agreed to any such amendment or supplement.
(e) Holders of a beneficial interest in Series 2000-1 Notes sold in
reliance on Regulation S as Temporary Regulation S Global Notes are prohibited
from receiving distributions or from exchanging beneficial interests in such
Temporary Regulation S Global Notes for a beneficial interest in a Permanent
Regulation S Global Note until the later of (i) the expiration of the
Distribution Compliance Period (the "RELEASE DATE") and (ii) the furnishing of a
certificate, substantially in the form of Exhibit E-2 attached hereto,
certifying that the beneficial owner of the Temporary Regulation S Global Note
is a non-United States Person (a "REGULATION S CERTIFICATE") as provided in
Section 5.04.
Section 5.03. Global Notes. The Series 2000-1 Notes, upon original
issuance, will be issued (i) in fully registered global form without interest
coupons to QIBs in transactions exempt from the registration requirements of the
Securities Act in reliance on Rule 144A, as a single note in fully registered
form, without interest coupons (the "RULE 144A GLOBAL NOTE"), authenticated and
delivered in substantially the form attached hereto as Exhibit A-1 and/or (ii)
as a single note in "offshore transactions" (within the meaning of Regulation
S), in fully registered form, without interest coupons (the "TEMPORARY
REGULATION S GLOBAL NOTE"), authenticated and delivered in substantially the
form attached hereto as Exhibit A-2. Such Notes shall be delivered to The
Depository Trust Company, the initial Clearing Agency by or on behalf of the
Issuer and initially shall be registered on the Note Register in the name of
Cede & Co., the nominee of the initial Clearing Agency, and no Beneficial Owner
will receive a Definitive Note representing such Beneficial Owner's interest in
such Note, except as provided in Section 2.13 of the Indenture.
Section 5.04. Regulation S Global Notes.
(a) Series 2000-1 Notes issued in reliance on Regulation S initially
will be in the form of a Temporary Regulation S Global Note. Any interest in a
Series 2000-1 Note evidenced by the Temporary Regulation S Global Note is
exchangeable for an interest in a Series 2000-1 Note in fully registered, global
form, without interest coupons, authenticated and delivered in substantially the
form attached hereto as Exhibit A-3 (the "PERMANENT REGULATION S GLOBAL NOTE")
upon the later of (i) the Release Date and (ii) the furnishing of a Regulation S
Certificate.
(b) i) On or prior to the Release Date, each Beneficial Owner of a
Temporary Regulation S Global Note shall deliver to Euroclear or Clearstream
Banking (as applicable) a Regulation S Certificate; provided, however, that any
Beneficial Owner of a Temporary Regulation S Global Note on the Release Date or
on any payment date that has previously delivered a Regulation S Certificate
hereunder shall not be required to deliver any subsequent Regulation S
Certificate (unless the certificate previously delivered is no longer true as of
such subsequent date, in which case such Beneficial Owner shall promptly notify
Euroclear or Clearstream Banking, as applicable, thereof and shall deliver an
updated Regulation S Certificate). Euroclear and/or Clearstream Banking, as
applicable, shall deliver to the Paying Agent a certificate substantially in the
form of Exhibit E-1 (a "NON-U.S. CERTIFICATE") attached hereto promptly upon the
receipt of each such Regulation S Certificate, and no such Beneficial
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Owner (or transferee from such Beneficial Owner) shall be entitled to receive an
interest in a Permanent Regulation S Global Note or any payment of principal of
or interest on or any other payment with respect to its beneficial interest in a
Temporary Regulation S Global Note prior to the Paying Agent receiving such
Non-U.S. Certificate from Euroclear or Clearstream Banking with respect to the
portion of the Temporary Regulation S Global Note owned by such Beneficial Owner
(and, with respect to an interest in the Permanent Regulation S Global Note,
prior to the Release Date).
(c) Any payments of principal of, interest on or any other payment on a
Temporary Regulation S Global Note received by Euroclear or Clearstream Banking
with respect to any portion of such Regulation S Global Note owned by a
Beneficial Owner that has not delivered the Regulation S Certificate required by
this Section 5.04 shall be held by Euroclear and Clearstream Banking solely as
agents for the Paying Agent. Euroclear and Clearstream Banking shall remit such
payments to the applicable Beneficial Owner (or to a Euroclear or Clearstream
Banking member on behalf of such Beneficial Owner) only after Euroclear or
Clearstream Banking has received the requisite Regulation S Certificate. Until
the Paying Agent has received a Non-U.S. Certificate from Euroclear or
Clearstream Banking, as applicable, stating that it has received the requisite
Regulation S Certificate with respect to the beneficial ownership of any portion
of a Temporary Regulation S Global Note, the Paying Agent may revoke the right
of Euroclear or Clearstream Banking, as applicable, to hold any payments made
with respect to such portion of such Temporary Regulation S Global Note. If the
Paying Agent exercises its right of revocation pursuant to the immediately
preceding sentence, Euroclear or Clearstream Banking, as applicable, shall
return such payments to the Paying Agent and the Paying Agent shall hold such
payments in the Distribution Account until Euroclear or Clearstream Banking, as
applicable, has provided the necessary Non-U.S. Certificates to the Paying Agent
(at which time the Paying Agent shall forward such payments to Euroclear or
Clearstream Banking, as applicable, to be remitted to the Beneficial Owner that
is entitled thereto on the records of Euroclear or Clearstream Banking (or on
the records of their respective members)).
(d) Each Beneficial Owner with respect to a Temporary Regulation S
Global Note shall exchange its interest therein for an interest in a Permanent
Regulation S Global Note on or after the Release Date upon furnishing to
Euroclear or Clearstream Banking (as applicable) the Regulation S Certificate
and upon receipt by the Paying Agent of the Non-U.S. Certificate thereof from
Euroclear or Clearstream Banking, as applicable, in each case pursuant to the
terms of this Section 5.04. On and after the Release Date, upon receipt by the
Paying Agent of any Non-U.S. Certificate from Euroclear or Clearstream Banking
described in the immediately preceding sentence (i) with respect to the first
such certification, the Issuer shall execute and, upon receipt of an order to
authenticate, the Authentication Agent shall authenticate and deliver to the
Custodian the applicable Permanent Regulation S Global Note and (ii) with
respect to the first and all subsequent certifications, the Custodian shall
exchange on behalf of the applicable Beneficial Owners the portion of the
applicable Temporary Regulation S Global Note covered by such certification for
a comparable portion of the applicable Permanent Regulation S Global Note. Upon
any exchange of a portion of a Temporary Regulation S Global Note for a
comparable portion of a Permanent Regulation S Global Note, the Custodian shall
endorse on the schedules affixed to each of such Regulation S Global Notes (or
on continuations of such schedules affixed to each of such Regulation S Global
Notes and made parts thereof) appropriate
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<PAGE>
notations evidencing the date of transfer and (x) with respect to the Temporary
Regulation S Global Note, a decrease in the principal amount thereof equal to
the amount covered by the applicable certification and (y) with respect to the
Permanent Regulation S Global Note, an increase in the principal amount thereof
equal to the principal amount of the decrease in the Temporary Regulation S
Global Note pursuant to clause (x) above.
Section 5.05. Special Transfer Provisions.
(a) If a holder of a beneficial interest in the Rule 144A Global Note
wishes at any time to exchange its interest in the Rule 144A Global Note for an
interest in the Regulation S Global Note, or to transfer its interest in the
Rule 144A Global Note to a person who wishes to take delivery thereof in the
form of an interest in the Regulation S Global Note, such holder may, subject to
the rules and procedures of the Clearing Agency and to the requirements set
forth in the following sentence, exchange or cause the exchange or transfer or
cause the transfer of such interest for an equivalent beneficial interest in the
Regulation S Global Note. Upon receipt by Transfer Agent and Registrar of (1)
instructions given in accordance with the Clearing Agency's procedures from or
on behalf of a Beneficial Owner of the Rule 144A Global Note, directing the
Transfer Agent and Registrar (via DWAC) to credit or cause to be credited a
beneficial interest in the Regulation S Global Note in an amount equal to the
beneficial interest in the Rule 144A Global Note to be exchanged or transferred,
(2) a written order in accordance with the Clearing Agency's procedures
containing information regarding the Euroclear or Clearstream Banking account to
be credited with such increase and the name of such account and (3) a
certificate given by such holder stating that the exchange or transfer of such
interest has been made pursuant to and in accordance with Rule 903 or Rule 904
of Regulation S under the Securities Act, the Transfer Agent and Registrar shall
promptly deliver appropriate instructions to the Clearing Agency (via DWAC), its
nominee or the Custodian, as the case may be, to reduce or reflect on its
records a reduction of the Rule 144A Global Note by the aggregate principal
amount of the beneficial interest in the Rule 144A Global Note to be so
exchanged or transferred from the relevant participant, and the Transfer Agent
and Registrar shall promptly deliver appropriate instructions (via DWAC) to the
Clearing Agency, its nominee, or the Custodian, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Regulation S Global Note by the aggregate principal
amount of the beneficial interest in the Rule 144A Global Note to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the person specified in such instructions (who may be Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear or Clearstream
Banking or another agent member of Euroclear or Clearstream Banking, or both, as
the case may be, acting for and on behalf of them) a beneficial interest in such
Regulation S Global Note equal to the reduction in the principal amount of the
Rule 144A Global Note. Notwithstanding anything to the contrary, the Transfer
Agent and Registrar may conclusively rely upon the completed schedule set forth
in the certificate evidencing the Notes.
(b If a holder of a beneficial interest in the Regulation S Global Note
wishes at any time to exchange its interest in the Regulation S Global Note for
an interest in the Rule 144A Global Note, or to transfer its interest in the
Regulation S Global Note to a person who wishes to take delivery thereof in the
form of an interest in the Rule 144A Global Note, such holder may, subject to
the rules and procedures of Euroclear or Clearstream Banking and the
30
<PAGE>
Clearing Agency, as the case may be, and to the requirements set forth in the
following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent beneficial interest in the Rule 144A
Global Note. Upon receipt by the Transfer Agent and Registrar of (1)
instructions given in accordance with the procedures of Euroclear or Clearstream
Banking and the Clearing Agency, as the case may be, from or on behalf of a
Beneficial Owner of the Regulation S Global Note directing the Transfer Agent
and Registrar to credit or cause to be credited a beneficial interest in the
Rule 144A Global Note in an amount equal to the beneficial interest in the
Regulation S Global Note to be exchanged or transferred, (2) a written order
given in accordance with the procedures of Euroclear or Clearstream Banking and
the Clearing Agency, as the case may be, containing information regarding the
account with the Clearing Agency to be credited with such increase and the name
of such account and (3) prior to the expiration of the Distribution Compliance
Period, a certificate given by such Beneficial Owner stating that the person
transferring such interest in such Regulation S Global Note reasonably believes
that the person acquiring such interest in the Rule 144A Global Note is a QIB
and is obtaining such beneficial interest for its own account or the account of
a QIB in a transaction meeting the requirements of Rule 144A and any applicable
securities laws of any state of the United States or any other jurisdiction, the
Transfer Agent and Registrar shall promptly deliver (via DWAC) appropriate
instructions to the Clearing Agency, its nominee or the Custodian, as the case
may be, to reduce or reflect on its records a reduction of the Regulation S
Global Note by the aggregate principal amount of the beneficial interest in such
Regulation S Global Note to be exchanged or transferred, and the Transfer Agent
and Registrar shall promptly deliver (via DWAC) appropriate instructions to the
Clearing Agency, its nominee, or the Custodian, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of the Rule 144A Global Note by the aggregate principal amount
of the beneficial interest in the Regulation S Global Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the person
specified in such instructions a beneficial interest in the Rule 144A Global
Note equal to the reduction in the principal amount of the Regulation S Global
Note. After the expiration of the Distribution Compliance Period, the
certification requirement set forth in clause (3) of the second sentence of this
Section 5.05 shall no longer apply to such exchanges and transfers.
Notwithstanding anything to the contrary, the Transfer Agent and Registrar may
conclusively rely upon the completed schedule set forth in the certificate
evidencing the Notes.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) Until the later of the Release Date and the provision of the
certifications required by Section 5.04, beneficial interests in a Regulation S
Global Note may only be held through Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or Clearstream Banking or another
agent member of Euroclear and Clearstream Banking acting for and on behalf of
them. During the Distribution Compliance Period, interests in the Regulation S
Global Note may be exchanged for interests in the Rule 144A Global Note only in
accordance with the certification requirements described above.
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Section 5.06. CUSIP Numbers. The Issuer in issuing the Series 2000-1
Notes may use "CUSIP" numbers and, if so, the Paying Agent may use "CUSIP"
numbers in notices of redemption as a convenience to Series 2000-1 Noteholders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Series 2000-1 Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Series 2000-1 Notes, and any
such redemption shall not be affected by any defect in or omission of such
numbers. The Issuer shall promptly notify the Paying Agent of any change in the
"CUSIP" numbers.
Section 5.07. Distributions.
(a) On each Distribution Date, the Paying Agent shall distribute to
each Series 2000-1 Noteholder of record on the related Record Date such Series
2000-1 Noteholder's pro rata share of amounts on deposit in the Distribution
Account as are payable to the Series 2000-1 Noteholders pursuant to Section 4.05
and Section 4.06(b).
(b) Distributions to Series 2000-1 Noteholders hereunder shall be made
by (i) check mailed to each Series 2000-1 Noteholder (at such Series 2000-1
Noteholder's address as it appears in the Note Register), except that with
respect to any Series 2000-1 Notes registered in the name of the nominee of a
Clearing Agency, such distribution shall be made in immediately available funds
and (ii) without presentation or surrender of any Series 2000-1 Note or the
making of any notation thereon.
Section 5.08. Reports and Statements to Series 2000-1 Noteholders.
(a) On each Distribution Date, the Paying Agent shall forward to each
Series 2000-1 Noteholder and the Series Enhancer a statement substantially in
the form of Exhibit C prepared by the Servicer and delivered to the Paying
Agent. The Paying Agent shall have no liability for the Servicer's failure to
provide such statement to it.
(b) On or before January 31 of each calendar year, beginning with
calendar year 2001, the Paying Agent shall furnish or cause to be furnished to
each Person and the Series Enhancer who at any time during the preceding
calendar year was a Series 2000-1 Noteholder, a statement prepared by the
Servicer containing the information required to be contained in the statement to
Series 2000-1 Noteholders and the Series Enhancer, as set forth in paragraph (a)
above, aggregated for such calendar year or the applicable portion thereof
during which such Person was a Series 2000-1 Noteholder or the Series Enhancer,
together with such other information as is required to be provided by an issuer
of indebtedness under the Code. Such obligation of the Paying Agent shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Paying Agent pursuant to any requirements
of the Code as from time to time in effect.
[END OF ARTICLE V]
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ARTICLE VI
Amortization Events
Section 6.01. Series 2000-1 Amortization Events. Upon the
occurrence and continuance of any of the following events:
(a) (i) failure on the part of the Issuer to pay principal of and
interest on the Series 2000-1 Notes in full on or before the Final Stated
Maturity Date (determined without giving effect to any payments on the Series
2000-1 Notes made with proceeds of draws under the Policy), or to pay accrued
interest on the Series 2000-1 Notes in full on any Distribution Date, and such
failure remains unremedied for one Business Day (determined without giving
effect to any payments on the Series 2000-1 Notes made with proceeds of draws
under the Policy), or (ii) failure on the part of the Issuer to maintain its
separate existence or duly to perform or observe any covenant set forth in
Section 3.03(a), (c), (d), (e), (f), (g) or (j) of the Indenture, which failure
continues unremedied for a period of ten calendar days, or (iii) failure on the
part of the Issuer duly to perform or observe any other covenants or agreements
of the Issuer set forth in the Indenture or this Indenture Supplement, which
failure has a Material Adverse Effect with respect to the Issuer or the
interests of the Series 2000-1 Noteholders (determined without giving effect to
any credit enhancement under the Policy) and which continues unremedied for a
period of 30 days, in each case, after the date on which written notice of such
failure, requiring the same to be remedied, has been given to the Issuer by the
Indenture Trustee, or to the Issuer and the Indenture Trustee by the Holders of
not less than a majority of the Series Outstanding Amount;
(b) any representation or warranty made by the Issuer in this Indenture
Supplement or the Indenture proves to have been incorrect in any material
respect when made or when delivered, and continues to be incorrect in any
material respect for a period of 30 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by
the Holders of not less than a majority of the Series Outstanding Amount, and as
a result of which the interests of the Series 2000-1 Noteholders are materially
and adversely affected for such period (determined without giving effect to any
credit enhancement under the Policy);
(c) a Servicer Default;
(d) a CMSC Purchase Termination Event under the Purchase Agreement, an
ARSC Purchase Termination Event under the Receivables Purchase Agreement or
Transfer Termination Event under the Transfer and Servicing Agreement;
(e) other than an Event of Default described in clause (s) below, an
Event of Default with respect to the Series 2000-1 Notes;
(f) a Series 2000-1 Asset Amount Deficiency, which Series 2000-1 Asset
Amount Deficiency continues for any five consecutive Business Days;
(g) the amount on deposit in the Liquidity Reserve Account Amount is
less than the Required Liquidity Reserve Account Amount for any five consecutive
Business Days;
(h) the amount on deposit in the Marketing Expenses Account is less
than the Required Marketing Expenses Account Amount for any five consecutive
Business Days;
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(i) (i) the Average Days in Inventory for Appraised Value Homes
equals or exceeds 210 days for any Monthly period; or
(ii) the average of the Average Days in Inventory for
Appraised Value Homes for any Monthly Period and for the immediately
preceding five Monthly Periods equals or exceeds 180 days; or
(iii) the Average Days in Inventory for Homes other than
Appraised Value Homes equals or exceeds 60 days for any Monthly Period;
or
(iv) the average of the Average Days in Inventory for Homes
other than Appraised Value Homes for any Monthly Period and for the
immediately preceding five Monthly Periods equals or exceeds 40 days;
(j) the Default Ratio for any Monthly Period exceeds 7.0%, or the Three
Month Average Default Ratio for any Monthly Period exceeds 6.0%;
(k) the Dilution Ratio for any Monthly Period exceeds 2.25%, or the
Three Month Average Dilution Ratio for any Monthly Period exceeds 1.50%;
(l) Net Credit Losses for any Monthly Period exceed $750,000 and for
any 12 consecutive Monthly Periods exceed $1,500,000;
(m) the failure to vest and maintain in the Indenture Trustee a
perfected first priority security interest in the Pledged Assets;
(n) either (i) the Internal Revenue Service files notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with respect to any of the
ARSC Purchased Assets, and such Lien has not been released within five days or,
if released, proved to the satisfaction of the Rating Agencies, or (ii) the PBGC
files, or indicates its intention to file a notice of a lien pursuant to Section
4068 of ERISA with respect to any of the Pledged Assets;
(o) an Insolvency Event occurs with respect to the Series Enhancer;
(p) any of the Purchase Agreement, the Receivables Purchase Agreement,
the Transfer and Servicing Agreement, the Indenture, this Indenture Supplement,
the Insurance Agreement or any related documents cease, for any reason, to be in
full force and effect, other than in accordance with its terms;
(q) a failure on the part of CMSC, as the Servicer, to cooperate with
the transfer of the servicing to a successor Servicer following the delivery of
a Termination Notice pursuant to the Transfer and Servicing Agreement, which
failure is determined by the Majority Investors to be material and continues
unremedied for a period of ten calendar days after the date on which written
notice of such failure, requiring the same to be remedied, has been given to the
Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by
the Holders of a majority of the Series Outstanding Amount;
(r) an Event of Bankruptcy shall occur with respect to the Issuer, the
Transferor, the Performance Guarantor, CMSC or CMF; or
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<PAGE>
(s) an Event of Default arising from a determination that the Issuer is
required to be registered under the Investment Company Act of 1940;
then, in the case of any event described in clauses (a) through (e), (g), (h)
and (j) through (q) an "AMORTIZATION EVENT" will be deemed to have occurred only
if, after the applicable grace period, if any, set forth in such clauses, either
the Indenture Trustee or the Holders of not less than a majority of the Series
Outstanding Amount by notice then given in writing to the Issuer and the
Servicer (and to the Indenture Trustee if given by the Series 2000-1
Noteholders) may declare that an Amortization Event has occurred as of the date
of such notice, in the case of any event described in clauses (f) and (i), an
Amortization Event will occur at the close of business on the fifth Business Day
following the occurrence of such event without any notice or other action on the
part of the Indenture Trustee or the Series 2000-1 Noteholders unless prior to
that time the Holders of not less than a majority of the Series Outstanding
Amount by notice then given in writing to the Issuer, the Servicer and the
Indenture Trustee declare that an Amortization Event will not result from the
occurrence of such event and, in the case of any event described in clauses (r)
or (s), an Amortization Event shall occur immediately upon the occurrence of
such event without any notice or other action on the part of the Indenture
Trustee or the Series 2000-1 Noteholders.
Section 6.02. Cross-Defaults. The Issuer will not include in any
Indenture Supplement for any Series of Notes (other than Series 2000-1) an
amortization event which would allow such Series to amortize based on the
occurrence of an Amortization Event.
[END OF ARTICLE VI]
35
<PAGE>
ARTICLE VII
Optional Redemption of Series 2000-1 Notes
Section 7.01 Optional Redemption of Series 2000-1 Notes.
(a) On any Business Day occurring on or after the date on which the
Series Outstanding Amount is reduced to an amount equal to or less than 10% of
the Initial Series Outstanding Amount, the Issuer shall have the option to
redeem the Series 2000-1 Notes, at a redemption price equal to (i) if such day
is a Distribution Date, the Redemption Price for such Distribution Date or (ii)
if such day is not a Distribution Date, the Redemption Price for the immediately
succeeding Distribution Date.
(b) The Issuer shall give the Servicer and the Indenture Trustee at
least 30 days prior written notice of the date on which the Issuer intends to
exercise such optional redemption. Not later than 12:00 noon, New York City
time, on such day the Issuer shall deposit into (a) the Series 2000-1 Principal
Subaccount in immediately available funds the excess of the principal portion of
the Redemption Price over the amount, if any, on deposit in the Series 2000-1
Principal Subaccount and (b) the Series 2000-1 Expense Subaccount in immediately
available funds the excess of the interest portion of the Redemption Price over
the amount, if any, of the Monthly Interest on deposit in the Series 2000-1
Expense Subaccount. The portion of the Redemption Price relating to amounts
owing to the Series Enhancer shall be paid directly to the Series Enhancer on
such day Such redemption option is subject to payment in full of the Redemption
Price. Upon payment and distribution of the Redemption Price and the reduction
in the Series Outstanding Amount to zero, the Series 2000-1 Noteholders and the
Series Enhancer shall have no further interest in the Pledged Assets. The
Redemption Price shall be distributed as set forth in Section 4.05.
[END OF ARTICLE VII]
36
<PAGE>
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. Ratification of Agreement. As supplemented by this
Indenture Supplement, the Indenture is in all respects ratified and confirmed
and the Indenture as so supplemented by this Indenture Supplement shall be read,
taken and construed as one and the same instrument.
Section 8.02. Counterparts. This Indenture Supplement may be
executed in two or more counterparts, and by different parties on separate
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
Section 8.03. Governing Law. THIS INDENTURE SUPPLEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ss.5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
Section 8.04. Series Enhancer Deemed Series 2000-1 Noteholder.
Except for any period during which a Series Enhancer Default is continuing, the
Series Enhancer shall be deemed to be the Holder of 100% of the Series 2000-1
Notes for the purposes of giving any consents, waivers, approvals, instructions,
directions, declarations, notices and/or taking any other action pursuant to the
Indenture, this Indenture Supplement and the other Transaction Documents. So
long as no Series Enhancer Default shall have occurred and be continuing, the
Series Enhancer shall have the right to exercise all rights of the Holders of
the Series 2000-1 Notes under the Transaction Documents without any consent of
such Holders, and such Holders may exercise such rights only with the prior
written consent of the Series Enhancer, except as otherwise expressly provided
herein. Any reference in the Indenture or the Transaction Documents to
materially, adversely, or detrimentally affecting the rights or interests of the
Noteholders, or words of similar meaning, shall be deemed, for purposes of the
Series 2000-1 Notes, to refer to the rights or interests of the Series Enhancer.
Section 8.05. Subrogation. In furtherance of and not in limitation
of the Series Enhancer's equitable right of subrogation, each of the Indenture
Trustee and the Issuer acknowledge that, to the extent of any payment made by
the Series Enhancer under the Policy with respect to interest on or principal of
the Series 2000-1 Notes, the Series Enhancer is to be fully subrogated to the
extent of such payment and any additional interest due on any late payment, to
the rights of the Series 2000-1 Noteholders under the Indenture and this
Indenture Supplement. Each of the Issuer and the Indenture Trustee agree to such
subrogation and, further, agree to take such actions as the Series Enhancer may
reasonably request to evidence such subrogation.
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<PAGE>
Section 8.06. Certain Rights of the Series Enhancer.
(a) The Series Enhancer is an express third-party beneficiary of the
Indenture to the extent of provisions relating to any Series Enhancer and this
Indenture Supplement.
(b) The Indenture Trustee shall provide to the Series Enhancer upon
request copies of any report, notice, opinion of counsel, officer's certificate,
request for consent or request for amendment to any Transaction Document
promptly upon the Indenture Trustee's production or receipt thereof (in each
case, to the extent that such documents are not expressly required to be
provided directly to the Series Enhancer pursuant to the terms of the
Transaction Documents).
(c) Subject, in each case, to Section 6.03(d) of the Indenture, the
Indenture Trustee shall cooperate in all respect with any reasonable request by
the Series Enhancer for action to preserve or enforce the Series Enhancer's
rights or interests under the Indenture, this Indenture Supplement and the other
Transaction Documents, including, without limitation, a request to institute
proceedings for collection of all amounts then owing in respect of the Series
2000-1 Notes or the Insurance Premium.
(d) The Indenture Trustee shall, upon reasonable prior written request,
permit any representative of the Series Enhancer, during the Indenture Trustee's
normal business hours, to examine all books of accounts, records, reports and
other information of the Indenture Trustee relating to the Series 2000-1 Notes
and the Pledged Assets, to make copies and extracts therefrom and to discuss the
Indenture Trustee's performance of its duties with respect to the Transaction
Documents with the responsible officers and employees of the Indenture Trustee.
(e) The Series Enhancer shall be deemed to be an Applicable Series
Enhancer for purposes of the Indenture.
[END OF ARTICLE VIII]
[SIGNATURE PAGE FOLLOWS]
38
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Indenture
Supplement to be duly executed and delivered by their respective duly authorized
officers on the day and year first above written.
APPLE RIDGE FUNDING LLC,
as Issuer
By:
---------------------------------------
Name:
Title:
BANK ONE, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Paying Agent, Authentication Agent
and Transfer Agent and Registrar
By:
---------------------------------------
Name:
Title:
[Signature Page to Indenture Supplement]
<PAGE>
DISTRICT OF COLUMBIA )
) ss.:
COUNTY OF __________________ )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared _______________ known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of the said Delaware limited
liability company and that she/he executed the same as the corporation for the
purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
2000.
-----------------------------
Notary Public
[Seal]
My commission expires:
- ------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared Steve M. Husbands known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said national
banking organization and that she/he executed the same as the corporation for
the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
2000.
------------------------------
Notary Public
[Seal]
My commission expires:
- ------------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF _____________ )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared ________________ known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said New York
banking corporation and that she/he executed the same as the corporation for the
purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
2000.
-----------------------------
Notary Public
[Seal]
My commission expires:
- ------------------------------
<PAGE>
EXECUTION COPY
PURCHASE AGREEMENT
Dated as of April 25, 2000
by and between
CENDANT MOBILITY SERVICES CORPORATION
as Originator
and
CENDANT MOBILITY FINANCIAL CORPORATION
as Buyer
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.1 Sale and Purchase............................................1
Section 2.2 Purchases....................................................3
Section 2.3 No Assumption................................................3
Section 2.4 No Recourse..................................................3
Section 2.5 True Sales...................................................4
Section 2.6 Servicing of CMSC Purchased Assets...........................4
Section 2.7 Financing Statements.........................................4
ARTICLE III
CALCULATION OF CMF PURCHASE PRICE
Section 3.1 Calculation of the CMF Purchase Price........................4
ARTICLE IV
PAYMENT OF CMF PURCHASE PRICE.
Section 4.1 CMF Purchase Price Payments..................................5
Section 4.2 The CMF Subordinated Note....................................5
Section 4.3 Originator Adjustments.......................................5
Section 4.4 Payments and Computations, Etc...............................7
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions Precedent to Sales and Purchases..................8
Section 5.2 Conditions Precedent to CMF Subordinated Loans...............8
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1 Representations and Warranties of the Originator.............8
Section 6.2 Representations and Warranties of the Buyer.................14
ARTICLE VII
GENERAL COVENANTS
Section 7.1 Affirmative Covenants of the Originator.....................14
Section 7.2 Reporting Requirements......................................18
Section 7.3 Negative Covenants of the Originator........................20
Section 7.4 Affirmative Covenants of the Buyer..........................22
ARTICLE VIII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE CMSC PURCHASED ASSETS
Section 8.1 Rights of the Buyer.........................................23
Section 8.2 Responsibilities of the Originator..........................24
Section 8.3 Further Action Evidencing Purchases.........................24
Section 8.4 CMSC Collections; Rights of the Buyer and its Assignees.....25
ARTICLE IX
TERMINATION
Section 9.1 CMF Purchase Termination Events.............................26
Section 9.2 Purchase Termination........................................27
ARTICLE X
INDEMNIFICATION; SECURITY INTEREST
Section 10.1 Indemnities by the Originator...............................28
Section 10.2 Security Interest...........................................30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments; Waivers, Etc....................................30
Section 11.2 Notices, Etc................................................30
Section 11.3 Cumulative Remedies.........................................31
Section 11.4 Binding Effect; Assignability; Survival of Provisions.......31
Section 11.5 Governing Law...............................................31
Section 11.6 Costs, Expenses and Taxes...................................31
Section 11.7 Submission to Jurisdiction..................................31
Section 11.8 Waiver of Jury Trial........................................32
Section 11.9 Integration.................................................32
Section 11.10 Captions and Cross References...............................33
Section 11.11 Execution in Counterparts...................................33
Section 11.12 Acknowledgment and Consent..................................33
Section 11.13 No Partnership or Joint Venture.............................34
Section 11.14 No Proceedings..............................................34
Section 11.15 Severability of Provisions..................................34
Section 11.16 Recourse to the Buyer.......................................34
Section 11.17 Confidentiality.............................................34
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APPENDIX
APPENDIX A Definitions
SCHEDULES
SCHEDULE 2.1 List of Pool Relocation Management Agreements
SCHEDULE 6.1(n) List of Offices
SCHEDULE 6.1(s) List of Legal Names
SCHEDULE 11.2 Notice Addresses
EXHIBITS
EXIBIT 2.1 Form of Notice of Additional Pool Relocation Management
Agreements
EXHIBIT 4.2 Form of CMF Subordinated Note
EXHIBIT 6.1(u) Credit and Collection Policy
EXHIBIT 7.3(j) Form of Acknowledgment Letter
EXHIBIT C Forms of Contracts
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") dated as of April 25, 2000
made by and between CENDANT MOBILITY SERVICES CORPORATION, a Delaware
corporation, as originator (the "ORIGINATOR") and Cendant Mobility Financial
Corporation, a Delaware corporation, as buyer (the "BUYER").
WHEREAS, the Originator wishes to sell Receivables and Related Assets
that it now owns and Receivables and Related Assets that it from time to time
hereafter will own to the Buyer, and the Buyer is willing to purchase such
Receivables and Related Assets from the Originator from time to time, on the
terms and subject to the conditions contained in this Agreement; and
WHEREAS, the Buyer intends to transfer the CMSC Purchased Assets,
together with additional Receivables and Related Assets that the Buyer from time
to time hereafter will own, to Apple Ridge Services Corporation ("ARSC") from
and after the Closing Date pursuant to the terms of the Receivables Purchase
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used and not otherwise defined in this Agreement have
the meanings specified in Part A of Appendix A. In addition, this Agreement
shall be interpreted in accordance with the conventions set forth in Parts B, C
and D of Appendix A.
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.1 Sale and Purchase.
(a) Agreement. Upon the terms and subject to the conditions hereof, the
Buyer agrees to buy, and the Originator agrees to sell, all of the Originator's
right, title and interest in and to the following:
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(i) all Receivables owned by the Originator at the close of
business on the Business Day preceding the Closing Date or thereafter
created and arising (collectively, the "ORIGINATOR RECEIVABLES");
(ii) all Related Property with respect to the Originator
Receivables (collectively, the "ORIGINATOR RELATED PROPERTY");
(iii) all CMSC Collections;
(iv) all proceeds of and earnings on any of the foregoing; and
(v) all of the right, title and interest, if any, CMSC has in, to
or under the CMF Designated Receivables, including all Related Property with
respect thereto, rights, if any, to reimbursement of, or interest on, such
CMF Designated Receivables and all proceeds thereof;
it being understood and agreed that the Originator does not hereby sell,
transfer or convey any of its right, title or interest in any Excluded Assets or
Excluded Contracts.
The items listed above in clauses (ii), (iii) and (iv), whenever and
wherever arising, are collectively referred to herein as the "ORIGINATOR RELATED
ASSETS." The Originator Receivables and the Originator Related Assets are
sometimes collectively referred to herein as the "ORIGINATOR ASSETS."
It is the intent of the parties hereto that CMSC not have any right,
title, or interest in, to, or under the CMF Designated Receivables or the other
property listed in clause (v) above, and such CMF Designated Receivables and
other property is included in the property being sold hereunder solely in case
it should be determined, contrary to the intent of the parties hereto, that CMSC
does have any right, title, or interest in the CMF Designated Receivables or the
other property listed in clause (v) above.
As used herein, "CMSC RECEIVABLES" means Originator Receivables that
are being Purchased or have been Purchased by the Buyer hereunder; "CMSC RELATED
PROPERTY" means Originator Related Property that is being Purchased or has been
Purchased by the Buyer hereunder; "CMSC RELATED ASSETS" means Originator Related
Assets that are being Purchased or have been Purchased by the Buyer hereunder;
and "CMSC PURCHASED ASSETS" means Originator Assets that are being Purchased or
have been Purchased by the Buyer hereunder.
Schedule 2.1 sets forth a list of all Relocation Management Agreements
subject to this Agreement (each, a "POOL RELOCATION MANAGEMENT AGREEMENT") as of
the Closing Date. Each new Relocation Management Agreement that is not an
Excluded Contract and that is entered into by the Originator during any month
shall be added to the Pool Relocation Management Agreements on or after the last
day of such month by delivering a written notice in the form of Exhibit 2.1 to
the Buyer or its designee, whereupon Schedule 2.1 shall be amended by the
Originator to add such new Relocation Management Agreement to the list of Pool
Relocation Management Agreements set forth therein. A copy of such Exhibit 2.1
appended to
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the Receivables Activity Report for such month, upon delivery to the Indenture
Trustee, shall be sufficient evidence of inclusion. On or prior to the date of
the delivery of any such notice, the Originator shall indicate, or cause to be
indicated, in its computer files, books and records that the CMSC Receivables
and other CMSC Purchased Assets then existing and thereafter created pursuant to
or in connection with each such Pool Relocation Management Agreement are being
transferred to the Buyer pursuant to this Agreement.
(b) Treatment of Certain Receivables and Related Assets. It is
expressly understood that (i) each CMSC Receivable sold to the Buyer hereunder,
together with all CMSC Related Assets then existing or thereafter created and
arising with respect thereto, will thereafter be the property of the Buyer (or
its assignees), without the necessity of any further purchase or other action by
the Buyer (other than satisfaction of the conditions set forth herein) and (ii)
the change of a Receivable's status from that of Unsold Home Receivable to
Unbilled Receivable or from Unbilled Receivable to Billed Receivable shall not
be deemed the creation of a new Receivable for any purpose.
Section 2.2 Purchases. On the Closing Date, the Buyer shall purchase
all of the Originator's right, title and interest in and to all Originator
Assets and any property described in clause (v) of Section 2.1(a) existing as of
the close of business on the immediately preceding Business Day. On each
Business Day thereafter until the Termination Date, the Buyer shall purchase all
of the Originator's right, title and interest in and to all Originator Assets
and any property described in clause (v) of Section 2.1(a) existing as of the
close of business on the immediately preceding Business Day that were not
previously purchased by the Buyer hereunder. Notwithstanding the foregoing, if
an Insolvency Proceeding is pending with respect to either the Originator or the
Buyer prior to the Termination Date, the Originator shall not sell, and the
Buyer shall not buy, any Originator Assets hereunder unless and until such
Insolvency Proceeding is dismissed or otherwise terminated.
Section 2.3 No Assumption. The sales and Purchases of CMSC Purchased
Assets do not constitute and are not intended to result in a creation or an
assumption by the Buyer or its successors and assigns of any obligation of the
Originator or any other Person in connection with the CMSC Purchased Assets
(other than any such obligations as may arise from the ownership of CMSC
Receivables) or under the related Contracts or any other agreement or instrument
relating thereto, including without limitation any obligation to any Obligors or
Transferred Employees. None of the Servicer, the Buyer or the Buyer's assignees
shall have any obligation or liability to any Obligor, Transferred Employee or
other customer or client of the Originator (including without limitation any
obligation to perform any of the obligations of the Originator under any
Relocation Management Agreement, CMSC Home Purchase Contract, CMSC Related
Property or any other agreement), except such obligations as may arise from the
ownership of the CMSC Receivables. Except as expressly provided in Section
3.05(k) of the Transfer and Servicing Agreement, no such obligation or liability
to any Obligor, Transferred Employee or other customer or client of the
Originator is intended to be assumed by the Servicer or its successors and
assigns hereunder or under the Transfer and Servicing Agreement, and any such
assumption is expressly disclaimed.
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Section 2.4 No Recourse. Except as specifically provided in this
Agreement, the sale and Purchase of the CMSC Purchased Assets and any interest
of CMSC in and to the CMF Designated Receivables and other property described in
clause (v) of Section 2.1(a) under this Agreement shall be without recourse to
the Originator; provided, however, that the Originator shall be liable to the
Buyer for all representations, warranties, covenants and indemnities made by it
pursuant to the terms of this Agreement (it being understood that such
obligations of the Originator will not arise solely on account of the
credit-related inability of an Obligor to pay a Receivable).
Section 2.5 True Sales. The Originator and the Buyer intend the
transfers of CMSC Purchased Assets hereunder to be true sales by the Originator
to the Buyer that are absolute and irrevocable and to provide the Buyer with the
full benefits of ownership of the CMSC Purchased Assets, and neither the
Originator nor the Buyer intends the transactions contemplated hereunder to be,
or for any purpose to be characterized as, loans from the Buyer to the
Originator, secured by the CMSC Purchased Assets.
Section 2.6 Servicing of CMSC Purchased Assets. Consistent with the
Buyer's ownership of all CMSC Purchased Assets and subject to the terms of the
Pool Relocation Management Agreements, as between the parties to this Agreement,
the Buyer shall have the sole right to service, administer and collect all CMSC
Purchased Assets, to assign such right and to delegate such right to others. In
consideration of the Buyer's purchase of the CMSC Purchased Assets and as more
fully set forth in Section 11.12, the Originator hereby acknowledges and agrees
that the Buyer intends to assign for the benefit of ARSC and its successors and
assigns the rights and interests granted by the Originator to the Buyer
hereunder, and agrees to cooperate fully with the Issuer and its successors and
assigns in the exercise of such rights.
Section 2.7 Financing Statements. In connection with the transfer
described above, the Originator agrees, at its expense, to record and file
financing statements (and continuation statements when applicable) with respect
to the CMSC Purchased Assets conveyed by the Originator meeting the requirements
of applicable law in such manner and in such jurisdictions as are necessary to
perfect and maintain the perfection of the transfer and assignment of its
interest in the CMSC Purchased Assets to the Buyer, and to deliver a file
stamped copy of each such financing statement or other evidence of such filing
to the Buyer as soon as practicable after the Closing Date; provided, however,
that prior to recordation pursuant to Section 8.3 or the sale of a CMSC Home to
an Ultimate Buyer, record title to such CMSC Home may remain in the name of the
related Transferred Employee and no recordation in real estate records of the
conveyance pursuant to the related CMSC Home Purchase Contract or CMSC Home Sale
Contract shall be made except as otherwise required or permitted under Section
2.01(d)(i) of the Transfer and Servicing Agreement.
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ARTICLE III
CALCULATION OF CMF PURCHASE PRICE
Section 3.1 Calculation of the CMF Purchase Price.
(a) On each Business Day from and including the Closing Date to but
excluding the Termination Date, the Originator shall deliver to the Buyer an
accounting (each, a "DAILY ORIGINATOR REPORT") with respect to (i) the Purchases
of CMSC Purchased Assets to be made on such Business Day and (ii) the CMF
Purchase Price to be paid on account of the foregoing as calculated in
accordance with this Section 3.1.
(b) With respect to the Purchase of any CMSC Purchased Assets by the
Buyer from the Originator pursuant to Article II, (i) on the Closing Date, the
Buyer shall pay to the Originator a purchase price equal to $654,199,874, and
(ii) on any day thereafter, the Buyer shall pay to the Originator a purchase
price equal to the fair market value thereof, using a discount rate and expected
collection period to be recalculated monthly based on the Buyer's weighted cost
of funds and Average Days Outstanding for the prior month and assuming a
reasonable return on the Buyer's equity (each such purchase price, the "CMF
PURCHASE PRICE"), and adjusted to reflect such factors as the Originator and the
Buyer mutually agree will result in a CMF Purchase Price determined to be the
fair market value of such CMSC Purchased Assets. The sale of the property
described in clause (v) of Section 2.1(a) is in consideration of CMF funding the
CMF Designated Receivables or the obligation of the Issuer to reimburse the
Servicer for advances in respect of such CMF Designated Receivables.
ARTICLE IV
PAYMENT OF CMF PURCHASE PRICE
Section 4.1 CMF Purchase Price Payments. On the terms and subject to
the conditions of this Agreement, the Buyer shall pay to the Originator on the
Closing Date the CMF Purchase Price for the CMSC Purchased Assets sold on such
date, by paying such CMF Purchase Price to the Originator in cash. On the terms
and subject to the conditions of this Agreement, the Buyer shall pay to the
Originator, on each other Business Day on which any CMSC Purchased Assets are
purchased from the Originator by the Buyer pursuant to Article II, the CMF
Purchase Price for such CMSC Purchased Assets by paying such CMF Purchase Price
to the Originator in cash.
Section 4.2 The CMF Subordinated Note. On the Closing Date, the Buyer
shall deliver to the Originator the CMF Subordinated Note in the form set forth
as Exhibit 4.2. Subject to the limitations set forth in the CMF Subordinated
Note, the Originator irrevocably agrees to make each advance (each, a "CMF
SUBORDINATED LOAN") requested by the Buyer on or prior to the Termination Date
for the sole purposes of acquiring CMF Homes pursuant to CMF Home Purchase
Contracts (including the making of Equity Payments), making Mortgage Payoffs and
Mortgage Payments with respect to CMF Homes and making Seller Adjustments under
the Receivables Purchase Agreement. No advance shall be made under the CMF
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Subordinated Note on any date if the aggregate principal amount outstanding
thereunder on such date, after giving effect to such advance, would exceed an
amount equal to five times the net worth of the Buyer (such maximum amount
required to be advanced at any time, the "CMF SUBORDINATED NOTE CAP"). The CMF
Subordinated Loans shall be evidenced by, and shall be payable as provided in,
the CMF Subordinated Note. Notwithstanding any other provision of this
Agreement, under no circumstances shall funds borrowed under the CMF
Subordinated Note be used for the purpose of paying the CMF Purchase Price for
the CMSC Purchased Assets.
Section 4.3 Originator Adjustments.
(a) With respect to any CMSC Receivable purchased by the Buyer from the
Originator, if on any day the Buyer (or its assigns), the Servicer or the
Originator determines that (i) such CMSC Receivable (A) was not identified by
the Originator in the Daily Originator Report as other than an Eligible
Receivable on the Business Day such CMSC Receivable was sold hereunder or (B)
was otherwise treated as or represented to be an Eligible Receivable in any
Receivables Activity Report, but was not in fact an Eligible Receivable on such
date or (ii) any of the representations or warranties set forth in Section
6.1(d) or 6.1(k) was not true when made with respect to such CMSC Receivable or
the related CMSC Related Assets (each such CMSC Receivable described in clause
(i) or clause (ii), a "CMSC NONCOMPLYING ASSET"), then the Originator shall pay
the aggregate Unpaid Balance of such CMSC Receivables (such payment, a "CMSC
NONCOMPLYING ASSET ADJUSTMENT") to the Buyer in accordance with Section 4.3(c).
(b) If on any day the Unpaid Balance of any CMSC Receivable (i) is
reduced as a result of any cash discount or any adjustment by the Originator or
any Affiliate of the Originator (other than the Buyer, ARSC or the Issuer), (ii)
is subject to reduction on account of any offsetting account payable of the
Originator to an Obligor or is reduced or cancelled as a result of a set-off in
respect of any claim by, or defense or credit of, the related Obligor against
the Originator or any Affiliate of the Originator (other than the Buyer, ARSC or
the Issuer) (whether such claim, defense or credit arises out of the same or a
related or an unrelated transaction) or (iii) is reduced on account of the
obligation of the Originator to pay to the related Obligor any rebate or refund
(each of the reductions and cancellations described above in clauses (i) through
(iii), an "ORIGINATOR DILUTION ADJUSTMENT"), then the Originator shall pay such
Originator Dilution Adjustment to the Buyer in accordance with Section 4.3(c).
(c) On each Business Day, the Originator shall pay to the Buyer, in
cash in accordance with Section 4.4, an amount (an "ORIGINATOR ADJUSTMENT")
equal to the sum of (A) the aggregate Originator Dilution Adjustment, if any,
for each day from and including the immediately preceding Business Day plus (B)
the CMSC Noncomplying Asset Adjustment, if any, for each day from and including
the immediately preceding Business Day. The CMSC Receivables that gave rise to
any Originator Dilution Adjustment and any related CMSC Related Assets shall
remain the property of the Buyer. From and after the day on which any CMSC
Noncomplying Asset Adjustment is made, any collections received by the Buyer
that are identified as proceeds of the Receivables that gave rise to such CMSC
Noncomplying Asset Adjustment and any Related Property with respect to such
Receivable shall be promptly returned to the Originator.
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Section 4.4 Payments and Computations, Etc. All amounts to be paid by
the Originator to the Buyer hereunder shall be paid in accordance with the terms
hereof no later than 11:00 a.m. (New York time) on the day when due in United
States dollars in immediately available funds to an account specified in writing
from time to time by the Buyer or its designee. Payments received by the Buyer
after such time shall be deemed to have been received on the next Business Day.
If any payment becomes due on a day that is not a Business Day, then such
payment shall be made on the next succeeding Business Day. The Originator shall
pay to the Buyer, on demand, interest on all amounts not paid when due hereunder
at a rate equal to the Prime Rate plus 2% per annum; provided, however, that
such interest rate shall not at any time exceed the maximum rate permitted by
applicable law. All computations of interest payable hereunder shall be made on
the basis of a year of 360 days for the actual number of days elapsed (including
the first day but excluding the last day). All payments made under this
Agreement shall be made without set-off or counterclaim.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions Precedent to Sales and Purchases. No Purchase of
CMSC Purchased Assets shall be made hereunder on any date on which the Buyer
does not have sufficient funds available to pay the CMF Purchase Price in cash.
Section 5.2 Conditions Precedent to CMF Subordinated Loans. The
Originator's obligation to make each CMF Subordinated Loan under this Agreement
shall be subject to the conditions precedent that on the date of such CMF
Subordinated Loan:
(a) the CMF Subordinated Note shall have been duly executed and
delivered by the Buyer and shall be in full force and effect;
(b) no Event of Bankruptcy shall have occurred and be continuing
with respect to the Buyer; and
(c) after giving effect to such CMF Subordinated Loan, the
aggregate outstanding principal amount of the CMF Subordinated Note shall
not exceed the CMF Subordinated Note Cap.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1 Representations and Warranties of the Originator. In order
to induce the Buyer to enter into this Agreement and to make Purchases
hereunder, the Originator hereby makes the representations and warranties set
forth in this Section 6.1, in each case as of
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the date hereof, as of the Closing Date, as of the date of each Purchase
hereunder and as of any other date specified in such representation and
warranty.
(a) Organization and Good Standing. The Originator is a corporation
duly organized and validly existing in good standing under the laws of the State
of Delaware and has full power and authority to own its properties and to
conduct its business as such properties are presently owned and such business is
presently conducted. The Originator had at all relevant times, and now has, all
necessary power, authority and legal right to own and sell the CMSC Purchased
Assets.
(b) Due Qualification. The Originator is duly qualified to do business,
is in good standing as a foreign corporation, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualification, licenses or
approvals and in which the failure so to qualify or to obtain such licenses and
approvals or to preserve and maintain such qualification, licenses or approvals
could reasonably be expected to give rise to a Material Adverse Effect.
(c) Power and Authority: Due Authorization. The Originator (i) has all
necessary corporate power and authority (A) to execute and deliver this
Agreement, the Contracts and the other Transaction Documents to which it is a
party, (B) to perform its obligations under this Agreement, the Contracts and
the other Transaction Documents to which it is a party and (C) to sell and
assign the CMSC Purchased Assets transferred hereunder on and after such date,
on the terms and subject to the conditions herein and therein provided and (ii)
has duly authorized by all necessary corporate action such sale and assignment
and the execution, delivery and performance of, and the consummation of the
transactions provided for in, this Agreement, the Contracts and the other
Transaction Documents to which it is a party.
(d) Valid Sale; Binding Obligations. This Agreement constitutes a valid
sale, transfer, set-over and conveyance to the Buyer of all of the Originator's
right, title and interest in, to and under the CMSC Receivables transferred
hereunder on such date, which is perfected and of first priority (subject to
Permitted Liens and Permitted Exceptions) under the UCC and other applicable
law, enforceable against creditors of, and purchasers from, the Originator, free
and clear of any Lien (other than Permitted Liens); and this Agreement
constitutes, and each other Transaction Document to which the Originator is a
party when duly executed and delivered will constitute, a legal, valid and
binding obligation of the Originator, enforceable against the Originator in
accordance with its terms, except (i) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) as such
enforceability may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
The Originator has no right, title or interest in or to any CMF Home, CMF Home
Purchase Contract or any Receivable created or arising under any CMF Home
Purchase Contract.
(e) No Conflict or Violation. The execution, delivery and performance
of, and the consummation of the transactions contemplated by, this Agreement and
the other Transaction Documents to be signed by the Originator, and the
fulfillment of the terms hereof
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and thereof, will not (i) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under (A) the certificate of incorporation or the
by-laws of the Originator or (B) any material indenture, loan agreement,
mortgage, deed of trust or other material agreement or instrument to which the
Originator is a party or by which it or any of its properties is bound, (ii)
result in the creation or imposition of any Lien on any of the CMSC Purchased
Assets pursuant to the terms of any such material indenture, loan agreement,
mortgage, deed of trust or other material agreement or instrument other than
this Agreement and the other Transaction Documents or (iii) conflict with or
violate any federal, state, local or foreign law or any decision, decree, order,
rule or regulation applicable to the Originator or of any federal, state, local
or foreign regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Originator, which conflict or
violation described in this clause (iii), individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(f) Litigation and Other Proceedings. (i) There is no action, suit,
proceeding or investigation pending, or to the best knowledge of the Originator
threatened, against the Originator before any court, arbitrator, regulatory
body, administrative agency or other tribunal or governmental instrumentality
and (ii) the Originator is not subject to any order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
government authority that, in the case of either of the foregoing clauses (i) or
(ii), (A) asserts the invalidity of this Agreement or any other Transaction
Document, (B) seeks to prevent the sale of any CMSC Purchased Asset by the
Originator to the Buyer, the creation of a material amount of CMSC Receivables
or the consummation of any of the transactions contemplated by this Agreement or
any other Transaction Document, (C) seeks any determination or ruling that, in
the reasonable judgment of the Originator, would materially and adversely affect
the performance by the Originator of its obligations under this Agreement or any
other Transaction Document to which it is a party or the validity or
enforceability of this Agreement or any other Transaction Document to which it
is a party or (D) individually or in the aggregate for all such actions, suits,
proceedings and investigations could reasonably be expected to have a Material
Adverse Effect.
(g) Governmental Approvals. Except where the failure to obtain or make
such authorization, consent, order, approval or action could not reasonably be
expected to have a Material Adverse Effect, (i) all authorizations, consents,
orders and approvals of, or other actions by, any Governmental Authority that
are required to be obtained by the Originator in connection with the conveyance
of the CMSC Purchased Assets transferred hereunder on and after such date, or
the due execution, delivery and performance by the Originator of this Agreement
or any other Transaction Document to which it is a party and the consummation of
the transactions contemplated by this Agreement or any other Transaction
Documents to which it is a party have been obtained or made and are in full
force and effect and (ii) all filings with any Governmental Authority that are
required to be obtained in connection with such conveyance and the execution and
delivery by the Originator of this Agreement have been made; provided, however,
that prior to recordation pursuant to Section 8.3 or the sale of a Home to an
Ultimate Buyer, record title to such Home may remain in the name of the related
Transferred Employee and no recordation in real estate records of the conveyance
pursuant to the related Home Purchase Contract or Home Sale Contract shall be
made except as otherwise required or permitted under Section 2.01(d)(i) of the
Transfer and Servicing Agreement.
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(h) Margin Regulations. The Originator is not engaged, principally or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meanings of
Regulations T, U and X of the Board of Governors of the Federal Reserve System).
The Originator has not taken and will not take any action to cause the use of
proceeds of the sales hereunder to violate said Regulations T, U or X.
(i) Taxes. The Originator has filed (or there have been filed on its
behalf as a member of a consolidated group) all tax returns and reports required
by law to have been filed by it and has paid all taxes, assessments and
governmental charges thereby shown to be owing by it, other than any such taxes,
assessments or charges (i) that are being diligently contested in good faith by
appropriate proceedings, for which adequate reserves in accordance with GAAP
have been set aside on its books and that have not given rise to any Liens
(other than Permitted Liens) or (ii) the amount of which, either singly or in
the aggregate, would not have a Material Adverse Effect.
(j) Solvency. After giving effect to the conveyance of CMSC Purchased
Assets hereunder on such date, the Originator is solvent and able to pay its
debts as they come due and has adequate capital to conduct its business as
presently conducted.
(k) Quality of Title/Valid Transfers.
(i) Immediately before the Purchase to be made by the Buyer
hereunder on such date, each CMSC Purchased Asset to be sold to the
Buyer shall be owned by the Originator free and clear of any Lien
(other than any Permitted Lien), and the Originator shall have made all
filings and shall have taken all other action under applicable law in
each relevant jurisdiction in order to protect and perfect the
ownership interest of the Buyer and its successors and assigns in such
CMSC Purchased Assets against all creditors of, and purchasers from,
the Originator (subject to Permitted Exceptions).
(ii) With respect to each CMSC Receivable transferred hereunder on
such date, the Buyer shall acquire a valid and (subject to Permitted
Exceptions) perfected ownership interest in such CMSC Receivable and
any identifiable proceeds thereof, free and clear of any Lien (other
than any Permitted Liens).
(iii) Immediately prior to the sale of a CMSC Purchased Asset
hereunder on such date, no effective financing statement or other
instrument similar in effect that covers all or part of any CMSC
Purchased Asset or any interest therein is on file in any recording
office except such as may be filed (A) in favor of the Originator in
accordance with the Pool Relocation Management Agreements, (B) in favor
of the Buyer pursuant to this Agreement, (C) in favor of the Buyer's
successors and assigns pursuant to the Receivables Purchase Agreement,
the Transfer and Servicing Agreement or the Indenture or otherwise
filed by or at the direction of the Buyer's successors and assigns or
(D) to evidence any Mortgage on a CMSC Home created by a Transferred
Employee.
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(iv) The CMF Purchase Price constitutes reasonably equivalent
value for the CMSC Purchased Assets conveyed in consideration therefor
on such date, and no purchase of an interest in such CMSC Purchased
Assets by the Buyer from the Originator constitutes a fraudulent
transfer or fraudulent conveyance under the United States Bankruptcy
Code or applicable state bankruptcy or insolvency laws or is otherwise
void or voidable or subject to subordination under similar laws or
principles or for any other reason.
(l) Eligible Receivables. Each CMSC Receivable included in the CMSC
Purchased Assets transferred hereunder on such date, unless otherwise identified
to the Buyer and its assignees by the Originator in the related Daily Originator
Report, is an Eligible Receivable on such date.
(m) Accuracy of Information. All written information furnished by the
Originator to the Buyer or its successors and assigns pursuant to or in
connection with any Transaction Document or any transaction contemplated herein
or therein with respect to the CMSC Purchased Assets transferred hereunder on
such date is true and correct in all material respects on such date.
(n) Offices. The principal place of business and chief executive office
of the Originator is located, and the offices where the Originator keeps all
CMSC Records (and all original documents relating thereto) are located, at the
addresses specified in Schedule 6.1(n), except that (i) Home Deeds and related
documents necessary to close CMSC Home sale transactions, including powers of
attorney, may be held by local attorneys or escrow agents acting on behalf of
the Originator in connection with the sale of CMSC Homes to Ultimate Buyers, so
long as such local attorneys are notified of the interest of the Buyer and the
Buyer's assignees therein and (ii) CMSC Records relating to any Pool Relocation
Management Agreement and the Receivables arising thereunder or in connection
therewith may be maintained at the offices of the related Employer.
(o) Payment Instructions to Obligors. The Originator has instructed (i)
all Obligors to remit all payments on the CMSC Purchased Assets directly to one
of the Lockboxes or Lockbox Accounts, (ii) all Lockbox Banks to deposit all CMSC
Collections remitted to a Lockbox directly to the related Lockbox Account and
(iii) all Persons receiving CMSC Home Sale Proceeds to deposit such CMSC Home
Sale Proceeds in one of the Lockboxes or Lockbox Accounts within two Business
Days after receipt, except to the extent a longer escrow period is required
under applicable law, in which case such CMSC Home Sale Proceeds shall be
deposited into one of the Lockboxes or Lockbox Accounts within one Business Day
after the expiration of such period.
(p) Investment Company Act. The Originator is not, and is not
controlled by, an "investment company" registered or required to be registered
under the Investment Company Act.
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(q) Accounting for Certain Assets. (i) If the CMSC Receivables sold on
such date hereunder had not been sold to the Buyer hereunder, and if interests
therein had not been transferred by the Buyer in accordance with the Transaction
Documents, all CMSC Receivables would have been and at all times would be
represented in the financial statements and records of the Originator as
accounts receivable or amounts owed from Obligors in accordance with GAAP
consistently applied by the Originator and (ii) in accordance with GAAP
consistently applied, upon the sale of any CMSC Home to an Ultimate Buyer, any
such obligation relating to any Equity Payment, Mortgage Payoff or Mortgage
Payment with respect to such CMSC Home would be reduced by the amount of the
cash proceeds of the sale of such CMSC Home (in some cases, net of certain
Direct Expenses relating to such CMSC Home).
(r) ERISA. Each Plan is in compliance with all applicable material
provisions of ERISA, and the Originator or the relevant ERISA Affiliate has
received a favorable determination letter from the Internal Revenue Service that
each Plan intended to be qualified under Section 401(a) of the Code is so
qualified. No Plan has incurred an "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived. Neither the Originator nor any ERISA Affiliate (i) has incurred or
expects to incur any liability under Title IV of ERISA with respect to any Plan
that could give rise to a lien in favor of the PBGC other than liability for the
payment of premiums, all of which have been timely paid when due in accordance
with Section 4007 of ERISA, (ii) has incurred or expects to incur any withdrawal
liability within the meaning of Section 4201 of ERISA, (iii) is subject to any
lien under Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA or
arising out of any action brought under Sections 4070 or 4301 of ERISA or (iv)
is required to provide security to a Plan under Section 401(a)(29) of the Code.
The PBGC has not instituted proceedings to terminate any Plan or to appoint a
trustee or administrator of any such Plan, and no circumstances exist that
constitute grounds under Section 4042 of ERISA to commence any such proceedings.
(s) Legal Names. Except as described in Schedule 6.1(s), since January
1, 1995, the Originator (i) has not been known by any legal name other than its
corporate name as of the date hereof, except as otherwise permitted pursuant to
Section 7.3(d), (ii) has not been the subject of any merger or other corporate
reorganization that resulted in a change of name, identity or corporate
structure and (iii) has not used any trade names other than its actual corporate
name.
(t) Compliance with Applicable Laws. The Originator is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
all Governmental Authorities (federal, state, local or foreign, including
without limitation Environmental Laws), a violation of any of which,
individually or in the aggregate for all such violations, is reasonably likely
to have a Material Adverse Effect.
(u) Credit and Collection Policy. The copy of the Credit and Collection
Policy of the Originator attached as Exhibit 6.1(u) to this Agreement is a true
and complete copy thereof. As of the date each CMSC Purchased Asset is
transferred hereunder, the Originator has complied in all applicable material
respects with the Credit and Collection Policy with respect to such CMSC
Purchased Asset transferred on such date and the related Contract. There has
been
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no change to the Credit and Collection Policy that would be reasonably likely to
adversely affect the collectibility of any material portion of the CMSC
Receivables or other CMSC Purchased Assets or to decrease the credit quality of
any newly created CMSC Receivables or other CMSC Purchased Assets.
(v) Environmental. On such date, to the best knowledge of the
Originator, (i) there are no (A) pending or threatened claims, complaints,
notices or requests for information received by the Originator with respect to
any alleged violation of any Environmental Law in connection with any CMSC Home
relating to any CMSC Receivable transferred hereunder on such date or (B)
pending or threatened claims, complaints, notices or requests for information
received by the Originator regarding potential liability under any Environmental
Law in connection with any CMSC Home relating to any CMSC Receivable transferred
hereunder on such date and (ii) the Originator is in material compliance with
all permits, certificates, approvals, licenses and other authorizations relating
to environmental matters, if any, that are required to be held by it under
applicable law in connection with any CMSC Homes relating to any CMSC Receivable
transferred hereunder on such date, other than those that, in the case of either
clause (i) or (ii), singly or in the aggregate, are not reasonably likely to
have a Material Adverse Effect.
(w) Pool Relocation Management Agreements. The Pool Relocation
Management Agreements include all Relocation Management Agreements to which the
Originator is a party except for Excluded Contracts.
(x) Indebtedness for Borrowed Money. As of the Closing Date, the
Originator has no Indebtedness for Borrowed Money.
Section 6.2 Representations and Warranties of the Buyer. The Buyer
hereby represents and warrants, on and as of the date hereof and on and as of
the Closing Date, that (a) this Agreement has been duly authorized, executed and
delivered by the Buyer and constitutes the Buyer's valid, binding and legally
enforceable obligation, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) as such
enforceability may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law,
(b) the execution, delivery and performance of this Agreement does not violate
any federal, state, local or foreign law applicable to the Buyer or any
agreement to which the Buyer is a party and (c) all of the outstanding capital
stock of the Buyer is directly or indirectly owned by the Originator, and all
such capital stock is fully paid and nonassessable.
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ARTICLE VII
GENERAL COVENANTS
Section 7.1 Affirmative Covenants of the Originator. From the Closing
Date until the termination of this Agreement in accordance with Section 11.4,
the Originator hereby agrees that it will perform the covenants and agreements
set forth in this Section 7.1.
(a) Compliance with Laws, Etc. The Originator will comply in all
material respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including without limitation those relating to the CMSC
Receivables, CMSC Home Purchase Contracts, CMSC Related Assets and all
Environmental Laws affecting any CMSC Home), in each case to the extent that any
such failure to comply, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Preservation of Corporate Existence. The Originator (i) will
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation (other than any change in corporate
status by reason of a merger or consolidation permitted by Section 7.3(c)) and
(ii) will qualify and remain qualified in good standing as a foreign corporation
in each jurisdiction in which the failure to preserve and maintain such
qualification as a foreign corporation could reasonably be expected to have a
Material Adverse Effect.
(c) Keeping of Records and Books of Account. The Originator will
maintain and implement administrative and operating procedures (including
without limitation an ability to recreate records evidencing the CMSC Purchased
Assets in the event of the destruction of the originals thereof) and will keep
and maintain all documents, books, records and other information that are
necessary or advisable, in the reasonable determination of the Buyer, for the
collection of all amounts due under any or all CMSC Purchased Assets. Upon the
reasonable request of the Buyer or its assignees made at any time after the
occurrence and continuance of an Unmatured Servicer Default or a Servicer
Default, the Originator will deliver copies of all CMSC Records maintained
pursuant to this Section 7.1(c) to the Buyer or its designee. The Originator
will maintain at all times accurate and complete books, records and accounts
relating to the CMSC Purchased Assets and all CMSC Collections, in which timely
entries will be made. The Originator's master data processing records will be
marked to indicate the sales of all CMSC Purchased Assets to the Buyer hereunder
and will include without limitation all payments received and all credits and
extensions granted with respect to the CMSC Purchased Assets.
(d) Location of Records and Offices. The Originator will keep its
principal place of business and chief executive office and the offices where it
keeps all CMSC Records (and all original documents relating thereto other than
those CMSC Records that are maintained with local attorneys or escrow agents or
at the offices of the relevant Employer as described in Section 6.1(n)) at the
addresses specified in Schedule 6.1(n) or, upon not less than 30 days' prior
written notice given by the Originator to the Buyer and its assignees, at such
other locations in jurisdictions in the United States of America where all
action required by Section 8.3 has been taken and completed.
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(e) Separate Corporate Existence of the Buyer. The Originator hereby
acknowledges that the parties to the Transaction Documents are entering into the
transactions contemplated by the Transaction Documents in reliance on the
Buyer's identity as a legal entity separate from the Originator and the other
CMS Persons. From and after the date hereof until the Final Payout Date, the
Originator will, and will cause each other CMS Person to, take such actions on
the part of the Originator or such CMS Person as shall be required in order
that:
(i) The Buyer's operating expenses will not be paid by any CMS
Person, except that certain organizational expenses of the Buyer and
expenses relating to creation and initial implementation of the Transaction
Documents have been or will be paid by the Originator;
(ii) Any financial statements of any CMS Person that are
consolidated to include the Buyer will contain appropriate footnotes clearly
stating that (A) all of the Buyer's assets are owned by the Buyer and (B)
the Buyer is a separate corporate entity with its own separate creditors
that will be entitled to be satisfied out of the Buyer's assets prior to any
value in the Buyer becoming available to the Buyer's equity holders;
(iii) Any transaction between the Buyer and a CMS Person will be
fair and equitable to the Buyer, will be the type of transaction that would
be entered into by a prudent Person in the position of the Buyer with a CMS
Person and will be on terms that are at least as favorable as may be
obtained from a Person that is not a CMS Person; and
(iv) No CMS Person will be, or will hold itself out to be,
responsible for the debts of the Buyer.
(f) Payment Instruction to Obligors. The Originator will (i) instruct
all Obligors to submit all payments on the CMSC Purchased Assets either (A) to
one of the Lockboxes maintained at the Lockbox Banks for deposit in a Lockbox
Account or (B) directly to one of the Lockbox Accounts and (ii) instruct all
Persons receiving Home Sale Proceeds to deposit such Home Sale Proceeds in one
of the Lockboxes or Lockbox Accounts within two Business Days after such
receipt, except to the extent a longer escrow period is required under
applicable law, in which case such Home Sale Proceeds will be deposited into one
of the Lockboxes or Lockbox Accounts within one Business Day after the
expiration of such period. The Originator will direct all Obligors with respect
to receivables and related assets that are not CMSC Receivables or CMF
Receivables to deposit all collections in respect of such receivables and
related assets in an account that is not a Lockbox or Lockbox Account and will
take such other steps as the Buyer reasonably may request to ensure that all
collections on such receivables and related assets will be segregated from CMSC
Collections and CMF Collections.
(g) Segregation of Collections. The Originator will use reasonable
efforts to minimize the deposit of any funds other than CMSC Collections or CMF
Collections into any of the Lockbox Accounts and, to the extent that any such
funds are deposited into any of such Lockbox Accounts, promptly will identify
any such funds or will cause such funds to be so
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identified to the Servicer, it being understood and agreed that the Originator
does not hereby assume any affirmative duty to re-direct Obligors to remit funds
to alternate locations.
(h) Identification of Eligible Receivables. The Originator will (i)
establish and maintain necessary procedures for determining, no less frequently
than each date on which a Daily Originator Report is required to be delivered
pursuant to Section 3.1(a), whether each CMSC Receivable qualifies as an
Eligible Receivable, and for identifying on any such date all CMSC Receivables
to be sold to the Buyer on that date that are not Eligible Receivables and (ii)
will provide to the Servicer in a timely manner information that shows whether,
and to what extent, the CMSC Receivables described in such Daily Originator
Report are Eligible Receivables.
(i) Payment of Taxes. The Originator will file (or there will be filed
on its behalf as a member of a consolidated group) all tax returns and reports
required by law to be filed by it and will pay all taxes, assessments and
governmental charges thereby shown to be owing by it, except for any such taxes,
assessments or charges (i) that are being diligently contested in good faith by
appropriate proceedings, for which adequate reserves in accordance with GAAP
have been set aside on its books and that have not given rise to any Liens
(other than Permitted Liens) or (ii) the amount of which, either singly or in
the aggregate, would not have a Material Adverse Effect.
(j) Accounting for Certain Assets. To the extent permitted by
applicable law and GAAP, the Originator will (i) prepare all financial
statements that account for the transactions contemplated hereby as a sale of
the CMSC Purchased Assets by the Originator to the Buyer and, in all other
respects, will account for and treat the transactions contemplated hereby
(including but not limited to accounting and (to the extent taxes are not
consolidated) for tax reporting purposes) as a sale of the CMSC Purchased Assets
by the Originator to the Buyer and (ii) maintain and prepare its financial
statements and records in accordance with GAAP, applied in accordance with the
representation contained in Section 6.1(q).
(k) Receivables Reviews. Upon reasonable prior notice, the Originator
will permit the Buyer or its assignees (or other Persons designated by the Buyer
from time to time) or their agents or representatives (including without
limitation certified public accountants or other auditors), at the expense of
the Originator and during regular business hours, (i) to examine and make copies
of and abstracts from, and to conduct accounting reviews of, all CMSC Records in
the possession or under the control of the Originator, including without
limitation the related Contracts, invoices and other documents related thereto
and (ii) to visit the offices and properties of the Originator for the purpose
of examining any materials described in the preceding clause (i) and to discuss
matters relating to the CMSC Receivables or the other CMSC Purchased Assets or
the performance by the Originator of its obligations under any Transaction
Document to which it is a party with any Authorized Officers of the Originator
having knowledge of such matters or with the Originator's certified public
accountants or other auditors; provided, however, that all such reviews will
occur no more frequently than twice per year (with only the first such review in
any year being at the Originator's expense) unless (i) CMSC is the Servicer and
a Servicer Default has occurred and is continuing or (ii) the Buyer or its
successor or assignee has given advance written notice to the Originator that it
believes the composition and/or performance of
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the CMSC Purchased Assets have deteriorated in a manner materially adverse to
the interests of the Buyer or its assignees.
(l) Computer Software, Hardware and Services. The Originator will
provide the Buyer and its assignees with such licenses, sublicenses and/or
assignments of contracts as the Servicer, the Buyer or the Buyer's assignees
require with respect to all services and computer hardware or software that
relate to the servicing of the CMSC Receivables or the other CMSC Purchased
Assets; provided, however, that with respect to any computer software licensed
from a third party, the Originator will be required to provide such licenses,
sublicenses and/or assignments of such software only to the extent that
provision of the same would not violate the terms of any contracts of the
Originator with such third party.
(m) Environmental Claims. The Originator will use commercially
reasonable efforts to promptly cure and have dismissed with prejudice to the
satisfaction of the Buyer any actions and any proceedings relating to compliance
with Environmental Laws relating to any CMSC Home, but only to the extent that
the conditions that gave rise to such proceedings were in existence as of the
date on which the Buyer acquired the related CMSC Receivable.
(n) Turnover of Collections. If the Originator or any of its agents or
representatives at any time receives any cash, checks or other instruments
constituting CMSC Collections or CMF Collections, such recipient will segregate
and hold such payments in trust for, and in a manner acceptable to, the Servicer
and will, promptly upon receipt (and in any event within one Business Day
following receipt) remit all such cash, checks and instruments, duly endorsed or
with duly executed instruments of transfer, to a Lockbox Account.
(o) Performance and Compliance by Originator with Relocation Management
Agreements. The Originator will, at its expense, timely and fully perform and
comply with all provisions, covenants and other promises required to be observed
by it under the Pool Relocation Management Agreements, the CMSC Home Purchase
Contracts and other Contracts related to the CMSC Purchased Assets.
(p) Compliance with Credit and Collection Policy. The Originator will
comply in all applicable material respects with the Credit and Collection Policy
with respect to each CMSC Purchased Asset and will not take any action in
violation of the Credit and Collection Policy with respect to any other ARSC
Purchased Asset.
Section 7.2 Reporting Requirements. From the Closing Date until the
termination of this Agreement in accordance with Section 11.4, the Originator
agrees that it will furnish to the Buyer or its assignees:
(a) Annual Financial Statements. As soon as available and in any event
within 95 days after the end of each fiscal year of the Performance Guarantor
and the Originator, as applicable, copies of (i) the consolidated balance sheet
of the Performance Guarantor and its consolidated subsidiaries as at the end of
such fiscal year and the related statements of earnings and cash flows and
stockholders' equity of the Performance Guarantor and its consolidated
subsidiaries for such fiscal year, setting forth in each case in comparative
form the corresponding
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figures for the preceding fiscal year and prepared in accordance with GAAP
applied consistently throughout the periods reflected therein, certified by
Deloitte & Touche (or such other independent certified public accountants of
nationally recognized standing in the United States of America as shall be
selected by the Performance Guarantor) and (ii) copies of the statements of
earnings of the Originator on a consolidated basis for such fiscal year, setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal year and certified by the chief financial officer, chief
accounting officer or controller of the Originator (it being understood and
agreed that such statements of earnings will be prepared in accordance with the
Originator's customary management accounting practices as in effect on the date
hereof and need not be prepared in accordance with GAAP);
(b) Material Adverse Effect. Promptly and in any event within two
Business Days after the president, chief financial officer, controller or
treasurer of the Originator has actual knowledge thereof, written notice that
describes in reasonable detail any event or occurrence with respect to CMSC
that, individually or in the aggregate for all such events or occurrences, has
had, or that such Authorized Officer in its reasonable good faith judgment
determines could reasonably be expected to have, a Material Adverse Effect (as
defined in the Indenture);
(c) Proceedings. Promptly and in any event within five Business Days
after an Authorized Officer of the Originator has knowledge thereof, written
notice of (i) any litigation, investigation or proceeding of the type described
in Section 6.1(f) not previously disclosed to the Buyer, (ii) any material
adverse development that has occurred with respect to any such previously
disclosed litigation, investigation or proceeding or (iii) any CMF Purchase
Termination Event or event which, with the giving of notice or passage of time
or both, would constitute a CMF Purchase Termination Event;
(d) ERISA Event. (i) As soon as possible and in any event within 30
days after the Originator or any ERISA Affiliate knows or has reason to know
that a "reportable event" (as defined in Section 4043 of ERISA) has occurred
with respect to any Plan, a statement of an Authorized Officer of the Originator
setting forth details as to such reportable event and the action that the
Originator or an ERISA Affiliate proposes to take with respect thereto, together
with a copy of the notice of such reportable event, if any, given to the PBGC,
the Internal Revenue Service or the Department of Labor; (ii) promptly and in
any event within 10 Business Days after receipt thereof, a copy of any notice
the Originator or any ERISA Affiliate receives from the PBGC relating to the
intention of the PBGC to terminate any Plan or to appoint a trustee to
administer any such Plan; (iii) promptly and in any event within 10 Business
Days after a filing with the PBGC pursuant to Section 412(n) of the Code of a
notice of failure to make a required installment or other payment with respect
to a Plan, a statement of the chief financial officer of the Originator setting
forth details as to such failure and the action that the Originator or an ERISA
Affiliate proposes to take with respect thereto, together with a copy of such
notice given to the PBGC; and (iv) promptly and in any event within 30 Business
Days after receipt thereof by the Originator or any ERISA Affiliate from the
sponsor of a multiemployer plan (as defined in Section 3(37) of ERISA), a copy
of each notice received by the Originator or any ERISA Affiliate concerning the
imposition of withdrawal liability or a determination that a multiemployer plan
is, or is expected to be, terminated or reorganized;
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(e) Environmental Claims. Promptly and in any event within five
Business Days after receipt thereof, notice and copies of all written claims,
complaints, notices, actions, proceedings, requests for information or inquiries
relating to the condition of any CMSC Homes or compliance with Environmental
Laws relating to the CMSC Homes, other than those received in the ordinary
course of business and that, singly or in the aggregate, do not represent events
or conditions that would cause the representation set forth in Section 6.1(v) to
be incorrect; and
(f) Other. Promptly, from time to time, such other information,
documents, records or reports with respect to the CMSC Purchased Assets or the
condition or operations, financial or otherwise, of the Originator as the Buyer
or its assignees may from time to time reasonably request in order to protect
the interests of the Buyer or such assignees under or as contemplated by this
Agreement and the other Transaction Documents, including timely delivery of all
such information required under any Enhancement Agreement.
Section 7.3 Negative Covenants of the Originator. From the Closing Date
until the termination of this Agreement in accordance with Section 11.4, the
Originator agrees that it will not:
(a) Sales, Liens, Etc. Sell, assign (by operation of law or otherwise)
or otherwise dispose of, or create or suffer to exist any Lien (other than
Permitted Liens) of anyone claiming by or through it on or with respect to,
any ARSC Purchased Asset or Excluded Asset or any interest therein or any
Lockbox or Lockbox Account, other than (i) sales of CMSC Purchased Assets
pursuant to this Agreement, (ii) sales of CMSC Homes in accordance with the
applicable Contracts and (iii) transfers of Excluded Assets where the
transferee has executed and delivered to the Indenture Trustee an
Acknowledgement Letter;
(b) Change in Business or Credit and Collection Policy. (i) Make any
material change in the Credit and Collection Policy or (ii) make any
material change in the character of its employee relocation business or
engage in any business unrelated to such business as currently conducted
that, in either case, individually or in the aggregate with all other such
changes, would be reasonably likely to have a material adverse effect on the
composition or performance of the CMSC Purchased Assets;
(c) No Mergers, Etc. Consolidate with or merge with or into any other
Person or convey, transfer or sell all or substantially all of its
properties and assets to any Person, unless:
(i) (A) the Originator is the surviving entity thereof or, if the
Originator is not the surviving entity thereof, (x) the Person formed
by such consolidation or into which the Originator is merged or the
Person that acquires by conveyance, transfer or sale all or
substantially all of the properties and assets of the Originator (any
such Person, the "SURVIVING ENTITY") is an entity organized and
existing under the laws of the United States of America or any State
thereof, (y) such Surviving Entity expressly assumes, by an agreement
supplemental hereto in form and substance satisfactory to the Buyer and
its assignees, performance of every covenant and obligation of the
Originator hereunder and under the other Transaction
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Documents to which the Originator is a party and (z) such Surviving
Entity delivers to the Buyer and its assignees an opinion of counsel
that such Surviving Entity is duly organized and validly existing under
the laws of its organization, has duly executed and delivered such
supplemental agreement, and such supplemental agreement is a valid and
binding obligation of such Surviving Entity, enforceable against such
Surviving Entity in accordance with its terms (subject to customary
exceptions relating to bankruptcy and equitable principles) and
covering such other matters as the Buyer or its assignees may
reasonably request;
(ii) all actions necessary to maintain the perfection of the security
interests or ownership interests of the Buyer in the CMSC Purchased
Assets in connection with such consolidation, merger, conveyance or
transfer have been taken, as evidenced by an opinion of counsel
reasonably satisfactory to the Buyer and its assignees;
(iii) so long as the Originator is the Servicer, no Servicer Default or
Unmatured Servicer Default is then occurring or would result from such
merger, consolidation, conveyance or transfer; and
(iv) any necessary consents of each applicable Series Enhancer have
been obtained.
(d) Change in Name. Change its corporate name or the name under or by
which it conducts its core relocation business or the jurisdiction in which
it is incorporated unless the Originator has given the Buyer and its
assignees and each rating agency then rating any Series of Notes at least 30
days' prior written notice thereof and unless, prior to any such change in
name or jurisdiction of incorporation, the Originator has taken and
completed all action required by Section 8.3;
(e) Home Deeds. Record any Home Deeds with respect to any Homes except
at the direction of the Buyer or its assignees or as permitted by Section
8.3 hereof or by Section 2.01(d)(i) of the Transfer and Servicing Agreement;
and
(f) Termination of Relocation Management Agreements. Terminate any Pool
Relocation Management Agreement, CMSC Home Purchase Contract, CMSC Home Sale
Contract, CMSC Equity Loan Note or CMSC Equity Loan Agreement except in
accordance with the Credit and Collection Policy.
(g) Extension or Amendment. Extend, amend or otherwise modify the terms
of any Receivable included in the ARSC Purchased Assets, or amend, modify or
waive any material term or condition related thereto, except in accordance
with Section 3.10 of the Transfer and Servicing Agreement.
(h) Change in Payment Instruction to Obligors. Make any change in its
instructions to Obligors or other Persons regarding payments to be made to
the Originator
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or payments to be made to any Lockbox Account (except for a change in
instructions solely for the purpose of directing such Obligors or other
Persons to make such payments to another existing Lockbox Account), unless
(i) the Indenture Trustee has received copies of a Lockbox Agreement with
each new Lockbox Bank duly executed by the Originator, the Buyer, the
Issuer, the Indenture Trustee and such Lockbox Bank and (ii) in the case of
any termination, the Buyer or its successors and assigns have received
evidence to their satisfaction that the Obligors that were making payments
into a terminated Lockbox Account have been instructed in writing to make
payments into another Lockbox Account then in use.
(i) Home Purchase Contracts. Purchase any Home or make any Equity
Payments, Mortgage Payoffs, or Mortgage Payments on or after the Closing
Date other than Equity Payments, Mortgage Payoffs and Mortgage Payments with
respect to CMSC Homes.
(j) Indebtedness for Borrowed Money. Create, incur, guarantee or permit
to exist any Indebtedness for Borrowed Money, except for (A) any such
Indebtedness owed on an intercompany basis to the Performance Guarantor or
any Affiliate thereof and (B) any such Indebtedness to a Person that has
executed and delivered an Acknowledgment Letter in favor of the Originator
and the Buyer and its successors and assigns, including any Series Enhancer.
Section 7.4 Affirmative Covenants of the Buyer. From the Closing Date
until the termination of this Agreement in accordance with Section 11.4, the
Buyer hereby agrees that it will perform the covenants and agreements set forth
in this Section 7.4.
(a) The Buyer hereby acknowledges that the parties to the Transaction
Documents are entering into the transactions contemplated by the Transaction
Documents in reliance upon the Buyer's identity as a legal entity separate from
the Originator and the other CMS Persons. From and after the date hereof until
one year and one day after the Final Payout Date, the Buyer will take such
actions as shall be required in order that:
(i) The Buyer will conduct its business in office space allocated to it
and for which it pays an appropriate rent and overhead allocation;
(ii) The Buyer will maintain corporate records and books of account
separate from those of each CMS Person and telephone numbers and stationery
that are separate and distinct from those of each CMS Person;
(iii) The Buyer's assets will be maintained in a manner that
facilitates their identification and segregation from those of any CMS
Person;
(iv) The Buyer will strictly observe corporate formalities in its
dealings with the public and with each CMS Person, and funds or other assets
of the Buyer will not be commingled with those of any CMS Person, except as
expressly permitted by the Transaction Documents. The Buyer will at all
times, in its dealings with the public and
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with each CMS Person, hold itself out and conduct itself as a legal entity
separate and distinct from each CMS Person. The Buyer will not maintain
joint bank accounts or other depository accounts to which any CMS Person
(other than the Originator in its capacity as Servicer under the Transfer
and Servicing Agreement) has independent access;
(v) The duly elected board of directors of the Buyer and duly appointed
officers of the Buyer will at all times have sole authority to control
decisions and actions with respect to the daily business affairs of the
Buyer;
(vi) Not less than one member of the Buyer's board of directors will be
an Independent Director. The Buyer will observe those provisions in its
certificate of incorporation that provide that the Buyer's board of
directors will not approve, or take any other action to cause the filing of,
a voluntary bankruptcy petition with respect to the Buyer unless the
Independent Director and all other members of the Buyer's board of directors
unanimously approve the taking of such action in writing prior to the taking
of such action;
(vii) The Buyer will compensate each of its employees, consultants and
agents from the Buyer's own funds for services provided to the Buyer;
(viii) The Buyer will not hold itself out to be responsible for the
debts of any CMS Person; and
(ix) The Buyer will take all actions necessary on its part to be taken
in order to ensure that the facts and assumptions relating to the Buyer set
forth in the opinions of Orrick, Herrington & Sutcliffe LLP of even date
herewith relating to true sale matters with respect to the Purchase of the
CMSC Purchased Assets hereunder and substantive consolidation matters with
respect to the Originator and the Buyer will be true and correct at all
times.
(b) The Buyer assumes no obligations of the Originator under the Pool
Relocation Management Agreements with respect to any CMSC Home Purchase
Contracts, including without limitation the obligations of the Originator to
make Equity Payments, Mortgage Payoffs and Mortgage Payments with respect to
CMSC Homes. The Buyer will enter into all Home Purchase Contracts under the Pool
Relocation Management Agreements in its own name and will make all Equity
Payments, Mortgage Payoffs and Mortgage Payments from and after the Closing Date
other than Equity Payments, Mortgage Payoffs and Mortgage Payments with respect
to CMSC Homes.
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ARTICLE VIII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE CMSC PURCHASED ASSETS
Section 8.1 Rights of the Buyer.
(a) Subject to Section 8.4(b), the Originator hereby authorizes the
Buyer and its assignees and designees to take any and all steps in the
Originator's name and on behalf of the Originator that the Buyer, the Servicer
and/or their respective designees determine are reasonably necessary or
appropriate to collect all amounts due under any and all CMSC Purchased Assets,
including without limitation endorsing the name of the Originator on checks and
other instruments representing CMSC Collections and enforcing such CMSC
Purchased Assets.
(b) The Buyer shall have no obligation to account for, to replace, to
substitute or to return any CMSC Purchased Asset to the Originator, except as
provided in Section 4.3(c).
(c) The Buyer shall have the unrestricted right to further assign,
transfer, deliver, hypothecate, subdivide or otherwise deal with the CMSC
Purchased Assets and all of the Buyer's right, title and interest in, to and
under this Agreement on whatever terms the Buyer determines, pursuant to the
Receivables Purchase Agreement or otherwise.
(d) As between the Originator and the Buyer, the Buyer shall have the
sole right to retain any gains or profits created by buying, selling or holding
the CMSC Purchased Assets.
Section 8.2 Responsibilities of the Originator. Anything herein to the
contrary notwithstanding:
(a) The Originator agrees to deliver directly to the Servicer (for the
Buyer's account), within one Business Day after receipt thereof, any CMSC
Collections or CMF Collections that it receives, in the form so received, and
agrees that all such CMSC Collections and CMF Collections will be deemed to be
received in trust for the Buyer and its assignees and will be maintained and
segregated separate and apart from all other funds and moneys of the Originator
until delivery of such CMSC Collections and CMF Collections to the Servicer; and
(b) The Originator hereby grants to the Buyer an irrevocable power of
attorney, with full power of substitution, coupled with an interest, to take in
the name of the Originator all steps necessary or advisable to endorse,
negotiate or otherwise realize on any writing or other right of any kind held or
transmitted by the Originator or transmitted or received by the Buyer (whether
or not from the Originator) in connection with any CMSC Purchased Asset (which
power of attorney may be exercised by the Buyer's successors and assigns in
accordance with Section 8.4 and Section 11.12(b)).
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(c) The Originator shall perform all of its obligations hereunder and
under the Pool Relocation Management Agreements and other Contracts related to
the CMSC Purchased Assets to which it is a party (other than those obligations
undertaken by the Buyer as provided in Section 7.4(b)) to the same extent as if
such CMSC Purchased Assets had not been sold hereunder, and the exercise by the
Buyer or its designee or assignee of the Buyer's rights hereunder or in
connection herewith shall not relieve the Originator from any of its obligations
under any such Pool Relocation Management Agreements or Contracts related to the
CMSC Purchased Assets to which it is a party. Notwithstanding the foregoing, the
Originator acknowledges that the Buyer or its designees are entitled to perform
such obligations to the extent permitted under the Transaction Documents.
Section 8.3 Further Action Evidencing Purchases. The Originator agrees
that from time to time, at its expense and upon reasonable request, it will
promptly execute and deliver all further instruments and documents and take all
further action as is reasonably necessary to perfect, protect or more fully
evidence the Purchase of the CMSC Purchased Assets by the Buyer hereunder, or to
enable the Buyer or its assignees to exercise or enforce any of its rights
hereunder or under any other Transaction Document to which the Originator is a
party; provided, however, that the Originator will not file or record any Home
Deeds except (i) in its capacity as the Servicer pursuant to the Transfer and
Servicing Agreement and in accordance with the terms thereof and (ii) at any
time, to the extent such recordation is required by local law, regulation or
custom. No Home Deeds or Home Purchase Contracts may be recorded in the name of
the Originator other than Home Deeds relating to CMSC Homes and CMSC Home
Purchase Contracts. Without limiting the generality of the foregoing, the
Originator shall:
(a) upon the Buyer's request, execute and file such financing or
continuation statements or amendments thereto or assignments thereof and
such other instruments or notices as the Buyer or its assignees may
reasonably determine to be necessary or appropriate; and
(b) mark the master data processing records evidencing the CMSC
Purchased Assets and, if requested by the Buyer or its assignees, legend the
related Pool Relocation Management Agreements and CMSC Home Purchase
Contracts to reflect the sale of the CMSC Purchased Assets to the Buyer
pursuant to this Agreement.
The Originator hereby authorizes the Buyer and its assignees to file
one or more financing or continuation statements and amendments thereto and
assignments thereof with respect to all or any of the CMSC Purchased Assets, in
each case whether now existing or hereafter generated by the Originator. If (i)
the Originator fails to perform any of its agreements or obligations under this
Agreement and does not remedy such failure within the applicable cure period, if
any, and (ii) the Buyer or its assignees in good faith reasonably believes that
the performance of such agreements and obligations is necessary or appropriate
to protect the interests of the Buyer or its assignees under this Agreement,
then the Buyer or its assignees may (but shall not be required to) perform or
cause performance of such agreement or obligation, and the reasonable expenses
of the Buyer or its assignees incurred in connection with such performance shall
be payable by the Originator as provided in Section 10.1.
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Section 8.4 CMSC Collections; Rights of the Buyer and its Assignees.
At any time following the designation of a Servicer other than the
Originator pursuant to the Transfer and Servicing Agreement:
(a) The Buyer or its assignees may direct the Obligors of CMSC
Receivables, or any of them, to pay all amounts payable under any CMSC
Receivable directly to the Buyer or its assignees;
(b) At the request of the Buyer or its assignees and at the
Originator's expense, the Originator shall give notice of such ownership to
each said Obligor and direct that payments be made directly to the Buyer or
its assignees;
(c) At the request of the Buyer or its assignees and at the
Originator's expense, the Originator shall (A) assemble all of the CMSC
Records, to the extent such CMSC Records are in its possession, and make the
same available at a place selected by the Buyer or its successors and
assigns, or instruct any escrow agents holding any such documents,
instruments and other records on its behalf to make the same available and
(B) segregate all cash, checks and other instruments received by it from
time to time constituting CMSC Collections or CMF Collections in a manner
reasonably acceptable to the Buyer or its assignees and, promptly upon
receipt, remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to the Buyer or its assignees; and
(d) The Originator hereby authorizes the Buyer or its assignees to
take any and all steps in the Originator's name and on behalf of the
Originator that are necessary or desirable, in the reasonable determination
of the Buyer or its assignees, to collect all amounts due under any and all
CMSC Purchased Assets, including without limitation endorsing the
Originator's name on checks and other instruments representing CMSC
Collections and enforcing the CMSC Purchased Assets.
ARTICLE IX
TERMINATION
Section 9.1 CMF Purchase Termination Events. The following events shall
be "CMF PURCHASE TERMINATION EVENTS":
(a) The occurrence of an Event of Default or an Amortization Event with
respect to all outstanding Series of Notes; or
(b) Any representation or warranty made by the Originator under any of
the Transaction Documents, any Receivables Activity Report or other information
or report delivered by the Originator (including in its capacity as Servicer)
with respect to the Originator or the CMSC Purchased Assets shall prove to have
been untrue or incorrect in any material
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respect when made or deemed to have been made, and such failure could be
reasonably expected to have a Material Adverse Effect and such occurrence
remains unremedied for 30 days; provided, however, that any such incorrect
representation relating to a CMSC Receivable with respect to which the
Originator has made a CMSC Noncomplying Asset Adjustment pursuant to Section
4.3(a) shall not constitute a CMF Purchase Termination Event; or
(c) (i) The Originator shall fail to perform or observe, as and when
required, any term, covenant or agreement contained in this Agreement or any of
the other Transaction Documents to which it is a party or any Contract required
on its part to be performed or observed, and such failure shall remain
unremedied for: (A) in the case of a failure to deliver any Daily Originator
Report pursuant to Section 3.1(a), ten calendar days (provided, however, that
such ten-day period may be extended for an additional three days if such failure
to deliver a Daily Originator Report is due to computer failure); (B) in the
case of a failure to provide payment instructions to Obligors pursuant to
Section 7.1(f), a failure to segregate CMSC Collections or CMF Collections
pursuant to Section 7.1(g), a failure to provide records pursuant to Section
7.1(k), a failure to provide required notices pursuant to Section 7.2(c), a
failure to provide any required monthly report or a breach of any of the
negative covenants of the Originator set forth in Section 7.3, ten calendar
days; or (C) in the case of any other failure to perform or observe, as and when
required, any term, covenant or agreement, which failure could be reasonably
expected to have a Material Adverse Effect, 30 days or (ii) the Performance
Guarantor shall fail to make any required payment under the PHH Guarantee and
such failure shall remain unremedied for one Business Day or (iii) the
Performance Guarantor shall otherwise fail to perform under the PHH Guarantee;
or
(d) An Event of Bankruptcy shall have occurred with respect to the
Originator or the Performance Guarantor; or
(e) The representation and warranty in Section 6.1(k) shall not be true
at any time with respect to a substantial portion of the CMSC Purchased Assets;
or
(f) Either (i) the Internal Revenue Service shall file notice of a Lien
pursuant to Section 6323 of the Internal Revenue Code with respect to any of the
CMSC Receivables or the CMSC Related Assets and such Lien shall not have been
released within five days or, if released, proved to the satisfaction of the
rating agencies then rating each Series of Notes or (ii) the PBGC shall file, or
shall indicate its intention to file, notice of a Lien pursuant to Section 4068
of the Employee Retirement Income Security Act of 1974 with respect to any of
the CMSC Receivables or the CMSC Related Assets; or
(g) This Agreement or the PHH Guarantee shall cease to be in full force
and effect for any reason other than in accordance with its terms; or
(h) An ARSC Purchase Termination Event or Transfer Termination Event
shall have occurred.
If a CMF Purchase Termination Event occurs, the Originator shall promptly give
notice to the Buyer and its assignees of such CMF Purchase Termination Event.
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Section 9.2 Purchase Termination. (a) On the Termination Date, the
Originator shall cease transferring CMSC Purchased Assets to the Buyer, provided
that any right, title and interest of the Originator in and to any CMF
Designated Receivables arising from any Servicer Advances made thereafter,
including any Related Property relating thereto and proceeds thereof, shall
continue to be transferred. Notwithstanding any cessation of the transfer to the
Buyer of additional CMSC Purchased Assets, CMSC Purchased Assets transferred to
the Buyer prior to the Termination Date and CMSC Collections in respect of such
CMSC Purchased Assets and the related Finance Charges, whenever accrued in
respect of such CMSC Receivables, shall continue to be property of the Buyer
available for transfer by the Buyer pursuant to the Receivables Purchase
Agreement. Nothing in this Section 9.2 shall be deemed to prohibit the Buyer
from funding CMF Designated Receivables from and after the Termination Date.
(b) Upon the occurrence of a CMF Purchase Termination Event, the Buyer
and its assignees shall have, in addition to all other rights and remedies under
this Agreement or otherwise, all other rights and remedies provided under the
UCC of each applicable jurisdiction and other applicable laws, which rights
shall be cumulative. Without limiting the foregoing, the occurrence of a CMF
Purchase Termination Event shall not deny to the Buyer or its assignees any
remedy in addition to termination of its obligation to make Purchases hereunder
to which the Buyer or its assignees may be otherwise appropriately entitled,
whether by statute or applicable law, at law or in equity.
ARTICLE X
INDEMNIFICATION; SECURITY INTEREST
Section 10.1 Indemnities by the Originator. Without limiting any other
rights that any CMSC Indemnified Party may have hereunder or under applicable
law, the Originator agrees to indemnify the Buyer and each of its successors,
permitted transferees and assigns, and all officers, directors, shareholders,
controlling Persons, employees and agents of any of the foregoing (each of the
foregoing Persons, a "CMSC INDEMNIFIED PARTY"), from and against any and all
damages, losses, claims (whether on account of settlements or otherwise),
actions, suits, demands, judgments, liabilities (including penalties),
obligations or disbursements of any kind or nature and related costs and
expenses (including reasonable attorneys' fees and disbursements) awarded
against or incurred by any of them, arising out of or as a result of any of the
following (all of the foregoing, collectively, "CMSC INDEMNIFIED LOSSES"):
(a) any representation or warranty made by the Originator under any of
the Transaction Documents to which it is a party, any Receivables Activity
Report or any other information or report delivered by the Originator
(including in its capacity as Servicer) with respect to the Originator or
the CMSC Purchased Assets, having been untrue or incorrect in any respect
when made or deemed to have been made; provided, however, that the
Originator's obligation to make a CMSC Noncomplying Asset Adjustment
pursuant to Section 4.3(a) with respect to any representation made in
Section
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6.1(1) as to Eligible Receivables having been incorrect when made shall be
the only remedy available to the Buyer or its assignees relating to such
incorrect representation;
(b) the failure by the Originator to comply with any material
applicable law, rule or regulation applicable to the Originator with respect
to any CMSC Purchased Asset or any failure of a CMSC Purchased Asset to
comply with any such law, rule or regulation as of the date of sale of such
CMSC Purchased Asset hereunder;
(c) the failure to vest and maintain in the Buyer a valid ownership
interest in the CMSC Purchased Assets, free and clear of any Lien arising
through the Originator or anyone claiming through or under the Originator
(including without limitation any such failure arising from a circumstance
described in the definition of Permitted Exceptions);
(d) any failure of the Originator to perform its duties or obligations
in accordance with the provisions of the Transaction Documents or any
Contract, in each case to which it is a party;
(e) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to the transfer of any
CMSC Purchased Assets to the Buyer, whether at the time of any sale or at
any subsequent time;
(f) the failure by the Originator to pay when due any taxes owing by it
(including sales, excise or property taxes) payable in connection with the
CMSC Purchased Assets, other than any such taxes, assessments or charges
that are being diligently contested in good faith by appropriate
proceedings, for which adequate reserves in accordance with GAAP have been
set aside on its books and that have not given rise to any Liens (other than
Permitted Liens);
(g) any reduction in the Unpaid Balance of any Receivable included in
the ARSC Purchased Assets as a result of (i) any cash discount or any
adjustment by the Originator, (ii) any offsetting account payable of the
Originator to an Obligor, (iii) a set-off in respect of any claim by, or
defense or credit of, the related Obligor against the Originator (whether
such claim, defense or credit arises out of the same or a related or an
unrelated transaction) or (iv) the obligation of the Originator to pay to
the related Obligor any rebate or refund;
(h) any product liability or personal injury claim in connection with
the service that is the subject of any CMSC Purchased Asset; and
(i) any investigation, litigation or proceeding related to any use by
CMSC of the proceeds of any Purchase made hereunder.
Notwithstanding anything to the contrary in this Agreement, any
representations, warranties and covenants made by the Originator in this
Agreement or the other Transaction Documents that are qualified by or limited to
events or circumstances that have, or are
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reasonably likely to have, given rise to a Material Adverse Effect shall (solely
for purposes of the indemnification obligations set forth in this Section 10.1)
be deemed not to be so qualified or limited.
Notwithstanding the foregoing (and with respect to clause (ii) below,
without prejudice to the rights that the Buyer may have pursuant to the other
provisions of this Agreement or the provisions of any of the other Transaction
Documents), in no event shall any CMSC Indemnified Party be indemnified for any
CMSC Indemnified Losses (i) resulting from negligence or willful misconduct on
the part of such CMSC Indemnified Party, (ii) to the extent the same includes
losses in respect of CMSC Purchased Assets and reimbursement therefor that would
constitute credit recourse to the Originator for the amount of any CMSC
Receivable not paid by the related Obligor or (iii) resulting from the action or
omission of the Servicer (unless the Servicer is the Originator or an Affiliate
thereof (other than the Buyer, ARSC or the Issuer)).
If for any reason the indemnification provided in this Section 10.1 is
unavailable to an CMSC Indemnified Party or is insufficient to hold an CMSC
Indemnified Party harmless, then the Originator shall contribute to the maximum
amount payable or paid to such CMSC Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such CMSC Indemnified Party on the one
hand and the Originator on the other hand, but also the relative fault of such
CMSC Indemnified Party and the Originator, and any other relevant equitable
considerations.
Section 10.2 Security Interest. Without prejudice to the provisions of
Section 2.1 providing for the absolute transfer of the Originator's interest in
the CMSC Purchased Assets and the proceeds thereof and any interest of the
Originator in the other property described in clause (v) of Section 2.1(a) to
the Buyer, in order to secure the prompt payment and performance of all
obligations of the Originator to the Buyer arising in connection with this
Agreement, whether now or hereafter existing, due or to become due, direct or
indirect, or absolute or contingent, the Originator hereby assigns and grants to
the Buyer a first priority security interest in the Originator's right, title
and interest, if any, in, to and under all of the CMSC Purchased Assets and the
proceeds thereof and any interest of the Originator in the other property
described in clause (v) of Section 2.1(a), whether now or hereafter existing.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments; Waivers, Etc.
(a) The provisions of this Agreement may be amended, modified or waived
from time to time if such amendment, modification or waiver is in writing and
signed by the Originator and the Buyer and its assignees. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) No failure or delay on the part of the Buyer or its assignees, or
any CMSC Indemnified Party, or any other third party beneficiary referred to in
Section 11.12(a) in
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exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to, or demand on, the Originator shall entitle it in any case to any
notice or demand in similar or other circumstances. No waiver or approval by the
Buyer or its assignees under this Agreement shall, except as may otherwise be
stated in such waiver or approval, be applicable to subsequent transactions. No
waiver or approval under this Agreement shall require any similar or dissimilar
waiver or approval thereafter to be granted hereunder.
Section 11.2 Notices, Etc. Unless otherwise stated herein, all notices,
demands, consents, approvals and other communications provided for hereunder
shall be in writing (including via telecopier) and shall be personally delivered
or sent by certified mail, return receipt requested, postage prepaid, by
telecopier or by overnight courier to the intended party at the address or
telecopier number of such party set forth on Schedule 11.2 hereof, or at such
other address or telecopier number as shall be designated by such party in a
written notice to the other party hereto given in accordance with this Section
11.2. Copies of all notices and other communications provided for hereunder
shall be delivered to ARSC and the Issuer at their respective addresses for
notices set forth in the Receivables Purchase Agreement. All notices and
communications provided for hereunder shall be effective when received.
Section 11.3 Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
Section 11.4 Binding Effect; Assignability; Survival of Provisions.
This Agreement shall be binding upon, and inure to the benefit of, the Buyer and
the Originator and their respective successors and assigns. Except as permitted
pursuant to Section 7.3(c), the Originator may not assign any of its rights
hereunder or any interest herein without the prior written consent of the Buyer
and its assignees. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms and shall remain
in full force and effect until terminated pursuant hereto. Such termination
shall not occur prior to the Final Payout Date. The rights and remedies with
respect to any breach of any representation and warranty made by the Originator
pursuant to Article VI and the indemnification and payment provisions of Article
X and Section 11.6 and the provisions of Section 11.14 and Section 11.16 shall
be continuing and shall survive any termination of this Agreement.
Section 11.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
INCLUDING ss.5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
Section 11.6 Costs, Expenses and Taxes. In addition to the obligations
of the Originator under Article X, the Originator agrees to pay on demand:
(a) all reasonable costs and expenses incurred by the Buyer and its
assignees in connection with the negotiation, preparation, execution and
delivery of, the administration (including periodic auditing), the
preservation of any rights under, or the
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enforcement of, or any breach of, this Agreement (including any amendment,
supplement or modification hereto), including without limitation (i) the
reasonable fees, expenses and disbursements of counsel to any such Persons
incurred in connection with any of the foregoing or in advising such Persons
as to their respective rights and remedies under this Agreement and (ii) all
reasonable out-of-pocket expenses (including reasonable fees and expenses of
independent accountants) incurred in connection with any review of the
Originator's books and records either prior to the execution and delivery
hereof or pursuant to Section 7.1(k), and
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of
this Agreement or any amendment, supplement or modification thereto, and
agrees to indemnify each CMSC Indemnified Party against any liabilities with
respect to, or resulting from, any delay in paying or omission to pay such
taxes and fees.
Section 11.7 Submission to Jurisdiction. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND HEREBY (a) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT; (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING; AND (c) IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS
AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 111 EIGHTH AVENUE, NEW YORK, NEW
YORK 10011, UNITED STATES OF AMERICA, AS ITS AGENT TO RECEIVE ON BEHALF OF IT
AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS THAT MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE
MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND EACH PARTY HERETO HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON
ITS BEHALF. EACH PARTY HERETO AGREES TO ENTER INTO ANY AGREEMENT RELATING TO
SUCH APPOINTMENT THAT THE PROCESS AGENT MAY CUSTOMARILY REQUIRE AND TO PAY THE
PROCESS AGENT'S CUSTOMARY FEES UPON DEMAND. AS AN ALTERNATIVE METHOD OF SERVICE,
EACH PARTY HERETO ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL
PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH
PROCESS TO SUCH PARTY AT ITS ADDRESS SPECIFIED PURSUANT TO SECTION 11.2. NOTHING
IN THIS SECTION 11.7 SHALL AFFECT THE RIGHT OF EITHER PARTY HERETO TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF EITHER
PARTY HERETO TO BRING ANY ACTION OR PROCEEDING AGAINST THE OTHER PARTY HERETO OR
ANY OF ITS PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.
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Section 11.8 Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR RELATING TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF EITHER OF THE PARTIES HERETO
OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
Section 11.9 Integration. This Agreement contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement between the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings.
Section 11.10 Captions and Cross References. The various captions
(including without limitation the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.
Section 11.11 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
Section 11.12 Acknowledgment and Consent.
(a) The Originator acknowledges that, from time to time prior to the
Termination Date, the Buyer intends to sell all of the Buyer's right, title and
interest in, to and under the CMSC Purchased Assets, this Agreement and all of
the other Transaction Documents pursuant to the Receivables Purchase Agreement,
and that the interests of the Buyer hereunder will be further assigned pursuant
to the Transfer and Servicing Agreement and the Indenture. The Originator
acknowledges and agrees to each such sale by the Buyer and consents to the sale
and assignment by the Buyer of all or any portion of its right, title and
interest in, to and under the CMSC Purchased Assets, this Agreement and the
other Transaction Documents and all of the Buyer's rights, remedies, powers and
privileges and all claims of the Buyer against the Originator under or with
respect to this Agreement and the other Transaction Documents (whether arising
pursuant to the terms of this Agreement or otherwise available at law or in
equity), including without limitation (whether or not an Unmatured Servicer
Default or a Servicer Default has occurred and is continuing) (i) the right of
the Buyer at any time to enforce this Agreement against the Originator and the
obligations of the Originator hereunder and (ii) the right at any time to give
or withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement, any
other Transaction Document or the obligations in respect of the Originator
thereunder, all of which rights, remedies, powers, privileges and claims may be
exercised and/or enforced by the Buyer's
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successors ands assigns to the same extent as the Buyer may do. Each of the
parties hereto acknowledges and agrees that the Buyer's successors and assigns
are third party beneficiaries of this Agreement, including without limitation
the rights of the Buyer arising hereunder, and may rely on the Originator's
representations and warranties made herein as if made directly to them. The
Originator hereby acknowledges and agrees that, except with respect to its
rights under Section 4.3, it has no claim to or interest in any of the Lockbox
Accounts.
(b) The Originator hereby agrees to execute all agreements, instruments
and documents and to take all other actions that the Buyer or its assignees
determines are necessary or appropriate to evidence its consent described in
Section 11.12(a). The Originator hereby acknowledges and agrees that the Buyer
in all of its capacities may assign to the Buyer's successors and assigns such
powers of attorney and other rights and interests granted by the Originator to
the Buyer hereunder and agrees to cooperate fully with the Buyer's successors
and assigns in the exercise of such rights.
(c) The Originator hereby acknowledges that the Buyer's successors and
assigns are entering into the Transaction Documents in reliance on the Buyer's
identity as a legal entity separate from the Originator.
Section 11.13 No Partnership or Joint Venture. Nothing contained in
this Agreement shall be deemed or construed by the parties hereto or by any
third person to create the relationship of principal and agent or of partnership
or of joint venture.
Section 11.14 No Proceedings. The Originator hereby agrees that it will
not institute against the Buyer or its successors or join any other Person in
instituting against the Buyer or its successors any Insolvency Proceeding so
long as there shall not have elapsed one year plus one day since the Final
Payout Date. The foregoing shall not limit the right of the Originator to file
any claim in or otherwise take any action with respect to any Insolvency
Proceeding that was instituted against the Buyer or its successors by any Person
other than the Originator or any other CMS Person.
Section 11.15 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement are for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 11.16 Recourse to the Buyer. Except to the extent expressly
provided otherwise in the Transaction Documents, the obligations of the Buyer
under the Transaction Documents to which it is a party are solely the
obligations of the Buyer, and no recourse shall be had for payment of any fee
payable by or other obligation of or claim against the Buyer that arises out of
any Transaction Document to which the Buyer is a party against any director,
officer or employee of the Buyer. The provisions of this Section 11.16 shall
survive the termination of this Agreement.
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Section 11.17 Confidentiality. The Buyer agrees to maintain the
confidentiality of any information regarding the Originator, Cendant Corporation
and PHH obtained in accordance with the terms of this Agreement that is not
publicly available; provided, however, that the Buyer may reveal such
information (a) as necessary or appropriate in connection with the
administration or enforcement of this Agreement or its funding of Purchases
under this Agreement or (b) as required by law, government regulation, court
proceeding or subpoena. Notwithstanding anything herein to the contrary, none of
the Originator, Cendant Corporation nor PHH shall have any obligation to
disclose to the Buyer or its assignees any personal and confidential information
relating to a Transferred Employee.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
CENDANT MOBILITY SERVICES CORPORATION
By:
--------------------------------------
Name:
Title:
CENDANT MOBILITY FINANCIAL CORPORATION
By:
--------------------------------------
Name:
Title:
[Signature Page to Purchase Agreement]
<PAGE>
APPENDIX A
DEFINITIONS
A. Defined Terms. As used in this Agreement, the following terms have the
following meanings (such meanings to be equally applicable to the
singular and plural forms thereof):
"Acknowledgment Letter" shall mean a letter substantially in the form
attached hereto as Exhibit 7.3(j).
"Advance Billing Receivable" shall mean a Billed Receivable for Advance
Payments owed by an Obligor.
"Advance Payment" shall mean an amount paid by an Obligor pursuant to a
Pool Relocation Management Agreement or otherwise for application to existing or
future Receivables (other than existing Billed Receivables), including without
limitation any payments of anticipated fees and expenses under a Pool Relocation
Management Agreement.
"Affiliate" shall mean, when used with respect to a Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, such Person. As used in this definition of Affiliate, the term
"control" means the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of such Person's voting securities, by contract or otherwise, and the
terms "affiliated," "controlling" and "controlled" have correlative meanings.
"Aggregate Employer Balance" shall have the meaning set forth in the
Indenture.
"Amortization Event" shall have the meaning provided in the Indenture.
"ARSC" shall have the meaning set forth in the Preliminary Statement to
this Agreement.
"ARSC Purchased Assets" shall have the meaning set forth in the
Receivables Purchase Agreement.
"Authorized Officer" shall mean, with respect to any Transaction Party,
the President, the Chief Financial Officer, the Controller, the Treasurer, any
Assistant Treasurer, any Senior Vice President, any Vice President, the
Secretary or any Assistant Secretary of such Transaction Party.
"Average Days Outstanding" shall have the meaning set forth in the
Indenture.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as
amended from time to time (Title 11 of the United States Code).
"Billed Receivable" shall mean any CMSC Receivable or CMF Receivable
that has been billed to an Obligor.
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"Business Day" shall mean a day (other than a Saturday or Sunday) on
which commercial banks in New York, New York and Chicago, Illinois are not
authorized or required to be closed.
"Buyer" shall mean Cendant Mobility Financial Corporation, in its
capacity as the buyer under this Agreement.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Closing Date" shall mean April 25, 2000.
"CMF Collections" shall have the meaning set forth in the Receivables
Purchase Agreement.
"CMF Designated Receivable" shall mean any Receivable arising from an
amount advanced by CMF or the Servicer on behalf of CMF in respect of Equity
Payments, Mortgage Payoffs, Direct Expenses, Mortgage Payments or Other
Reimbursable Expenses, even though such amounts may be advanced after the
Termination Date.
"CMF Home" shall have the meaning set forth in the Receivables Purchase
Agreement.
"CMF Home Purchase Contract" shall have the meaning set forth in the
Receivables Purchase Agreement.
"CMF Home Sale Contract" shall have the meaning set forth in the
Receivables Purchase Agreement.
"CMF Purchase Price" shall have the meaning set forth in Section
3.1(b).
"CMF Purchase Termination Event" shall have the meaning set forth in
Section 9.1.
"CMF Receivable" shall have the meaning set forth in the Receivables
Purchase Agreement.
"CMF Subordinated Loan" shall have the meaning set forth in Section
4.2.
"CMF Subordinated Note" shall mean the CMF Subordinated Note dated the
Closing Date, made by the Buyer and payable to the order of the Originator
substantially in the form of Exhibit 4.2, as such note may be amended,
supplemented, otherwise modified or replaced from time to time.
"CMF Subordinated Note Cap" shall have the meaning set forth in Section
4.2.
"CMSC" shall mean Cendant Mobility Services Corporation, a Delaware
corporation.
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"CMSC Collections" shall mean all funds that are received on account of
or otherwise in connection with any CMSC Purchased Asset, including without
limitation all funds received (a) from or on behalf of any Obligor in payment of
or otherwise in respect of any CMSC Receivable included in the CMSC Purchased
Assets (including without limitation funds received in respect of Advance
Payments, but only including any such Advance Payments to the extent necessary
to reduce the Aggregate Employer Balance of Receivables with respect to the
related Employer to zero), (b) from or on behalf of any Ultimate Buyer or any
other Person in respect of CMSC Home Sale Proceeds, (c) from any other Person to
the extent such funds were applied, or should have been applied, pursuant to any
Contract to repay or discharge any CMSC Receivable or CMSC Related Asset
included in the CMSC Purchased Assets (including without limitation insurance
payments that any Transaction Party applies in the ordinary course of its
business to amounts owed in respect of such CMSC Purchased Assets and the amount
of any Equity Payments applied to repayment of Equity Loans), (d) from the
Originator in respect of Originator Adjustments under this Agreement or any
other obligation of the Originator hereunder, (e) if the Servicer is CMSC, from
the Servicer in respect of Servicer Dilution Adjustments with respect to CMSC
Purchased Assets under Section 3.10(a) of the Transfer and Servicing Agreement
and (f) from PHH in respect of any payments made by PHH as guarantor of the
obligations of CMSC under the PHH Guarantee; provided, however, that any
proceeds of Receivables that gave rise to CMSC Noncomplying Asset Adjustments
that have been paid as provided in Section 4.3 hereof and any Related Property
with respect to such Receivables shall not constitute CMSC Collections and shall
be promptly returned to the Originator as provided in Section 4.3 hereof.
"CMSC Equity Loan" shall mean an Equity Loan made by the Originator.
"CMSC Equity Loan Agreement" shall mean a loan agreement entered into
by the Originator and a Transferred Employee in connection with a CMSC Equity
Loan.
"CMSC Equity Loan Note" shall mean a promissory note executed to
evidence a CMSC Equity Loan.
"CMSC Home" shall mean any Home subject to a CMSC Home Purchase
Contract.
"CMSC Home Purchase Contract" shall mean any Home Purchase Contract
that was executed, and pursuant to which CMSC purchased a Home, prior to the
Closing Date and that relates to a Receivable included in the CMSC Purchased
Assets.
"CMSC Home Sale Contract" shall mean any Home Sale Contract with
respect to a CMSC Home.
"CMSC Home Sale Proceeds" shall mean any Home Sale Proceeds arising
under a CMSC Home Sale Contract.
"CMSC Indemnified Losses" shall have the meaning set forth in Section
10.1.
"CMSC Indemnified Party" shall have the meaning set forth in Section
10.1.
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"CMSC Noncomplying Asset" shall have the meaning set forth in Section
4.3(a).
"CMSC Noncomplying Asset Adjustment" shall have the meaning set forth
in Section 4.3(a).
"CMSC Purchased Assets" shall have the meaning set forth in Section
2.1(a).
"CMSC Receivable" shall have the meaning set froth in Section 2.1(a).
"CMSC Records" shall mean all Records maintained by the Originator with
respect to the CMSC Purchased Assets and/or the related Obligors.
"CMSC Related Assets" shall have the meaning set forth in Section
2.1(a).
"CMSC Related Property" shall have the meaning set forth in Section
2.1(a).
"CMS Person" shall mean the Originator and each of its Subsidiaries and
Affiliates other than CMF, ARSC or the Issuer.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contract" shall mean a Pool Relocation Management Agreement and any
other related contract entered into pursuant thereto or in connection therewith,
pursuant to or under which any Person (other than a Transaction Party) is
obligated to make payments from time to time, including as the context may
require any Equity Loan Note, Equity Loan Agreement, Home Purchase Contract or
Home Sale Contract.
"Credit and Collection Policy" shall mean those credit and collection
policies and practices of the Originator relating to the Contracts and
Receivables described in Exhibit 6.1(u), as such credit and collection policies
may be modified from time to time in accordance with Section 7.3(b).
"Cut-Off Date" shall mean the last day of any Monthly Period.
"Daily Originator Report" shall have the meaning set forth in Section
3.1(a).
"Defaulted Receivable" shall mean any Receivable that:
(a) has been or should have been written off as uncollectible in
conformity with the Credit and Collection Policy; or
(b) is owed by an Obligor who is in Insolvency Proceedings or with
respect to which an Event of Bankruptcy has occurred; or
(c) has been billed and remains unpaid more than 150 days after the
invoice date thereof.
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"Direct Expenses" shall mean, with respect to any Home, any costs
attributable to the provision of services to a Transferred Employee, including
without limitation appraisals, broker's market analyses and inspections,
brokerage commissions, title and title search fees, transfer taxes, mortgage
payments, mortgage interest (or interest on the mortgage payments at the
mortgage interest rate), insurance premiums, property taxes, cost of
establishment and maintenance of appropriate files, overnight delivery charges,
wire transfer fees, cost of interest in the manner specified in the related
Contract, cost of improvements, cost of removal and mitigation of Hazardous
Materials or gases (such as removal of asbestos, lead paint, radon gas or urea
formaldehyde insulation) and reinsulation with suitable replacement materials,
repair and maintenance costs, utilities, sales loss on resale, buyer incentive
costs and real estate closing costs.
"Eligible Contract" shall mean:
(a) a Relocation Management Agreement (i) that has been duly executed
and delivered by an Employer that is an Eligible Obligor and is in full
force and effect, (ii) (A) the rights to payment under which are assignable
without the consent of the Employer party thereto or any other Person (other
than the Originator), other than any such consent that has been obtained and
remains in effect, or (B) which, if subject to any restriction on assignment
of rights to payment, is in effect on the date of this Agreement and all of
the Receivables under such Contract that are subject to such restriction
constitute rights to payment for services rendered not evidenced by an
instrument or chattel paper, (iii) that provides for the payment in full by
the Employer of all Direct Expenses, Service Fees and Other Reimbursable
Expenses and any loss sustained with respect to a Home covered thereby
following the sale of such Home (less any Advance Payment with respect to
such Home and after giving effect to the application of the Home Sale
Proceeds with respect to such Home) (it being understood that any Contract
that permits an Employer to approve any expenses or the price at which any
Home is sold shall not, for that reason alone, fail to qualify as an
Eligible Contract), (iv) that was originated in accordance with the Credit
and Collection Policy, (v) the Receivables under which, once billed, are
required to be paid within 65 days of the original invoice date and (vi)
that is substantially in the form of Relocation Management Agreement
attached as Exhibit C, with such Permitted Changes to such form as may be
made by the Originator in the ordinary course of its business (or such other
form as has been approved in writing by the Buyer and its successors and
assigns);
(b) an Equity Loan Agreement or Equity Loan Note (i) that has been duly
executed and delivered by a Transferred Employee that is an Eligible Obligor
and that is an employee of an Employer that is a party to a Pool Relocation
Management Agreement (which Pool Relocation Management Agreement is then an
Eligible Contract), (ii) that is substantially in the form of Equity Loan
Agreement attached as Exhibit C or the form of Equity Loan Note attached as
Exhibit C, as applicable, with such Permitted Changes to such forms as may
be made by the Originator in the ordinary course of its business (or, in
either case, such other form as has been approved in writing by the Buyer
and its successors and assigns) and (iii) the obligations of the Transferred
Employee under which are fully covered by the Guaranty or loss indemnity of
the related Employer or
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Employer-purchased insurance policy under the applicable Pool Relocation
Management Agreement;
(c) a Home Purchase Contract that (i) has been duly executed and
delivered by a Transferred Employee of an Employer that is a party to a Pool
Relocation Management Agreement (which Pool Relocation Management Agreement
is then an Eligible Contract) and (ii) is substantially in the form of Home
Purchase Contract attached as Exhibit C, with such Permitted Changes to such
form as may be made by the Originator in the ordinary course of its business
(or such other form as has been approved in writing by the Buyer and its
successors and assigns); or
(d) a Home Sale Contract that (i) was entered into under or in
connection with a Pool Relocation Management Agreement (which Pool
Relocation Management Agreement is then an Eligible Contract), (ii) has been
duly executed and delivered by the applicable Ultimate Buyer and is in full
force and effect and (iii) is substantially in the form of the contract of
purchase and sale used in the area where the property is located, or on a
form prescribed by the Originator for that area, with such amendments and
additions as may be reasonably negotiated to efficiently sell the Home (or
such other form as has been approved in writing by the Buyer and its
assignees and assigns).
"Eligible Home" shall mean a Home (a) that is located within the United
States, (b) record title for which is not in the name of any Transaction Party
or any Affiliate of a Transaction Party and (c) that satisfies the requirements
specified in the definition of "Home" in the applicable Pool Relocation
Management Agreement or, if such term is not defined therein, in the applicable
Home Sale Service Supplement; provided, however, that a Home that does not
satisfy the requirement specified in clause (b) may nonetheless be treated as an
Eligible Home if and to the extent that either (i) title is recorded on terms
and conditions reasonably satisfactory to the Buyer and its assignees or (ii)
the aggregate Unpaid Balance of all Eligible Unsold Home Receivables that do not
satisfy the requirement specified in clause (b) would not exceed 10% of the
aggregate Unpaid Balance of all Eligible Unsold Home Receivables; and provided,
further, that a Home that does not satisfy the requirements specified in clause
(c) may nonetheless constitute an Eligible Home if and to the extent that (i)
the applicable Employer has acknowledged in writing that such property
constitutes a "Special Home Transaction" within the meaning of the applicable
Home Sale Service Supplement and (ii) the Originator and its Affiliates followed
all necessary procedures and obtained all necessary approvals with respect to
such Home (including without limitation approvals of the applicable Employer) as
may be required by the Credit and Collection Policy and the customary practices
of the Originator with respect to such Homes.
"Eligible Obligor" shall mean an Obligor that:
(a) is a United States resident (which term includes a United States
division or branch of an entity organized in a jurisdiction outside of the
United States, so long as such division or branch maintains a place of
business in the United States to which all Receivables are billed);
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(b) is not the United States of America, any state or local government
or any agency or instrumentality of any of the foregoing;
(c) is not an Affiliate of the Originator or the Buyer;
(d) is not the subject of an Insolvency Proceeding; and
(e) has been instructed by the Originator to remit all payments on the
CMSC Purchased Assets directly to one of the Lockboxes or Lockbox Accounts.
"Eligible Receivable" shall mean any Receivable:
(a) the Obligor of which is an Eligible Obligor;
(b) that is denominated and payable only in U.S. dollars;
(c) that was generated in the ordinary course of the Originator's
business;
(d) either (1) with respect to which all of the Originator's right,
title and interest has been (or will be, at the time such Receivable becomes
included in the CMSC Purchased Assets) validly transferred to the Buyer
under and in accordance with the terms of this Agreement; or (2) with
respect to any CMF Receivable only, that arose out of or with respect to an
Equity Payment, Mortgage Payment or Mortgage Payoff made by the Buyer in
respect of a CMF Home Purchase Contract;
(e) that arises under or in connection with a Pool Relocation
Management Agreement that is then an Eligible Contract, and with respect to
which any Home Sale Contract, Home Purchase Contract, Equity Loan Agreement
or Equity Loan Note relating to such Receivable is also an Eligible
Contract;
(f) that is not a Defaulted Receivable;
(g) that is an "eligible asset" within the meaning of Rule 3a-7
promulgated under the Investment Company Act of 1940, as amended;
(h) that constitutes an "account" or a "general intangible" or "chattel
paper" and not an "instrument" (except in the case of an Equity Loan, to the
extent the same is evidenced by an Equity Loan Note), in each case within
the meaning of the New York UCC;
(i) the transfer of which (including without limitation the sale by the
Originator to the Buyer or by the Buyer to ARSC) does not contravene or
conflict with any law, rule or regulation or any contractual or other
restriction, limitation or encumbrance that applies to the Originator (or,
with respect to any CMF Receivable only, the Buyer) (including without
limitation the related Contract), and the sale, assignment or transfer of
which, and the granting of a security interest in which, does not require
the consent of the Obligor thereof or any other Person other than any such
consent that has
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been previously obtained and is in effect; provided, however, that a
Receivable arising out of a Relocation Management Agreement that is subject
to a restriction on assignment may nonetheless be an Eligible Receivable
hereunder if such Receivable constitutes a right to payment for services
rendered not evidenced by an instrument or chattel paper;
(j) that has not been compromised, adjusted, amended or otherwise
modified (including by extension of time for payment or the granting of any
discounts, allowances or credits) except in a manner that is expressly
permitted under Section 3.10(b) of the Transfer and Servicing Agreement;
(k) that, together with the Contracts related thereto, conforms in all
material respects with all applicable laws, rules, regulations, orders,
judgments, decrees and determinations of all courts and other Governmental
Authorities (whether federal, state, local or foreign and including without
limitation usury laws);
(l) that is not subject to an asserted reduction (other than any
reduction on account of any offsetting account payable of the Originator or
the Buyer to an Obligor or any Advance Payment made by the related Obligor
so long as such reduction is included in the determination of the Aggregate
Employer Balance with respect to the related Obligor) cancellation, rebate
or refund or any dispute, offset, counterclaim, lien or defense whatsoever;
(m) with respect to which the representations and warranties of the
Originator in Section 6.1(k) of this Agreement (or with respect to any CMF
Receivable only, of the Buyer in Section 6.1(k) of the Receivables Purchase
Agreement) are true and correct;
(n) that represents a bona fide obligation arising under a Contract
that has been duly authorized and that, together with such Receivable, is in
full force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable, enforceable against such
Obligor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally
and general principles of equity;
(o) that, in the case of a Receivable arising on account of any Equity
Payment, Mortgage Payoff, Mortgage Payment, Direct Expenses or any Service
Fee or Finance Charge arising in connection with any of the foregoing,
relates to an Eligible Home as to which (i) a Home Purchase Contract has
been executed and delivered by the related Homeowner and the Originator or
the Buyer, as applicable and, to the best knowledge of the Originator (or
the Buyer, with respect to CMF Homes only), constitutes the legal, valid and
binding obligation of such Homeowner, (ii) a Home Deed has been executed and
delivered by the related Homeowner naming the Originator or the Buyer, as
applicable, as transferee or with the transferee's name blank, (iii) such
Home Purchase Contract and Home Deed have been delivered to and are then in
the possession of the agent of CMSC (with respect to CMSC Homes) or the
agent of CMF (with respect to
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CMF Homes) and (iv) either no Mortgage is outstanding or, if a Mortgage is
outstanding, no more than one monthly payment on such Mortgage is past due;
(p) that, in the case of a Receivable that arises from an Equity Loan,
arose under an Equity Loan Agreement and an Equity Loan Note, each of which
are Eligible Contracts and are then in the possession of the Servicer;
(q) that, in the case of an Unbilled Receivable, represents the right
to payment for services rendered; and
(r) that, in the case of a Billed Receivable (other than an Advance
Billing Receivable), has been fully earned by performance.
"Eligible Unsold Home Receivable" shall mean an Unsold Home Receivable
that is an Eligible Receivable.
"Employer" shall mean a customer of the Originator that has executed a
Relocation Management Agreement with the Originator.
"Enhancement Agreement" shall have the meaning provided in the
Indenture.
"Environmental Laws" shall mean all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"Equity Loan" shall mean an advance of all or a portion of the Equity
Payment to be made to a Homeowner prior to the execution of the Home Purchase
Contract by such Homeowner.
"Equity Loan Agreement" shall mean a loan agreement entered into by a
Transferred Employee in connection with an Equity Loan or a proposed Equity
Loan.
"Equity Loan Note" shall mean a promissory note made by a Transferred
Employee to evidence the Transferred Employee's obligations in respect of an
Equity Loan, which may be included in the same document as an Equity Loan
Agreement.
"Equity Payment" shall mean, with respect to any Homeowner, a payment
or credit (other than an Equity Loan) made to such Homeowner at the time of, or
following the execution of, the related Home Purchase Contract by such Homeowner
in respect of its equity interest in a Home as determined pursuant to the
applicable Home Purchase Contract.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the rules and regulations thereunder, each as amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is treated as a single employer with the Originator under
Section 414 of the Code.
A-9
<PAGE>
"Event of Bankruptcy" shall be deemed to have occurred with respect to
a Person if either:
(a) a case or other proceeding has been commenced in any court without
the application or consent of such Person, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up or composition or
readjustment of debts of such Person, the appointment of a trustee,
receiver, custodian, liquidator, assignee, sequestrator or the like for such
Person or any substantial part of its assets, or any similar action with
respect to such Person under any law (foreign or domestic) relating to
bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts and such case or proceeding continues undismissed or
unstayed and in effect for a period of 60 days; or an order for relief with
respect to such Person has been entered in an involuntary case under the
Bankruptcy Code or other similar laws (foreign or domestic) now or hereafter
in effect; or
(b) such Person has commenced a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect or
shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) for, such Person or for any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall
admit in writing its inability to, pay its debts generally as they become
due.
"Excluded Asset" shall mean any receivable or related asset that arises
under or relates to an Excluded Contract.
"Excluded Contract" shall mean (a) any of the following, to the extent
that either the same have not been identified as Pool Relocation Management
Agreements or all CMSC Receivables and CMF Receivables arising thereunder have
been the subject of a CMSC Noncomplying Asset Adjustment or CMF Noncomplying
Asset Adjustment that has been fully paid: (i) if the Originator merges with any
other Person that is engaged in the relocation management business, any
agreement for relocation management services originated by such other Person
prior to the date of such merger and, so long as such business is maintained and
operated as a separate division of the Originator, any additional agreements for
relocation management services originated by such division, (ii) any agreement
for relocation management services that is not an Eligible Contract or (iii) any
agreement for relocation management services the receivables arising under which
would not be Eligible Receivables because the Employer party thereto is not
obligated to provide reimbursement for losses on resale of homes or because the
homes relating to such agreement would be located solely outside of the United
States and (b) any home purchase contract, home sale contract, equity loan note,
equity loan agreement or similar agreement entered into pursuant to any
agreement referred to in clause (a) above.
"Final Payout Date" shall mean the earlier of the date after the
satisfaction and discharge of the Indenture pursuant to Article IV thereof on
which either (i) all of the Notes have been paid in full or (ii) the Unpaid
Balance of all outstanding CMSC Receivables has been reduced to zero; provided
that for purposes of this definition of Final Payout Date, the Unpaid
A-10
<PAGE>
Balance of a Defaulted Receivable shall be deemed to be outstanding until all
Homes related thereto have been sold and such Receivable has been written off as
uncollectible.
"Finance Charge" shall mean any interest, late payment fee or other
finance charge with respect to a Receivable or other Related Property, including
without limitation any interest accrued or to accrue on an Equity Loan, Equity
Payment, Mortgage Payoff or Mortgage Payment under the terms of the applicable
Contract or Contracts.
"GAAP" shall mean generally accepted accounting principles, including
the opinions, statements and pronouncements of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board and the
Securities and Exchange Commission, as in effect from time to time.
"Governmental Authority" shall mean the United States of America, any
State or other political subdivision thereof and any entity in the United States
of America or any applicable foreign jurisdiction that exercises executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty" shall mean any agreement, undertaking or arrangement by
which any Person guarantees, endorses, agrees to purchase or otherwise becomes
or is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions on the shares of any other Person.
"Hazardous Material" shall mean (a) any "hazardous substance" as
defined under CERCLA, (b) any "hazardous waste" as defined under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as amended, (c)
any petroleum product or (d) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material or substance within the meaning of any
Environmental Laws.
"Home" shall mean a family residence or other improved real estate that
is the subject of any services provided under a Pool Relocation Management
Agreement, including without limitation any Home or property subject to a
"Special Home Transaction" within the meaning of the applicable Home Sale
Service Supplement.
"Home Deed" shall mean, with respect to any Home, a deed or other
instrument of conveyance executed by the related Homeowner that effects the
conveyance of such Home pursuant to the related Home Purchase Contract.
"Home Purchase Contract" shall mean the contract by which a Home is
purchased from a Homeowner pursuant to, or in connection with, a Pool Relocation
Management Agreement.
"Home Sale Contract" shall mean, with respect to any Home, the contract
by which such Home is sold to an Ultimate Buyer.
A-11
<PAGE>
"Home Sale Proceeds" shall mean, with respect to any Home, the cash
sale proceeds received upon the sale of such Home to an Ultimate Buyer, net of
any unpaid mortgage loan amounts, closing costs, brokerage costs, commissions
owed to third parties and any other amounts payment of which are necessary to
clear title to such Home.
"Home Sale Service Supplement" shall mean a supplement to a Pool
Relocation Management Agreement substantially in the form attached as Exhibit C.
"Homeowner" shall mean, with respect to any Home, the Transferred
Employee and any other homeowner of record with respect to such Home.
"Indebtedness" of any Person shall mean, in the aggregate, without
duplication, (i) all indebtedness, obligations and other liabilities of such
Person and its Subsidiaries that are, at the date as of which Indebtedness is to
be determined, includable as liabilities in a consolidated balance sheet of such
Person and its Subsidiaries, other than (x) accounts payable and accrued
expenses, (y) advances from clients obtained in the ordinary course of the
relocation management services business of any such Person and (z) current and
deferred income taxes and other similar liabilities, (ii) the maximum aggregate
amount of all liabilities of such Person or any of its Subsidiaries under any
Guaranty, indemnity or similar undertaking given or assumed of or in respect of,
the indebtedness, obligations or other liabilities, assets, revenues, income or
dividends of any Person other than such Person or one of its Subsidiaries and
(iii) all other obligations or liabilities of such Person or any of its
Subsidiaries with respect to the discharge of the obligations of any Person
other than itself or one of its Subsidiaries. For purposes of the Transaction
Documents, the Indebtedness of any Person includes the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer.
"Indebtedness for Borrowed Money" shall mean, with respect to any
Person, (i) any Indebtedness of such Person, contingent or otherwise, in respect
of borrowed money including all principal, interest, fees and expenses with
respect thereto (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, acceptances, debentures or other instruments or letters of credit (or
reimbursement obligations with respect thereto) but excluding capitalized lease
obligations and excluding obligations representing the deferred and unpaid
purchase price of any property.
"Indenture" shall mean the Indenture dated as of April 25, 2000 by and
between the Issuer and the Indenture Trustee.
"Indenture Supplement" shall have the meaning set forth in the
Indenture.
"Indenture Trustee" shall mean Bank One, National Association, as
indenture trustee under the Indenture, and any successor thereto.
"Independent Director" shall mean, with respect to the Buyer, ARSC or
the Issuer, an individual who is an Independent Director as defined in the
organizational documents of such entity as in effect on the date of this
Agreement.
"Insolvency Proceeding" shall mean, with respect to any Person, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
under any Federal or state
A-12
<PAGE>
bankruptcy or similar law or any other proceeding of the type described in the
definition of Event of Bankruptcy, whether voluntary or involuntary.
"Issuer" shall mean Apple Ridge Funding LLC, a Delaware limited
liability company.
"Lien" shall mean, when used with respect to any Person, any interest
in any real or personal property, asset or other right held, owned or being
purchased or acquired by such Person for its own use, consumption or enjoyment
in its business that secures payment or performance of any obligation, and
includes any mortgage, lien, pledge, encumbrance, charge, retained security
title of a conditional vendor or lessor or other security interest of any kind,
whether arising under a security agreement, mortgage, deed of trust, chattel
mortgage, assignment, pledge, retention of security title, financing or similar
statement or notice or arising as a matter of law, judicial process or
otherwise.
"Lockbox" shall mean any post office box to which the Obligors remit
CMSC Collections established pursuant to the Transfer and Servicing Agreement.
"Lockbox Account" shall mean any lockbox account, concentration
account, depositary account or similar account (including any associated demand
deposit account) established pursuant to the Transfer and Servicing Agreement,
in which any CMSC Collections or CMF Collections are collected or deposited.
"Lockbox Agreement" shall have the meaning provided in the Transfer and
Servicing Agreement.
"Lockbox Bank" shall mean any institution at which a Lockbox or Lockbox
Account is maintained.
"Material Adverse Effect" shall mean, with respect to any event or
circumstance, a material adverse effect on (a) the business, financial
condition, operations or assets of the Originator, (b) the ability of the
Originator to perform its obligations under any Transaction Document or all or
any substantial portion of the Contracts, (c) the validity or enforceability of,
or collectibility of, amounts payable by the Originator under any Transaction
Document, (d) the status, existence, perfection or priority of the interest of
the Buyer (and its assignees) in the CMSC Purchased Assets, taken as a whole, in
each case free and clear of any Lien (other than Permitted Liens) or (e) the
validity, enforceability or collectibility of all or any substantial portion of
the ARSC Purchased Assets.
"Monthly Period" shall mean (i) a calendar month or (ii) with respect
to the initial Monthly Period for any Series, the period commencing on the
closing date with respect to such Series and ending on the last day of the same
month, or such other period set forth in the related Indenture Supplement.
"Mortgage" shall mean, with respect to a Home, either or both of (a)
any indebtedness of the relevant Homeowner secured by a mortgage, deed of trust
or other Lien on such Home and (b) such mortgage, deed of trust or other Lien,
as the context may require.
A-13
<PAGE>
"Mortgage Payment" shall mean, with respect to any Home, any payment
actually made under any Mortgage on such Home (other than a Mortgage Payoff),
including without limitation payments of principal and interest and for taxes
and insurance.
"Mortgage Payoff" shall mean, with respect to any Home, the amount, if
any, paid to retire the entire remaining principal balance of any Mortgage on
such Home, together with interest accrued thereon to the date of payment.
"Notes" shall have the meaning set forth in the Indenture.
"Obligor" shall mean, with respect to any Contract, the Person or
Persons obligated to make payments in respect of Receivables arising thereunder,
including without limitation (i) with respect to any Equity Payment, Mortgage
Payoff or Mortgage Payment, the related Employer, (ii) with respect to any
Equity Loan, both the Transferred Employee and the related Employer and (iii)
with respect to any Unsold Home Receivable, the Employer party to the related
Relocation Management Agreement.
"Originator" shall mean CMSC and its successors and permitted assigns.
"Originator Adjustment" shall have the meaning set forth in Section
4.3(c).
"Originator Assets" shall have the meaning set forth in Section 2.1(a).
"Originator Dilution Adjustment" shall have the meaning set forth in
Section 4.3(b).
"Originator Receivables" shall have the meaning set forth in Section
2.1(a).
"Originator Related Assets" shall have the meaning set forth in Section
2.1(a).
"Originator Related Property" shall have the meaning set forth in
Section 2.1(a).
"Other Reimbursable Expense" shall mean a cost or expense that is
incurred and paid in connection with services under a Pool Relocation Management
Agreement or reimbursable by the Obligor under the applicable Pool Relocation
Management Agreement, and that is not included in the calculation of Direct
Expenses thereunder.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Performance Guarantor" shall mean PHH.
"Permitted Change" shall mean, with respect to any Contract the form of
which is attached hereto in Exhibit C, any revisions or modifications to such
form that (i) are made by the Originator in the ordinary course of its business
consistent with the Credit and Collection Policy, (ii) do not, individually or
in the aggregate, materially adversely affect the collectibility of the CMSC
Receivables or any Receivables arising under or in connection with any CMF Home
Purchase Contract, (iii) do not, individually or in the aggregate, materially
alter (in a manner
A-14
<PAGE>
adverse to the Originator or any of its assigns) the reimbursement or
indemnification obligations of such Obligor thereunder or the composition of the
losses, costs or expenses to which such reimbursement or indemnification
obligations pertain, (iv) would not cause such Contract to cease to be an
Eligible Contract or the Receivables arising thereunder to cease to be Eligible
Receivables and (v) do not violate any of the terms and provisions of this
Agreement.
"Permitted Exception" shall mean that, with respect to any
representation, warranty or covenant with respect to the interest of the Buyer
and its assignees in the ARSC Purchased Assets or any Servicer Default, that (i)
prior to recordation (A) pursuant to Section 8.3 of this Agreement and/or
Section 2.01(d)(i) of the Transfer and Servicing Agreement or (B) upon the sale
of a Home to an Ultimate Buyer, record title to such Home may remain in the name
of the related Transferred Employee, and no recordation in real estate records
of any mortgage or any conveyance pursuant to the related Home Purchase Contract
or Home Sale Contract in favor of any Transaction Party or any of the Buyer's
assignees and assigns pursuant to the Receivables Purchase Agreement will be
made except as otherwise permitted under Section 2.01(d)(i) of the Transfer and
Servicing Agreement and (ii) no delivery of any Home Purchase Contracts, Home
Deeds and Equity Loan Notes to any custodian will be required.
"Permitted Lien" shall mean:
(a) with respect to any Home, the related Receivables or Related
Property with respect thereto, (i) an inchoate Lien on the Home for
real estate taxes not yet due and payable, (ii) a Mortgage on the Home
created by the related Transferred Employee and (iii) any Lien that is
fully covered by the terms of the indemnity provisions of the
applicable Pool Relocation Management Agreement and that arises in the
ordinary course of the Originator's business;
(b) with respect to any CMSC Purchased Asset, any Lien in favor of
the Buyer pursuant to this Agreement; and
(c) with respect to any ARSC Purchased Asset, any Lien created
pursuant to the Transaction Documents.
"Person" shall mean an individual, partnership, corporation (including
a business trust), joint stock company, trust, limited liability company,
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity.
"PHH" shall mean PHH Corporation, a Maryland corporation, and any
successor thereto.
"PHH Guarantee" shall mean the performance guarantee dated as of the
Closing Date, executed by the Performance Guarantor in favor of the Buyer and
the Issuer.
"Plan" shall mean each employee benefit plan (as defined in Section
3(3) of ERISA) currently sponsored, maintained or contributed to by the
Originator or any ERISA Affiliate or with respect to which the Originator or any
ERISA Affiliate has any liability.
A-15
<PAGE>
"Pool Relocation Management Agreement" shall have the meaning set forth
in Section 2.1(a).
"Prime Rate" shall mean the Prime Rate as most recently published in
The Wall Street Journal in New York City.
"Purchase" shall mean each purchase of CMSC Receivables and other CMSC
Purchased Assets by the Buyer from the Originator hereunder.
"Receivable" shall mean any right arising under a Contract to receive
any payment or any funds from or on behalf of an Obligor, whether or not earned
by performance and whether constituting an account, chattel paper, instrument,
general intangible or otherwise. The term "Receivable" includes without
limitation rights to payment (whether matured or unmatured and whether absolute
or contingent) arising out of or with respect to Equity Loans, Equity Payments,
Direct Expenses, Mortgage Payments, Mortgage Payoffs, Service Fees and Other
Reimbursable Expenses and the right to payment of any and all Finance Charges
with respect to any of the foregoing, whether such amounts are owed by an
Employer, a Transferred Employee, an Ultimate Buyer or any other Obligor. The
change of a Receivable's status from that of Unsold Home Receivable to Unbilled
Receivable or from Unbilled Receivable to Billed Receivable shall not be deemed
the creation of a new Receivable for any purpose hereunder.
"Receivables Activity Report" shall have the meaning provided in the
Transfer and Servicing Agreement.
"Records" shall mean all Contracts, purchase orders, invoices, customer
lists, credit files and other agreements, documents, books, records and other
media for the storage of information (including without limitation tapes, disks,
punch cards, computer software and databases and related property) with respect
to the Receivables, the Related Property and/or the related Obligors.
"Related Property" shall mean, with respect to any Receivable, (i) all
security interests or liens and property subject thereto from time to time
purporting to secure payment of such Receivable, whether pursuant to the related
Relocation Management Agreement or any other Contract related to such Receivable
or otherwise; (ii) all guarantees and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable, (iii) all rights under warranties, indemnities or insurance with
respect to such Receivable, related Contracts, CMSC Related Assets (with respect
to CMSC Receivables) or CMF Related Assets (with respect to CMF Receivables),
(iv) all rights to the CMSC Home Sale Proceeds arising out of or with respect to
any CMSC Homes and CMF Home Sale Proceeds arising out of or with respect to any
CMF Homes under the related Relocation Management Agreement and (v) all Records.
"Relocation Management Agreement" shall mean an agreement pursuant to
which the Originator agrees to provide employee relocation, asset management or
other services, as the same may be amended, restated or otherwise modified from
time to time, including any and all supplements thereto, and any similar
agreement, howsoever denominated, and any agreement for intercultural services.
A-16
<PAGE>
"Self-Funding Obligor" shall mean an Employer that deposits funds with
the Originator in order to fund Equity Payments, Other Reimbursable Expenses or
other payments made to or on behalf of the Transferred Employees of such
Employer under the terms of the Employer's Relocation Management Agreement.
"Seller Adjustment" shall have the meaning set forth in the Receivables
Purchase Agreement.
"Series" shall have the meaning set forth in the Indenture.
"Series Enhancer" shall have the meaning set forth in the Indenture.
"Service Fee" shall mean any fee payable by an Employer under a Pool
Relocation Management Agreement, including without limitation any fee payable
with respect to the marketing and sale of a particular Home or otherwise in
connection with any employee relocation services or asset management services
performed under or in connection with such Pool Relocation Management Agreement.
"Servicer" shall mean the Originator, in its capacity as the Servicer
under the Transfer and Servicing Agreement, and any successor thereto in such
capacity appointed pursuant to Article IX of the Transfer and Servicing
Agreement.
"Servicer Default" shall have the meaning set forth in the Transfer and
Servicing Agreement.
"Servicer Dilution Adjustment" shall have the meaning set forth in the
Transfer and Servicing Agreement.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other entity of which more than 50% of the outstanding capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors of such corporation (notwithstanding that at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) or other persons performing
similar functions is at the time directly or indirectly owned by such Person.
"Surviving Entity" shall have the meaning provided in Section
7.3(c)(i).
"Termination Date" shall mean the date specified by the Indenture
Trustee following the occurrence of a CMF Purchase Termination Event; provided,
however, that if an Event of Bankruptcy has occurred with respect to either the
Originator or the Buyer, the Termination Date shall be deemed to have occurred
automatically without any such notice.
"Transaction Documents" shall mean, collectively, this Agreement, the
Receivables Purchase Agreement, the Transfer and Servicing Agreement, the PHH
Guarantee, the CMF Subordinated Note, the Lockbox Agreements and all agreements,
instruments, certificates, reports and documents (other than any of the
Contracts) executed and delivered or to be executed and delivered under or in
connection with any of the foregoing, as any of the foregoing may be amended,
supplemented, restated or otherwise modified from time to time.
A-17
<PAGE>
"Transaction Party" shall mean the Buyer, the Originator, ARSC, the
Issuer or the Servicer (so long as the Servicer is the Originator or an
Affiliate thereof).
"Transfer and Servicing Agreement" shall mean the transfer and
servicing agreement dated as of April 25, 2000 by and between the Originator,
the Buyer, ARSC, the Servicer and the Issuer.
"Transferred Employee" shall mean an individual designated by an
authorized representative of an Employer pursuant to the applicable Relocation
Management Agreement as a person entitled to the benefits of such Relocation
Management Agreement.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the applicable jurisdiction or jurisdictions.
"Ultimate Buyer" shall mean the buyer of a Home from the Originator (or
from the Buyer or its assignee, as the case may be).
"Unbilled Receivable" shall mean any CMSC Receivable or CMF Receivable
(other than any Unsold Home Receivable) that has not yet been billed to the
related Obligor.
"Unmatured Servicer Default" shall have the meaning set forth in the
Transfer and Servicing Agreement.
"Unpaid Balance" of any Receivable shall mean at any time the unpaid
amount thereof at such time; provided, however, that the Unpaid Balance of
Unsold Home Receivables with respect to any Home shall be the aggregate amount
(without duplication) of Receivables arising from Equity Payments, Mortgage
Payoffs, Mortgage Payments and Equity Loans in respect of such Home.
"Unsold Home Receivable" shall mean any CMSC Receivable or CMF
Receivable, including any Finance Charges in respect thereof, incurred in
respect of an Equity Loan, Equity Payment, Mortgage Payoff or Direct Expenses on
a Home that has not yet been sold to an Ultimate Buyer (or the sale of which has
not been closed or the Home Sale Proceeds of which have not been received).
B. Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP or with United States generally
accepted regulatory principles, as applicable. To the extent that the
definitions of accounting terms in this Agreement are inconsistent with the
meanings of such terms under GAAP or regulatory accounting principles, the
definitions contained in this Agreement shall control. All terms used in Article
9 of the UCC in the State of New York and not specifically defined herein are
used herein as defined in such Article 9.
C. Computation of Time Periods. Unless otherwise stated in this
Agreement with respect to computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and each
of the words `to" and "until' means "to but excluding".
A-18
<PAGE>
D. Reference. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and references to
"Section", "subsection", "Appendix", " Schedule" and "Exhibit" in this Agreement
are references to Sections, subsections, Appendices, Schedules and Exhibits in
or to this Agreement unless otherwise specified in this Agreement.
A-19
<PAGE>
EXHIBIT 12
PHH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
Earnings before fixed charges:
Income before income taxes $ 25 $ 50
Plus: Fixed charges 25 39
------------------ ------------------
Earnings available to cover fixed charges $ 50 $ 89
================== ==================
Fixed charges (1):
Interest, including amortization of deferred
financing costs $ 23 $ 37
Interest portion of rental payment 2 2
------------------ ------------------
Total fixed charges $ 25 $ 39
================== ==================
Ratio of earnings to fixed charges 2.00x 2.28x
================== ==================
</TABLE>
(1) Fixed charges include interest expense on all indebtedness (including
amortization of deferred financing costs) and the portion of operating
lease rental expense that is representative of the interest factor
(deemed to be one-third of operating lease rentals). A substantial
portion of interest expense incurred on debt is used to finance the
Company's mortgage and relocation service activities.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheet and statement of income of the Company as of and for
the quarter ended March 31, 2000 and is qualified in its entirety to be
referenced to such financial statements. Amounts are in millions.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 42
<SECURITIES> 0
<RECEIVABLES> 539
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 252
<DEPRECIATION> 90
<TOTAL-ASSETS> 4,398
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 512
<OTHER-SE> 688
<TOTAL-LIABILITY-AND-EQUITY> 4,398
<SALES> 0
<TOTAL-REVENUES> 175
<CGS> 0
<TOTAL-COSTS> 148
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 25
<INCOME-TAX> 10
<INCOME-CONTINUING> 15
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
