- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 13, 1998
Prudential Securities Secured Financing Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
One New York Plaza 10292
New York, New York (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212) 778-1000
No Change
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
Description of the Notes and the Mortgage Loans
Prudential Securities Secured Financing Corporation registered issuances
of up to $1,500,000,000 principal amount of Mortgage Pass-Through Certificates
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Act"), by the Registration Statements on Form S-3
(Registration File No. 333-27555) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, Mortgage Lenders Network Home Equity
Loan Trust 1998-1 (the "Trust") issued $120,000,000 in aggregate principal
amount of its Asset Backed Notes, Series 1998-1 (the "Notes"), on March 13,
1998. This Current Report on Form 8-K is being filed to satisfy an undertaking
to file copies of certain agreements executed in connection with the issuance of
the Notes.
The Notes were issued pursuant to an Indenture (the "Indenture") attached
hereto as Exhibit 4.1, dated as of March 1, 1998, between Mortgage Lenders
Network Home Equity Loan Trust 1998-1, Mortgage Lenders Network USA, Inc., in
its capacity as servicer (the "Servicer"), and Norwest Bank Minnesota, National
Association, in its capacity as trustee (the "Trustee"). The Notes represent
obligations of the Trust, which obligations are secured by a pledge of mortgage
loans and certain related property. Norwest Bank Minnesota, National
Association, will serve as indenture trustee with respect to the Notes and the
Registrant is filing herewith as Exhibit 25.1 to this Form 8-K, the Form T-1
Statement of Eligibility for the Trustee.
The assets of the Trust consist primarily of fixed-rate, closed-end,
conventional, monthly pay, mortgage loans (the "Mortgage Loans") secured by
first or second lien mortgages or deeds of trust (the "Mortgages") on real
properties (the "Mortgage Properties"). The Mortgaged Properties securing the
Mortgage Loans consist primarily of single family residences (which may be
detached, part of a two-to four-family dwelling, a condominium unit or a unit in
a planned unit development).
Interest distributions on the Notes are based on the aggregate principal
balance thereof and the then applicable Note Interest Rate thereof. The Note
Interest Rate is 6.755% for each Interest Period prior to the Initial Redemption
Date and 7.255% for each Interest Period thereafter.
As of February 17, 1998, the Mortgage Loans possessed the characteristics
described in the Prospectus dated June 10, 1997 and the Prospectus Supplement
dated March 5, 1998 filed pursuant to Rule 424(b)(2) of the Act on March 11,
1998.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Not applicable
(b) Not applicable
<PAGE>
(c) Exhibit 1.1. Underwriting Agreement, dated March 5, 1998, between
Prudential Securities Secured Financing Corporation ("PSSFC") and
Prudential Securities Incorporated ("PSI").
Exhibit 1.2. Indemnity Agreement, dated March 5, 1998, from Mortgage
Lenders Network USA, Inc. ("MLN") to PSSFC, PSI and First Union
Capital Markets, a division of Wheat First Securities Corp. ("First
Union")
Exhibit 1.3. Indemnity Agreement, dated March 5, 1998, from First
Union to PSSFC and PSI.
Exhibit 2.1. Mortgage Loan Sale Agreement, dated as of March 1,
1998, among MLN, Norwest and PSSFC.
Exhibit 2.2. Mortgage Loan Contribution Agreement, dated as of March
1, 1998, between Mortgage Lenders Network Home Equity Loan Trust
1998-1 ("Issuer")
Exhibit 4.1. Indenture, dated as of March 1, 1998, between the
Issuer and Norwest.
Exhibit 4.2. Deposit Trust Agreement, dated as of March 1, 1998,
among PSSFC, Wilmington Trust Company, as Owner Trustee, Norwest and
MLN.
Exhibit 5.1. Opinion of Dewey Ballantine LLP regarding legality.
Exhibit 8.1. Opinion of Dewey Ballantine LLP regarding tax matters.
Exhibit 10.1. MBIA Insurance Policy, dated March 13, 1998.
Exhibit 23.1. Consent of Coopers & Lybrand L.L.P. regarding
financial statements of the MBIA Insurance Corporation and their
report.
Exhibit 25.1. Form T-1 Statement of Eligibility.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
as Depositor and on behalf of Mortgage Lenders
Network Home Equity Loan Trust 1998-1
Registrant
By: /s/ MARY ALICE KOHS
-----------------------------------
Name: Mary Alice Kohs
Title: Vice President
Dated: March 23, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
Exhibit 1.1. Underwriting Agreement, dated March 5, 1998, between
Prudential Securities Secured Financing Corporation ("PSSFC")
and Prudential Securities Incorporated ("PSI").
Exhibit 1.2. Indemnity Agreement, dated March 5, 1998, from Mortgage
Lenders Network USA, Inc. ("MLN") to PSSFC, PSI and First
Union Capital Markets, a division of Wheat First Securities
Corp. ("First Union")
Exhibit 1.3. Indemnity Agreement, dated March 5, 1998, from First Union to
PSSFC and PSI.
Exhibit 2.1. Mortgage Loan Sale Agreement, dated as of March 1, 1998,
among MLN, Norwest and PSSFC.
Exhibit 2.2. Mortgage Loan Contribution Agreement, dated as of March 1,
1998, between Mortgage Lenders Network Home Equity Loan Trust
1998-1 ("Issuer")
Exhibit 4.1. Indenture, dated as of March 1, 1998, between the Issuer and
Norwest.
Exhibit 4.2. Deposit Trust Agreement, dated as of March 1, 1998, among
PSSFC, Wilmington Trust Company, as Owner Trustee, Norwest and
MLN.
Exhibit 5.1. Opinion of Dewey Ballantine LLP regarding legality.
Exhibit 8.1. Opinion of Dewey Ballantine LLP regarding tax matters.
Exhibit 10.1. MBIA Insurance Policy, dated March 13, 1998.
Exhibit 23.1. Consent of Coopers & Lybrand LLP regarding financial
statements of the MBIA Insurance Corporation and their report.
Exhibit 25.1. Form T-1 Statement of Eligibility
Exhibit 1.1
Execution Copy
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
ASSET BACKED NOTES
SERIES 1998-1
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
Prudential Securities Incorporated,
as Representative of the several Underwriters
One New York Plaza
New York, New York 10292
March 5, 1998
Dear Sirs:
Prudential Securities Secured Financing Corporation (the "Depositor")
proposes, subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated March 5, 1998 (the "Standard
Provisions"), between the Depositor, Prudential Securities Incorporated
("Prudential") and First Union Capital Markets, a division of Wheat First
Securities Corp. ("First Union") to issue and sell to you (Prudential and First
Union, collectively, the "Underwriters") the Securities specified in Schedule I
hereto (the "Offered Securities") in the amounts set forth in Schedule I hereto.
The Depositor agrees that each of the provisions of the Standard Provisions is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this
Underwriting Agreement. Each reference to the "Representative" herein and in the
provisions of the Standard Provisions so incorporated by reference shall be
deemed to refer to Prudential. Unless otherwise defined herein, terms defined in
the Standard Provisions are used herein as therein defined. The Prospectus
Supplement and the accompanying Prospectus relating to the Offered Securities
(together, the "Prospectus") are incorporated by reference herein.
Subject to the terms and conditions set forth herein and in the Standard
Provisions incorporated herein by reference, the Depositor agrees to cause the
Issuer to issue and sell to the Underwriters, and each Underwriter agrees to
purchase from the Depositor, at the time and place and at the purchase price to
each Underwriter and in the manner set forth in Schedule I hereto, the original
principal balance of the Offered Securities in the amounts set forth in Schedule
I hereto with respect to each Underwriter.
[Remainder of Page Intentionally Left Blank]
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us two counterparts hereof, and upon acceptance hereof by you, this
letter and such acceptance hereof, including the provisions of the Standard
Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ EDWARD J. FITZGERALD
---------------------------
Name: Edward J. Fitzgerald
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED,
as Representative of the several Underwriters
By: /s/ MARY ALICE KOHS
----------------------
Name: Mary Alice Kohs
Title: Vice President
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE I
Issuer: Mortgage Lenders Network Home Equity
Loan Trust 1998-1
Title of Offered Securities: Mortgage Lenders Network Home Equity
Loan Trust 1998-1, Asset Backed Notes,
Series 1998-1
Terms of Offered Securities: The Offered Securities shall have the
terms set forth in the Prospectus and
shall conform in all material respects
to the descriptions thereof contained
therein, and shall be issued pursuant to
an Indenture to be dated as of March 1,
1998 among the Issuer and Norwest Bank
Minnesota, National Association, as
trustee.
Purchase Commitment: Prudential Securities Incorporated:
$60,000,000 First Union Capital Markets
(a division of Wheat First Securities
Corp.): $60,000,000
Purchase Price: The purchase price for the Offered
Securities shall be 100.00% of the
aggregate principal balance of the
Notes, as of the Closing Date, plus
accrued interest at the rate of 6.755%
per annum, on the aggregate principal
balance of the Notes, from March 1, 1998
to, but not including, March 13, 1998.
Specified funds for payment of Federal Funds (immediately available
Purchase Price: funds).
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings
Services
Closing Date: On or about March 13, 1998 at 10:00 A.M.
eastern standard time or at such other
time as the Depositor and the
Underwriter shall agree.
Closing Location: Offices of Dewey Ballantine LLP, 1301
Avenue of the Americas, New York, New
York 10019.
Representative: Designated Representative: Prudential
Securities Incorporated.
Address for Notices, etc.: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attn: Len Blum
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
March 5, 1998
From time to time, Prudential Securities Secured Financing Corporation, a
Delaware corporation (the "Depositor") may enter into one or more underwriting
agreements (each, an "Underwriting Agreement") that provide for the sale of
designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
SECTION 1. The Offered Securities. The Depositor proposes to cause the
Issuer to sell, pursuant to the Underwriting Agreement to the several
Underwriters named therein, asset backed notes (the "Securities") representing
obligations of the Issuer, which obligations are secured by a pledge of mortgage
loans (the "Mortgage Loans") and certain related property. The Securities will
be issued pursuant to an indenture (the "Indenture") dated as of March 1, 1998
by and between the Issuer and Norwest Bank Minnesota, National Association., as
indenture trustee (the "Trustee"). The underlying loans were originated by
Mortgage Lenders Network USA, Inc. (the "Seller") and are to be serviced
pursuant to a Servicing Agreement dated as of March 1, 1998 by and among the
Issuer, Mortgage Lenders Network USA, Inc., as servicer (the "Servicer") and the
Trustee.
The terms and rights of any particular issuance of Securities shall be as
specified in the Underwriting Agreement relating thereto and in or pursuant to
the Indenture identified in such Underwriting Agreement. The Securities which
are the subject of any particular Underwriting Agreement into which this
Agreement is incorporated are herein referred to as the "Offered Securities."
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-27355),
including a prospectus relating to the Securities under the Securities Act of
1933, as amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
term "Base Prospectus" means the prospectus included in the Registration
Statement. The term "Prospectus" means the Base Prospectus together with the
<PAGE>
prospectus supplement specifically relating to the Offered Securities, as first
filed with the Commission pursuant to Rule 424. The term "Preliminary
Prospectus" means a preliminary prospectus supplement specifically relating to
the Offered Securities together with the Base Prospectus.
SECTION 2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement to any Offered Securities and the authorization by the
Representative of the release of such Offered Securities, the several
Underwriters propose to offer for sale to the public the Offered Securities at
the prices and upon the terms set forth in the Prospectus.
SECTION 3. Purchase, Sale and Delivery of the Offered Securities. Unless
otherwise specified in the Underwriting Agreement, payment for the Offered
Securities shall be made by certified or official bank check or checks payable
to the order of the Depositor in immediately available or next day funds, at the
time and place set forth in the Underwriting Agreement, upon delivery to the
Representative for the respective accounts of the several Underwriters of the
Offered Securities registered in definitive form and in such names and in such
denominations as the Representative shall request in writing not less than five
full business days prior to the date of delivery. The time and date of such
payment and delivery with respect to the Offered Securities are herein referred
to as the "Closing Date".
SECTION 4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required to be made
by or on behalf of the Depositor under the 1933 Act and the Securities Exchange
Act of 1934, as amended (the "1934 Act") prior to the sale of the Offered
Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall be in effect; (ii) no proceedings for such purpose shall be
pending before or threatened by the Commission, or by any authority
administering any state securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall have been complied
with to the Representative's reasonable satisfaction; (iv) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall have been no material
adverse change in the condition, financial or otherwise, earnings, affairs,
regulatory situation or business prospects of the Depositor; (v) there are no
material actions, suits or proceedings pending before any court or governmental
agency, authority or body or threatened, affecting the Depositor or the
transactions contemplated by the Underwriting Agreement; (vi) the Depositor is
not in violation of its charter or its by-laws or in default in the performance
or observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party
2
<PAGE>
or by which it or its properties may be bound, which violations or defaults
separately or in the aggregate would have a material adverse effect on the
Depositor; and (vii) the Representative shall have received, on the Closing Date
a certificate, dated the Closing Date and signed by an executive officer of the
Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement, there shall
not have occurred any of the following: (i) if at or prior to the Closing Date,
trading in securities on the New York Stock Exchange shall have been suspended
or any material limitation in trading in securities generally shall have been
established on such exchange, or a banking moratorium shall have been declared
by New York or United States authorities; (ii) if at or prior to the Closing
Date, there shall have been an outbreak or escalation of hostilities between the
United States and any foreign power, or of any other insurrection or armed
conflict involving the United States which results in the declaration of a
national emergency or war, and, in the reasonable opinion of the Representative,
makes it impracticable or inadvisable to offer or sell the Offered Securities;
or (iii) if at or prior to the Closing Date, a general moratorium on commercial
banking activities in New York shall have been declared by either federal or New
York State authorities.
(d) The Representative shall have received, on the Closing Date, a
certificate dated the Closing Date and signed by an executive officer of the
Depositor to the effect that attached thereto is a true and correct copy of the
letter from each nationally recognized statistical rating organization (as that
term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933
Act) that rated the Offered Securities and confirming that, unless otherwise
specified in the Underwriting Agreement, the Offered Securities have been rated
in the highest rating categories by each such organization and that each such
rating has not been rescinded since the date of the applicable letter.
(e) The Representative shall have received, on the Closing Date, an
opinion of Dewey Ballantine LLP, special counsel for the Depositor, dated the
Closing Date, in form and substance satisfactory to the Representative and
containing opinions substantially to the effect set forth in Exhibit A hereto.
(f) The Representative shall have received, on the Closing Date, an
opinion of counsel for Mortgage Lenders Network USA, Inc., dated the Closing
Date, in form and substance satisfactory to the Representative and counsel for
the Underwriters and containing opinions substantially to the effect set forth
in Exhibit B hereto.
(g) The Representative shall have received, on the Closing Date, an
opinion of counsel for the Trustee, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the Underwriters
and containing opinions substantially to the effect set forth in Exhibit C
hereto.
(h) The Representative shall have received, on the Closing Date, an
opinion of Dewey Ballantine LLP, counsel for the Underwriters, dated the Closing
Date, with respect to the incorporation of the Depositor, the validity of the
Offered Securities, the Registration Statement, the Prospectus and other related
matters as the Underwriters may reasonably require, and the Depositor shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
3
<PAGE>
(i) The Representative shall have received, on the Closing Date, such
other opinions of Counsel in form and substance satisfactory to the
Representative and counsel to the Underwriters as the Representative shall
request.
(j) The Representative shall have received, on or prior to the date of
first use of each of the preliminary prospectus supplement and the prospectus
supplement relating to the Offered Securities, and on the Closing Date if
requested by the Representative, letters of independent accountants of the
Depositor in the form and reflecting the performance of the procedures
previously requested by the Representative.
(k) The Depositor shall have furnished or caused to be furnished to the
Representative on the Closing Date a certificate of an executive officer of the
Depositor satisfactory to the Representative as to the accuracy of the
representations and warranties of the Depositor herein at and as of such Closing
Date as if made as of such date, as to the performance by the Depositor of all
of its obligations hereunder to be performed at or prior to such Closing Date,
and as to such other matters as the Representative may reasonably request;
(l) The Servicer shall have furnished or caused to be furnished to the
Representative on the Closing Date a certificate of officers of such Servicer in
form and substance reasonably satisfactory to the Representative;
(m) The Note Guaranty Insurance Policy (the "Note Insurance Policy") shall
have been duly executed and issued at or prior to the Closing Date and shall
conform in all material respects to the description thereof in the Prospectus
Supplement.
(n) The Representative shall have received, on the Closing Date, an
opinion of counsel to MBIA Insurance Corporation. (the "Note Insurer"), dated
the Closing Date, in form and substance satisfactory to the Representative and
counsel for the Underwriters and containing opinions substantially to the effect
set forth in Exhibit D hereto.
(o) On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended or
potential downgrading or (ii) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the Note
Insurer's claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act.
(p) There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since December 31, 1996 of the Note Insurer,
that is in the Representative's judgment material and adverse and that makes it
in the Representative's judgment impracticable to market the Offered Securities
on the terms and in the manner contemplated in the Prospectus.
(q) The Representative shall have received, on the Closing Date, a
certificate dated the Closing Date and signed by the President, a senior vice
president or a vice president of the Note Insurer to the effect that the signer
of such certificate has carefully examined the Note Insurance Policy, the
Insurance Agreement dated the Closing Date (the "Insurance Agreement") among the
Note Insurer, the Issuer, the Servicer, the Depositor and the Trustee and the
related documents and that, to the best of his or her knowledge based on
reasonable investigation:
4
<PAGE>
(i) there are no actions, suits or proceedings pending or threatened
against or affecting the Note Insurer which, if adversely determined,
individually or in the aggregate, would adversely affect the Note
Insurer's performance under the Note Insurance Policy or the Insurance
Agreement;
(ii) each person who, as an officer or representative of the Note Insurer,
signed or signs the Note Insurance Policy, the Insurance Agreement or any
other document delivered pursuant hereto, on the date thereof, or on the
Closing Date, in connection with the transactions described in this
Agreement was, at the respective times of such signing and delivery, and
is now, duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures;
(iii) the information contained in the Prospectus under the caption "THE
NOTE INSURANCE" is true and correct in all material respects and does not
omit to state a material fact with respect to the description of the Note
Insurance Policy or the ability of the Note Insurer to meet its payment
obligations under the Note Insurance Policy;
(iv) the tables regarding the Note Insurer's capitalization set forth
under the heading "THE NOTE INSURANCE - The Note Insurer" present fairly
the capitalization of the Note Insurer as of September 30, 1997;
(v) on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (i) any intended or potential downgrading or
(ii) any review or possible changes in rating the direction of which has
not been indicated, in the rating accorded the claims paying ability of
the Note Insurer by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act;
(vi) the audited balance sheet of the Note Insurer as of December 31, 1996
and the related statement of income and retained earnings for the fiscal
year then ended, and the accompanying footnotes, together with an opinion
thereon of Coopers & Lybrand L.L.P., independent certified public
accountants, copies of which are incorporated by reference in the
Prospectus, fairly present in all material respects the financial
condition of the Note Insurer as of such date and for the period covered
by such statements in accordance with generally accepted accounting
principles consistently applied.
(vii) to the best knowledge of such officer, since December 31, 1996 no
material adverse change has occurred in the financial position of the Note
Insurer other than as set forth in the Prospectus.
The officer of the Note Insurer certifying to items (v)-(vii) shall be an
officer in charge of a principal financial function. The Note Insurer
shall attach to such certificate a true and correct copy of its
certificate or articles of incorporation, as appropriate, and its bylaws,
all of which are in full force and effect on the date of such certificate.
5
<PAGE>
(r) The Representative shall have been furnished such further information,
certificates, documents and opinions as the Representative may reasonably
request.
SECTION 5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of the
Registration Statement and any amendments thereto including exhibits and as many
copies of the Prospectus and any supplements and amendments thereto as the
Representative may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting Agreement, the
Depositor will prepare a prospectus supplement setting forth the principal
amount, notional amount or stated amount, as applicable, of Offered Securities
covered thereby, the price at which the Offered Securities are to be purchased
by the Underwriters from the Depositor, either the initial public offering price
or prices or the method by which the price or prices at which the Offered
Securities are to be sold will be determined, the selling concessions and
reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the Depositor will
not file any amendment to the Registration Statement or any supplement to the
Prospectus of which the Representative shall not previously have been advised
and furnished with a copy a reasonable time prior to the proposed filing or to
which the Representative shall have reasonably objected. The Depositor will use
its best efforts to cause any amendment to the Registration Statement to become
effective as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as it is
able with all requirements imposed upon it by the 1933 Act and the rules and
regulations thereunder to the extent necessary to permit the continuance of
sales or of dealings in the Offered Securities in accordance with the provisions
hereof and of the Prospectus, and the Depositor will prepare and file with the
Commission, promptly upon request by the Representative, any amendments to the
Registration Statement or supplements to the Prospectus which may be necessary
or advisable in connection with the distribution of the Offered Securities by
the Underwriters, and will use its best efforts to cause the same to become
effective as promptly as possible. The Depositor will advise the Representative,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement or any amended Registration Statement has become
effective or any supplement to the Prospectus or any amended Prospectus has been
filed. The Depositor will advise the Representative, promptly after it receives
notice or obtains knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any preliminary Prospectus or the
Prospectus, or the suspension of the qualification of the Offered Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose, or of any request made by the Commission for
the amending or supplementing of the Registration Statement or the Prospectus or
for additional information, and the Depositor will use its best efforts to
prevent the issuance of any such stop order or any order suspending any such
qualification, and if any such order is issued, to obtain the lifting thereof as
promptly as possible.
6
<PAGE>
(c) If, at any time when a prospectus relating to the Offered Securities
is required to be delivered under the 1933 Act, any event occurs as a result of
which the Prospectus as then amended or supplemented would include any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
for any other reason to amend or supplement the Prospectus to comply with the
1933 Act, to promptly notify the Representative thereof and upon their request
to prepare and file with the Commission, at the Depositor's own expense, an
amendment or supplement which will correct such statement or omission or any
amendment which will effect such compliance.
(d) During the period when a prospectus is required by law to be delivered
in connection with the sale of the Offered Securities pursuant to the
Underwriting Agreement, the Depositor will file, on a timely and complete basis,
all documents that are required to be filed by the Depositor with the Commission
pursuant to Sections 13, 14, or 15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Representative shall
reasonably request and to pay all expenses (including fees and disbursements of
counsel) in connection with such qualification of the eligibility of the Offered
Securities for investment under the laws of such jurisdictions as the
Representative may designate provided that in connection therewith the Depositor
shall not be required to qualify to do business or to file a general consent to
service of process in any jurisdiction.
(f) To make generally available to the Depositor's security holders, as
soon as practicable, but in any event not later than eighteen months after the
date on which the filing of the Prospectus, as amended or supplemented, pursuant
to Rule 424 under the 1933 Act first occurs, an earnings statement of the
Depositor covering a twelve-month period beginning after the date of the
Underwriting Agreement, which shall satisfy the provisions of Section 11(a) of
the 1933 Act and the applicable rules and regulations of the Commission
thereunder (including, at the option of the Depositor, Rule 158).
(g) For so long as any of the Offered Securities remain outstanding, to
furnish to the Representative upon request in writing copies of such financial
statements and other periodic and special reports as the Depositor may from time
to time distribute generally to its creditors or the holders of the Offered
Securities and to furnish to the Representative copies of each annual or other
report the Depositor shall be required to file with the Commission.
(h) For so long as any of the Offered Securities remain outstanding, the
Depositor will, or will cause the Servicer to, furnish to the Representative, as
soon as available, a copy of (i) the annual statement of compliance delivered by
the Servicer to the Trustee under the Servicing Agreement, (ii) the annual
independent public accountants' servicing report furnished to the Trustee
pursuant to the Servicing Agreement, (iii) each report regarding the Offered
Securities mailed to the holders of such Securities, and (iv) from time to time,
such other information concerning such Securities as the Representative may
reasonably request.
7
<PAGE>
SECTION 6. Representations and Warranties of the Depositor. The Depositor
represents and warrants to, and agrees with, each Underwriter, as of the date of
the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating to the
Securities and the offering thereof from time to time in accordance with Rule
415 under the 1933 Act has been filed with the Commission and such Registration
Statement, as amended to the date of the Underwriting Agreement, has become
effective. No stop order suspending the effectiveness of such Registration
Statement has been issued and no proceeding for that purpose has been initiated
or threatened by the Commission. A prospectus supplement specifically relating
to the Offered Securities will be filed with the Commission pursuant to Rule 424
under the 1933 Act; provided, however, that a supplement to the Prospectus
prepared pursuant to Section 5(b) hereof shall be deemed to have supplemented
the Base Prospectus only with respect to the Offered Securities to which it
relates. The conditions to the use of a registration statement on Form S-3 under
the 1933 Act, as set forth in the General Instructions on Form S-3, and the
conditions of Rule 415 under the 1933 Act, have been satisfied with respect to
the Depositor and the Registration Statement. There are no contracts or
documents of the Depositor that are required to be filed as exhibits to the
Registration Statement pursuant to the 1933 Act or the rules and regulations
thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the Registration
Statement and the Base Prospectus conformed in all material respects to the
requirements of the 1933 Act and the rules and regulations thereunder, and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; on the date of the Underwriting Agreement and as of the
Closing Date, the Registration Statement and the Prospectus conform, and as
amended or supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations thereunder, and
on the date of the Underwriting Agreement and as of the Closing Date, neither of
such documents, any Computational Materials nor any ABS Term Sheets includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and neither of such documents as amended or supplemented, if applicable, will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the foregoing does not apply to
statements or omissions in any of such documents based upon written information
furnished to the Depositor by any Underwriter specifically for use therein.
"Computational Materials" shall mean those materials delivered within the
meaning of the no-action letter dated May 20, 1994 issued by the Division of
Corporation Finance of the Commission to Kidder, Peabody Acceptance Corporation
I. Kidder, Peabody & Co., Incorporated, and Kidder Structured Asset Corporation
and the no-action letter dated May 27, 1994 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association for
which the filing of such material is a condition of the relief granted in such
letters. "ABS Term Sheet" shall mean those materials delivered in the form of
"Structural Term Sheets" or "Collateral Term Sheets", in each case within the
meaning of the no-action letter dated February 13, 1995 issued by the Division
of Corporation Finance of the Commission to the Public Securities Association
for which the filing of such material is a condition of the relief granted in
such letter.
8
<PAGE>
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
there has been no material adverse change in the condition, financial or
otherwise, earnings, affairs, regulatory situation or business prospects of the
Depositor, whether or not arising in the ordinary course of the business of the
Depositor.
(d) The Depositor has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(e) The Depositor has all requisite power and authority (corporate and
other) and all requisite authorizations, approvals, orders, licenses,
certificates and permits of and from all government or regulatory officials and
bodies to own its properties, to conduct its business as described in the
Registration Statement and the Prospectus and to execute, deliver and perform
this Agreement, the Underwriting Agreement, the Deposit Trust Agreement and the
Mortgage Loan Contribution Agreement, except such as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution by
the Underwriter of the Offered Securities; all such authorizations, approvals,
orders, licenses, certificates are in full force and effect and contain no
unduly burdensome provisions; and, except as set forth or contemplated in the
Registration Statement or the Prospectus, there are no legal or governmental
proceedings pending or, to the best knowledge of the Depositor, threatened that
would result in a material modification, suspension or revocation thereof.
(f) The Offered Securities have been duly authorized, and when the Offered
Securities are issued and delivered pursuant to the Underwriting Agreement, the
Offered Securities will have been duly executed, issued and delivered and will
be entitled to the benefits provided by the Indenture, subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the rights of creditors generally, and to
general principles of equity (regardless of whether the entitlement to such
benefits is considered in a proceeding in equity or at law), and will conform in
substance to the description thereof contained in the Registration Statement and
the Prospectus, and will in all material respects be in the form contemplated by
the Indenture.
(g) The execution and delivery by the Depositor of this Agreement, the
Underwriting Agreement, the Deposit Trust Agreement and the Mortgage Loan
Contribution Agreement are within the corporate power of the Depositor and
neither the execution and delivery by the Depositor of this Agreement, the
Underwriting Agreement, the Deposit Trust Agreement and the Mortgage Loan
Contribution Agreement, nor the consummation by the Depositor of the
transactions therein contemplated, nor the compliance by the Depositor with the
provisions thereof, will conflict with or result in a breach of, or constitute a
default under, the charter or the by-laws of the Depositor or any of the
provisions of any law, governmental rule, regulation, judgment, decree or order
binding on the Depositor or its properties, or any of the provisions of any
indenture, mortgage, contract or other instrument to which the Depositor is a
party or by which it is bound, or will result in the creation or imposition of a
lien, charge or encumbrance upon any of its property pursuant to the terms of
any such indenture, mortgage, contract or other instrument, except such as have
been obtained under the 1933 Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Offered
Securities by the Underwriters.
9
<PAGE>
(h) The Underwriting Agreement has been, and at the Closing Date the
Deposit Trust Agreement and the Mortgage Loan Contribution Agreement will have
been, duly authorized, executed and delivered by the Depositor.
(i) At the Closing Date, each of this Agreement, the Underwriting
Agreement, the Deposit Trust Agreement and the Mortgage Loan Contribution
Agreement will constitute a legal, valid and binding obligation of the
Depositor, enforceable against the Depositor, in accordance with its terms,
subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity and the discretion of
the court (regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent, approval,
non-disapproval, authorization or order or other action of, any court or
governmental authority or agency is required for the consummation by the
Depositor of the transactions contemplated by this Agreement, the Underwriting
Agreement, the Deposit Trust Agreement and the Mortgage Loan Contribution
Agreement, except such as have been obtained and except such as may be required
under the 1933 Act, the rules and regulations thereunder, or state securities or
"Blue Sky" laws, in connection with the purchase and distribution of the Offered
Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease, own or license, as the case may be, and to
operate, its properties and to carry on its business as presently conducted and
has received no notice of proceedings relating to the revocation of any such
license, permit, consent, order or approval, which singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations, net worth
or condition (financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus, there are
no legal or governmental proceedings pending to which the Depositor is a party
or of which any property of the Depositor is the subject which, if determined
adversely to the Depositor would individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise), earnings,
affairs, or business or business prospects of the Depositor and, to the best of
the Depositor's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a "mortgage
related security" as such term is defined in Section 3(a)(41) of the 1934 Act.
(n) At the Closing Date, the representations and warranties made by the
Depositor in such Mortgage Loan Contribution Agreement will be true and correct
as of such date.
(o) At the time of execution and delivery of the Mortgage Loan
Contribution Agreement, the Depositor will have good and marketable title to the
Mortgage Loans being transferred to the Trustee pursuant to the Mortgage Loan
Contribution Agreement, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest claiming through the
Depositor (collectively, "Liens"), and will not have assigned to any person any
of its
10
<PAGE>
right, title or interest in such Mortgage Loans or in such Mortgage Loan
Contribution Agreement, the Depositor will have the power and authority to
transfer such Mortgage Loans to the Issuer and to cause the Issuer to transfer
the Offered Securities to each of the Underwriters, and upon execution and
delivery to the Issuer of the Mortgage Loan Contribution Agreement and delivery
to each of the Underwriters of the Offered Securities, the Issuer will have good
and marketable title to the Mortgage Loans and each of the Underwriters will
have good and marketable title to the Offered Securities, in each case free and
clear of any Liens claiming through the Depositor.
(p) The Indenture has been duty qualified under the Trust Indenture Act of
1939, as amended, and the Issuer is not required to be registered under the
Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in connection with the
execution, delivery and issuance of this Agreement, the Underwriting Agreement,
the Deposit Trust Agreement, the Mortgage Loan Contribution Agreement, and the
Offered Securities have been or will be paid at or prior to the Closing Date.
SECTION 7. Indemnification and Contribution. (a)The Depositor agrees to
indemnify and hold harmless each Underwriter (including Prudential Securities
Incorporated acting in its capacity as Representative and as one of the
Underwriters), and each person, if any, who controls any Underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, any Computational Materials, any ABS Term Sheets, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Depositor will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with (1) written information furnished to the Depositor by any
Underwriter through the Representative specifically for use therein or (2)
information regarding the Mortgage Loans except to the extent that the Depositor
has been indemnified by the Seller. This indemnity agreement will be in addition
to any liability which the Depositor may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Depositor, each
of the Depositor's directors, each of the Depositor's officers who signed the
Registration Statement and each person, if any, who controls the Depositor,
within the meaning of the 1933 Act, against any losses, claims, damages or
liabilities to which the Depositor, or any such director, officer or controlling
person may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration
11
<PAGE>
Statement, any Preliminary Prospectus, the Prospectus, any Computational
Materials, any ABS Term Sheets or any amendment or supplement thereto, or any
other prospectus relating to the Offered Securities, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statements or alleged untrue statements or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Depositor by any Underwriter through the Representative specifically for use
therein; and each Underwriter will reimburse any legal or other expenses
reasonably incurred by the Depositor or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in addition
to any liability which such Underwriter may otherwise have. The Depositor
acknowledges that the statements set forth under the caption "UNDERWRITING" in
the Prospectus Supplement constitute the only information furnished to the
Depositor by or on behalf of any Underwriter for use in the Registration
Statement, any Preliminary Prospectus or the Prospectus, and each of the several
Underwriters represents and warrants that such statements are correct as to it.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 7 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by the
Depositor on the one hand, and the Underwriters on the other, from the offering
of the Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters' relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Depositor and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity for such
purpose). No Underwriter or person controlling such Underwriter shall be
obligated to make contribution hereunder which in the aggregate exceeds the
total underwriting fee of the Offered Securities purchased by such Underwriter
under the Underwriting Agreement, less the aggregate amount of any damages which
such Underwriter and its controlling persons have otherwise been required to pay
in respect of the same or any substantially similar claim. The Underwriters'
obligation to contribute hereunder are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Depositor, each officer of the Depositor who signed the
Registration Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the 1933 Act, shall have the same rights to
contribution as the Depositor.
12
<PAGE>
(d) The parties hereto agree that the first sentence of Section 6 of the
Indemnification Agreement (the "Indemnification Agreement") dated as of the
Closing Date among the Note Insurer, Mortgage Lenders Network USA, Inc.,
Prudential Securities Incorporated and First Union Capital Markets, division of
Wheat First Securities Corp. shall not be construed as limiting the Depositor's
right to enforce its rights under Section 7 of this Agreement. The parties
further agree that, as between the parties hereto, to the extent that the
provisions of Section 6 of the Indemnification Agreement conflict with Section 7
hereof, the provisions of Section 7 hereof shall govern.
SECTION 8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor, its officers and the several Underwriters set
forth in, or made pursuant to, the Underwriting Agreement shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
SECTION 9. Termination. (a)The Underwriting Agreement may be terminated by
the Depositor by notice to the Representative in the event that a stop order
suspending the effectiveness of the Registration Statement shall have been
issued or proceedings for that purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the Representative by
notice to the Depositor in the event that the Depositor shall have failed,
refused or been unable to perform all obligations and satisfy all conditions to
be performed or satisfied hereunder by the Depositor at or prior to the Closing
Date.
(c) Termination of the Underwriting Agreement pursuant to this Section 9
shall be without liability of any party to any other party other than as
provided in Sections 7 and 11 hereof.
SECTION 10. Default of Underwriters. If any Underwriter or Underwriters
defaults or default in their obligation to purchase Offered Securities which it
or they have agreed to purchase under the Underwriting Agreement and the
aggregate principal amount of the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase is ten percent or less
of the aggregate principal amount, notional amount or stated amount, as
applicable, of the Offered Securities to be sold under the Underwriting
Agreement, as the case may be, the other Underwriters shall be obligated
severally in proportion to their respective commitments under the Underwriting
Agreement to purchase the Offered Securities which such defaulting Underwriter
or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or
13
<PAGE>
reimbursed by the Depositor pursuant to Section 11 hereof. As used in the
Underwriting Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 10. Nothing herein shall relieve a
defaulting Underwriter from liability for its default.
SECTION 11. Expenses. The Depositor agrees with the several Underwriters
that:
(a) whether or not the transactions contemplated in the Underwriting
Agreement are consummated or the Underwriting Agreement is terminated, the
Depositor will pay all fees and expenses incident to the performance of its
obligations under the Underwriting Agreement, including, but not limited to, (i)
the Commission's registration fee, (ii) the expenses of printing and
distributing the Underwriting Agreement and any related underwriting documents,
the Registration Statement, any Preliminary Prospectus, the Prospectus, any
amendments or supplements to the Registration Statement or the Prospectus, and
any Blue Sky memorandum or legal investment survey and any supplements thereto,
(iii) fees and expenses of rating agencies, accountants and counsel for the
Depositor, (iv) the expenses referred to in Section 5(e) hereof, and (v) all
miscellaneous expenses referred to in Item 30 of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees, disbursements and
expenses, reasonably incurred by the Underwriters in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement will be borne and paid by the Depositor if the
Underwriting Agreement is terminated by the Depositor pursuant to Section 9(a)
hereof or by the Representative on account of the failure, refusal or inability
on the part of the Depositor to perform all obligations and satisfy all
conditions on the part of the Depositor to be performed or satisfied hereunder;
and
(c) the Depositor will pay the cost of preparing the certificates for the
Offered Securities.
Except as otherwise provided in this Section 11, the Underwriters agree to
pay all of their expenses in connection with investigating, preparing to market
and marketing the Offered Securities and proposing to purchase and purchasing
the Offered Securities under the Underwriting Agreement, including the fees and
expenses of their counsel and any advertising expenses incurred by them in
making offers and sales of the Offered Securities.
SECTION 12. Notices. All communications under the Underwriting Agreement
shall be in writing and, if sent to the Underwriters, shall be mailed, delivered
or telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, and, if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
Prudential Securities Secured Financing Corporation, One New York Plaza, New
York, New York 10292, Attention: Managing Director-Asset Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
SECTION 13. Representative of Underwriters. Any Representative identified
in the Underwriting Agreement will act for the Underwriters of the Offered
Securities and any
14
<PAGE>
action taken by the Representative under the Underwriting Agreement will be
binding upon all of such Underwriters.
SECTION 14. Successors. The Underwriting Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters and the Depositor
and their respective successors and legal representatives, and nothing expressed
or mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
15
<PAGE>
SECTION 16. Governing Law. This Agreement and each Underwriting Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.
[Signature Page Follows]
16
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ EDWARD J. FITZGERALD
-------------------------
Name: Edward J. Fitzgerald
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED,
as Representative of the several Underwriters
By: /s/ MARY ALICE KOHS
----------------------
Name: Mary Alice Kohs
Title: Vice President
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine LLP,
special counsel for the Depositor
(1) Each of the Documents constitutes the valid, legal and binding
agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(2) The Notes, assuming the due execution by the Trustee and due
authentication by the Trustee and payment therefor pursuant to the Underwriting
Agreement, are validly issued and outstanding and are entitled to the benefits
of the Indenture.
(3) No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of New York for the execution, delivery
and performance of the Documents or the offer, issuance, sale or delivery of the
Notes or the consummation of any other transaction contemplated thereby by the
Depositor, except such which have been obtained.
(4) The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not called
upon to express any opinion), at the time the Registration Statement became
effective, as of the date of execution of the Underwriting Agreement and as of
the date hereof comply as to form in all material respects with the requirements
of the 1933 Act and the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder, and we do not know of any amendment to
the Registration Statement required to be filed, or of any contracts, indentures
or other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration Statement
or the Prospectus, which has not been filed or described as required.
(5) The Indenture has been duly qualified under the Trust Indenture Act of
1939, as amended and the Issuer is not required to be registered under the
Investment Company Act of 1940.
(6) The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE NOTES," to the extent such statements purport to
summarize certain provisions of the Notes or of the Indenture, are fair and
accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
Mortgage Lender Network USA, Inc.
(1) Mortgage Lender Network USA, Inc. has been duly organized and is
validly existing as a corporation in good standing under the State of Delaware
and is duly qualified to transact business in all states in which the conduct of
its business requires such qualification.
(2) The Company has the requisite power and authority to execute and
deliver, engage in the transactions contemplated by, and perform and observe the
conditions of, the Basic Documents to which it is a party (collectively referred
to herein as the MLN Agreements).
(3) The MLN Agreements have been duly and validly authorized, executed and
delivered by the Company, all requisite corporate action having been taken with
respect thereto, and each constitutes the valid, legal and binding agreement of
the Company, and are enforceable against the Company in accordance with their
respective terms.
(4) Neither the transfer of the Mortgage Loans to the Depositor, nor the
execution, delivery or performance by the Company of the MLN Agreements
conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default under or violates or will violate, (i)
any term or provision of the Articles of Incorporation or By-laws of the
Company; (ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Company or any of its subsidiaries is a
party or is bound; or (iii) any order, judgment, writ, injunction or decree of
any court or governmental agency or body or other tribunal having jurisdiction
over the Company or any of its properties.
(5) The endorsement and delivery of each Mortgage Note, and the
preparation, delivery and recording of an Assignment of Mortgage with respect to
each Mortgage is sufficient fully to transfer to the Depositor and its assignees
all right, title and interest of the Company in the Mortgage Note and Mortgage,
as noteholder and mortgagee or assignee thereof.
(6) No consent, approval, authorization or order of, registration or
qualification of or with or notice to, any courts, governmental agency or body
or other tribunal is required under the laws of New York or Delaware, for the
execution, delivery and performance of the Company Agreements or the
consummation of any other transaction contemplated thereby by the Company,
except such which have been obtained.
(7) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Company before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on (i) the consolidated financial
position, business prospects, stockholders's equity or results of operations of
the Company; (ii) the Company's ability to perform its obligations under, or the
validity or enforceability of, the MLN Agreements; (iii) any Mortgage Note or
Mortgaged Property, or the title of any Mortgagor to any Mortgaged Property; or
(B) which have not otherwise been disclosed in the Registration Statement and to
the best of such counsel's knowledge, no such proceedings or investigations are
threatened or contemplated by governmental authorities or threatened by others.
<PAGE>
Exhibit C
Opinions of Counsel to
the Trustee
-----------
(1) The Trustee is a banking association duly organized, validly existing
and in good standing under the laws of the United States and has the power and
authority to enter into and to take all actions required of it under the
Indenture.
(2) The Indenture has been duly authorized, executed and delivered by the
Trustee and the Indenture constitutes the legal, valid and binding obligation of
the Trustee, enforceable against the Trustee in accordance with its terms,
except as enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the Trustee, and
(B) general principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Trustee in connection with its execution and delivery of the Indenture or the
performance of its obligations thereunder.
(4) The Notes have been duly executed, authenticated and delivered by the
Trustee.
(5) The execution and delivery of, and performance by the Trustee of its
obligations under, the Indenture do not conflict with or result in a violation
of any statute or regulation applicable to the Trustee, or the charter or bylaws
of the Trustee, or to the best knowledge of such counsel, any governmental
authority having jurisdiction over the Trustee or the terms of any indenture or
other agreement or instrument to which the Trustee is a party or by which it is
bound.
<PAGE>
Exhibit D
Opinions of Counsel
to the Note Insurer
-------------------
(1) The Note Insurer is a stock insurance corporation, duly incorporated
and validly existing under the laws of the State of New York. The Note Insurer
is validly licensed and authorized to issue the Note Insurance Policy and
perform its obligations under the Note Insurance Policy in accordance with the
terms thereof, under the laws of the State of New York.
(2) The execution and delivery by the Note Insurer of the Note Insurance
Policy, and the Indemnification Agreement are within the corporate power of the
Note Insurer and have been authorized by all necessary corporate action on the
part of the Note Insurer; the Note Insurance Policy has been duly executed and
is the valid and binding obligation of the Note Insurer enforceable in
accordance with its terms except that the enforcement of the Note Insurance
Policy may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity.
(3) The Note Insurer is authorized to deliver the Indemnification
Agreement, and the Indemnification Agreement has been duly executed and is the
valid and binding obligation of the Note Insurer enforceable in accordance with
its terms except that the enforcement thereof may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by general principles of
equity and by public policy considerations relating to indemnification for
securities law violations.
(4) No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required on the part of the Note
Insurer, the lack of which would adversely affect the validity or enforceability
of the Note Insurance Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the Note
Insurance Policy, the form of each Note Insurance Policy has been filed with,
and approved by, all governmental authorities having jurisdiction over the Note
Insurer in connection with such Note Insurance Policy.
(5) To the extent the Note Insurance Policy constitutes a security within
the meaning of Section 2(1) of the 1933 Act, it is a security that is exempt
from the registration requirements of the Act.
(6) The information set forth under the captions "THE NOTE INSURANCE - The
Insurance Policy" and "THE NOTE INSURANCE - The Note Insurer" in the Prospectus
insofar as such statements constitute a description of the Note Insurance
Policy, accurately summarizes the Note Insurance Policy.
Exhibit 1.2
Execution Copy
INDEMNITY AGREEMENT
Reference is made to the Prospectus Supplement dated March 5, 1998 (the
"Prospectus Supplement") relating to the Asset Backed Notes, Series 1998-1 (the
"Notes"), which Notes will be issued by Mortgage Lenders Network Home Equity
Loan Trust, Series 1998-1. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Prospectus Supplement.
Mortgage Lenders Network USA, Inc., a Delaware corporation (the
"Company"), hereby represents and warrants to Prudential Securities Secured
Financing Corporation ("PSSFC") and Prudential Securities Incorporated and First
Union Capital Markets, a division of Wheat First Securities Corp., (together
with Prudential Securities Incorporated, the "Underwriters") that (a) it
provided to PSSFC the information relating to the Company and the Mortgage Loans
set forth in the Prospectus Supplement under "Summary of Terms--The Mortgage
Loans," "Mortgage Lenders Network USA, Inc.," "Description of the Mortgage
Pool," "Servicing of the Mortgage Loans--General," "Servicing of the Mortgage
Loans--Customary Servicing Procedures," and "Servicing of the Mortgage
Loans--Historical Servicing Experience of the Servicer (collectively, the
"Company Information"), and (b) such Company Information does not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company acknowledges and understands that PSSFC is relying on the aforesaid
representation and warranty and is causing the issuance of the Notes in partial
reliance thereon and the Company agrees, in consideration for PSSFC facilitating
the financing of the Company's Mortgage Loans and in consideration of the
Underwriters' purchase of the Notes, to indemnify and hold harmless PSSFC, each
of PSSFC's directors, each of PSSFC's officers who signed the Registration
Statement and each person if any who controls PSSFC within the meaning of the
Securities Act of 1933, as amended, and the Underwriters and each person who
controls the Underwriters within the meaning of the Securities Act of 1933, as
amended, for any losses, claims, damages or liabilities joint or several it
incurs as a result of (i) a breach of such representation and warranty or (ii)
as a result of a Mortgage Pool Error from which any Computational or ABS Term
Sheets were derived, and will reimburse any legal or other expenses incurred by
PSSFC or any such director, officer or controlling person and the Underwriters
or any such controlling person in connection with investigating any such loss,
claim, damage, liability or action. "Computational Materials" shall mean those
materials delivered within the meaning of the no-action letter dated May 20,
1994 issued by the Division of Corporation Finance of the Commission to Kidder,
Peabody Acceptance Corporation I, Kidder, Peabody & Co., Incorporated, and
Kidder Structured Asset Corporation and the no-action letter dated May 27, 1994
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association for which the filing of such material is a condition of
the relief granted in such letters. "ABS Term Sheet" shall mean those materials
delivered in the form of "Structural Term Sheets" or "Collateral Term Sheets",
in each case within the meaning of
<PAGE>
the no-action letter dated February 13, 1995 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association for
which the filing of such material is a condition of the relief granted in such
letter. For purposes hereof, a "Mortgage Pool Error" shall mean an error in
information regarding the characteristics of the Mortgage Loans provided by the
Company to the Underwriters for the preparation of Computational Materials or
ABS Term Sheets.
Each obligation of the Company to indemnify PSSFC and the Underwriters
(each, an "Indemnified Party") is conditioned upon the following: the related
Indemnified Party shall promptly notify the Company in writing of the existence
of any fact or circumstance known to such Indemnified Party giving rise to the
Company's obligation of indemnity and in the case of any claim or litigation
which may give rise to such an obligation, the Indemnified Party shall promptly
notify the Company in writing of the making of such claim or the commencement of
such litigation when the same become known to such Indemnified Party. The
Company shall have the option of defending the Indemnified Party in connection
with any such claim or litigation using the Company's own counsel, which counsel
shall be reasonably satisfactory to the Indemnified Party: if the Company
exercises such option, the Company shall not be responsible for the Indemnified
Party's attorneys' fees incurred after the Indemnified Party receives
notification of the Company's exercise of such option and the Indemnified Party
has acknowledged its approval of the selected counsel. The Company shall have
the right to settle any such claim or litigation with the approval the
Indemnified Party, which approval shall not be unreasonably withheld. If the
Indemnified Party recovers from any third party any amount paid by the Company
to the Indemnified Party in satisfaction of the Company's obligations to
indemnify the Indemnified Party, the Indemnified Party shall promptly pay to the
Company the full amount so recovered. The Company shall have no obligation to
indemnify each Indemnified Party for any claims, liabilities, losses, costs,
damages, attorneys' fees, or other expenses which would have been avoided had
the Indemnified Party taken reasonable action to mitigate such claims,
liabilities, losses, costs, damages, attorneys' fees, or other expenses. The
Company shall have no obligation to indemnify each Indemnified Party from any
claim, liability, loss, cost, damage, attorneys' fees or other expenses arising
from the negligence or willful misconduct of such Indemnified Party or its
officers, employees, or agents.
The obligations of the Company hereunder shall be in addition to any
liability which the Company may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the related Indemnified
Party and to each person, if any, who controls such Indemnified Party within the
meaning of the Securities Act of 1933, as amended.
The agreement shall be construed in accordance with the substantive laws
of the State of New York (without regard to conflicts of laws principles).
2
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Indemnity Agreement as
of March 5, 1998.
MORTGAGE LENDERS NETWORK USA, INC.
BY: /s/ MITCHELL L. HEFFERNAN
----------------------------
NAME: Mitchell L. Heffernan
TITLE: President & CEO
Exhibit 1.3
INDEMNITY AGREEMENT
Reference is made to the Prospectus Supplement dated March 5, 1998 (the
"Prospectus Supplement") relating to the Asset Backed Notes, Series 1998-1 (the
"Notes"), which Notes will be issued by Mortgage Lenders Network Home Equity
Loan Trust, Series 1998-1. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Prospectus Supplement.
First Union Capital Markets, a division of Wheat First Securities Corp. a
Virginia corporation ("First Union"), hereby represents and warrants to
Prudential Securities Secured Financing Corporation ("PSSFC") and Prudential
Securities Incorporated (the "Underwriter") that (a) it provided to PSSFC the
information relating to First Union set forth in the Prospectus Supplement in
the fifth paragraph under "Underwriting" (the "First Union Information"), and
(b) such First Union Information does not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. First Union
acknowledges and understands that PSSFC is relying on the aforesaid
representation and warranty and is causing the issuance of the Notes in partial
reliance thereon and First Union agrees, in consideration for PSSFC facilitating
the financing of the Mortgage Loans and in consideration of the Underwriter's
purchase of the Notes, to indemnify and hold harmless PSSFC, each of PSSFC's
directors, each of PSSFC's officers who signed the Registration Statement and
each person if any who controls PSSFC within the meaning of the Securities Act
of 1933, as amended, and the Underwriter and each person who controls the
Underwriter within the meaning of the Securities Act of 1933, as amended, for
any losses, claims, damages or liabilities joint or several it incurs as a
result of a breach of such representation and warranty and will reimburse any
legal or other expenses incurred by PSSFC or any such director, officer or
controlling person and the Underwriter or any such controlling person in
connection with investigating any such loss, claim, damage, liability or action.
Each obligation of First Union to indemnify PSSFC and the Underwriter
(each, an "Indemnified Party") is conditioned upon the following: the related
Indemnified Party shall promptly notify First Union in writing of the existence
of any fact or circumstance known to such Indemnified Party giving rise to First
Union's obligation of indemnity and in the case of any claim or litigation which
may give rise to such an obligation, the Indemnified Party shall promptly notify
First Union in writing of the making of such claim or the commencement of such
litigation when the same become known to such Indemnified Party. First Union
shall have the option of defending the Indemnified Party in connection with any
such claim or litigation using First Union's own counsel, which counsel shall be
reasonably satisfactory to the Indemnified Party: if First Union exercises such
option, First Union shall not be responsible for the Indemnified Party's
attorneys' fees incurred after the Indemnified Party receives notification of
First Union's exercise of such option and the Indemnified Party has acknowledged
its approval
<PAGE>
of the selected counsel. First Union shall have the right to settle any such
claim or litigation with the approval the Indemnified Party, which approval
shall not be unreasonably withheld. If the Indemnified Party recovers from any
third party any amount paid by First Union to the Indemnified Party in
satisfaction of First Union's obligations to indemnify the Indemnified Party,
the Indemnified Party shall promptly pay to First Union the full amount so
recovered. First Union shall have no obligation to indemnify each Indemnified
Party for any claims, liabilities, losses, costs, damages, attorneys' fees, or
other expenses which would have been avoided had the Indemnified Party taken
reasonable action to mitigate such claims, liabilities, losses, costs, damages,
attorneys' fees, or other expenses. First Union shall have no obligation to
indemnify each Indemnified Party from any claim, liability, loss, cost, damage,
attorneys' fees or other expenses arising from the negligence or willful
misconduct of such Indemnified Party or its officers, employees, or agents.
The obligations of First Union hereunder shall be in addition to any
liability which First Union may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the related Indemnified
Party and to each person, if any, who controls such Indemnified Party within the
meaning of the Securities Act of 1933, as amended.
The agreement shall be construed in accordance with the substantive laws
of the State of New York (without regard to conflicts of laws principles).
2
<PAGE>
IN WITNESS WHEREOF, First Union has executed this Indemnity Agreement as
of March 5, 1998.
FIRST UNION CAPITAL MARKETS, a division
of Wheat First Securities Corp.
BY: /s/ SHANKER MERCHANT
---------------------------------
Name: Shanker Merchant
Title: Managing Director
Exhibit 2.1
- --------------------------------------------------------------------------------
MORTGAGE LOAN SALE AGREEMENT
Dated as of March 1, 1998
between
MORTGAGE LENDERS NETWORK USA, INC.
and
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. Sale and Purchase.................................................2
SECTION 2. Pool Purchase Price...............................................2
SECTION 3. Transfer of the Mortgage Loans....................................3
SECTION 4. Representations and Warranties of the Seller......................5
SECTION 5. Representations and Warranties of the Depositor...................8
SECTION 6. Covenants of the Seller...........................................9
SECTION 7. Repurchase Obligations...........................................10
SECTION 8. Indemnification..................................................11
SECTION 9. Conditions to Obligation of the Depositor........................12
SECTION 10. Fees and Deposits................................................13
SECTION 11. Mandatory Delivery; Grant of Security Interest...................13
SECTION 12. Notices..........................................................14
SECTION 13. Severability of Provisions.......................................14
SECTION 14. GOVERNING LAW....................................................15
SECTION 15. Agreement of the Seller..........................................15
SECTION 16. Survival.........................................................15
SECTION 17. Assignment; Third Party Beneficiaries............................15
SECTION 18. Miscellaneous....................................................16
EXHIBITS
A. Bill of Sale..............................................................A-1
B. Mortgage Loans Representations and Warranties.............................B-1
C. Defined Terms.............................................................C-1
D. Special Power of Attorney.................................................D-1
E. Assignment of Mortgage Notes..............................................E-1
i
<PAGE>
MORTGAGE LOAN SALE AGREEMENT
THIS MORTGAGE LOAN SALE AGREEMENT (this "Agreement"), made as of March 1,
1998, by and between Mortgage Lenders Network USA, Inc., a Delaware corporation
("MLN" or the "Seller"), and Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor"), recites and provides as
follows:
RECITALS
1. Schedule I attached hereto (the "Mortgage Loan Schedule") and made a
part hereof lists fixed-rate mortgage loans secured by first and second liens on
real properties (the "Mortgage Loans"). The Mortgage Loans are currently owned
by the Seller and the Seller desires to sell such Mortgage Loans to the
Depositor.
2. The Depositor desires to purchase the Mortgage Loans and intends
immediately after its purchase to transfer the Mortgage Loans to Mortgage
Lenders Network Home Equity Loan Trust 1998-1 (the "Issuer"), which will be
formed pursuant to the terms of a deposit trust agreement (the "Trust
Agreement"), dated as of March 1, 1998, by and between the Depositor, as
depositor, and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the "Owner Trustee").
3. The Issuer will in turn pledge the Mortgage Loans to Norwest Bank
Minnesota, National Association, as trustee (the "Indenture Trustee"), under an
indenture to be dated as of March 1, 1998 (the "Indenture"), by and between the
Issuer and the Indenture Trustee, pursuant to which the Issuer's Asset Backed
Notes, Series 1998-1 (the "Notes") will be issued.
4. The Notes shall be sold pursuant to an underwriting agreement dated
March 5, 1998 (the "Underwriting Agreement"), among Prudential Securities
Incorporated ("Prudential"), as representative of Prudential and First Union
Capital Markets, a division of Wheat First Securities Corp. ("First Union," and,
together with Prudential, the "Underwriters"), and the Depositor, and will be
offered publicly for sale by the Underwriters pursuant to a preliminary
prospectus supplement dated March 2, 1998 (the "Preliminary Prospectus
Supplement"), prospectus supplement dated March 5, 1998 (the "Prospectus
Supplement"), and the related prospectus, dated June 10, 1997 (together with the
Prospectus Supplement, the "Prospectus").
5. The certificates of beneficial ownership of the Issuer (the "Trust
Certificates") will be issued at the direction of the Depositor to MLN Capital
Corporation I, a subsidiary of the Seller.
6. Capitalized terms used and not defined herein shall have the meanings
assigned to them in Exhibit C attached hereto or, if not defined therein, in the
Indenture.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the above premises, the mutual
promises herein made and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Sale and Purchase.
(a) Subject to the terms and conditions of this Agreement, the Seller
agrees to sell, and the Depositor agrees to purchase, on the date of the
issuance of the Notes (the "Closing Date"), which is expected to be on or about
March 13, 1998, Mortgage Loans having an aggregate principal balance as of the
close of business on March 1, 1998 or, in the case of those Mortgage Loans which
were funded after March 1, 1998 but before the Closing Date, as of their
respective origination dates, of approximately $120,000,000 The "Cut-off Date"
with respect to any Mortgage Loan will be the later of (i) March 1, 1998 or (ii)
the date such Mortgage Loan was funded by the Seller (which date will have
occurred prior to the Closing Date).
(b) The Seller has prepared the schedule attached hereto as Schedule I
identifying all of the Mortgage Loans to be purchased by the Depositor on the
Closing Date and describing such Mortgage Loans. The Seller shall, with the
Depositor's consent, amend or modify Schedule I on or prior to the Closing Date
if necessary to reflect the inclusion of additional Mortgage Loans and the
withdrawal of certain of the Mortgage Loans currently listed on the attached
Schedule I. Schedule I, as so amended or modified (the "Mortgage Loan
Schedule"), shall conform to the requirements of the Depositor as set forth in
this Agreement and shall be used as the definitive mortgage loan schedule
attached as an exhibit to the Indenture identifying all of the Mortgage Loans
actually transferred by the Seller and accepted by the Depositor on the Closing
Date.
(c) The sale of the Mortgage Loans shall be effected pursuant to the Bill
of Sale substantially in the form attached hereto as Exhibit A (the "Bill of
Sale").
SECTION 2. Pool Purchase Price.
(a) On the Closing Date, as full consideration for the Seller's sale of
the Mortgage Loans to the Depositor, the Depositor will (1) pay to the Seller
cash, in immediately available funds, equal to the proceeds of the sale of the
Notes by the Issuer, net of underwriting discounts and the Issuance Fee
described in Section 10 below, and (2) direct the issuance of the Trust
Certificates (collectively, the "Pool Purchase Price").
(b) The Depositor or any assignee or transferee of the Depositor (which
will include the Issuer and the Indenture Trustee) shall be entitled to all
Monthly Payments due after the Cut-off Date and all Principal Prepayments and
other unscheduled collections of principal collected in respect of the Mortgage
Loans on or after the Cut-off Date. All Monthly Payments due on or before the
Cut-off Date and collected on or after the Cut-off Date shall belong to the
Seller.
2
<PAGE>
(c) The Depositor will transfer and assign all of its right, title and
interest in and to the Mortgage Loans to the Issuer, which will in turn pledge
all of its right, title and interest in and to the Mortgage Loans to the
Indenture Trustee pursuant to the Indenture for the benefit of the holders of
the Notes and the Note Insurer.
SECTION 3. Transfer of the Mortgage Loans.
(a) Transfer of Ownership. Upon the sale of the Mortgage Loans, the
ownership of each Mortgage Loan and the related Mortgage Loan Documents shall be
vested in the Depositor, and the ownership of all other records and documents
with respect to any Mortgage Loan prepared by or which come into the possession
of the Seller shall immediately vest in the Depositor upon such preparation or
possession. The Seller shall promptly deliver to the Custodian, on behalf of the
Indenture Trustee, any documents that come into its possession with respect to
the Mortgage Loans following the sale of the Mortgage Loans to the Depositor.
Prior to such delivery, the Seller shall hold any such documents for the benefit
of the Depositor, its successors and assigns.
All documents with respect to any Mortgage Loan in the possession of MLN
following the execution by MLN of the Servicing Agreement shall be held by MLN,
in its capacity as Servicer, as bailee and agent for the Depositor, its
successors and assigns (including particularly the Issuer and the Indenture
Trustee), and shall only be released in accordance with the terms of the
Servicing Agreement.
(b) Delivery of Mortgage Loan Files. Not later than two Business Days
prior to the Closing Date, the Seller shall deliver to the Custodian, on behalf
of the Indenture Trustee, each of the Mortgage Loan Documents required to be
included in the Mortgage File for each Mortgage Loan and an assignment of
Mortgage endorsed in blank substantially in the form of Exhibit E hereto. In the
event that the assignment of mortgage is recorded in accordance with Section
3(d) hereof, the Mortgage Note for each Mortgage Loan shall be endorsed by the
Custodian without recourse to the Indenture Trustee and the Mortgage for each
Mortgage Loan shall be assigned to the Indenture Trustee. Each endorsement of a
Mortgage Note to the Indenture Trustee shall be in the following form:
WITHOUT RECOURSE,
PAY TO THE ORDER OF
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
AS INDENTURE TRUSTEE
Each assignment of a Mortgage relating to a Mortgage Loan shall be made to
"NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE under an
Indenture with Mortgage Lenders Network Home Equity Loan Trust 1998-1 dated as
of March 1, 1998."
The Seller shall deliver the Mortgage Notes and the assignments of
Mortgage in recordable form to the Custodian, on behalf of the Indenture
Trustee, endorsed and assigned in blank, and in the event that the assignment of
mortgage is recorded in
3
<PAGE>
accordance with Section 3(d) hereof, the Custodian, on behalf of the Indenture
Trustee, shall fill in the endorsements and assignments as specified above by
stamp. The Indenture Trustee shall return the completed assignments of Mortgage
to the Custodian as soon as possible after the Closing Date so the Custodian can
send them out for recording as appropriate.
Prior to the transfer and sale of the Mortgage Loans pursuant to this
Agreement, all Mortgage Loan Documents delivered to the Custodian, on behalf of
the Indenture Trustee, shall be held by the Custodian, on behalf of the
Indenture Trustee, for the benefit of the Seller, and the possession by the
Custodian, on behalf of the Indenture Trustee, of such Mortgage Loan Documents
will be at the will of the Seller and will be in a custodial capacity only.
Following the transfer and sale of the Mortgage Loans from the Seller to the
Depositor in accordance with the terms and upon satisfaction of the conditions
of this Agreement and until transfer of the Mortgage Loans to the Issuer, the
Custodian, on behalf of the Indenture Trustee, will hold all Mortgage Loan
Documents delivered to it hereunder for the benefit of the Depositor, as its
agent and bailee. The Custodian will act on the Depositor 's behalf as a
custodian for the receipt and custody of all Mortgage Files during the period
described in the preceding sentence and, after the transfer of the Mortgage
Loans to the Issuer, the Custodian will hold all Mortgage Loan Documents
delivered to it hereunder as the agent of and custodian for the Issuer until the
Mortgage Loans are pledged by the Issuer to the Indenture Trustee.
(c) Examination of Mortgage Loan Documents; Acceptance of Mortgage Loans.
Prior to the Closing Date, the Seller shall either (1) deliver to the Depositor
or its designee in escrow, for examination, the Mortgage Loan Documents
pertaining to each Mortgage Loan, or (2) make such Mortgage Loan Documents
available to the Depositor or its designee for examination at the Seller's
offices or at such other place as the Seller shall specify. The Depositor, the
Issuer, the Custodian, the Indenture Trustee, or a designee of any such entity
may review the Mortgage Loan Documents.
Prior to the Closing Date, the Custodian shall review the documents
delivered pursuant to Section 3(b) hereof as provided in Section 6.15(a) of the
Indenture. An additional review shall be conducted by the Custodian, on behalf
of the Indenture Trustee prior to the first anniversary of the Closing Date as
provided in Section 6.15(b) of the Indenture. If at any time the Depositor, the
Custodian or the Indenture Trustee discovers or receives notice that any
Mortgage Loan Document is missing or defective in any material respect with
respect to any Mortgage Loan, or that there exists any material discrepancy
between the Mortgage Loan Documents and the Mortgage Loan Schedule, it shall
promptly notify the Seller and the Note Insurer in writing thereof. Upon its
receipt of notice of such incompleteness, defect or discrepancy, the Seller
shall cure, repurchase or substitute for the affected Mortgage Loan to the
extent provided in Section 7(b) hereof. At the time of any such repurchase or
substitution, the Custodian shall release documents in its possession relating
to such Mortgage Loan to the Seller. The fact that the Depositor, the Custodian,
the Indenture Trustee or a designee of either entity has conducted or has failed
to conduct any partial or complete examination of the Mortgage Loan Documents
shall not affect the rights of the Depositor, the Indenture Trustee (or any
4
<PAGE>
assignee or successor of either of them) to demand repurchase or other relief as
provided herein.
(d) Recordation of Assignments of Mortgage. Subject to the sale of the
Mortgage Loans by the Seller to the Depositor in accordance with the terms of
this Agreement, the Depositor hereby authorizes and instructs the Seller, and
the Seller hereby agrees, to record (or to cause one of its affiliates to
record) all assignments with respect to each Mortgage Loan required to be
contained in the Mortgage File pursuant to the Indenture in the public recording
office for the jurisdiction in which the related Mortgaged Property is located;
provided, however, that, for administrative convenience and facilitation of
servicing and to reduce closing costs, assignments of mortgage shall not be
required to be submitted for recording with respect to any Mortgage Loan, unless
a Recordation Trigger Event shall have occurred and be continuing; and provided,
further, that no recordation of the assignment of mortgage shall be required
upon the occurrence of a Recordation Trigger Event, if the Indenture Trustee,
the Note Insurer and each Rating Agency has received an Opinion of Counsel,
satisfactory in form to the Note Insurer and each Rating Agency, to the effect
that the recordation of such assignments in any specific jurisdiction is not
necessary to protect the Indenture Trustee's interest in the related Mortgage.
All recording fees relating to the recordation of the assignments as described
above shall be paid by the Seller or an affiliate of the Seller. Such
assignments with respect to each Mortgage Loan must be delivered to the
recording office of the appropriate jurisdiction within 60 days after the
Closing Date, and the failure of the related assignment to contain evidence of
recording thereon within one year after the Closing Date will constitute a
defect for purposes of Section 7 below.
(e) On or before the Closing Date, the Seller shall deliver to the
Indenture Trustee original executed powers of attorney, from the current
recordholders of the related Mortgage substantially in the form of Exhibit D,
authorizing the Indenture Trustee to record the assignments of mortgage as
provided in (d) above, if necessary. Pursuant to such powers of attorney, the
Indenture Trustee also may authorize the Servicer to execute a new assignment of
mortgage for any Mortgage Loan if the original assignment of mortgage delivered
by the Seller to the Indenture Trustee is not in recordable form at such time as
the assignment of mortgage is to be recorded by the Custodian.
SECTION 4. Representations and Warranties of the Seller.
(a) The Seller hereby represents and warrants to the Depositor as of the
date of this Agreement, or as of such other date as is specifically provided, as
follows:
(1) The Seller has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to do business and in good standing under the laws of each
jurisdiction that requires such qualification wherein it owns or leases
any material properties (except where the failure so to qualify would not
have a material adverse effect on the Seller). The Seller has the full
power and authority (corporate and other) to own its properties and
conduct its business as its business is presently conducted.
5
<PAGE>
(2) The Seller has the full power, authority and legal right to
transfer and convey the Mortgage Loans to the Depositor, and has the full
power, authority (corporate and other) and legal right to execute and
deliver, engage in the transactions contemplated by, and perform and
observe the terms and conditions of, this Agreement.
(3) This Agreement has been duly and validly authorized, executed
and delivered by the Seller and (assuming the due authorization, execution
and delivery hereof by the Depositor) constitutes the valid, legal and
binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws affecting
creditors' rights generally and to general principles of equity,
regardless of whether such enforcement is sought in a proceeding in equity
or at law.
(4) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance by
the Seller with this Agreement or the consummation by the Seller of any
other transaction contemplated hereby except for those that have been
obtained by the Seller and are in full force and effect.
(5) Neither the execution and delivery of this Agreement by the
Seller, nor the consummation by the Seller of the transactions herein
contemplated, nor compliance with the provisions hereof by the Seller,
will (A) conflict with or result in a breach of, or constitute a default
under, any of the provisions of the Seller's articles of incorporation or
by-laws, or any law, governmental rule or regulation, or any judgment,
decree or order binding on the Seller or any of its properties, or any of
the provisions of any indenture, mortgage, deed of trust, contract or
other instrument to which the Seller is a party or by which the Seller is
bound or (B) result in the creation or imposition of any lien, charge or
encumbrance which would have a material adverse effect upon any of the
Seller's properties pursuant to the terms of any such indenture, mortgage,
deed of trust, contract or other instrument.
(6) The Seller is not, and with passage of time does not expect to
become, insolvent or bankrupt.
(7) There are no actions, suits, proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller that
should reasonably be expected to affect adversely the transfer of the
Mortgage Loans, the issuance of the Notes, or the execution, delivery,
performance or enforceability of this Agreement or have a material adverse
effect on the financial condition of the Seller.
(8) The Seller is, and, immediately prior to the sale of the
Mortgage Loans to the Depositor, the Seller will be, the sole owner of,
and will have good,
6
<PAGE>
indefeasible and marketable title to, the Mortgage Loans, subject to no
prior lien, mortgage, security interest, pledge, charge or other
encumbrance, except any lien to be released prior to or concurrently with
the purchase of the Mortgage Loans by the Depositor. Following the sale of
the Mortgage Loans, the Depositor or the Issuer as the Depositor's
transferee will own such Mortgage Loans, free and clear of any prior lien,
mortgage, security interest, pledge, charge or other encumbrance (assuming
that an Assignment of the related Mortgage from the Seller to the
Depositor, or its designee, is recorded), except the lien created by the
Indenture.
(9) Neither this Agreement, nor any statement, report or other
document prepared by MLN and furnished or to be furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement or alleged untrue statement of any material
fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading.
(b) As to each Mortgage Loan, the Seller hereby represents and warrants to
the Depositor as of the date of this Agreement, or as of such other date as is
specifically provided, that each representation and warranty set forth in
Exhibit B hereto is true and correct.
(1) The Seller has not dealt with any broker, investment banker,
agent or other person that may be entitled to any commission or
compensation in connection with the sale of the Mortgage Loans to the
Depositor.
(2) The Seller will treat the transfer of the Mortgage Loans to the
Depositor as a sale on its books and records in accordance with generally
accepted accounting principles.
(3) With respect to each Mortgage Loan, the Seller is in possession
of each of the Mortgage Loan Documents required to be included in the
related Mortgage File (except to the extent such Mortgage File has been
delivered to the Indenture Trustee or the Custodian as described in this
Agreement).
(4) The transfer, assignment and conveyance of the Mortgage Loans by
the Seller pursuant to this Agreement are not subject to the bulk transfer
or any similar statutory provisions in effect in any applicable
jurisdiction.
(5) The Seller used no adverse selection procedures in selecting the
Mortgage Loans that identified the Mortgage Loans as being less desirable
or valuable than other mortgage loans in its portfolio as to which the
representations and warranties required by this Agreement could truthfully
be made. The Mortgage Loans are representative of the Seller's portfolio
of fixed-rate residential mortgage loans.
(6) The description of those Mortgage Loans that had been identified
as of February 17, 1998 (the "Initial Mortgage Loans") set forth in the
Offering Documents and the Prospectus Supplement under the heading
"Summary of
7
<PAGE>
Terms - The Mortgage Loans" and "Description of the Mortgage Pool" does
not contain any untrue statement of any material fact or omit any material
fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which
they are made, not misleading.
(7) The information set forth in the Mortgage Loan Schedule hereto
is true and correct in all material respects in the case of each Mortgage
Loan, as of its respective Cut-off Date.
(8) The consideration received by the Seller upon the sale of the
Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans.
(9) The Seller is solvent, and the sale of the Mortgage Loans as
contemplated hereby will not cause the Seller to become insolvent. The
sale of the Mortgage Loans is not undertaken with the intent to hinder,
delay or defraud any of the Seller's creditors.
(10) The Seller intends to relinquish all rights to possess, control
and monitor the Mortgage Loans sold pursuant to this Agreement (except
such rights as are entailed in its serving as the Servicer of the Mortgage
Loans under the Servicing Agreement). After the Closing Date, the Seller
will have no right to modify or alter the terms of the sale of the
Mortgage Loans (except such rights as are entailed in its serving as the
Servicer of the Mortgage Loans under the Servicing Agreement), and the
Seller will have no right or obligation to repurchase any Mortgage Loan or
substitute another mortgage loan for any Mortgage Loan sold hereunder,
except as provided in Sections 3 and 7 hereof.
SECTION 5. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Seller as of the date of
this Agreement, or as of such other date as is specifically provided, as
follows:
(a) The Depositor is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware.
(b) The Depositor has the full power, authority (corporate and other) and
legal right to execute and deliver, engage in the transactions contemplated by,
and perform and observe the terms and conditions of, this Agreement.
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, and (assuming the due authorization, execution and
delivery hereof by the Seller) constitutes the valid, legal and binding
agreement of the Depositor, enforceable against the Depositor in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws affecting creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is sought
in a proceeding in equity or at law.
8
<PAGE>
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required, for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any other transaction
contemplated hereby except for those which have been obtained by the Depositor
and are in full force and effect.
(e) Neither the execution and delivery of this Agreement by the Depositor,
nor the consummation by the Depositor of the transactions hereby contemplated,
nor compliance with the provisions hereof by the Depositor, will (i) conflict
with or result in a breach of, or constitute a default under, any of the
provisions of the Depositor's certificate of incorporation or by-laws, or any
law, governmental rule or regulation, or any judgment, decree or order binding
on the Depositor or any of its properties, or any of the provisions of any
contract or other instrument to which the Depositor is a party or by which it is
bound or (ii) result in the creation or imposition of any lien, charge or
encumbrance which would have a material adverse effect upon the Notes.
(f) There are no actions, suits, proceedings or investigations pending or,
to the Depositor's knowledge, threatened against the Depositor that should
reasonably be expected to affect adversely the execution, delivery, performance
or enforceability of this Agreement or have a material adverse effect on the
financial condition of the Depositor.
SECTION 6. Covenants of the Seller. The Seller hereby covenants to the
Depositor as follows:
(a) On or before the Closing Date, the Seller shall execute and deliver a
Secretary's or Assistant Secretary's Certificate evidencing the Seller's
authority to enter into the transactions contemplated by this Agreement.
(b) On or before the Closing Date, the Seller shall take all steps
reasonably required of it to effect the transfer of the Mortgage Loans to the
Depositor, the transfer of the Mortgage Loans to the Issuer and the pledge of
the Mortgage Loans to the Indenture Trustee, free and clear of any lien, charge,
or encumbrance except the lien evidenced by the Indenture.
(c) The Seller shall use its best efforts to make available to counsel for
the Depositor in executed form each of the Closing Documents (as defined in
Section 9(b) below) on or before the Closing Date, it being understood that such
documents are to be released and delivered only on the closing of the
transaction contemplated hereby and the sale of the Notes.
(d) In the event the Seller fails to take all actions necessary to effect
the conveyance of the Mortgage Loans to the Depositor on or before the Closing
Date as contemplated hereby, the Seller hereby constitutes and appoints the
Depositor and its officers and representatives as the Seller's true and lawful
attorneys-in-fact to do all acts and transactions and to execute and deliver all
agreements, documents, instruments and papers by and on behalf of the Seller as
may be necessary to consummate the transfer of
9
<PAGE>
the Mortgage Loans to the Depositor. The foregoing grant of authority shall be
deemed to be irrevocable and a power coupled with an interest.
(e) The Seller covenants that it shall operate in such a manner that MLN
Capital Corporation I would not be substantively consolidated in the bankruptcy
estate of the Seller, such that the separate existence of MLN Capital
Corporation I would be disregarded in the event of the bankruptcy or insolvency
of the Seller.
SECTION 7. Repurchase Obligations.
(a) Each of the representations and warranties made by the Seller herein
shall survive the purchase by the Depositor of the Mortgage Loans and shall
continue in full force and effect, notwithstanding any restrictive or qualified
endorsement on the Mortgage Notes and notwithstanding subsequent termination of
this Agreement, the Trust Agreement or the Indenture. The Seller's
representations and warranties shall not be impaired by any review or
examination of Mortgage Loan Documents or other documents evidencing or relating
to the Mortgage Loans or any failure on the part of the Depositor to review or
examine such documents and shall inure to the benefit of the Issuer and the
Indenture Trustee (as the assignees of the Depositor) for the benefit of the
Noteholders and the Note Insurer. With respect to the representations and
warranties contained herein that are made to the best of the Seller's knowledge
or as to which the Seller has no knowledge, if it is discovered by either the
Seller, the Depositor, or the Indenture Trustee that the substance of any such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan, then notwithstanding
the Seller's lack of knowledge with respect to the substance of such
representation and warranty being inaccurate at the time the representation and
warranty was made, the Seller shall take action in accordance with the following
paragraph in respect of such Mortgage Loan.
(b) Upon discovery or receipt of notice by the Seller, the Depositor or
the Indenture Trustee of any missing or materially defective document in any
Mortgage File, a breach of any of the representations and warranties set forth
in Section 4 hereof or in Exhibit B hereto, or a default in the performance of
any of the covenants or other obligations of the Seller under this Agreement,
that in any of the foregoing cases materially and adversely affects the value of
any Mortgage Loan or the interest therein of the Depositor, the Issuer, the
Indenture Trustee, the Noteholders or the Note Insurer, the party discovering or
receiving notice of the missing or materially defective document, breach, or
default shall give prompt written notice to the other parties and to the
Underwriters. Upon its discovery or its receipt of notice of any such missing or
materially defective documentation or any such breach of a representation and
warranty or covenant, the Seller shall, within 60 days after such discovery or
receipt of such notice, either (i) cure such defect or breach in all material
respects, or (ii) either repurchase the affected Mortgage Loan at the Purchase
Price therefor or substitute one or more Qualified Replacement Mortgage Loans
for the related Mortgage Loan. The Seller shall amend the Mortgage Loan Schedule
to reflect the withdrawal of any Mortgage Loan from the terms of this Agreement,
the Trust Agreement and the Indenture and the addition, if any, of any Qualified
Replacement Mortgage Loan(s). In order to effect a substitution pursuant to
10
<PAGE>
this Section 7(b), the Seller will deliver to the Indenture Trustee or the
Custodian (i) each of the Mortgage Loan Documents required to be contained in
the Mortgage File with respect to the Qualified Replacement Mortgage Loan(s) and
(ii) if the aggregate Principal Balance on the date of substitution of the
Qualified Replacement Mortgage Loan(s) is less than the Principal Balance of the
replaced Mortgage Loan (after application of Monthly Payments due in the month
of substitution), cash in an amount equal to such shortfall plus 30 days'
interest at the Mortgage Interest Rate for the replaced Mortgage Loan on the
amount of such shortfall. The Indenture Trustee shall deposit any such cash into
the Note Account. Any repurchase of a Mortgage Loan pursuant to this Section
7(b) shall be accomplished by the delivery to the Indenture Trustee, on (or
determined as of) the last day of the calendar month in which such repurchase is
made, of the Purchase Price for such Mortgage Loan (such delivery may be made on
or before the Deposit Date in the month following such calendar month).
(c) It is understood and agreed that the obligations of the Seller set
forth in this Section 7 to cure, repurchase or substitute for a Mortgage Loan
and to indemnify the Depositor as provided in Section 8 of this Agreement
constitute the sole remedies of the Depositor, the Issuer and the Indenture
Trustee against the Seller with respect to a missing or materially defective
document in any Mortgage File, a breach of representations and warranties of the
Seller set forth in Section 4 hereof or in Exhibit B hereto, or a default in the
performance by the Seller of any of its covenants or other obligations under
this Agreement.
SECTION 8. Indemnification.
(a) In the event the Seller breaches its representations, warranties,
covenants or obligations set forth herein or in the event of Mortgage Pool
Error, the Seller shall indemnify and hold harmless the Depositor (and its
assignees in accordance with Section 17 hereof) (the "Indemnified Parties") from
and against any losses, damages, penalties, fines, forfeitures, legal fees and
related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, such
breach or such Mortgage Pool Error. Promptly after receipt by an Indemnified
Party of notice of the commencement of any such action, such Indemnified Party
will notify the Seller in writing of the commencement thereof if a claim in
respect of such action is to be made against the Seller under this Section 8,
but the omission so to notify the Seller will not relieve the Seller from any
liability hereunder unless such omission materially prejudices the rights and
positions of the Seller. If any such action is brought against an Indemnified
Party, and it notifies the Seller of the commencement thereof, the Seller will
be entitled to participate therein, and to assume the defense thereof, with
counsel selected by the Seller and reasonably satisfactory to such Indemnified
Party, and after notice from the Seller to the Indemnified Party of its election
so to assume the defense thereof, the Seller will not be liable to the
Indemnified Party under this Section 8 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
of such action; provided, however, that this sentence shall not be in effect if
(1) the Seller shall not have employed counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action or (2) the Seller shall have
11
<PAGE>
authorized the employment of counsel for the Indemnified Party at the expense of
the Seller. If the Seller assumes the defense of any such proceeding, it shall
be entitled to settle such proceeding with the consent of any Indemnified Party
that is also subject to such proceeding or, if such settlement provides for
release of any such Indemnified Party in connection with all matters relating to
the proceeding which have been asserted against such Indemnified Party in such
proceeding by the other parties to such settlement, without the consent of such
Indemnified Party.
(b) The Seller shall reimburse the Underwriters upon demand for all
amounts otherwise payable by the Depositor pursuant to the indemnification
provisions in the Underwriting Agreement, in the event that any breach referred
to in the preceding paragraph or any of the following results in the inability
of the parties hereto to consummate the transactions contemplated herein: (1)
failure to obtain any consent or authorization, if any, required under federal
or applicable state law for the Seller to perform the transactions contemplated
herein; or (2) the Seller's failure to perform any of the obligations of the
Seller under Section 9(a), (b), (c) or (d) hereof.
(c) In the event of a breach by an Underwriter of its obligation to
purchase the Notes pursuant to the Underwriting Agreement, subject to payment in
full of the Issuance Fee (as defined in Section 10 below) to the Depositor, the
Depositor hereby assigns to the Seller any and all rights of action or other
claims the Depositor may have against any Underwriter pursuant to the
Underwriting Agreement (other than the Depositor's right to receive payment due
the Depositor from the Underwriters for the Depositor's expenses related to the
proposed issuance of the Notes); provided, however, that the Depositor expressly
reserves, and does not hereby assign, its rights to indemnification and
contribution under the Underwriting Agreement and any other rights to
indemnification or contribution it may have at law or in equity.
SECTION 9. Conditions to Obligation of the Depositor. The obligation of
the Depositor hereunder to purchase the Mortgage Loans is subject to the
following conditions:
(a) The accuracy in all material respects of all of the representations
and warranties of the Seller under this Agreement and the non-occurrence of any
event which, with notice or the passage of time, would constitute a default
under this Agreement;
(b) the Depositor shall have received, or the Depositor's attorneys shall
have received, in escrow (to be released from escrow at the time of closing),
the following documents (collectively, the "Closing Documents") in such forms as
are agreed upon and acceptable to the Depositor, duly executed by all
signatories other than the Depositor as required pursuant to the respective
terms thereof:
(i) A Bill of Sale substantially in the form of Exhibit A hereto;
(ii) An opinion of counsel for the Seller as to various corporate
matters and such other opinions of counsel as are necessary in order to
obtain the ratings set forth in Section 9(f) below, each of which shall be
12
<PAGE>
acceptable to the Depositor, its counsel, the Seller, its counsel, and
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc. ("S&P" and
together with Moody's, the "Rating Agencies") (it being understood that
such opinions shall expressly provide that the Indenture Trustee shall be
entitled to rely on such opinions of counsel); and
(iii) From Coopers and Lybrand LLP, certified public accountants,
comfort letters as required by the Underwriting Agreement.
(c) The Seller shall have delivered to the Indenture Trustee, in escrow,
all documents required to be delivered hereunder and shall have released its
interest therein to the Depositor or its designee;
(d) Compliance by the Seller with all other terms and conditions of this
Agreement;
(e) The purchase by the Underwriters of the Notes pursuant to the terms of
the Underwriting Agreement; and
(f) The receipt of written confirmation from Moody's and S&P that they
have assigned ratings of "Aaa" and "AAA" to the Notes, respectively.
SECTION 10. Fees and Deposits. The Seller shall be responsible for
payment of (1) all fees and expenses of accountants, printers, the Note Insurer,
the Owner Trustee and the Indenture Trustee in connection with the issuance of
the Notes, including the fees of their respective attorneys, including such fees
and expenses associated with loan file due diligence review, (2) the fees
incurred by the Depositor in connection with the establishment of the
registration statement with respect to the Notes, including fees payable to the
Securities and Exchange Commission with respect to the Notes, the payment of an
issuance fee (the "Issuance Fee") of $300,000 to or at the direction of the
Depositor for the use of its services in connection with the issuance of the
Notes and the Depositor's related fees and expenses for attorneys and
accountants, and (3) the fees and expenses payable to the Rating Agencies for
their initial ratings of the Notes, including the fees of their respective
attorneys. In addition, the Seller shall pay the fees and expenses of its and
the Depositor's attorneys and accountants in connection with the issuance of the
Notes.
SECTION 11. Mandatory Delivery; Grant of Security Interest. The sale and
delivery on the Closing Date of the Mortgage Loans described in the Mortgage
Loan Schedule are mandatory, it being specifically understood and agreed that
each Mortgage Loan is unique and identifiable on the Closing Date and that an
award of money damages would be insufficient to compensate the Depositor for the
losses and damages that would be incurred by the Depositor in the event of the
Seller's failure to deliver the Mortgage Loans on or before the Closing Date.
The Seller hereby grants to the Depositor a first lien on and a continuing first
priority security interest in each Mortgage Loan and each document and
instrument evidencing each Mortgage Loan to secure the performance by
13
<PAGE>
the Seller of its obligation to deliver such Mortgage Loans hereunder. All
rights and remedies of the Depositor under this Agreement are distinct from, and
cumulative with, any other rights or remedies under this Agreement or afforded
by law or equity, and all such rights and remedies may be exercised
concurrently, independently or successively.
SECTION 12. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or mailed by registered mail, postage prepaid, or transmitted by
telecopier, telex or telegraph and confirmed by a similar mailed writing, to the
following:
a. If to the Depositor:
Prudential Securities Secured Financing Corporation
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292-1000
Telecopy: (212)778-7401
b. If to the Seller:
Mortgage Loan Network USA, Inc.
Middlesex Corporate Center, 11th Floor
213 Court Street
Middletown, Connecticut 06487
Attention: General Counsel
Telecopy: (860) 344-5707
c. If to the Note Insurer:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management - Structured
Finance (IMP-SF) (Mortgage Lenders Network Home Equity Loan
Trust 1998-1)
Telecopy: (914) 765-3810
Any party may alter the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the
provisions of this Section 12 for the giving of notice.
SECTION 13. Severability of Provisions. Any part, provision,
representation, warranty or covenant contained in this Agreement that is
prohibited or unenforceable or that is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties
14
<PAGE>
hereto waive any provision of law that prohibits or renders void or
unenforceable any provision hereof.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, NOTWITHSTANDING
ANY NEW YORK OR OTHER CONFLICT OF LAWS PROVISION TO THE CONTRARY.
SECTION 15. Agreement of the Seller. The Seller agrees to execute and
deliver such instruments and take such actions as the Depositor, the Issuer or
the Indenture Trustee may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement, including,
without limitation, the execution and filing of any UCC financing statements to
evidence the interests of the Depositor and any of its transferees in the
Mortgage Loans and other assets pledged to the Indenture Trustee.
SECTION 16. Survival. The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to have been relied upon by
the Depositor, notwithstanding any investigation heretofore or hereafter made by
the Depositor or on the Depositor's behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans.
SECTION 17. Assignment; Third Party Beneficiaries. The Seller hereby
acknowledges that the Depositor will assign all its rights hereunder (except
those rights set forth in Section 8(b) and Section 10 hereof) to the Issuer,
which will in turn pledge all of the rights hereunder to the Indenture Trustee.
The Seller agrees that, upon the execution of the Indenture, the Indenture
Trustee will have all such rights and remedies provided to the Depositor
hereunder (except those rights set forth in Section 8(b) and Section 10 hereof)
and this Agreement will inure to the benefit of the Indenture Trustee for the
benefit of the Noteholders and the Note Insurer.
The Indenture Trustee shall constitute not only an assignee of the
Depositor's rights in accordance with this Section 17 but also an intended
third-party beneficiary of this Agreement to the extent necessary to enforce
such rights and to obtain the benefit of such remedies. The Note Insurer is an
intended third-party beneficiary of this Agreement, and this Agreement shall be
binding upon and inure to the benefit of the Note Insurer; provided that,
notwithstanding the foregoing, for so long as a Note Insurer Default is
continuing with respect to its obligations under the Note Insurance Policy, the
Noteholders shall succeed to the Note Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Agreement that expressly confer rights upon the Note Insurer shall be for the
benefit of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Agreement.
15
<PAGE>
SECTION 18. Miscellaneous.
(a) This Agreement may be executed in two or more counterparts, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument. This Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns.
(b) Any person into which the Seller may be merged or consolidated or any
person resulting from a merger or consolidation involving the Seller or any
person succeeding to the business of the Seller shall be considered the
successor of the Seller hereunder, without the further act or consent of either
party hereto. Except as provided above, this Agreement cannot be assigned,
pledged or hypothecated by any party without the written consent of each other
party to this Agreement and the Note Insurer.
(c) This Agreement supersedes all prior agreements and understandings
between the parties hereto relating to the subject matter hereof. Neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning of the provisions of this Agreement.
(d) The Depositor shall immediately deliver the Mortgage Loans and all
related Mortgage Loan Documents to the Seller or the Seller's designee and any
security interest created by Section 11 hereof shall be deemed to have been
released if, on the Closing Date, each of the conditions set forth in Section 9
hereof shall not have been satisfied or waived.
(e) It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Seller to the Depositor as contemplated by this
Agreement be construed as a sale of the Mortgage Loans by the Seller to the
Depositor. It is, further, not the intention of the parties that such conveyance
be deemed a pledge of the Mortgage Loans by the Seller to the Depositor or any
assignee of the Depositor, including, but not limited to, the Indenture Trustee,
to secure a debt or other obligation of the Seller. However, in the event that,
notwithstanding the intent of the parties hereto, the Mortgage Loans are held to
be property of the Seller, then (i) this Agreement shall also be deemed to be a
security agreement within the meaning of Article 9 of the New York Uniform
Commercial Code; (ii) the conveyance provided for herein shall be deemed to be a
grant by the Seller to the Depositor of a first priority security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holder of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities, or other property, including,
without limitation, all amounts, other than investment earnings, from time to
time held or invested in the Note Account or the Collection Account, whether in
the form of cash, instruments, securities or other property; (iii) the
possession by the Depositor or its agents of items of property that constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the
16
<PAGE>
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the New York Uniform Commercial Code, and (iv) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Depositor for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Depositor pursuant to any provision hereof shall also be deemed to be an
assignment of any security interest created hereby. The Seller and the Depositor
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and would be
maintained as such throughout the terms of this Agreement and the Indenture.
17
<PAGE>
IN WITNESS WHEREOF, the Seller and the Depositor have caused this Mortgage
Loan Sale Agreement to be executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
MORTGAGE LENDERS NETWORK USA, INC.
By: /s/ MITCHELL L. HEFFERNAN
-------------------------------------
Name: Mitchell L. Heffernan
Title: President & CEO
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ EDWARD J. FITZGERALD
-------------------------------------
Name: Edward J. Fitzgerald
Title: Vice President
FOR THE LIMITED PURPOSE OF ACKNOWLEDGING ITS OBLIGATIONS UNDER SECTIONS 3 AND 7
HEREOF:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: /s/ AMY WAHL
-------------------------------------
Name: Amy Wahl
Title: Assistant Vice President
18
<PAGE>
EXHIBIT A
BILL OF SALE
BILL OF SALE, made as of the 13th day of March, 1998, by Mortgage Lenders
Network USA, Inc., a Delaware corporation ("MLN" or the "Seller"), to Prudential
Securities Secured Financing Corporation, a Delaware corporation (the
"Depositor").
WHEREAS, the Seller and the Depositor are parties to that certain Mortgage
Loan Sale Agreement, dated as of March 1, 1998, with respect to the sale by the
Seller and purchase by the Depositor of certain Mortgage Loans (the "Sales
Agreement");
WHEREAS, the Depositor intends to transfer the Mortgage Loans and certain
related assets to Mortgage Lenders Network Home Equity Loan Trust 1998-1 (the
"Issuer"), and the Issuer intends in turn to pledge the Mortgage Loans and
certain related assets to Norwest Bank Minnesota, National Association, as
trustee (the "Indenture Trustee") pursuant to an Indenture (the "Indenture"),
dated as of March 1, 1998, between the Issuer and the Indenture Trustee.
NOW, THEREFORE, the Seller, for and in consideration of the consideration
set forth in the Sales Agreement, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, does hereby bargain,
sell, convey, assign and transfer to the Depositor, without recourse, free and
clear of any liens, claims or other encumbrances, all of its right, title and
interest in and to each of the Mortgage Loans identified on Schedule I to the
Indenture, together with the Mortgage Loan Documents and other documents
maintained as part of the related Mortgage Files and the Seller's interest in
any Mortgaged Properties which secure a Mortgage Loan but are acquired by
repossession, foreclosure or deed in lieu of foreclosure after the Closing Date,
and all scheduled payments due on the Mortgage Loans after their respective
Cut-off Dates, and all principal prepayments and other unscheduled collections
collected in respect of the Mortgage Loans on or after the Cut-off Date, and all
proceeds of the conversion, voluntary or involuntary, of the foregoing.
The Seller hereby acknowledges receipt from the Depositor of the Pool
Purchase Price referred to in Section 2 of the Sales Agreement.
Nothing in this Bill of Sale shall be construed to be a modification of,
or limitation on, any provision of the Sales Agreement, including the
representations, warranties and agreements set forth therein.
Unless otherwise defined herein, capitalized terms used in this Bill of
Sale shall have the meanings assigned to them in the Sales Agreement, or if not
assigned in the Sales Agreement, the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be executed
and delivered by its respective officer thereunto duly authorized as of the date
above written.
MORTGAGE LENDERS NETWORK USA, INC.
By:_________________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT B
MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
The Seller makes the following representations, warranties and covenants
as to each Initial Mortgage Loan as of its Cut-off Date and as of the Closing
Date.
(i) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule (as to the Initial Mortgage Loans) and in the
Closing Schedule (with respect to all of the Mortgage Loans) is true and
correct in all material respects.
(ii) Payments Current; No First Payment Default. No payment required
under the Mortgage Note is more than two payments past due as of the
Cut-off Date.
(iii) No Outstanding Charges. There are no defaults in complying
with the terms of the Mortgage, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold payments
and ground rents which previously became due and owing have been paid, or
an escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed but is
not yet due and payable.
(iv) Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any
respect, except by a written instrument which has been recorded, if
necessary to protect the interests of the mortgagee and which has been
delivered to the Depositor or its designee as part of the related Mortgage
File. The substance of any such waiver, alteration or modification has
been approved by the title insurer, to the extent required by the policy.
The mortgagor has not been released, in whole or in part, except in
connection with an assumption agreement approved by the title insurer, to
the extent required by the policy, and which assumption agreement is
included in the Mortgage File delivered to the Depositor or its designee.
(v) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including, without
limitation, the defense of usury, nor will the operation of any of the
terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable,
in whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including, without limitation the defense of
usury, and no such right of rescission, set-off, counterclaim or defense
has been asserted with respect thereto.
(vi) Insurance Policies in Effect. Pursuant to the terms of the
Mortgage, all improvements upon the related Mortgaged Property are insured
by an insurer rated B/III, A/II or better by Best's Key Rating Guide
against loss by fire and such
<PAGE>
other risks as are usually insured against in the broad form of extended
coverage hazard insurance available in the jurisdiction where that
Mortgaged Property is located, including flood hazards if the Mortgaged
Property is in an area identified in the Federal Register by the Federal
Emergency Management Agency as subject to special flood hazards (and if
flood insurance was required by federal regulation and flood insurance has
been made available in the jurisdiction where the related Mortgaged
Property is located). All such insurance policies (collectively, the
"hazard insurance policy") meet the requirements of the current guidelines
of the Federal Insurance Administration and are standard policies of
insurance for the locale where the related Mortgaged Property is located.
The coverage amount of the insurance provided by any such insurance policy
is at least equal to the lesser of (a) the full insurable value of the
Mortgaged Property on a replacement cost basis or (b) the unpaid balance
of the Mortgage Loan. Each such insurance policy names (and will name) the
present owner of the Mortgaged Property as the insured and contains a
standard mortgagee loss payable clause naming the loan's originator or the
Seller and its successors and assigns as Mortgagee, and all premiums
thereon have been paid.
The Mortgage obligates the mortgagor thereunder to maintain the hazard
insurance policy at the mortgagor's cost and expense, and on the mortgagor's
failure to do so, authorizes the holder of the Mortgage to obtain and maintain
such insurance at such mortgagor's cost and expense, and to seek reimbursement
therefor from the mortgagor. Where required by state law or regulation, the
mortgagor has been given an opportunity to choose the carrier of any required
hazard or flood insurance, provided the policy is not a "master" or "blanket"
hazard insurance policy covering a condominium, or a hazard insurance policy
covering the common facilities of a planned unit development. Any such hazard or
flood insurance policy is the valid and binding obligation of the related
insurer, is in full force and effect, and will be in full force and effect and
inure to the benefit of the Depositor and its successors and assigns upon the
consummation of the sale of the Mortgage Loan to the Depositor and its
assignees. In connection with the issuance of any hazard or flood insurance
policy, no unlawful fee, commission, kickback or other unlawful compensation or
value of any kind has been or will be received, retained or realized by any
attorney, firm or other person or entity, and no such unlawful items have been
received, retained or realized by the Seller. The Seller has not engaged in, and
has no knowledge of the mortgagor having engaged in, any act or omission which
should reasonably be expected to impair the coverage of any such policy, the
benefits of the endorsement provided for therein, or the validity and binding
effect of either.
(vii) Compliance with Applicable Law. Any and all requirements of
any federal, state or local law, rules and regulations, including, without
limitation, usury laws, TILA and Regulation Z relating thereto, RESPA and
related regulations, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act and Regulation B relating thereto, the Debt Collection
Practices Act, the Home Mortgage Disclosure Act, and any and all consumer
credit protection laws and disclosure laws applicable to the Mortgage
Loan, and all rules and regulations relating thereto, have been complied
with.
B-2
<PAGE>
(viii) No Satisfaction of Mortgage or Mortgage Note. Neither the
Mortgage nor the Mortgage Note has been satisfied, canceled, subordinated
or rescinded, in whole or in part, and the related Mortgaged Property has
not been released from the lien of the Mortgage, in whole or in part, nor
has any instrument been executed that would effect any such release,
cancellation, subordination or rescission. The Seller has not waived the
performance by the mortgagor of any action, if the mortgagor's failure to
perform such action would cause the Mortgage Loan to be in default, nor
has the Seller waived any default resulting from any action or inaction by
the mortgagor.
(ix) Location and Type of Mortgaged Property. The related Mortgaged
Property consists of a parcel of real property with a single family
residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit in a low-rise or mid-rise condominium project,
or an individual unit in a planned unit development, or a unit of
manufactured housing, provided that no residence or dwelling is a
cooperative or a mobile home attached to a foundation or otherwise
constitutes other than real property under applicable state law. Except in
the case of no more than 0.37% of the Mortgage Loans by principal balance,
the Mortgaged Property is used exclusively for residential purposes, and
the remainder of the Mortgaged Properties are mixed-use properties in
compliance with the Seller's underwriting guidelines.
(x) Valid Lien. The Mortgage creates a valid, subsisting and
enforceable first or second lien on the related Mortgaged Property,
including all buildings on the Mortgaged Property and all installations
and mechanical, electrical, plumbing, heating and air conditioning systems
located in or annexed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing. With
respect to the first Mortgage Loans, the lien of the Mortgage is subject
only to Permitted Exceptions and with respect to junior Mortgage Loans,
the lien of the Mortgage is subject only to the senior lien on the related
Mortgaged Property and to Permitted Exceptions. Any security agreement,
chattel mortgage or equivalent document related to and delivered in
connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest
on the property described therein with respect to each first Mortgage Loan
and a valid, subsisting and enforceable lien and security interest on the
property described therein with respect to each junior Mortgage Loan and
the Seller has the full right and authority to pledge and assign the same
to the Depositor or its designee.
(xi) Validity and Enforceability of Mortgage Documents. The Mortgage
Note and the Mortgage and each other agreement, if any, executed and
delivered by the mortgagor in connection with the Mortgage Loan is
genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms. All parties to the
Mortgage Note, the Mortgage and each other such related agreement had
legal capacity to enter into the Mortgage Loan and to execute and deliver
the Mortgage Note, the Mortgage and any such agreement, and the Mortgage
Note, the Mortgage and each such
B-3
<PAGE>
agreement has been duly and properly executed by such parties.
(xii) Full Disbursement of Proceeds. Each Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully disbursed,
there is no requirement for future advances thereunder, and there was no
commitment to make future advances in effect with respect to the Mortgage
Loan as of the date of its origination except in the case of a Mortgage
Loan, a portion of the proceeds of which has been disbursed to an escrow
account in connection with improvements to be made to the related
Mortgaged Property where (i) the Mortgage Loan bears interest on the
entire principal amount thereof as if it had been fully disbursed, (ii)
any proceeds of such Mortgage Loan have not been held in such an escrow
account for more than 60 days, and (iii) the deposit of such funds into
such an escrow account has been effected in accordance with the Seller's
holdback policies. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of the
Mortgage were paid, and the mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage.
(xiii) Doing Business. All parties who have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest,
were) (a) in compliance with any and all applicable licensing requirements
of the laws of the state wherein the related Mortgaged Property is
located, and (b) (i) organized under the laws of such state, or (ii)
qualified to do business in such state, or federal savings and loan
associations, or national banks or (iii) federal credit unions having
principal offices in such state, or (iv) not doing business in such state.
(xiv) Loan-to-Value (LTV). The initial Loan-to-Value Ratio ("LTV")
or Combined Loan-to-Value Ratio ("CLTV"), if applicable, of the Mortgage
Loan was as set forth in the Mortgage Loan Schedule. The weighted average
CLTV of the Initial Mortgage Loans is no greater than 75.92%.
(xv) Title Insurance. The Mortgage Loan is covered by either (a) an
attorney's opinion of title and abstract of title the form and substance
of which is acceptable to Fannie Mae (if the related Mortgaged Property is
located in Iowa) or (b) an ALTA lender's title insurance policy or other
generally acceptable form of policy of insurance, issued by a title
insurer qualified to do business in the jurisdiction where the related
Mortgaged Property is located, in either case insuring the Seller and its
successors and assigns as to the first or second priority lien, as the
case may be, of the Mortgage in the amount of 100% of the outstanding
principal amount of the Mortgage Loan, subject only to Permitted
Exceptions and the lien of any senior mortgagee, and against any loss by
reason of the invalidity or unenforceability of the lien resulting from
any provisions of
B-4
<PAGE>
the Mortgage proving for adjustment to the mortgage interest rate and
Monthly Payment. Where required by state law or regulation, the mortgagor
has been given the opportunity to choose the carrier of such lender's
title insurance policy. Immediately prior to the sale of the Mortgage Loan
to the Depositor under this agreement, the Seller, together with its
successors or assigns, was the sole insured under such lender's title
insurance policy, and such lender's title insurance policy is full force
and effect and will be in full force and effect upon the sale of the
Mortgage Loan to the Depositor. No claims have been made under such
lender's title insurance policy, and no prior holder of the Mortgage,
including the Seller, has done, by act or omission, anything which should
reasonably be expected to impair the coverage provided by such lender's
title insurance policy. In connection with the issuance of such lender's
title insurance policy, no unlawful fee, commission, kickback or other
unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other person or entity, and
no such unlawful items have been received, retained or realized by the
Seller.
(xvi) No Defaults. There is no material default, breach, violation
or event of acceleration existing under the Mortgage or the Mortgage Note
or related documents and no event which, with the passage of time or with
notice and the expiration of any applicable grace or cure period (other
than payment delinquencies of not more than 30 days), would constitute a
default, breach, violation or event of acceleration, and neither the
Seller nor any of its predecessors has waived any such default, breach,
violation or event of acceleration.
(xvii) No Mechanics' Lien. There are no mechanics' or similar liens
or claims which have been filed for work, labor or material (and no rights
are outstanding that under the law could give rise to such liens)
affecting the related Mortgaged Property which are or may be liens prior
or equal to, or coordinate with, the lien of the Mortgage.
(xviii) Location of Improvements; No Encroachments. All improvements
which were considered in determining the Appraised Value of the related
Mortgaged Property in the Initial Appraisal lay wholly within the
boundaries and building restriction lines of the Mortgaged Property and no
improvements on adjoining properties encroach upon the Mortgaged Property.
No improvement located on or constituting part of the Mortgaged Property
is in violation of any applicable zoning law or regulation.
(xix) RESERVED.
(xx) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (a)
in the case of a Mortgage denominated as a deed of trust, by trustee's
sale, and (b) otherwise by judicial
B-5
<PAGE>
foreclosure. There is no homestead or other exemption available to a
mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage.
(xxi) Conformance with Seller's Underwriting Guidelines. With the
exception of Certain Exception Loans, each Mortgage Loan was underwritten
in accordance with, and the Mortgage Loan and Mortgaged Property conform
to, the Borrower's applicable underwriting guidelines.
(xxii) Occupancy of the Mortgaged Property. All inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the Mortgaged Property and with respect to the
use and occupancy of the same, including, but not limited to, certificates
of occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities. Except with respect to no more
than 6.20% of the Mortgage Loans by principal balance, the Mortgagor
represented at the time of origination of each Mortgage Loan that the
Mortgagor would occupy the related Mortgaged Property as the Mortgagor's
primary residence.
(xxiii) No Additional Collateral. The Mortgage Note is not and has
not been secured by any collateral except the lien of the corresponding
Mortgage and the security interest of any applicable security agreement or
chattel mortgage referred to in representation (x) above.
(xxiv) Deeds of Trust. In the event the Mortgage is a deed of trust,
a trustee, authorized and duly qualified under applicable law to serve as
such, has been properly designated and currently serves as trustee and is
named in the Mortgage, and no fees or expenses are or will become payable
by the Depositor or its successors and assignees to the trustee under the
deed of trust, except in connection with a trustee's sale after default by
the mortgagor on the Mortgage.
(xxv) Due on Sale. The Mortgage contains an enforceable provision
for the acceleration of the payment of the unpaid principal balance of the
Mortgage Note in the event that the related Mortgaged Property is sold or
transferred without the prior written consent of the mortgagee or its
assignee thereunder.
(xxvi) No Buydown Provisions; No Graduated Payments or Contingent
Interest. The Mortgage Loan is not subject to any provisions pursuant to
which Monthly Payments are paid or partially paid with funds deposited in
any separate account established by the originator, the Servicer, the
Seller, the mortgagor or anyone on behalf of the mortgagor, or pursuant to
which Monthly Payments are paid by anyone other than the mortgagor, nor
does it contain any other similar provisions which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment mortgage
loan and the Mortgage Loan does not have a shared appreciation or other
contingent interest feature.
B-6
<PAGE>
(xxvii) RESERVED.
(xxviii) Mortgaged Property Undamaged. The Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty (causing damages thereto in excess of any
insurance coverage therefor less any deductible) so as to affect adversely
the value of the Mortgaged Property as security for the Mortgage Loan or
the use for which the premises were intended. The Mortgaged Property is in
good repair in all material respects. There have been no condemnation
proceedings with respect to the Mortgaged Property and the Seller has no
knowledge of any such proceedings pending.
(xxix) Collection Practices; Escrow Deposits. The collection and
servicing practices used with respect to the Mortgage Loan have been in
all respects in compliance with Accepted Servicing Practices, applicable
laws and regulations, and have been in all respects legal and consistent
with industry standards for the servicing of non-conforming Mortgage loans
similar to the Mortgage Loan. All servicing of the Mortgage Loan has been
conducted in accordance with Accepted Servicing Practices. With respect to
escrow deposits and escrow payments, all such payments are in the
possession or under the control of the Seller and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All escrow payments, if any, have
been collected in full compliance with state and federal law. An escrow of
funds is not prohibited by applicable law and has been established in an
amount sufficient to pay for every material item that remains unpaid and
that has been assessed but is not yet due and payable. No escrow deposits
or escrow payments or other charges or payments due to the Seller or to
the applicable servicer have been capitalized under the Mortgage or the
Mortgage Note. Any interest required to be paid with respect to any escrow
deposits pursuant to state and local law has been properly paid and
credited.
(xxx) Seller Appraisal. The Servicer Mortgage File (as defined in
the Servicing Agreement) contains an appraisal of the related Mortgaged
Property signed prior to the approval of the Mortgage Loan application by
a qualified appraiser, duly appointed by or on behalf of the Seller, who
had no interest, direct or indirect in the Mortgaged Property or in any
loan made on the security thereof, and whose compensation was not affected
by the approval or disapproval of the Mortgage Loan.
(xxxi) Computer Tape. The Seller's computer tape or electronic data
file describing the Initial Mortgage Loans was made available to the
accountants that are providing a comfort letter to the Note Insurer and
the Underwriters in connection with any information contained in the
Prospectus Supplement, and such information was complete and accurate as
of its date and includes a description of the same Initial Mortgage Loans
that are described on the Mortgage Loan Schedule and the payments due
thereunder as of the Closing Date.
B-7
<PAGE>
(xxxii) Obligations Fulfilled. The Seller has fulfilled all
obligations to be fulfilled on the lender's part under or in connection
with the origination, acquisition and assignment of the Mortgage Loans and
the related Mortgages and Mortgage Notes, including, without limitation,
giving any notices or consents necessary to effect the acquisition of each
Mortgage Loan and the related Mortgage and Mortgage Note by the Depositor
and its assignees, and has done nothing to impair the rights of the
Depositor, the Issuer, the Indenture Trustee, the Note Insurer or the
Noteholders in payments with respect thereto.
(xxxiii) Amortization; Balloon Loans. With respect to 60.083% of the
Initial Mortgage Loans by principal balance, the payments required of the
related of the Mortgagor are and will be such that the Mortgage Loan will
fully amortize over its term. 39.917% of the Initial Mortgage Loans by
principal balance require a balloon payment at the end of its term.
(xxxiv) First Payment Date. The first date on which the applicable
Mortgagor must make a payment on each Mortgage Loan is no later than May
1, 1998.
(xxxv) Timing of Payments. Each Mortgage Note is payable on the same
day of each month.
(xxxvi) Current Servicing. The Mortgage Loan is being serviced by
the Servicer.
(xxxvii) Fee Simple, Residential. Each property securing a Mortgage
Loan consists of a fee simple estate (or a leasehold estate if the related
Mortgaged Property is located in a jurisdiction where title to real
property is typically held through leasehold estates) in a single parcel
of real property improved by a one- to four-family residential dwelling,
(xxxviii) Civil Relief Act. To the Seller's knowledge, no Mortgagor
has requested relief under the Soldiers' and Sailors' Civil Relief Act of
1940.
(xxxix) No Transfer Taxes. The sale, transfer, assignment and
conveyance of Mortgage Loans by the Seller pursuant to the Mortgage Loan
Sale Agreement is not subject to and will not result in any tax, fee or
governmental charge payable by the Seller, the Depositor, the Issuer or
the Indenture Trustee to any federal, state or local government ("Transfer
Taxes") other than Transfer Taxes which have or will be paid by the Seller
as due. In the event that the Depositor, the Issuer or the Indenture
Trustee receives actual notice of any Transfer Taxes arising out of the
transfer, assignment and conveyance of the Mortgage Loans, on written
demand by the Depositor, the Issuer or the Indenture Trustee, or upon the
Seller's otherwise being given notice thereof by the Depositor, the Issuer
or the Indenture Trustee, the Seller shall pay, and otherwise indemnify
and hold the Depositor, the Issuer, the Indenture Trustee, and the Note
Issuer harmless, on an after-tax basis, from and against any and all such
Transfer
B-8
<PAGE>
Taxes (it being understood that the Noteholders, the Indenture Trustee,
the Depositor, the Issuer, and the Note Insurer shall have no obligation
to pay such Transfer Taxes).
(xl) Environmental Compliance. To the Seller's knowledge, the
Mortgaged Property is free from any and all toxic or hazardous substances
and there exists no violation of any local, state or federal environmental
law, rule or regulation with respect to such property.
(xli) No Adverse Circumstances. There do not exist any circumstances
or conditions with respect to the Mortgage, the property securing the
same, the Mortgagor or the Mortgagor's credit standing that reasonably can
be expected to cause private institutional investors to regard the related
Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to
become delinquent, or adversely affect the value or marketability of the
Mortgage Loan, it being understood that the Mortgage Loans are sub-prime
credit Mortgage Loans and the Mortgagors do not meet FNMA or FHLMC credit
underwriting standards.
(xlii) RESERVED.
(xliii) Final Payment. No Mortgage Loan has a final payment date
later than April 15, 2028.
(xliv) Purchase Money Mortgage Loans. As of the respective Cut-off
Dates, at least 3.27% of the Initial Mortgage Loans by principal balance
are purchase money mortgage loans.
(xlv) Characteristics of Non-First Liens. With respect to each
Mortgage Loan that is not a first mortgage loan:
(a) At the time of origination, the related prior lien was not more than
30 days delinquent.
(b) Either (i) no consent for the Mortgage Loan is required by the
holder of the related prior lien or (ii) such consent has been
obtained and has been delivered to the Indenture Trustee.
(c) The related prior lien does not provide for negative amortization.
(d) The Seller has not received, and is not aware of, a notice of
default of any senior mortgage loan which has not been cured.
(e) No more than 7.20% of the Initial Mortgage Loans are second mortgage
loans.
B-9
<PAGE>
EXHIBIT C
DEFINED TERMS
"ABS Term Sheet": Those materials (attached as Exhibits F-1 and F-2
hereto) delivered in the form of "Structural Term Sheets" or "Collateral Term
Sheets", in each case within the meaning of the no-action letter dated February
13, 1995 issued by the Division of Corporation Finance of the Commission to the
Public Securities Association for which the filing of such material is a
condition of the relief granted in such letter.
"Accepted Servicing Practices": With respect to any Mortgage Loan, written
servicing procedures that the Seller would follow in servicing residential and
mixed- use mortgage loans held for its own account, which shall be consistent
with mortgage servicing practices of prudent mortgage lending institutions that
service mortgage loans of the same type, as such Mortgage Loan.
"Appraisal": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, FNMA and FHLMC standards, and must meet the
appraisal standards of the Uniform Standards of Professional Appraisal Practice.
"Appraised Value": With respect to any Mortgaged Property, the lesser of
(a) the value thereof as determined by an Appraisal and (b) the purchase price
paid for the related Mortgaged Property by the Mortgagor with the proceeds of
the related Mortgage Loan; provided, however, that in the case of a Refinanced
Mortgage Loan, the Appraised Value of the Mortgaged Property shall be equal to
the value thereof as determined by an Appraisal.
"Business Day": Any Day other than (i) a Saturday or Sunday or (ii) a day
on which the Note Insurer or banking institutions in the State of Connecticut,
the State of Maryland, the State of Delaware, the State of New York or the city
in which the corporate trust office of the Indenture Trustee are authorized or
obligated by law, regulation, executive order or governmental decree to be
closed.
"Collection Account": As defined in the Indenture.
"Combined Loan-to-Value Ratio": As of any date for any Mortgage Loan with
respect to which the related Mortgaged Property is subject to a mortgage, deed
of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage, the fraction, expressed as a
percentage, (a) the numerator of which is the sum of (1) the outstanding
principal amount of the indebtedness secured by such subordinate lien, plus (2)
the outstanding principal balance of the Mortgage Loan, and (b) the denominator
of which is the Appraised Value of the related Mortgaged Property.
"Computational Materials": Those materials (attached as Exhibits F-1 and
F-2 hereto) delivered within the meaning of the no-action letter dated May 20,
1994 issued by the Division of Corporation Finance of the Commission to Kidder,
Peabody Acceptance
<PAGE>
Corporation I, Kidder, Peabody & Co., Incorporated, and Kidder Structured Asset
Corporation and the no-action letter dated May 27, 1994 issued by the Division
of Corporation Finance of the Commission to the Public Securities Association
for which the filing of such material is a condition of the relief granted in
such letters.
"Custodial Agreement": The Custodial Agreement, dated as of March 1, 1998,
among MLN, the Custodian and the Indenture Trustee.
"Custodian": The custodian appointed pursuant to the Custodial Agreement,
which shall initially be BankBoston.
"Escrow Payment": An amount escrowed by a mortgagor consisting of amounts
necessary to pay taxes, assessments, hazard and flood insurance premiums and
other similar payments anticipated to be made with respect to the related
Mortgage Loan, which is to be held in escrow by the servicer of such Mortgage
Loan for future payment on behalf of the related mortgagor.
"Exception Loan": A Mortgage Loan originated or re-underwritten generally
pursuant to, but which does not fully comply with, the Seller's underwriting
guidelines, but as to which variances from such guidelines have been
specifically approved by the Seller's chief credit officer or chief underwriter
after making a determination that mitigating factors in respect thereof
justified such approval.
"Initial Appraisal": With respect to any Mortgage Loan, the Appraisal made
for the Mortgage Loan's originator in connection with its origination, which
must be included in the related Mortgage File.
"Loan-to-Value Ratio" or "LTV": With respect to any Mortgage Loan as of
its date of origination, the ratio on such date borne by the outstanding
principal amount of the Mortgage Loan to the Appraised Value of the related
Mortgaged Property.
"Monthly Payment": As defined in the Servicing Agreement.
"Mortgage": With respect to a Mortgage Loan, the mortgage, deed of trust,
deed to secure debt or other instrument securing the related Mortgage Note which
creates a valid and enforceable first (or in the case of junior mortgages,
second) lien on or ownership interest in the related Mortgaged Property, subject
only to Permitted Exceptions and the lien of any senior mortgagee if applicable.
"Mortgage File": As to each Mortgage Loan, a file containing all of the
related Mortgage Loan Documents..
"Mortgage Loan": Any of the mortgage loans identified on the Mortgage Loan
Schedule.
"Mortgage Loan Documents": With respect to each Mortgage Loan, the
following documents:
C-2
<PAGE>
(a) The original Mortgage Note bearing all intervening endorsements,
endorsed in blank.
(b) The original of the guarantee executed in connection with the Mortgage
Note (if any ).
(c) The original Mortgage with evidence of recording thereon, or a copy
thereof together with an officer's certificate of MLN or of the title company,
escrow company, or attorney that closed the related Mortgage Loan (the
"Settlement Agent") certifying that such represents a true and correct copy of
the original and that such original has been submitted for recordation in the
appropriate governmental recording office of the jurisdiction where the Mortgage
Property is located.
(d) The originals of all assumption, modification, consolidation or
extension agreements (if any) with evidence of recording thereon, or copies
thereof together with an officer's certificate of MLN or the Settlement Agent
certifying that such represent true and correct copies of the originals and that
such originals have each been submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.
(e) The originals of all intervening assignments of mortgage (if any) with
evidence of recording thereon, or copies thereof together with an officer's
certificate of MLN or the Settlement Agent certifying that such represent true
and correct copies of the originals and that such originals have been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located.
(f) The original attorney's opinion of title and abstract of title or the
original mortgagee title insurance policy, or if the original mortgagee title
insurance policy has not been issued, the irrevocable commitment to issue the
same (which may have been marked-up by the title company or its authorized
agent), or the preliminary title report for appropriate jurisdictions.
(g) The original of any security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage Loan.
(h) The original power of attorney or other authorizing instrument (if
any) with evidence of recording thereon, if the Mortgage Note or Mortgage or any
other material document relating to the Mortgage Loan has been signed by a
person on behalf of the Mortgagor (or a copy thereof together with an officer's
certificate of MLN or the Settlement Agent certifying that such represent true
and correct copies of the originals and that such originals have been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located).
"Mortgage Note": With respect to a Mortgage Loan, note or other evidence
of the indebtedness secured by the related Mortgage.
C-3
<PAGE>
"Mortgage Pool Error": Shall mean an error in information regarding the
characteristics of the Mortgage Loans provided by the Company to the
Underwriters for the preparation of Computational Materials or ABS Term Sheets.
"Mortgaged Property": With respect to a Mortgage Loan, the real property,
together with the improvements thereon, subject to the lien of the related
Mortgage.
"Note Account": As defined in the Indenture.
"Noteholder": As defined in the Indenture.
"Note Insurer": As defined in the Indenture.
"Offering Documents": Collectively, the Prospectus and the Prospectus
Supplement, together with other information and documents specifically approved
by MLN for distribution to prospective holders of the Notes.
"Opinion of Counsel": A written opinion of counsel, which counsel is
satisfactory to the Servicer, the Note Insurer and the Indenture Trustee.
Whenever an Opinion of Counsel is required hereunder, the renderer of such
Opinion may rely on other Opinions of Counsel. Any Opinion of Counsel relating
to tax matters must be an opinion of independent counsel.
"Permitted Exceptions": Any of the following encumbrances on a Mortgaged
Property: (1) the lien of current real property taxes and assessments not yet
due and payable; (2) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the originator
of the related Mortgage Loan and referred to or otherwise considered in the
appraisal made for the originator of such Mortgage Loan; and (3) other matters
to which like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the related
Mortgage or the use, enjoyment, value or marketability of the Mortgaged
Property.
"Principal Balance": As defined in the Indenture.
"Principal Prepayment": Any mortgagor payment or other recovery in respect
of principal on a Mortgage Loan (including Net Liquidation Proceeds (as defined
in the Indenture)) which, in the case of a mortgagor payment, is received in
advance of its scheduled due date and is not accompanied by an amount as to
interest representing scheduled interest for any month subsequent to the month
of such payment, or that was accompanied by instructions from the related
mortgagor directing the Servicer to apply such payment to the Principal Balance
of such Mortgage Loan currently.
"Purchase Price": As defined in the Indenture.
"Qualified Replacement Mortgage Loan": As defined in the Indenture.
C-4
<PAGE>
"Recordation Trigger Event": The occurrence of any of the following: (i)
the occurrence and continuation of an Event of Default under the Servicing
Agreement, (ii) the request of the Note Insurer, if, in the reasonable judgment
of the Note Insurer, recordation is required to preserve the Trust Estate (as
defined in the Indenture), or (iii) with respect to a particular Mortgage Loan,
the institution of foreclosure proceedings or the insolvency of the related
Mortgagor.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which were not
used to purchase the related Mortgaged Property.
"Servicer": MLN, or any successor thereto, in its capacity as servicer
under the Servicing Agreement.
"Servicing Agreement": The Servicing Agreement, dated as of March 1, 1998,
between MLN, as servicer of the Mortgage Loans, the Issuer and the Indenture
Trustee.
C-5
<PAGE>
EXHIBIT D
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, ______________________, authorized
officer of Mortgage Lenders Network USA, Inc. (the "Seller"), do hereby
constitute and appoint Norwest Bank Minnesota, National Association as the true
and lawful attorney, for the Issuer, and in its name, place and stead, to record
the assignments of mortgage with respect to the Mortgage Loans transferred to
the Norwest Bank Minnesota, National Association as indenture trustee (the
"Indenture Trustee"), under that Indenture dated as of March 1, 1998 between
Mortgage Lenders Network Home Equity Loan Trust 1998-1 (the "Issuer") and the
Indenture Trustee, but only under the circumstances in which such recording is
required under the Sale Agreement dated as of March 1, 1998 between the Seller
and Prudential Securities Secured Financing Corporation, and to do and perform
all other things and acts relating to such assignments of mortgage as may be
necessary to effectuate the transfer of such Mortgage Loans to the Indenture
Trustee, including the execution and delivery of new assignments of mortgage
where necessary to comply with applicable real estate recording laws at the time
of recordation.
This power of attorney is irrevocable and is coupled with an interest in
the Mortgage Loans, and it may at all times be relied upon by any person, firm
or corporation dealing with the attorney named herein as remaining in full force
and effect, and such person, firm or corporation shall have no liability to the
Issuer with respect thereto.
WITNESS the following signature this 13th day of March, 1998
MORTGAGE LENDERS NETWORK USA, INC.
By: _______________________________________
Name:
Title:
D-1
<PAGE>
EXHIBIT E
BLANKET ASSIGNMENT OF THE NOTES
The undersigned, _____________________, an authorized officer of Mortgage
Lenders Network USA, Inc. (the "Seller"), hereby assigns and conveys all right,
title and interest in the Notes listed on Schedule I to the Indenture, dated as
of March 1, 1998, between Mortgage Lenders Network Home Equity Loan Trust,
Series 1998 (the "Issuer") and Norwest Bank Minnesota, National Association as
indenture trustee (the "Indenture Trustee") (except for the undersigned's right,
title and interest in and to principal received prior to and on after the
Cut-off Date) to the as Indenture Trustee for the Issuer pursuant to the
Mortgage Loan Sale Agreement, dated as of March 1, 1998 (the "Sale Agreement"),
between the Seller and Prudential Securities Secured Financing Corporation, to
have and to hold the same unto the successors, legal representatives and assigns
of the assignee forever.
Capitalized terms not defined herein shall have their respective meanings
as set forth in the Sale Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this assignment this
13th day of March, 1998.
MORTGAGE LENDERS NETWORK USA, INC.
By: _______________________________________
Name:
Title:
E-1
Exhibit 2.2
Execution Copy
- --------------------------------------------------------------------------------
MORTGAGE LOAN CONTRIBUTION AGREEMENT
Between
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
and
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
- --------------------------------------------------------------------------------
Mortgage Lenders Network Home Equity Loan Trust 1998-1
Asset Backed Notes
Series 1998-1
Dated as of March 1, 1998
<PAGE>
Mortgage Loan Contribution Agreement
This MORTGAGE LOAN CONTRIBUTION AGREEMENT (this "Agreement"), dated as of
March 1, 1998, is made and entered into by and between PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION, a Delaware corporation (the "Depositor"), and
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1 (the "Issuer"), a
Delaware business trust formed pursuant to a Deposit Trust Agreement, dated as
of March 1, 1998 (the "Deposit Trust Agreement"), among the Depositor,
Wilmington Trust Company, as Owner Trustee, Norwest Bank Minnesota, National
Association, as Trust Paying Agent and Mortgage Lenders Network USA, Inc., as
Servicer.
Recitals
On the terms and conditions hereinafter provided, the Depositor intends to
contribute and convey, and the Issuer intends to accept and acquire, certain
Mortgage Loans (hereinafter defined) which the Depositor acquired from Mortgage
Lenders Network USA, Inc. (the "Seller") pursuant to that certain Mortgage Loan
Sale Agreement, dated as of March 1, 1998 (the "Sale Agreement"). The Issuer
intends to pledge the Mortgage Loans to Norwest Bank Minnesota, National
Association, a national banking association, as trustee (in such capacity, the
"Indenture Trustee"), under an indenture, to be dated as of March 1, 1998 (the
"Indenture"), by and between the Issuer and the Indenture Trustee, pursuant to
which the Issuer's Asset Backed Notes, Series 1998-1 (the "Notes") will be
issued. Pursuant to the Deposit Trust Agreement, the Issuer will issue one or
more certificates evidencing a 100% beneficial interest in the Issuer (the
"Certificates"). The Issuer will deliver the net proceeds from the sale of the
Notes and issue the Certificates to or upon the order of the Depositor in
consideration of the transfer of the Mortgage Loans and the related rights
thereunder and the rights pursuant to the Sale Agreement (collectively, the
"Consideration").
Capitalized terms used but not defined herein shall have the meanings
given such terms in the Indenture.
Now, therefore, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:
Section 1. Agreement to Contribute and Convey. As and for the
Consideration and subject to the terms and conditions set forth herein, the
Depositor agrees to contribute and convey, and the Issuer agrees to accept and
acquire, all of the Depositor's right, title and interest in and to the fixed
rate mortgage loans identified on the schedule (the "Mortgage Loan Schedule")
annexed hereto as Exhibit A (such loans, together with all related rights,
interests and obligations, are collectively referred to herein as the "Mortgage
Loans"). The Mortgage Loan Schedule will set forth as to each Mortgage Loan the
items specified in the definition of "Mortgage Loan Schedule" in the Indenture.
<PAGE>
The aggregate of the principal balances of the Mortgage Loans being
contributed and conveyed pursuant to this Agreement as of the close of business
on the applicable Cut-off Dates, after application of all payments of principal
received in respect of such Mortgage Loans on or before the applicable Cut-off
Dates (the "Initial Mortgage Pool Balance"), is set forth on the Cross Receipt
executed concurrently herewith in the form of Exhibit B attached hereto (the
"Cross Receipt"). Simultaneously with and in consideration of the Depositor's
contribution and conveyance of the Mortgage Loans to the Issuer, the Issuer
shall cause the Notes to be issued and delivered and shall transfer the net
proceeds received from the sale of the Notes to be delivered to the Depositor
and the Issuer shall cause the Certificates to be issued to or upon the order of
the Depositor. The Depositor shall be deemed automatically and for all purposes
to have made a contribution to the capital of the Issuer (which contribution
shall be reflected in the value assigned to the certificates evidencing equity
interests in the Issuer) in an aggregate amount specified on the Cross Receipt.
The transfer and conveyance of the Mortgage Loans shall take place on March 13,
1998 or such other date as shall be mutually acceptable to the parties hereto
(the "Closing Date").
Section 2. Conveyance of Mortgage Loans.
(a) Effective as of the Closing Date, subject only to delivery of the
Mortgage File (as defined in the Sale Agreement) for each Mortgage Loan pursuant
to subsection (c) below, the Depositor does hereby contribute, assign, transfer
and otherwise convey to the Issuer, without recourse, representation or warranty
(other than as expressly set forth in Section 3(a) hereof), and the Issuer does
hereby accept, assume and acquire, all of the Depositor's right, title and
interest in and to the Mortgage Loans identified on the Mortgage Loan Schedule,
and the Issuer hereby assumes and agrees to perform and be bound by each and all
of the covenants, agreements, duties and obligations of the Depositor arising
under or relating to such Mortgage Loans.
(b) The Issuer and its assignees shall be entitled to receive all payments
of principal and interest due on or with respect to the Mortgage Loans after the
applicable Cut-off Dates, and all other recoveries of principal and interest
collected after the applicable Cut-off Dates (other than in respect of interest
that accrued on such Mortgage Loan during periods prior to the applicable
Cut-off Dates), and each of the rights of the Depositor pursuant to
representations, warranties and indemnities in favor of the Depositor contained
in the Sale Agreement. All payments of interest and principal due on or before
the applicable Cut-off Dates, but collected after the applicable Cut-off Dates,
and recoveries of principal and interest collected on or before the applicable
Cut-off Dates (other than amounts representing interest that accrued on the
Mortgage Loans during any period on or after the applicable Cut-off Dates),
shall belong to, and be promptly remitted to the Seller.
(c) In connection with its contribution and conveyance of the Mortgage
Loans pursuant to subsection (a) above, the terms of the Sale Agreement govern
the delivery of the Mortgage Files to the Custodian, as the Issuer's designee,
and the Depositor assigns all of its rights under the Sale Agreement to the
Issuer.
2
<PAGE>
(d) In connection with its conveyance of the Mortgage Loans pursuant to
subsection (a) above, the Depositor shall deliver to the Issuer or its designee
in respect of such Mortgage Loans, on or before the Closing Date, all amounts,
if any, received on each Mortgage Loan after the applicable Cut-off Date (other
than amounts representing interest and principal due on or prior to the
applicable Cut-off Date) held by or on behalf of the Depositor.
(e) The Depositor shall, at any time upon the request of the Issuer,
without limiting the obligations of the Depositor under this Agreement, execute,
acknowledge and deliver all such additional documents and instruments and all
such further assurances and will do or cause to be done all such further acts
and things as may be proper or reasonably necessary to carry out the intent of
this Agreement.
Section 3. Representations, Warranties and Covenants of Depositor.
(a) The Depositor hereby represents and warrants to and covenants with the
Issuer, as of the date hereof, and shall be deemed to have represented and
warranted to and covenanted with the Issuer, as of the Closing Date, that:
(i) the Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) the execution and delivery of this Agreement by the Depositor,
the consummation of the transactions contemplated in this Agreement by the
Depositor and the performance and compliance with the terms of this
Agreement by the Depositor will not violate the Depositor's certificate of
incorporation or bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material agreement or other instrument to
which it is a party or which is applicable to it or any of its assets, or
result in the imposition of any lien, charge or encumbrance upon any of
its assets pursuant to any such agreement, and all board resolutions and
consents of shareholders necessary for the Depositor to enter into and
consummate all transactions contemplated by this Agreement have been
obtained;
(iii) the Depositor has the full corporate power and authority to
enter into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement;
(iv) this Agreement, assuming due authorization, execution and
delivery by the Issuer, constitutes a valid, legal and binding obligation
of the Depositor, enforceable against the Depositor in accordance with the
terms hereof, subject to (A) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and (B) general principles of
equity, regardless of whether such enforcement is considered in a
proceeding in equity or at law;
3
<PAGE>
(v) the Depositor is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law, any
order or decree of any court or arbiter, or any order, regulation or
demand of any federal, state or local governmental or regulatory
authority, which violation is likely to affect materially and adversely
either the ability of the Depositor to perform its obligations under this
Agreement or the financial condition of the Depositor;
(vi) the assignment of the Mortgage Loans to the Issuer as
contemplated herein is not subject to any bulk transfer or similar law in
effect in any applicable jurisdiction;
(vii) no action, suit, proceeding or investigation is pending or, to
the best of the Depositor's knowledge, threatened against the Depositor
which, if determined adversely to the Depositor, would prohibit the
Depositor from entering into this Agreement or is likely to materially and
adversely affect either the ability of the Depositor to perform its
obligations under this Agreement or the financial condition of the
Depositor;
(viii) the Depositor has no knowledge of any recent adverse
financial condition or event with respect to itself that is likely to
materially and adversely affect its ability to perform its obligations
under this Agreement;
(ix) the Depositor has not failed to obtain any consent, approval,
authorization or order of, and has not failed to cause any registration or
qualification with, any court or regulatory authority or other
governmental body having jurisdiction over the Depositor, which consent,
approval, authorization, order, registration or qualification is required
for, and the absence of which would materially and adversely affect, the
legal and valid execution, delivery and performance of this Agreement by
the Depositor. No consent or approval of any other person or entity is
necessary for the Depositor to transfer the Mortgage Loans to the Issuer
as contemplated herein, or, if any such consent or approval is necessary,
such consent or approval has previously been obtained;
(x) immediately prior to the transfer and assignment herein
contemplated, the Depositor held good, marketable and indefeasible title
to, and was the sole owner of, each Mortgage Loan conveyed by the
Depositor subject to no liens, charges, mortgages, encumbrances or rights
of others, except with respect to liens that will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Issuer will hold good,
marketable and indefeasible title to, and be the sole owner of, each
Mortgage Loan subject to no liens, charges, mortgages, encumbrances or
rights of others and the assignment of the Mortgage Loans contemplated
hereby is valid and effective.
(b) The representations and warranties of the Seller with respect to the
Mortgage Loans set forth in Section 4(b) of and Exhibit B to the Sale Agreement
are
4
<PAGE>
hereby incorporated by reference in their entirety and are assigned to the
Issuer in lieu of any other representations and warranties of the Depositor in
respect of the Mortgage Loans. Nothing herein shall be deemed to limit in any
respect either the representations and warranties of the Seller or the rights
and remedies assigned by the Depositor to the Issuer against the Seller on
account of a breach thereof under the Sale Agreement.
(c) Except for the representations and warranties of the Depositor in
Section 3(a) hereof, the Depositor is contributing and conveying the Mortgage
Loans, without recourse to the Depositor and without representations or
warranties of any kind, express or implied, by the Depositor, whether statutory
or otherwise, including, without limitation, any warranties of transfer,
merchantability or fitness for a particular, or the Issuer's intended, use or
purposes.
Section 4. Assignment of Related Rights and Remedies.
(a) Effective as of the Closing Date, subject only to delivery of the
Mortgage File for each Mortgage Loan pursuant to Section 2(c) hereof, the
Depositor does hereby assign, transfer and otherwise convey to Issuer, without
recourse, representation or warranty (other than as expressly set forth in
Section 3(a) hereof), and the Issuer does hereby accept, assume and acquire, to
be held jointly and severally with the Depositor, all of the Depositor's rights
and remedies under the Sale Agreement and the Issuer hereby assumes and agrees
to perform and be bound by each and all of the covenants and agreements of the
Depositor arising under the Sale Agreement relating to such rights and remedies
and the exercise or enforcement thereof.
(b) Simultaneously with the exercise of any rights and remedies or any
notices given to the Seller by the Issuer under the Sale Agreement, the Issuer
shall give the Depositor and the Note Insurer notice thereof, including, without
limitation, copies of all notices given to the Seller.
(c) This Section 4 provides the sole remedies available to the Issuer, its
successors and assignees, respecting any breach (i) of representations and
warranties with respect to the Mortgage Loans to which reference is made in
Section 3(c) or (ii) on the part of the Depositor under Section 2(c) hereof.
Section 5. Closing. The closing of the conveyance of the Mortgage Loans
(the "Closing") shall be held at the offices of Dewey Ballantine LLP, 1301
Avenue of the Americas, New York, New York 10019 at 10:00 a.m., Eastern time, on
the Closing Date.
The Closing shall be subject to each of the following conditions:
(a) All terms and conditions of this Agreement required to be complied
with on or before the Closing Date shall have been complied with and the
Depositor shall have the ability to comply with all terms and conditions and
perform all duties and obligations required to be complied with or performed
after the Closing Date.
5
<PAGE>
(b) The Issuer shall have paid all costs and expenses payable by it to the
Depositor or otherwise pursuant to this Agreement.
Both parties shall use their best efforts to perform their respective
obligations hereunder in a manner that will enable the Issuer to acquire the
Mortgage Loans on the Closing Date. Notwithstanding the foregoing, satisfaction
by the Depositor or Issuer of its respective obligations under the foregoing
provisions of this Section 5 shall not be conditions precedent to the obligation
of the Depositor or Issuer, respectively, to close the transactions contemplated
by this Agreement.
Section 6. Servicing. As of the applicable Cut-off Dates, the Mortgage
Loans will be serviced by Mortgage Lenders Network USA (in such capacity, the
"Servicer") pursuant to the terms of a Servicing Agreement, to be dated as of
March 1, 1998 (the "Servicing Agreement"), by and among the Issuer, the Servicer
and the Indenture Trustee.
Section 7. Grant of a Security Interest. It is the express intent of the
parties hereto that the conveyance of the Mortgage Loans by the Depositor to the
Issuer as provided in Section 2(a) hereof be, and be construed as, a complete
and absolute transfer by the Depositor to the Issuer of all of the Depositor's
right, title and interest in and to the Mortgage Loans and not as a pledge of
the Mortgage Loans by the Depositor to the Issuer to secure a debt or other
obligation of the Depositor. However, if, notwithstanding the aforementioned
intent of the parties, the Mortgage Loans are held to be property of the
Depositor, then (a) it is the express intent of the parties that such conveyance
be deemed a pledge of the Mortgage Loans by the Depositor to the Issuer to
secure a debt or other obligation of the Depositor, and (b) (i) this Agreement
shall also be deemed to be a security agreement within the meaning of Article 9
of the New York Uniform Commercial Code; (ii) the conveyance provided for in
Section 2(a) hereof shall be deemed to be a grant by the Depositor to the Issuer
of a security interest in all of the Depositor's right, title and interest in
and to the Mortgage Loans, and all amounts payable to the holder of the Mortgage
Loans in accordance with the terms thereof, and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including, without limitation, all such amounts, other than
investment earnings from time to time held or invested pursuant to and in
accordance with the provisions of the Servicing Agreement or the Indenture, as
applicable, whether in the form of cash, instruments, securities or other
property; (iii) the subsequent pledge of the Mortgage Loans by the Issuer to the
Indenture Trustee as contemplated by the preamble hereto shall be deemed to be
an assignment of any security interest created hereunder; (iv) the possession by
the Depositor or the Issuer or any of their respective agents, including,
without limitation, the Indenture Trustee or its agent, of the notes or other
instruments evidencing the indebtedness of the mortgagors under the related
Mortgage Loans (the "Mortgage Notes") and such other items of property relating
to the Mortgage Loans as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
New York Uniform Commercial Code; and (v) notifications to persons (other than
the Indenture Trustee) holding such property, and acknowledgments, receipts or
confirmations from persons holding such
6
<PAGE>
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the secured party for the purpose of perfecting such security interest under
applicable law. The Depositor and the Issuer shall, to the extent consistent
with this Agreement, take such actions as may be necessary to ensure that, if
this Agreement were deemed to create a security interest in the Mortgage Loans,
such security interest would be deemed to be a perfected security interest of
first priority under applicable law and will be maintained as such throughout
the term of this Agreement and the Indenture.
Section 8. Notices. All communications provided for or permitted hereunder
shall be in writing and shall be deemed to have been duly given if (a)
personally delivered, (b) mailed by registered or certified mail, postage
prepaid and received by the addressee, (c) sent by express courier delivery
service and received by the addressee, or (d) transmitted by telex or facsimile
transmission (or any other type of electronic transmission agreed upon by the
parties) and confirmed by a writing delivered by any of the means described in
(a), (b) or (c), if to the Issuer, addressed to the Issuer in care of Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration; Reference:
Mortgage Lenders Network Home Equity Loan Trust 1998-1, facsimile: (302)
651-8882 (or to such other address as may hereafter be furnished to the
Depositor in writing by the Issuer), if to the Depositor, addressed to the
Depositor at One New York Plaza, New York, NY 10292, facsimile: (212) 778-7401
(or to such other address as may hereafter be furnished to the Issuer in writing
by the Depositor), and, if to the Note Insurer, to MBIA Insurance Corporation,
113 King Street, Armonk, New York 10504, Attention: Insured Portfolio Management
Structured Finance (IPMSF) (Mortgage Lenders Network Home Equity Loan Trust
1998-1); facsimile: (914) 765-3810 (or to such other address previously
furnished in writing to the Depositor and Issuer).
Section 9. Representations, Warranties, Indemnities and Agreements to
Survive Delivery. All representations, warranties, indemnities and agreements
contained in this Agreement, incorporated herein by reference or contained in
the certificates of officers of the Depositor submitted pursuant hereto, shall
remain operative and in full force and effect and shall survive delivery of the
Mortgage Loans by the Depositor to the Issuer.
Section 10. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement that is prohibited or unenforceable or is held to be void or
unenforceable in any particular jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the
7
<PAGE>
parties hereto waive any provision of law which prohibits or renders void or
unenforceable any provision hereof.
Section 11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
Section 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK.
Section 13. Further Assurances. The Depositor and the Issuer shall execute
and deliver such instruments and take such further actions as the other party
may, from time to time, reasonably request in order to effectuate the purposes
and to carry out the terms of this Agreement.
Section 14. Successors and Assigns. The rights and obligations of the
Depositor under this Agreement shall not be assigned by the Depositor without
the prior written consent of the Issuer, except as provided in Section 15
hereof. The Issuer shall assign all of its right, title and interest herein to
the Indenture Trustee for the benefit of the Noteholders and the Note Insurer,
to which the Depositor hereby expressly consents. The Depositor agrees to
perform its obligations hereunder for the benefit of the Issuer, the Note
Insurer and the Noteholders and that the Indenture Trustee may enforce the
provisions of this Agreement, exercise the rights of the Issuer and enforce the
obligations of the Depositor hereunder without the consent of the Issuer.
Section 15. Merger, Consolidation, Etc. The Depositor may be merged or
consolidated with or into any person or entity, or transfer all or substantially
all of its assets to any person or entity; provided that the person or entity
resulting from any merger or consolidation to which the Depositor shall be a
party, or the person or entity which is the Issuer of all or substantially all
of the assets of the Depositor, shall be the successor to the Depositor
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
Section 16. Amendments. This Agreement may be amended from time to time by
the parties hereto, with the consent of the Note Insurer, to cure any ambiguity,
to correct or supplement any provision herein which may be inconsistent with any
other provision herein, or to add any other provision with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement or the Trust Agreement, the Indenture and the
Servicing Agreement; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel to the Issuer delivered to the Indenture Trustee and
the Note Insurer, adversely affect in any material respect the interests of the
Indenture Trustee on behalf of the Noteholders.
8
<PAGE>
Section 17. Waivers. No failure or delay on the part of the Issuer or its
assignees in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other or further exercise thereof or
the exercise of any other power, right or remedy.
Section 18. Third Party Beneficiaries. The Note Insurer is an intended
third-party beneficiary of this Agreement, and this Agreement shall be binding
upon and inure to the benefit of the Note Insurer; provided that,
notwithstanding the foregoing, for so long as a Note Insurer Default is
continuing with respect to its obligations under the Note Insurance Policy, the
Noteholders shall succeed to the Note Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Agreement that expressly confer rights upon the Note Insurer shall be for the
benefit of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Agreement.
Section 19. Limitation of Liability. It is expressly understood and agreed
by the parties hereto that (a) this Agreement is executed and delivered by
Wilmington Trust Company, not individually or personally but solely as Owner
Trustee of the Issuer, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Issuer, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any Person claiming by, through or
under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Agreement or any other related documents.
*****
[SIGNATURES FOLLOW]
9
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Issuer have caused their names
to be signed hereto by their respective duly authorized officers as of the date
first above written.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation
By: /s/ EDWARD J. FITZGERALD
-----------------------------------------
Name: Edward J. Fitzgerald
Title: Vice President
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN
TRUST 1998-1, a Delaware business trust
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner
Trustee of the Issuer
By: /s/ DONALD G. MACKELCAN
-----------------------------------------
Name: Donald G. Mackelcan
Title: Assistant Vice President
10
<PAGE>
EXHIBIT A
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT B
<PAGE>
Cross Receipt
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
ASSET BACKED NOTES SERIES 1998-1
Cross Receipt Between Prudential Securities Secured Financing Corporation and
Mortgage Lenders Network Home Equity Loan Trust 1998-1 Acknowledging
Receipt of Mortgage Notes
Reference is made to that certain Mortgage Loan Contribution Agreement,
between Prudential Securities Secured Financing Corporation (the "Depositor")
and Mortgage Lenders Network Home Equity Loan Trust 1998-1 (the "Issuer"), dated
as of March 1, 1998 (the "Mortgage Loan Contribution Agreement"). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
such terms in the Mortgage Loan Contribution Agreement.
The Issuer hereby acknowledges receipt from the Depositor of the Mortgage
Notes relating to the Mortgage Loans identified on the Mortgage Loan Schedule
annexed as Exhibit A to the Mortgage Loan Contribution Agreement (the "Mortgage
Loans"). The Mortgage Loans have an Initial Pool Balance of $____________.
MORTGAGE LENDERS NETWORK
HOME EQUITY LOAN TRUST 1998-1
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee of the Issuer
By: ______________________________
Authorized Signatory
The Depositor hereby acknowledges receipt of the Consideration for the
contribution of the Mortgage Loans by the Depositor to the Issuer as specified
in the Mortgage Loan Contribution Agreement. The Consideration consists of (a)
$________, in immediately available funds, representing the aggregate net
proceeds from the sale of the Notes delivered to the Underwriters pursuant to
the Underwriting Agreement, and (b) a Certificate, delivered to MLN Capital
Corporation I, a Delaware corporation, representing a 100% beneficial interest
in the Issuer.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: ______________________________
Name:
Title:
Dated: March __, 1998
Exhibit 4.1
INDENTURE
BETWEEN
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE
Dated as of March 1, 1998
Relating to
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
ASSET BACKED NOTES, SERIES 1998-1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS......................................................2
Section 1.01. General Definitions...........................................2
ARTICLE II THE NOTES.......................................................25
Section 2.01. Forms Generally..............................................25
Section 2.02. Forms of Certificate of Authentication.......................25
Section 2.03. General Provisions With Respect to
Principal and Interest Payment...............................25
Section 2.04. Denominations................................................26
Section 2.05. Execution, Authentication,
Delivery and Dating..........................................27
Section 2.06. Registration, Registration of
Transfer and Exchange........................................27
Section 2.07. Mutilated, Destroyed, Lost or
Stolen Notes.................................................28
Section 2.08. Payments of Principal and Interest...........................29
Section 2.09. Persons Deemed Owner.........................................31
Section 2.10. Cancellation.................................................31
Section 2.11. Authentication and Delivery of Notes.........................31
Section 2.12. Book-Entry Note..............................................33
Section 2.13. Termination of Book Entry System.............................33
ARTICLE III COVENANTS.......................................................34
Section 3.01. Payment of Notes.............................................34
Section 3.02. Maintenance of Office or Agency..............................35
Section 3.03. Money for Note Payments to Be
Held In Trust................................................36
Section 3.04. Existence of Issuer..........................................37
Section 3.05. Protection of Trust Estate...................................37
Section 3.06. Opinions as to Trust Estate..................................38
Section 3.07. Performance of Obligations;
Servicing Agreement..........................................38
Section 3.08. Investment Company Act.......................................39
Section 3.09. Negative Covenants...........................................39
Section 3.10. Annual Statement as to Compliance............................40
Section 3.11. Restricted Payments..........................................40
Section 3.12. Treatment of Notes as Debt for Tax Purposes..................41
Section 3.13. Notice of Events of Default..................................41
Section 3.14. Further Instruments and Acts.................................41
ARTICLE IV SATISFACTION AND DISCHARGE......................................41
Section 4.01. Satisfaction and Discharge of Indenture......................41
Section 4.02. Application of Trust Money...................................43
<PAGE>
ARTICLE V DEFAULTS AND REMEDIES...........................................43
Section 5.01. Event of Default.............................................43
Section 5.02. Acceleration of Maturity; Rescission and
Annulment....................................................44
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee.............................45
Section 5.04. Remedies.....................................................46
Section 5.05. Indenture Trustee May File Proofs of Claim...................46
Section 5.06. Indenture Trustee May Enforce Claims Without
Possession of Notes..........................................47
Section 5.07. Application of Money Collected...............................47
Section 5.08. Limitation on Suits..........................................48
Section 5.09. Unconditional Rights of Noteholders
to Receive Principal and Interest............................49
Section 5.10. Restoration of Rights and Remedies...........................49
Section 5.11. Rights and Remedies Cumulative...............................49
Section 5.12. Delay or Omission Not Waiver.................................50
Section 5.13. Control by Noteholders.......................................50
Section 5.14. Waiver of Past Defaults......................................50
Section 5.15. Undertaking for Costs........................................51
Section 5.16. Waiver of Stay or Extension Laws.............................51
Section 5.17. Sale of Trust Estate.........................................51
Section 5.18. Action on Notes..............................................53
Section 5.19. No Recourse to Other Trust Estates or
Other Assets of the Issuer...................................53
Section 5.20. Application of the Trust Indenture Act.......................53
ARTICLE VI THE INDENTURE TRUSTEE...........................................54
Section 6.01. Duties of Indenture Trustee..................................54
Section 6.02. Notice of Default............................................55
Section 6.03. Rights of Indenture Trustee..................................55
Section 6.04. Not Responsible for Recitals or
Issuance of Notes............................................56
Section 6.05. May Hold Notes...............................................56
Section 6.06. Money Held in Trust..........................................56
Section 6.07. Eligibility, Disqualification................................56
Section 6.08. Indenture Trustee's Capital and Surplus......................57
Section 6.09. Resignation and Removal;
Appointment of Successor.....................................57
Section 6.10. Acceptance of Appointment by Successor.......................58
Section 6.11. Merger, Conversion, Consolidation or
Succession to Business of Indenture Trustee..................59
Section 6.12. Preferential Collection of Claims
Against Issuer...............................................59
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees........59
Section 6.14. Authenticating Agents........................................61
Section 6.15. Review of Mortgage Files.....................................62
Section 6.16. Indenture Trustee Fees and Expenses..........................64
ii
<PAGE>
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS..................................64
Section 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders.....................................64
Section 7.02. Preservation of Information; Communications
to Noteholders...............................................65
Section 7.03. Reports by Indenture Trustee.................................65
Section 7.04. Reports by Issuer............................................65
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES......66
Section 8.01. Collection of Moneys.........................................66
Section 8.02. Note Account.................................................67
Section 8.03. Claims against the MBIA Insurance Policy.....................69
Section 8.04. General Provisions Regarding the Note Account
and Mortgage Loans...........................................70
Section 8.05. Releases of Defective Mortgage Loans.........................71
Section 8.06. Reports by Indenture Trustee to Noteholders;
Access to Certain Information................................72
Section 8.07. Trust Estate Mortgage Files..................................72
Section 8.08. Amendment to Servicing Agreement.............................72
Section 8.09. Delivery of the Mortgage Files Pursuant
to Servicing Agreement.......................................72
Section 8.10. Servicer as Agent............................................73
Section 8.11. Termination of Servicer......................................73
Section 8.12. Opinion of Counsel...........................................73
Section 8.13. Appointment of Custodians....................................73
Section 8.14. Rights of the Note Insurer to
Exercise Rights of Noteholders...............................74
Section 8.15. Trust Estate and Accounts Held
for Benefit of the Note Insurer..............................75
Section 8.16. Demand Note..................................................75
ARTICLE IX SUPPLEMENTAL INDENTURES.........................................76
Section 9.01. Supplemental Indentures Without Consent of Noteholders.......76
Section 9.02. Supplemental Indentures With Consent of Noteholders..........77
Section 9.03. Execution of Supplemental Indentures.........................78
Section 9.04. Effect of Supplemental Indentures............................78
Section 9.05. Conformity With Trust Indenture Act..........................78
Section 9.06. Reference in Notes to Supplemental Indentures................79
Section 9.07. Amendments to Governing Documents............................79
ARTICLE X REDEMPTION OF NOTES.............................................79
Section 10.01. Redemption...................................................79
Section 10.02. Form of Redemption Notice....................................81
Section 10.03. Notes Payable on Optional Redemption.........................82
iii
<PAGE>
ARTICLE XI MISCELLANEOUS...................................................82
Section 11.01. Compliance Certificates and Opinions.........................82
Section 11.02. Form of Documents Delivered to Indenture Trustee.............83
Section 11.03. Acts of Noteholders..........................................84
Section 11.04. Notices, etc. to Indenture Trustee,
the Note Insurer and Issuer..................................84
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices........86
Section 11.06. Rules by Indenture Trustee...................................86
Section 11.07. Conflict With Trust Indenture Act............................86
Section 11.08. Effect of Headings and Table of Contents.....................86
Section 11.09. Successors and Assigns.......................................86
Section 11.10. Separability.................................................87
Section 11.11. Benefits of Indenture........................................87
Section 11.12. Legal Holidays...............................................87
Section 11.13. Governing Law................................................87
Section 11.14. Counterparts.................................................87
Section 11.15. Recording of Indenture.......................................87
Section 11.16. Issuer Obligation............................................88
Section 11.17. No Petition..................................................88
Section 11.18. Inspection...................................................88
Section 11.19. Usury........................................................89
Section 11.20. Third Party Beneficiary......................................89
SCHEDULES AND EXHIBITS
Schedule l Mortgage Loan Schedule
Exhibit A Form of Note
Exhibit B MBIA Insurance Policy
Exhibit C Form of Notice of Claim
Exhibit D Notice of Draw
iv
<PAGE>
CROSS-REFERENCE TABLE
Cross-reference sheet showing the location in the Indenture of the
provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.(1)
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
Section 310
(a) (1).......................................... 6.07
(a) (2).......................................... 6.07, 6.08
(a) (3).......................................... 6.13
(a) (4).......................................... Not Applicable
(a) (5).......................................... 6.07
(b).............................................. 6.07, 6.09
(c).............................................. Not Applicable
Section 311
(a).............................................. 6.12
(b).............................................. 6.12
(c).............................................. Not Applicable
Section 312
(a).............................................. 7.01(a), 7.02(a)
(b).............................................. 7.02(b)
(c).............................................. 7.02(c)
Section 313
(a).............................................. 7.03(a)
(b).............................................. 7.03(a)
(c).............................................. 11.05
(d).............................................. 7.03(b)
Section 314
(a)(1)........................................... 7.04
(a)(2)........................................... 7.04
(a)(3)........................................... 7.04
(a)(4)........................................... 7.04
(b)(1)........................................... 2.11(c), 11.01
(b)(2)........................................... 3.06
(c)(1)........................................... 2.11(d), 4.01,
8.02(d), 11.01
(c)(2)........................................... 2.11(c), 4.01,
8.02(d), 11.01
(c)(3)........................................... 8.02(d)
(d)(1)........................................... 11.01(a)
(d)(2)........................................... 11.01(a)
(d)(3)........................................... 11.01(a)
(e).............................................. 11.0 1(b)
- ----------
(1)This Cross-Reference Table is not part of the Indenture
<PAGE>
Section 315
(a).............................................. 6.01(b), 6.01(c)(1)
(b).............................................. 6.02, 11.05
(c).............................................. 6.01(a)
(d)(1)........................................... 6.01(b), 6.01(c)
(d)(2)........................................... 6.01(c)(2)
(d)(3)........................................... 6.01(c)(3)
(e).............................................. 5.15
Section 316
(a).............................................. 5.20
(b).............................................. 5.09
(c).............................................. 5.20
Section 317
(a)(1)........................................... 5.03
(a)(2)........................................... 5.05
(b).............................................. 3.01
Section 318
(a).............................................. 11.07
<PAGE>
THIS INDENTURE, dated as of March 1, 1998 (as amended or supplemented from
time to time as permitted hereby, this "Indenture"), is between MORTGAGE LENDERS
NETWORK HOME EQUITY LOAN TRUST 1998-1, a Delaware business trust (together with
its permitted successors and assigns, the "Issuer") and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as indenture trustee
(together with its permitted successors in the trusts hereunder, the "Indenture
Trustee").
Preliminary Statement
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Asset Backed Notes, Series 1998-1 (the "Notes"),
issuable as provided in this Indenture. All covenants and agreements made by the
Issuer herein are for the benefit and security of the Holders of the Notes and
the Note Insurer. 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.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
Granting Clause
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Notes and the Note Insurer, all of the Issuer's
right, title and interest in and to (a) the Mortgage Loans listed in Schedule I
to this Indenture (including property that secures a Mortgage Loan that becomes
an REO Property), including the related Mortgage Files delivered or to be
delivered to the Custodian, on behalf of the Indenture Trustee, pursuant to the
Mortgage Loan Sale Agreement, all payments of principal received, collected or
otherwise recovered after the applicable Cut-off Date for each Mortgage Loan,
all payments of interest accruing on each Mortgage Loan after the applicable
Cut-off Date therefor whenever received and all other proceeds received in
respect of such Mortgage Loans, and any Qualified Replacement Mortgage Loan, (b)
the Servicing Agreement, (c) the Mortgage Loan Sale Agreement, (d) the Mortgage
Loan Contribution Agreement, (e) the Management Agreement, (f) the Insurance
Policies, (g) all cash, instruments or other property held or required to be
deposited in the Collection Account and the Note Account, including all
investments made with funds in such accounts (but not including any income on
funds deposited in, or investments made with funds deposited in, the Collection
Account and the Note Account, which income shall belong to and be for the
account of the Servicer), and (h) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all insurance proceeds and condemnation awards.
Such Grants are made, however, in trust, to secure the Notes equally and ratably
without prejudice, priority or distinction between any Note and any other Note
by reason of difference in time of issuance or otherwise, and for the benefit of
the Note Insurer to secure (x) the payment of
<PAGE>
all amounts due on the Notes in accordance with their terms, (y) the payment of
all other sums payable under this Indenture and (z) compliance with the
provisions of this Indenture, all as provided in this Indenture. All terms used
in the foregoing granting clauses that are defined in Section 1.01 are used with
the meanings given in said Section.
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required to the end that the interests of the Holders
of the Notes may be adequately and effectively protected. The Indenture Trustee
agrees that it will hold the MBIA Insurance Policy in trust and that it will
hold any proceeds of any claim upon the MBIA Insurance Policy, solely for the
use and benefit of the Noteholders in accordance with the terms hereof and the
MBIA Insurance Policy.
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions.
Except as otherwise specified or as the context may otherwise require, the
following terms have the respective meanings set forth below for all purposes of
this Indenture, and the definitions of such terms are applicable to the singular
as well as to the plural forms of such terms and to the masculine as well as to
the feminine genders of such terms. Whenever reference is made herein to an
Event of Default or a Default known to the Indenture Trustee or of which the
Indenture Trustee has notice or knowledge, such reference shall be construed to
refer only to an Event of Default or Default of which the Indenture Trustee is
deemed to have notice or knowledge pursuant to Section 6.01(d). All other terms
used herein that are defined in the Trust Indenture Act (as hereinafter
defined), either directly or by reference therein, have the meanings assigned to
them therein.
"Accountant": A Person engaged in the practice of accounting who (except
when this Indenture provides that an Accountant must be Independent) may be
employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"Act": With respect to any Noteholder, as defined in Section 11.03.
"Administrative Fee Amount": For any Payment Date, the sum of the Monthly
Servicing Fee, the Indenture Trustee's Fee and the Note Insurer Premium, each
relating to such Payment Date.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract, relation to individuals or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
2
<PAGE>
"Agent": Any Note Registrar, Paying Agent, Authenticating Agent or
Custodian.
"Aggregate Principal Balance": With respect to any Payment Date, the
aggregate of the Principal Balances of the Mortgage Loans as of the related
Determination Date (or other specified date).
"Assignments": Collectively (i) the original instrument of assignment of a
Mortgage, including any interim assignments, from the originator or any other
holder of any Mortgage Loan to the Indenture Trustee (that in each case may, to
the extent permitted by the laws of the state in which the related Mortgaged
Property is located, be a blanket instrument of assignment covering other
Mortgages and Mortgage Notes as well and that may also be an instrument of
assignment running directly from the mortgagee of record under the related
Mortgage to the Indenture Trustee).
"Authenticating Agent": The Person, if any, appointed as Authenticating
Agent by the Issuer pursuant to Section 6.14, until any successor Authenticating
Agent for the Notes is named, and thereafter "Authenticating Agent" shall mean
such successor. The initial Authenticating Agent shall be the Indenture Trustee.
Any Authenticating Agent other than the Indenture Trustee shall sign an
instrument under which it agrees to be bound by all of the terms of this
Indenture applicable to the Authenticating Agent.
"Authorized Officer": With respect to (i) the Indenture Trustee, any
Responsible Officer, (ii) the Owner Trustee, the president, any vice president,
any assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, any trust officer, any financial services
officer or any other officer of the Owner Trustee customarily performing
functions similar to those performed by the above officers and (iii) any other
Person, the Chairman, Chief Operating Officer, President or any Vice President
of such Person.
"Available Funds": With respect to the Notes and any Payment Date, the sum
of the amounts described in clauses (a) through (g) below, less (i) the
Administrative Fee Amount in respect of such Payment Date, (ii) Monthly Advances
and Servicing Advances previously made that are reimbursable to the Servicer
(other than those included in liquidation expenses for any Liquidated Mortgage
Loan and reimbursed from the related Liquidation Proceeds and from Insurance
Proceeds) with respect to the related Collection Period to the extent permitted
by the Servicing Agreement and (iii) the aggregate amounts (A) deposited into
the Collection Account or Note Account that may not be withdrawn therefrom
pursuant to a final and nonappealable order of a United States bankruptcy court
of competent jurisdiction imposing a stay pursuant to Section 362 of the
Bankruptcy Code and that would otherwise have been included in Available Funds
on such Payment Date and (B) received by the Indenture Trustee that are
recoverable and sought to be recovered from the Issuer as avoidable preference
by a trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with a
final nonappealable order of a court of competent jurisdiction:
(a) all scheduled payments of interest received with respect to the
Mortgage Loans and due during the related Due Period and all other
interest
3
<PAGE>
payments on or in respect of the Mortgage Loans received by or on behalf
of the Servicer during the related Collection Period (including Payments
Ahead that are allocable to interest for the related Due Period), net of
amounts representing interest accrued on such Mortgage Loans in respect of
any period prior to the applicable Cut-off Dates, plus any Compensating
Interest payments made by the Servicer in respect of the related Mortgage
Loans and any net income from related REO Properties for such Collection
Period;
(b) all scheduled payments of principal received with respect to the
Mortgage Loans and due during the related Due Period and all other
principal payments (including Principal Prepayments) received or deemed to
be received during the related Collection Period (including Payments Ahead
that are allocable as principal for the related Due Period) in respect of
the Mortgage Loans;
(c) the aggregate of any Trust Insurance Proceeds collected by the
Servicer during the related Collection Period;
(d) the aggregate of any Net Liquidation Proceeds collected by the
Servicer during the related Collection Period;
(e) the aggregate of the Purchase Prices received in respect of any
Mortgage Loans that are required or permitted to be repurchased, released,
removed or substituted by the Mortgage Loan Seller during or in respect of
the related Collection Period, to the extent such amounts are received by
the Indenture Trustee on or before the related Deposit Date;
(f) the amount of any Monthly Advances made by the Servicer for such
Payment Date; and
(g) the aggregate of amounts deposited in the Note Account during
such Collection Period in connection with redemption of the Notes pursuant
to Article X.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"Basic Documents": This Agreement, the Trust Agreement, the Servicing
Agreement, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Management Agreement, the Insurance Agreement and the
Indemnification Agreement.
"Beneficial Owner": With respect to a Book-Entry Note, the Person who is
the beneficial owner of such Note as reflected on the books of the Clearing
Agency for the Notes or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
4
<PAGE>
"Best Efforts": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer or the
Servicer, as the case may be, in its reasonable discretion. Such efforts do not
require the Issuer or the Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or the Servicer, as the case may be, to advance or expend
fees or sums of money in addition to those specifically set forth in this
Indenture and the Servicing Agreement.
"Book-Entry Notes": Any Notes registered in the name of the Clearing
Agency or its nominee, ownership of which is reflected on the books of the
Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"Book-Entry Termination": The time at which the book-entry registration of
the Book-Entry Notes shall terminate, as specified in Section 2.13.
"Business Day": Any day other than (i) a Saturday or Sunday or (ii) a day
that is either a legal holiday or a day on which the Note Insurer is closed or a
day on which banking institutions in the State of Connecticut, the State of New
York, the State of Minnesota, the State of Maryland, the state in which the
Corporate Trust Office is located or the State of Delaware are authorized or
obligated by law, regulation or executive order to be closed.
"Certificate": As defined in the Trust Agreement.
"Certificate Distribution Account": As defined in the Trust Agreement.
"Certificateholders": As defined in the Trust Agreement.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and Exchange Act of 1934, as amended,
and the regulations of the Commission thereunder and shall initially be The
Depository Trust Company of New York, the nominee for which is Cede & Co.
"Clearing Agency Participants": The entities for whom the Clearing Agency
will maintain book-entry records of ownership and transfer of Book-Entry Notes,
which may include securities brokers and dealers, banks and trust companies and
clearing corporations and certain other organizations.
"Closing Date": March 13, 1998, the date of initial issuance of the Notes.
"Code": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, as successor statutes thereto, and applicable
U.S. Department of Treasury regulations issued pursuant thereto in temporary or
final form and proposed regulations thereunder to the extent that, by reason of
their proposed effective date, such proposed regulations would apply.
5
<PAGE>
"Collection Account": The segregated trust account established by the
Servicer and maintained pursuant to Section 2.02(b) of the Servicing Agreement.
"Collection Period": As to any Payment Date, the period beginning on the
first day of the calendar month immediately preceding the month in which such
Payment Date occurs (except that, in the case of the first Payment Date, the
related Collection Period will commence on the applicable Cut-off Date for each
Mortgage Loan) and ending on the last day of such calendar month.
"Combined Loan-to-Value Ratio": As defined in the Mortgage Loan Sale
Agreement.
"Commission": The Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, or if at any
time such Commission is not existing and performing the duties now assigned to
it under the Trust Indenture Act, then the body performing such duties at such
time under the Trust Indenture Act or similar legislation replacing the Trust
Indenture Act.
"Compensating Interest": As defined in the Servicing Agreement.
"Corporate Trust Office": The principal office of the Indenture Trustee at
which at any particular time its corporate trust business with respect to this
Indenture shall be principally administered, which office at the date of the
execution of this Indenture is located at Sixth Street and Marquette Avenue,
Minneapolis, MN 55479, Attention: Mortgage Lenders Network Home Equity Loan
Trust 1998-1, Series 1998-1, with a copy to the Indenture Trustee at 11000
Broken Land Parkway, Columbia, Maryland 21044, Attention: Mortgage Lenders
Network Home Equity Loan Trust 1998-1, Series 1998-1.
"Current Note Balance": With respect to any Note as of any date of
determination, the original principal amount of such Note, reduced by all prior
payments (including Insured Payments), if any, made with respect to principal of
such Note.
"Custodian": A Person who is at any time appointed by the Indenture
Trustee pursuant to Section 8.13 as a document custodian for the Mortgage Files,
which Person shall not be the Issuer or an Affiliate of the Issuer. The
Custodian shall initially be BankBoston, N.A.
"Cut-off Date": For any Mortgage Loan, the later of (i) March 1, 1998 or
(ii) the date of origination of such Mortgage Loan by the Mortgage Loan Seller
(which date has occurred prior to the Closing Date).
"Default": Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
"Defective Mortgage Loan": Any Mortgage Loan that is required to be
repurchased or substituted by the Mortgage Loan Seller pursuant to the Mortgage
Loan Sale Agreement.
6
<PAGE>
"Definitive Notes": Notes other than Book-Entry Notes.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by a
Qualified Replacement Mortgage Loan.
"Delinquency Amount": As of any Payment Date, the product of the
Delinquency Percentage for such Payment Date and the Aggregate Principal Balance
of the Mortgage Loans as of the Determination Date relating to such Payment
Date.
"Delinquency Percentage": For any Payment Date, the rolling three month
average of the fraction, expressed as a percentage, (i) the numerator of which
is the aggregate of the Principal Balances as of the related Determination Date
of all Mortgage Loans that were 90 or more days contractually delinquent, in
foreclosure, REO Property or for which the related Mortgagor was in a bankruptcy
proceeding or paying a reduced Monthly Payment as a result of a bankruptcy
workout as of end of the related Collection Period and the denominator of which
is the Aggregate Principal Balance of all Mortgage Loans as of the related
Determination Date.
"Demand Note": The Demand Note issued by Mortgage Lenders Network USA,
Inc. in favor of MLN Capital Corporation I.
"Demand Note Limit": As of any Payment Date prior to the Target Date, 3.0%
of the Aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date
minus (i) the aggregate dollar amount of overcollateralization created on each
prior Payment Date and minus (ii) the aggregate amount of all draws made on the
Demand Note on all prior Payment Dates.
"Deposit Date": The date each month on which funds on deposit in the
Collection Account are remitted by the Servicer to the Indenture Trustee for
deposit into the Note Account, which date shall be with respect to any Payment
Date, the 18th day of the month in which such Payment Date occurs, or the next
succeeding Business Day, if such 18th day is not a Business Day.
"Depositor": Prudential Securities Secured Financing Corporation.
"Determination Date": As to any Payment Date, the last day of the Due
Period relating to such Payment Date.
"Due Period": With respect to any Payment Date, the period commencing on
the second day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs (or, with respect to the first Payment Date,
commencing the day following the applicable Cut-off Date for each Mortgage Loan)
and ending on the first day of the calendar month in which such Payment Date
occurs.
"Eligible Account": Either (A) a segregated account or accounts maintained
with an institution the deposits of which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC, the unsecured and
uncollateralized debt obligations of which shall be rated "AA" or better by
Standard & Poor's and "Aa2" or
7
<PAGE>
better by Moody's and in the highest short term rating category by Standard &
Poor's and Moody's, and that is either (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) which is approved in writing by the Note Insurer or (B)
a trust account maintained with the trust department of a federal or state
chartered depository institution or trust company, having capital and surplus of
not less than $50,000,000, acting in its fiduciary capacity, the unsecured and
uncollateralized debt obligations of which shall be rated "Baa3" or better by
Moody's. Any Eligible Accounts maintained with the Indenture Trustee shall
conform to the preceding clause (B).
"Event of Default": As defined in Section 5.01.
"Excess Cash": With respect to any Payment Date, the amount, if any, by
which Available Funds for such Payment Date exceed the sum of (i) any amounts
payable to the Note Insurer for Insured Payments paid on prior Payment Dates and
not yet reimbursed and for any unpaid Note Insurer Premiums for prior Payment
Dates (in each case with interest thereon at the "Late Payment Rate" (as defined
in the Insurance Agreement)), (ii) the Note Interest for the related Payment
Date, and (iii) the Monthly Principal for the related Payment Date.
"Excess Cash Payment". As defined in clause fourth of Section 8.02(c).
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"Final Certification": A certification as to the completeness of each
Mortgage File prepared by the Custodian on behalf of the Indenture Trustee, and
provided by the Indenture Trustee on or before the first anniversary of the
Closing Date pursuant to Section 6.15(b).
"Final Maturity Date": The Payment Date in August 2029.
"Full Prepayment": With respect to any Mortgage Loan, when any one of the
following occurs: (i) payment is made by the Mortgagor to the Servicer of 100%
of the outstanding principal balance of such Mortgage Loan, together with all
accrued and unpaid interest thereon at the Mortgage Interest Rate on such
Mortgage Loan, (ii) payment is made to the Indenture Trustee of the Purchase
Price of such Mortgage Loan in connection with the purchase of such Mortgage
Loan by the Mortgage Loan Seller or the Servicer or (iii) payment is made to the
Servicer of all Insurance Proceeds and Liquidation Proceeds, and other payments,
if any, that have been determined by the Servicer in accordance with the
provisions of the Servicing Agreement to be finally recoverable, in the
Servicer's reasonable judgment, in respect of such Mortgage Loan.
"Grant": To assign, transfer, mortgage, pledge, create and grant a
security interest in, deposit, set-over and confirm. A Grant of a Mortgage Loan
and related
8
<PAGE>
Mortgage Files, a Permitted Investment, the Servicing Agreement, the Mortgage
Loan Sale Agreement, the Mortgage Loan Contribution Agreement, or any other
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including without limitation the
immediate and continuing right to claim for, collect, receive and give receipts
for principal and interest payments thereunder, insurance proceeds, Purchase
Prices and all other moneys payable thereunder and all proceeds thereof, to give
and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring Proceedings in the name
of the Granting party or otherwise, and generally to do and receive anything
that the Granting party is or may be entitled to do or receive thereunder or
with respect thereto.
"Highest Lawful Rate": As defined in Section 11.19.
"Indenture": This instrument as originally executed and, if from time to
time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented or
amended. All references in this instrument to designated "Articles", "Sections",
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed.
The words "herein", "hereof', "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
"Indenture Trustee": Norwest Bank Minnesota, National Association, a
national banking association, and any Person resulting from or surviving any
consolidation or merger to which it may be a party until a successor Person
shall have become the Indenture Trustee pursuant to the applicable provisions of
this Indenture, and thereafter "Indenture Trustee" shall mean such successor
Person.
"Indenture Trustee's Fee": The Indenture Trustee's monthly fee, equal to
1/12th of 0.02% of the Aggregate Principal Balance of the Mortgage Loans as of
the first day of the applicable Due Period.
"Independent": When used with respect to any specified Person means such a
Person who (i) is in fact independent of the Issuer and any other obligor upon
the Notes, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (iii) is not connected with
the Issuer or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by an Issuer Order and such opinion or certificate shall state that
the signer has read this definition and that the signer is Independent within
the meaning hereof.
"Individual Note": A Note of an original principal amount of $1,000
(provided, however, one Note may be less than that amount); a Note of an
original principal amount
9
<PAGE>
in excess of $1,000 shall be deemed to be a number of Individual Notes equal to
the quotient obtained by dividing such original principal amount by $1,000.
"Initial Certification": A certification as to the completeness of each
Mortgage File prepared by the Custodian on behalf of the Indenture Trustee and
provided by the Indenture Trustee on the Closing Date pursuant to Section
6.15(a).
"Indemnification Agreement": As defined in the Insurance Agreement.
"Initial Redemption Date": The first Payment Date on which the Aggregate
Principal Balance of the Mortgage Loans is less than 10% of the Aggregate
Principal Balance as of the Cut-Off Date.
"Insurance Agreement": The Insurance Agreement, dated as of March 13,
1998, among the Note Insurer, the Issuer, the Servicer, the Mortgage Loan
Seller, the Depositor, and the Indenture Trustee.
"Insurance Policies": All insurance policies insuring any Mortgage Loan or
Mortgaged Property, to the extent the Issuer or the Indenture Trustee has any
interest therein.
"Insured Payments": As to any Payment Date, the amount required to be paid
by the Note Insurer under the MBIA Insurance Policy pursuant to a Notice of
Claim presented by the Indenture Trustee (in the manner described in Section
8.03). The Insured Payment is (a) for any Payment Date, the sum of (i) the Note
Interest for such Payment Date minus the Available Funds for such Payment Date
and (ii) the then existing Overcollateralization Deficit, if any (after
application of Available Funds for such Payment Date to reduce the Note Balance
on such Payment Date) and (b) any shortfall in the amount required to pay a
Preference Amount from any source other than the MBIA Insurance Policy.
"Insurance Proceeds": As defined in the Servicing Agreement.
"Interest Period": With respect to a Payment Date, the calendar month
immediately preceding the month in which such Payment Date occurs.
"Issuer": Mortgage Lenders Network Home Equity Loan Trust 1998-1, a
Delaware business trust.
"Issuer Order" and "Issuer Request": A written order or request of the
Issuer signed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or, in the case of such order or request required by Section 2.11, by an
Authorized Officer of the holder of the Certificate and delivered to the
Indenture Trustee or the Authenticating Agent, as applicable.
"Letter Agreement": The Letter of Representations to The Depository Trust
Company from the Indenture Trustee and the Issuer dated March 12, 1998.
10
<PAGE>
"Liquidated Mortgage Loan": As defined in the Servicing Agreement.
"Liquidation Date": With respect to any Mortgage Loan, the date of the
final receipt of all Liquidation Proceeds, Insurance Proceeds or other payments
with respect to such Mortgage Loan.
"Liquidation Proceeds": As defined in the Servicing Agreement.
"Loan-to-Value Ratio": As defined in the Mortgage Loan Sale Agreement.
"Maturity": With respect to any Note, the date on which the entire unpaid
principal amount of such Note becomes due and payable as therein or herein
provided, whether at the Final Maturity Date or by declaration of acceleration,
call for redemption or otherwise.
"Management Agreement": That certain agreement, dated as of March 1, 1998,
between the Issuer and the Indenture Trustee pursuant to which the Indenture
Trustee, as manager, will perform certain obligations of the Issuer hereunder.
"MBIA Insurance Policy": The financial guaranty insurance policy (No.
25906), dated March 13, 1998, issued by the Note Insurer to the Indenture
Trustee for the benefit of the Noteholders, pursuant to which the Note Insurer
guarantees payment of Insured Payments. A specimen of the MBIA Insurance Policy
is attached hereto as Exhibit C.
"MBIA Payment Default": Failure and continued failure by the Note Insurer
to make an Insured Payment required under the MBIA Insurance Policy in
accordance with its terms.
"Monthly Advance": As defined the Servicing Agreement.
"Monthly Payment": With respect to any Mortgage Note, the amount of each
monthly payment payable under such Mortgage Note by the Mortgagor in accordance
with its terms, including, one month's accrued interest on the related Principal
Balance at the then applicable Mortgage Interest Rate, but net of any portion of
such monthly payment that represents late payment charges, prepayment or
extension fees or collections allocable to payments to be made by Mortgagors for
payment of insurance premiums or similar items.
"Monthly Principal": For any Payment Date, an amount equal to (a) the
aggregate of (i) all scheduled payments of principal received (or advanced or to
be advanced on the related Deposit Date) with respect to the Mortgage Loans and
due during the related Due Period and all other amounts collected, received or
otherwise recovered in respect of principal on the Mortgage Loans (including
Principal Prepayments, but not including Payments Ahead that are not allocable
to principal for the related Due Period) during or in respect of the related
Collection Period, and (ii) the aggregate of the amounts allocable to principal
deposited in the Note Account on the related Deposit Date by the Issuer, the
Depositor, the Servicer or the Note Insurer in connection with a repurchase,
release, removal or substitution of any Mortgage Loans pursuant to this
Indenture,
11
<PAGE>
reduced by (b) the amount of any Overcollateralization Surplus with respect to
such Payment Date.
"Monthly Servicing Fee": As defined in the Servicing Agreement.
"Moody's": Moody's Investors Service, Inc. and its successors in interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"Mortgage File": As defined in the Mortgage Loan Sale Agreement.
"Mortgage Interest Rate": With respect to each Mortgage Loan, the rate per
annum set forth in the related Mortgage Note at which interest accrues on such
Mortgage Loan, in each case after giving effect to any modification of a
Mortgage Loan for any period in connection with a bankruptcy or similar
proceeding involving the related Mortgagor or a modification, waiver or
amendment of such Mortgage Loan granted or agreed to by the Servicer in
accordance with the Servicing Agreement.
"Mortgage Loan": Each of the mortgage loans Granted to the Indenture
Trustee under this Indenture as security for the Notes and that from time to
time comprise part of the Trust Estate, including any property that secures a
Mortgage that becomes REO Property. The Mortgage Loans are listed on the
Mortgage Loan Schedule annexed hereto as Schedule I.
"Mortgage Loan Contribution Agreement": That certain agreement, dated as
of March 1, 1998, between the Depositor and the Issuer pursuant to which the
Mortgage Loans will be acquired from the Depositor by the Issuer for inclusion
in the Trust Estate.
"Mortgage Loan Sale Agreement": That certain agreement, dated as of March
1, 1998, between the Mortgage Loan Seller and the Depositor pursuant to which
the Mortgage Loans will be acquired from the Mortgage Loan Seller by the
Depositor.
"Mortgage Loan Schedule": As of any date, the schedule of mortgage loans
included in the Trust Estate, Schedule I hereto identifies the Mortgage Loans
being Granted to the Indenture Trustee on the Closing Date. The Mortgage Loan
Schedule shall be amended by the Servicer as appropriate from time to time to
reflect the deletion and substitution of Mortgage Loans in accordance with the
terms of the Basic Documents. The Mortgage Loan Schedule shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the related Mortgaged Property and shall set forth as to each Mortgage Loan the
initial Loan-to-Value Ratio or Combined Loan-to-Value Ratio, the Principal
Balance as of the Cut-off Date, the Mortgage Interest Rate, the currently
Monthly Payment amount and the stated maturity date of the related Mortgage
Note. The Issuer shall cause the initial Mortgage Loan Schedule to be delivered
by the Mortgage Loan Seller to the Indenture Trustee in both physical and
computer-readable form.
12
<PAGE>
"Mortgage Loan Seller": Mortgage Lenders Network USA, Inc., a Delaware
corporation.
"Mortgage Note": The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
"Mortgaged Property": The underlying property securing a Mortgage Note.
"Mortgagor": The obligor under a Mortgage Note.
"Net Liquidation Proceeds": As defined in the Servicing Agreement.
"Nonrecoverable Advance": As defined in the Servicing Agreement.
"Note Account": The segregated trust account, which shall be an Eligible
Account, established and maintained pursuant to Section 8.02 and entitled
"Norwest Bank Minnesota, National Association, as Indenture Trustee for Mortgage
Lenders Network Home Equity Loan Trust 1998-1 Home Equity Loan Backed Notes,
Series 1998-1, Note Account" on behalf of the Noteholders and the Note Insurer.
"Note Balance": With respect to all of the Notes, the aggregate of the
Current Note Balances of all Notes Outstanding at the time of determination.
"Noteholder" or "Holder": The Person in whose name a Note is registered in
the Note Register, except that, solely for the purpose of taking any action
under Section 5.02 or giving of any consent pursuant to this Indenture, any Note
registered in the name of the Issuer, the Mortgage Loan Seller, the Servicer or
the Depositor or any Persons actually known by a Responsible Officer of the
Indenture Trustee to be an Affiliate of the Issuer, the Mortgage Loan Seller,
the Servicer or the Depositor shall be deemed not to be Outstanding and the
percentage interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite percentage interests necessary to
take any such action or effect any such consent have acted or consented unless
the Issuer, the Mortgage Loan Seller, the Servicer, the Depositor or any such
Person is an owner of record of all of the Notes.
"Note Insurer": MBIA Insurance Corporation, a New York stock insurance
company, and successors thereto.
"Note Insurer Commitment Letter": The commitment letter dated March 11,
1998, from the Note Insurer to the Mortgage Loan Seller regarding the issuance
of a financial guaranty insurance policy,
"Note Insurer Default": The existence and continuance of any of the
following-
(a) a MBIA Payment Default;
(b) the entry by a court having jurisdiction in the premises of (i)
a final and nonappealable decree or order for relief in respect of the
Note Insurer in an
13
<PAGE>
involuntary case or proceeding under any applicable United States federal
or state bankruptcy, insolvency, rehabilitation, reorganization or other
similar law of (ii) a final and nonappealable decree or order adjudging
the Note Insurer bankrupt or insolvent, or approving, as properly filed a
petition seeking reorganization, rehabilitation, arrangement, adjustment
or composition of or in respect of the Note Insurer under any applicable
United States federal or state law, or appointing a custodian, receiver,
liquidator, rehabilitator, assignee, trustee, sequestrator or other
similar official of the Note Insurer or of any substantial part of its
property, or ordering, the winding-up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive
days; or
(c) the commencement by the Note Insurer of a voluntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated bankrupt or insolvent, or the consent of the
Note Insurer to the entry of a decree or order for relief in respect of
the Note Insurer in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency case or proceeding
against the Note Insurer, or the filing by the Note Insurer of a petition
or answer or consent seeking reorganization or relief under any applicable
United States federal or state law, or the consent by the Note Insurer to
the filing of such petition or to the appointment of or the taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Note Insurer or of any substantial
part of its property, or the failure by the Note Insurer to pay debts
generally as they become due, or the admission by the Note Insurer in
writing of its inability to pay its debts generally as they become due.
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Note Insurer Default, the consent by the Note
Insurer shall not be required to any action or inaction hereunder and the Note
Insurer shall not have any rights with respect thereto.
"Note Insurer Premium": On the Closing Date, the premium due to the Note
Insurer in paragraph 1(a)(i) of the Note Insurer Commitment Letter and
thereafter the premium due to the Note Insurer on each Payment Date, which
amount shall be equal to the product of Note Insurer Premium Rate and the Note
Balance immediately prior to such Payment Date.
"Note Insurer Premium Rate": On the Closing Date, the Premium Percentage
specified in paragraph 1(a)(i) of the Note Insurer Commitment Letter and
beginning on April 27, 1998 and on each Payment Date thereafter, the Premium
Percentage specified in paragraph l(b) thereof.
"Note Interest": As to any Payment Date, the amount of interest payable to
Holders of the Notes on such Payment Date, which amount shall be equal to
interest at 1/12th of the Note Interest Rate on the Note Balance as of the
preceding Payment Date
14
<PAGE>
(after giving effect to the payment, if any, in reduction of principal made on
the Notes on such preceding Payment Date). All calculations of interest on the
Notes will be computed on the basis of twelve thirty-day months and a year of
360 days.
"Note Interest Rate": With respect to each Interest Period prior to the
Initial Redemption Date, 6.755% per annum. With respect to each Interest Period
thereafter, a rate equal to 7.255% per annum.
"Note Register": As defined in Section 2.06.
"Note Registrar": As defined in Section 2.06.
"Notes": Any Notes authorized by, and authenticated and delivered under,
this Indenture.
"Notice of Claim": The notice required to be furnished by the Indenture
Trustee to the Note Insurer in the event an Insured Payment is required to be
paid under the MBIA Insurance Policy with respect to any Payment Date, in the
form set forth as Exhibit C hereto.
"Notice of Draw": The notice required to be furnished by the Indenture
Trustee to Mortgage Lenders Network USA, Inc. in the event that amounts are
required to be drawn under the Demand Note with respect to any Payment Date, in
the form set forth as Exhibit D hereto.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Mortgage Loan Seller, the Depositor, the Servicer or, in
the case of the Issuer, an Authorized Officer of the Owner Trustee, as the case
may be, and delivered to the Indenture Trustee, Note Insurer or each Rating
Agency, as the case may be.
"Opinion of Counsel": A written opinion of counsel reasonably acceptable
to the Indenture Trustee and, in the case of opinions delivered to the Note
Insurer, reasonably acceptable to it. Any expense related to obtaining an
Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel, except in such instances where
such opinion is at the request of the Indenture Trustee, in which case such
expense shall be an expense of the Servicer.
"Original Note Balance": The principal balance of the Notes at the issue
date thereof, equal to $120,000,000.
"Outstanding": As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Definitive Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
15
<PAGE>
(ii) Notes or portions thereof for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent (other than the Issuer) in trust for the
Holders of such Notes; provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Indenture Trustee,
has been made;
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser (as defined by the Uniform Commercial Code
of the applicable jurisdiction); and
(iv) Notes alleged to have been destroyed, lost or stolen that have
been paid as provided for in Section 2.07;
provided, however, that in determining whether the Holders of the requisite
percentage of the Note Balance of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Issuer, any other obligor upon the Notes or any Affiliate of the
Issuer, the Mortgage Loan Seller, the Servicer or the Depositor or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes that the Indenture Trustee 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 upon the Notes or any Affiliate of
the Issuer, the Mortgage Loan Seller, the Servicer or the Depositor or such
other obligor; provided, further, however, that Notes that have been paid with
the proceeds of the MBIA Insurance Policy shall be deemed to be Outstanding for
the purposes of this Indenture, such payment to be evidenced by written notice
from the Note Insurer to the Indenture Trustee, and the Note Insurer shall be
deemed to the Holder thereof to the extent of any payments thereon made by the
Note Insurer.
"Overcollateralization Amount": As to any Payment Date, the amount, if
any, by which (x) the Aggregate Principal Balance of the Mortgage Loans as of
the end of the related Due Period exceeds (y) the Note Balance for such Payment
Date, after taking into account the Monthly Principal (disregarding any
permitted reduction thereof in Monthly Principal due to an Overcollateralization
Surplus made on such Payment Date) to be applied in reduction of the Note
Balance on such Payment Date. If the Aggregate Principal Balance of the Mortgage
Loans is less than the Note Balance for such Payment Date, determined as
provided above, the Overcollateralization Amount for such Payment Date shall be
zero.
"Overcollateralization Deficit": As to any Payment Date, the amount, if
any, by which the Note Balance on such Payment Date (after taking into account
any payments to
16
<PAGE>
be paid on such Payment Date in reduction of the Note Balance) exceeds the
Aggregate Principal Balance of the Mortgage Loans as of the end of the related
Due Period. If the Aggregate Principal Balance of the Mortgage Loans as
determined pursuant to the preceding sentence is greater than the Note Balance
for such Payment Date determined as provided above, the Overcollateralization
Deficit for such Payment Date shall be zero.
"Overcollateralization Surplus": As to any Payment Date, the amount, if
any, by which (x) the Overcollateralization Amount on such Payment Date exceeds
(y) the Required Overcollateralization Amount on such Payment Date.
"Owner Trustee": Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity, but solely as owner trustee under the Trust
Agreement, and any successor owner trustee thereunder.
"Owner Trustee Fee": As defined in the Trust Agreement.
"Paying Agent": The Indenture Trustee or any other depository institution
or trust company that is authorized by the Issuer pursuant to Section 3.03 to
pay the principal of, or interest on, any Notes on behalf of the Issuer, which
agent, if not the Indenture Trustee, shall have signed an instrument agreeing to
be bound by the terms of this Indenture applicable to the Paying Agent.
"Payment Ahead": As defined in the Servicing Agreement.
"Payment Date": The 25th day of each month or, if any such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
April 27, 1998.
"Payment Date Statement": The statement prepared pursuant to Section
2.08(d) with respect to collection on or in respect of the Mortgage Loans and
other assets of the Trust Estate and payments on or in respect of the Notes,
based upon the information contained in the Servicer Remittance Report prepared
pursuant to the Servicing Agreement and setting forth the following information
with respect to each Payment Date (to the extent the Servicer has made such
information (other than the information described in clause (ii), (iii), (iv),
(v) and (xiv) below) available to the Indenture Trustee):
(i) the amount of such payment to Noteholders allocable to (x)
Monthly Principal (separately setting forth Principal Prepayments) and (y)
any Excess Cash Payment;
(ii) the amount of such payment to Noteholders allocable to Note
Interest;
(iii) the Note Balance, after giving effect to the payment of
Monthly Principal and any Excess Cash Payment applied to reduce the Note
Balance on such Payment Date;
(iv) the amount of any Insured Payments for such Payment Date;
17
<PAGE>
(v) the Overcollateralization Amount, the then applicable Required
Overcollateralization Amount, the Overcollateralization Surplus, if any,
and the Overcollateralization Deficit, if any, with respect to such
Payment Date;
(vi) the Aggregate Principal Balance of the Mortgage Loans as of the
end of the related Due Period;
(vii) the amount of Monthly Advances made with respect to such
Payment Date, if any;
(viii) the number and aggregate of the Principal Balances of
Mortgage Loans (including the Principal Balances of all Mortgage Loans in
foreclosure) contractually delinquent (i) one month, (ii) two months and
(iii) three or more months, as of the end of the related Collection
Period;
(ix) the number and aggregate of the Principal Balances of the
Mortgage Loans in foreclosure or subject to other similar proceedings, and
the number and aggregate of the Principal Balance of Mortgage Loans, the
Mortgagor of which is known by the Servicer to be in bankruptcy as of the
end of the related Collection Period and the book value of any real estate
acquired through foreclosure, grant of a deed in lieu of foreclosure or
other similar proceedings during the related Collection Period:
(x) the aggregate of the Principal Balances of the Mortgage Loans
repurchased by the Mortgage Loan Seller or purchased by the Servicer,
separately setting forth the aggregate of the Principal Balances of
Mortgage Loans delinquent for three consecutive monthly installments
purchased by the Servicer at its option pursuant to the Servicing
Agreement;
(xi) the aggregate amount of the Monthly Servicing Fee paid to or
retained by the Servicer for the related Collection Period;
(xii) the aggregate Principal Balance of the three largest
outstanding Mortgage Loans subject to this Indenture as of the related
Determination Date;
(xiii) the aggregate amount of Realized Losses incurred during the
related Collection Period and the cumulative amount of Realized Losses
since the respective Cut-off Dates; and
(xiv) the Delinquency Percentage and the Rolling Loss Percentage (as
defined in the Servicing Agreement) relating to such Payment Date.
In the case of information furnished pursuant to subclauses (i) and (ii) above,
the amounts shall be expressed as a dollar amount per Individual Note.
"Percentage Interest": With respect to a Note, the undivided percentage
interest (carried to eight places rounded down) obtained by dividing the
original principal balance of such Note by the Original Note Balance and
multiplying the result by 100.
18
<PAGE>
"Permitted Investments": One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully guaranteed
by, the United States of America, the Federal Home Loan Mortgage
Corporation, Federal National Mortgage Corporation, the Federal Home Loan
Banks or any agency or instrumentality of the United States of America
rated Aa3 or higher by Moody's, the obligations of which are backed by the
full faith and credit of the United States of America;
(b) (i) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long
as, at the time of such investment or contractual commitment providing for
such investment, such depository institution or trust company or its
ultimate parent has a short-term uninsured debt rating in one of the two
highest available rating categories of Standard & Poor's and of Moody's
and provided that each such investment has an original maturity of no more
than 365 days and (ii) any other demand or time deposit or deposit which
is fully insured by the FDIC;
(c) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (a) above and entered into
with a depository institution or trust company (acting as a principal)
rated A or higher by S&P and rated A2 or higher by Moody's; provided,
however, that collateral transferred pursuant to such repurchase
obligation must be of the type described in clause (a) above and must (i)
be valued daily at current market price plus accrued interest, (ii)
pursuant to such valuation, be equal, at all times, to 105% of the cash
transferred by the Indenture Trustee in exchange for such collateral and
(iii) be delivered to the Indenture Trustee or, if the Indenture Trustee
is supplying the collateral, an agent for the Indenture Trustee, in such a
manner as to accomplish perfection of a security interest in the
collateral by possession of certified securities.
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which has a long-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the
time of such investment;
(e) commercial paper having an original maturity of less than 365
days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating
Agencies at the time of such investment;
19
<PAGE>
(f) a guaranteed investment contract approved by each of the Rating
Agencies and the Note Insurer and issued by an insurance company or other
corporation having a long-term unsecured debt rating in the highest
available rating category of each of the Rating Agencies at the time of
such investment;
(g) money market funds having ratings in the two highest available
rating category of Moody's and one of the two highest available rating
categories of S&P at the time of such investment which invest only in
other Permitted Investments (any such money market funds which provide for
demand withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth herein) including money
market funds of the Indenture Trustee and any such funds that are managed
by the Indenture Trustee or its affiliates or which Indenture Trustee or
any affiliate acts as advisor as long as such money market funds satisfy
the criteria of this subparagraph (g); and
(h) any investment approved in writing by the Note Insurer and
written evidence that any such investment will not result in a downgrading
or withdrawal of the rating by each Rating Agency on the Notes.
The Indenture Trustee may purchase from or sell to itself or an affiliate,
as principal or agent, the Permitted Investments listed above. All Permitted
Investments in a trust account under the Indenture shall be made in the name of
the Indenture Trustee for the benefit of the Noteholders and the Note Insurer.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association joint-stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Predecessor Notes": With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Note
shall be deemed to evidence the same debt as the lost, destroyed or stolen Note.
"Preference Amount": Any amount previously distributed to a Noteholder
that is recoverable and sought to be recovered as a avoidable preference by a
trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Principal Balance": As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Payment Date, as of the applicable Cut-off Date) less (i) all scheduled payments
of principal received or advanced (or to be advanced on the related Deposit
Date) with respect to the Mortgage Loans and due during the related Due Period
and all other amounts collected, received or otherwise recovered in respect of
principal on the Mortgage Loans (including Principal
20
<PAGE>
Prepayments, but not including Payments Ahead that are not allocable to
principal for the related Due Period) during or in respect of the related
Collection Period, Net Liquidation Proceeds and Trust Insurance Proceeds
allocable to principal recovered or collected in respect of such Mortgage Loan
during the related Collection Period, (ii) the portion of the Purchase Price
allocable to principal to be remitted by the Mortgage Loan Seller or the
Servicer to the Indenture Trustee on or prior to the related Deposit Date in
connection with a repurchase of such Mortgage Loan pursuant to the Mortgage Loan
Sale Agreement, the Servicing Agreement or Section 8.05 hereof, to the extent
such amount is actually remitted on or prior to such Deposit Date, and (iii) the
amount to be remitted by the Mortgage Loan Seller to the Indenture Trustee on
the related Deposit Date in connection with a substitution of a Qualified
Replacement Mortgage Loan for such Mortgage Loan pursuant to the Mortgage Loan
Sale Agreement and Section 8.05 hereof, to the extent such amount is actually
remitted on or prior to such Deposit Date; provided, however that Mortgage Loans
that have become Liquidated Mortgage Loans since the end of the preceding
Determination Date (or, in the case of the first Determination Date, since the
applicable Cut-off Date) will be deemed to have a Principal Balance of zero on
the current Determination Date.
"Principal Prepayment": As to any Mortgage Loan and Collection Period, any
payment by a Mortgagor or other recovery in respect of principal on a Mortgage
Loan (including Net Liquidation Proceeds and Trust Insurance Proceeds) that, in
the case of a payment by a Mortgagor, is received in advance of its scheduled
due date and is not a Payment Ahead.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Price": With respect to any Defective Mortgage Loan, an amount
equal to (i) the sum of (A) the Principal Balance of such Defective Mortgage
Loan as of the beginning of the Due Period next preceding the Deposit Date on
which such repurchase or purchase is required to occur, (B) interest computed at
the applicable Mortgage Interest Rate on such Principal Balance from the date to
which interest was last paid by the Mortgagor to the last day of the Due Period
immediately preceding the Deposit Date on which such repurchase occurs and (C)
any previously unreimbursed Servicing Advances made on or in respect of such
Defective Mortgage Loan, less (ii) any payments of principal and interest in
respect of such Defective Mortgage Loan made by or on behalf of the related
Mortgagor during such Due Period. With respect to any Qualified Replacement
Mortgage Loan, the amount remitted by the Mortgage Loan Seller to the Indenture
Trustee on or prior to the Deposit Date relating to a Payment Date in connection
with a substitution of such Qualified Replacement Mortgage Loan for a Mortgage
Loan pursuant to the Mortgage Loan Sale Agreement or Section 8.05 hereof.
"Qualified Replacement Mortgage Loan": A Mortgage Loan that is substituted
for a Deleted Mortgage Loan pursuant to Section 8.05 that must, at the end of
the Due Period preceding the date of such substitution, (i) have an outstanding
principal balance (when taken together with any other Qualified Replacement
Mortgage Loan being substituted for such Deleted Mortgage Loan), not in excess
of and not substantially less
21
<PAGE>
than the unpaid principal balance of the Deleted Mortgage Loan at the end of the
Due Period preceding the date of substitution, (ii) have the Mortgage Interest
Rate not less than the Mortgage Interest Rate on the Deleted Mortgage Loan,
(iii) have a remaining term to maturity not greater than (and not more than one
year less than) that of the Deleted Mortgage Loan, (iv) have a Loan-to-Value
Ratio or Combined Loan-to-Value Ratio equal to or lower than the Loan-to-Value
Ratio or Combined Loan-to-Value Ratio of the Deleted Mortgage Loan, (v) have the
same or better lien priority as the Deleted Mortgage Loan, (vi) comply as of the
date of substitution with each representation and warranty set forth in Section
4(b) and Exhibit B of the Mortgage Loan Sale Agreement, (vii) have the same or
better property type as the Deleted Mortgage Loan and (viii) have the same or
better occupancy status. In the event that one or more mortgage loans are
proposed to be substituted for one or more Deleted Mortgage Loans, the foregoing
tests may be met on a weighted average basis or other aggregate basis acceptable
to the Note Insurer, except that the requirements of clauses (v), (vi), (vii)
and (viii) hereof must be satisfied as to each Qualified Replacement Mortgage
Loan.
"Rating Agencies": Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Servicer, notice of which
designation shall be given to the Indenture Trustee.
"Realized Loss": As defined in the Servicing Agreement.
"Record Date": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Notes
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the last Business Day preceding such
Payment Date or, with respect to Definitive Notes, the last Business Day of the
month preceding the month of such Payment Date. With respect to a vote of
Noteholders required or allowed hereunder, the Record Date shall be the later of
(i) 30 days prior to the first solicitation of consents or (ii) the date of the
most recent list of Noteholders furnished to the Indenture Trustee pursuant to
Section 7.01(a) prior to such solicitation.
"Redemption Date": The Payment Date, if any, on which the Notes are
redeemed pursuant to Article X hereof which date may occur (i) on or after the
Payment Date on which the Aggregate Principal Balance of the Mortgage Loans as
of the related Determination Date is less than 10% of the Aggregate Principal
Balances of the Mortgage Loans as of their respective Cut-off Dates or (ii)
after the Indenture Trustee has received an acceptable offer to purchase the
Trust Estate as set forth in Section 10.01(c) hereof.
"Redemption Price": With respect to any Note to be redeemed in whole or in
part, an amount equal to 100% of the Current Note Balance of the Note to be so
redeemed, together with accrued and unpaid interest on such amount at the Note
Interest Rate.
22
<PAGE>
"Remittable Funds": As defined in the Servicing Agreement.
"REO Property": As defined in the Servicing Agreement.
"Required Overcollateralization Amount" means:
(a) for any Payment Date occurring during the period commencing on
the Closing Date and ending on the later of the 30th Payment Date
following the Closing Date and the date upon which principal of the Notes
in the amount of one-half of the Aggregate Principal Balance of the
Mortgage Loans as of the respective Cut-off Dates has been received by the
Noteholders, the greater of: (i) 4.5% of the Aggregate Principal Balance
of the Mortgage Loans as of the respective Cut-off Dates, and (ii) 75.0%
of the Delinquency Amount.
(b) for any Payment Date occurring after the end of the period
described in clause (a) above, the greatest of (i) 9.0% of the Aggregate
Principal Balance of the Mortgage Loans as of the Determination Date
relating to such Payment Date, (ii) 75.0% of the Delinquency Amount, (iii)
0.50% of the Aggregate Principal Balance of the Mortgage Loans as of the
respective Cut-off Dates; provided, however, that such percentage shall be
increased to 0.75% in the event that the Rolling Loss Percentage as of any
Deposit Date exceeds 1.0% of the Initial Pool Balance, and (iv) the sum of
the Principal Balances of the three largest Mortgage Loans then
outstanding.
(c) provided, however, for any Payment Date occurring after the end
of the period described in clause (a) above, if the Delinquency Percentage
exceeds 9.5% of the Aggregate Principal Balance of the Mortgage Loans as
of the related Determination Date, the Required Overcollateralization
Amount shall be no less than the Required Overcollateralization Amount as
of the previous Payment Date.
The Note Insurer may, in its sole discretion, at the request of the
holders of 50% or more of the ownership interests of the Issuer, modify clause
(a)(ii) or (b)(ii) above for the purpose of reducing or eliminating, in whole or
in part, the application of clause (a)(ii) or (b)(ii) above, if the Indenture
Trustee and each Rating Agency shall have been notified in writing of such
modification prior to the related Payment Date and each Rating Agency shall have
confirmed that such modification shall not result in a downgrading of the
then-current implied ratings on the Notes (without regard to the MBIA Insurance
Policy).
"Required Payment Amount": With respect to any Payment Date, the Note
Interest for such Payment Date plus the amount of any Overcollateralization
Deficit for such Payment Date.
"Responsible Officer": With respect to the Indenture Trustee, the chairman
or vice-chairman of the board of directors, the chairman or vice-chairman of the
executive committee of the board of directors, the president, any vice
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer, any assistant treasurer, the cashier, any trust officer or
assistant trust officer, the controller, any assistant controller
23
<PAGE>
or any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Sale": The meaning specified in Section 5.17.
"Servicer": With respect to any Mortgage Loan, Mortgage Lenders Network
USA, Inc., a Delaware corporation, as Servicer under the Servicing Agreement,
and its permitted successors and assigns thereunder, including any successor
servicers appointed pursuant to Section 6.02 of the Servicing Agreement.
"Servicer Remittance Report": As defined in the Servicing Agreement.
"Servicing Advance": As defined in the Servicing Agreement.
"Servicing Agreement": The servicing agreement, dated as of March 1, 1998,
among the Issuer, the Servicer and the Indenture Trustee, as indenture trustee,
providing, among other things, for the servicing of the Mortgage Loans, as such
agreement may be amended or supplemented from time to time as permitted hereby
and thereby. Such term shall also include any servicing agreement entered into
with a successor servicer.
"Servicing Fee Rate": 0.50% per annum.
"Standard & Poor's": Standard & Poor's Rating Services, a Division of The
McGraw-Hill Companies, Inc., and its successors in interest.
"Target Date": The first Payment Date on which the Overcollateralization
Amount equals or exceeds 3.0% of the Aggregate Principal Balance of the Mortgage
Loans as of the Cut-off Date.
"Transition Expenses": As defined in the Servicing Agreement.
"Trust Agreement": That certain Deposit Trust Agreement, dated as of March
1, 1998, among the Depositor, the Owner Trustee, Norwest Bank Minnesota,
National Association and the Servicer.
"Trust Estate": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Noteholders and the Note Insurer as of any particular time (including, without
limitation, all property and interests Granted to the Indenture Trustee,
including all proceeds thereof).
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939 as it may
be amended from time to time.
"Trust Insurance Proceeds": As defined in the Servicing Agreement.
24
<PAGE>
"Trust Paying Agent": The entity appointed to act as paying agent pursuant
to the Trust Agreement with respect to amounts on deposit from time to time in
the Certificate Distribution Account and distributions thereof to
Certificateholders. The initial Trust Paying Agent is Norwest Bank Minnesota,
National Association.
"U.S. Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
U.S.C. Sections 101, et seq., as amended or supplemented from time to time.
"Vice President": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
ARTICLE II
THE NOTES
Section 2.01. Forms Generally.
The Notes shall be in substantially the form set forth on Exhibit A
attached hereto. Each Note may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the Notes
may be listed, or as may, consistently herewith, be determined by the Issuer, as
evidenced by its execution thereof. Any portion of the text of any Note may be
set forth on the reverse thereof with an appropriate reference on the face of
the Note.
The Definitive Notes may be produced in any manner determined by the
Issuer, as evidenced by its execution thereof.
Section 2.02. Forms of Certificate of Authentication.
The form of the Authenticating Agent's certificate of authentication is as
follows:
This is one of the Notes referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Authenticating Agent
By:_________________________________
Authorized Signatory
Section 2.03. General Provisions With Respect to Principal and Interest
Payment.
The Notes shall be designated generally as the "Asset Backed Notes, Series
1998-1" of the Issuer.
25
<PAGE>
The aggregate principal amount of Notes that may be authenticated and
delivered under the Indenture is limited to $120,000,000, except for the Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or 9.06 of this
Indenture. The Notes shall consist of one and only one class having an Original
Note Balance, Note Interest Rate for the initial Interest Period and Final
Maturity Date as follows:
Original Note Note Interest Final
Designation Balance Rate Maturity Date
----------- ------- ---- -------------
Series 1998-1 $120,000,000 6.755% August 25, 2029
The Notes shall be issued in the form specified in Section 2.01.
Subject to the provisions of Section 3.01, Section 5.07, Section 5.09 and
Section 8.02(d), the principal of the Notes shall be payable in installments
ending no later than the Final Maturity Date unless the unpaid principal of such
Notes become due and payable at an earlier date by declaration of acceleration
or call for redemption or otherwise.
All payments made with respect to any Note shall be applied first to the
interest then due and payable on such Note and then to the principal thereof.
All computations of interest accrued on any Note shall be made on the basis of a
year of 360 days and twelve 30-day months.
Interest on the Notes shall accrue at the Note Interest Rate during each
Interest Period on the Current Note Balance of each Outstanding Note at the end
of such Interest Period. Interest accrued during an Interest Period shall be
payable on the next following Payment Date.
All payments of principal of and interest on any Note shall be made in the
manner specified in Section 2.
Notwithstanding any of the foregoing provisions with respect to payments
of principal of and interest on the Notes, if the Notes have become or been
declared due and payable following an Event of Default and such acceleration of
maturity and its consequences have not been rescinded and annulled, then
payments of principal of and interest on the Notes shall be made in accordance
with Section 5.07.
Section 2.04. Denominations.
The Notes shall be issuable only as registered Notes in the minimum
denomination of $1,000 and integral multiples in excess thereof, with the
exception of one Note which may be issued in a lesser amount.
26
<PAGE>
Section 2.05. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Issuer by an Authorized
Officer of the Owner Trustee. The signature of such Authorized Officer of the
Owner Trustee on the Notes may be manual or by facsimile.
Notes bearing the manual or facsimile signature of an individual who was
at any time an Authorized Officer of the Owner Trustee shall bind the Issuer,
notwithstanding that such individual has ceased to be an Authorized Officer of
the Owner Trustee prior to the authentication and delivery of such Notes or was
not an Authorized Officer of the Owner Trustee at the date of such Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Notes executed on behalf of the Issuer to the
Authenticating Agent for authentication; and the Authenticating Agent shall
authenticate and deliver such Notes as in this Indenture provided and not
otherwise.
Each Note authenticated on the Closing Date shall be dated the Closing
Date. All other Notes that are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Authenticating Agent by the manual signature of one of its authorized officers
or employees, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
Section 2.06. Registration, Registration of Transfer and Exchange.
The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee is hereby initially appointed "Note Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided. The
Indenture Trustee shall remain the Note Registrar throughout the term hereof.
Upon any resignation of the Indenture Trustee, the Issuer shall promptly appoint
a successor, with the approval of the Note Insurer, or, in the absence of such
appointment, the Issuer shall assume the duties of Note Registrar.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Owner
Trustee on behalf of the Issuer, shall execute, and the Authenticating Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of any
authorized denominations, and of a like aggregate initial principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes
27
<PAGE>
are so surrendered for exchange, the Owner Trustee shall execute, and the
Authenticating Agent shall authenticate and deliver, 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 be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by the Holder
thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer and the Note Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge as may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.07 not involving any transfer or any exchange
made by the Note Insurer.
The Note Registrar shall not register the transfer of a Note unless the
Note Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not, and is not acquiring the Note on
behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of the Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner of a Book-Entry Note shall be deemed to make one of the
foregoing representations.
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes.
If (1) any mutilated Note is surrendered to the Note Registrar or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (2) there is delivered to the Note Registrar such
security or indemnity as may be required by the Note Registrar to save each of
the Issuer, the Note Insurer and the Note Registrar harmless, then, in the
absence of notice to the Issuer or the Note Registrar that such Note has been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Issuer
shall execute and upon its request the Note Registrar shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a new Note or Notes of the same tenor and aggregate initial
principal amount bearing a number not contemporaneously outstanding. If, after
the delivery of such new Note, a bona fide purchaser of the original Note in
lieu of which such new Note was issued presents for payment such original Note,
the Issuer and the Note Registrar shall be entitled to recover such new Note
from the person to whom it was delivered or any person taking therefrom, except
a bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost
28
<PAGE>
or expenses incurred by the Issuer or the Note Registrar in connection
therewith. If any such mutilated, destroyed, lost or stolen Note shall have
become or shall be about to become due and payable, or shall have become subject
to redemption in full, instead of issuing a new Note, the Issuer may pay such
Note without surrender thereof, except that any mutilated Note shall be
surrendered.
Upon the issuance of any new Note under this Section, the Issuer or the
Note Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Indenture Trustee or
the Note Registrar) connected therewith.
Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.08. Payments of Principal and Interest.
(a) Payments on Notes issued as Book-Entry Notes will be made by or on
behalf of the Indenture Trustee to the Clearing Agency or its nominee. Any
installment of interest or principal payable on any Definitive Notes that is
punctually paid or duly provided for by the Issuer on the applicable Payment
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered at the close of business on the Record Date for
such Payment Date by either (i) check mailed to such Person's address as it
appears in the Note Register on such Record Date, or (ii) by wire transfer of
immediately available funds to the account of a Noteholder, if such Noteholder
(A) is the registered holder of Definitive Notes having an initial principal
amount of at least $1,000,000 and (B) has provided the Indenture Trustee with
wiring instructions in writing by five Business Days prior to the related Record
Date or has provided the Indenture Trustee with such instructions for any
previous Payment Date, except for the final installment of principal payable
with respect to such Note (or the Redemption Price for any Note called for
redemption, if such redemption will result in payment of the then entire unpaid
principal amount of such Note), which shall be payable as provided in subsection
(b) below of this Section 2.08. A fee may be charged by the Indenture Trustee to
a Noteholder of Definitive Notes for any payment made by wire transfer. Any
installment of interest or principal not punctually paid or duly provided for
shall be payable as soon as funds are available to the Indenture Trustee for
payment thereof, or if Section 5.07 applies, pursuant to Section 5.07.
(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by payments of installments of principal made on any
Payment Date shall
29
<PAGE>
be binding upon all Holders of such Note and of any Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof,
whether or not such payment is noted on such Note. The final installment of
principal of each Note (including the Redemption Price of any Note called for
optional redemption, if such optional redemption will result in payment of the
entire unpaid principal amount of such Note) shall be payable only upon
presentation and surrender thereof on or after the Payment Date therefor at the
Indenture Trustee's presenting office located within the United States of
America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire remaining unpaid
principal amount of any Note will become due and payable on the next Payment
Date other than pursuant to a redemption pursuant to Article X, it shall, no
later than two days prior to such Payment Date, telecopy or hand deliver to each
Person in whose name a Note to be so retired is registered at the close of
business on such otherwise applicable Record Date a notice to the effect that:
(i) the Indenture Trustee expects that funds sufficient to pay such
final installment will be available in the Note Account on such Payment
Date; and
(ii) if such funds are available, (A) such final installment will be
payable on such Payment Date, but only upon presentation and surrender of
such Note at the office or agency of the Note Registrar maintained for
such purpose pursuant to Section 3.02 (the address of which shall be set
forth in such notice) and (B) no interest shall accrue on such Note after
such Payment Date.
A copy of such form of notice shall be sent to the Note Insurer by the
Indenture Trustee.
Notices in connection with redemptions of Notes shall be mailed to
Noteholders in accordance with Section 10.02.
(c) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to unpaid principal and
interest that were carried by such other Note. Any checks mailed pursuant to
subsection (a) of this Section 2.08 and returned undelivered shall be held in
accordance with Section 3.03.
(d) Each Payment Date Statement, prepared by the Indenture Trustee based
on the Servicer Remittance Report delivered to the Indenture Trustee pursuant to
the Servicing Agreement, shall be delivered by the Indenture Trustee to the Note
Insurer, the Rating Agencies, the Owner Trustee, the Underwriters (as defined in
the Insurance Agreement) and each Noteholder as the statement required pursuant
to Section 8.06. Neither the Indenture Trustee nor the Paying Agent shall have
any responsibility to recalculate, verify or recompute information contained in
any such tape, electronic data file or disk or any such Servicer Remittance
Report except to the extent necessary to satisfy all obligations under this
Section 2.08(d) and under Article III of the Servicing Agreement.
30
<PAGE>
Within 90 days after the end of each calendar year, the Indenture Trustee
will be required to furnish to each person who at any time during the calendar
year was a Noteholder, if requested in writing by such person, a statement
containing the information set forth in subclauses (i) and (ii) in the
definition of "Payment Date Statement," aggregated for such calendar year or the
applicable portion thereof during which such person was a Noteholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force.
Section 2.09. Persons Deemed Owner.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Indenture Trustee, any Paying Agent and any other agent of the
Issuer, the Note Insurer or the Indenture Trustee may treat the Person in whose
name any Note is registered as the owner of such Note (a) on the applicable
Record Date for the purpose of receiving payments of the principal of and
interest on such Note and (b) on any other date for all other purposes
whatsoever, and neither the Issuer, the Indenture Trustee, any Paying Agent nor
any other agent of the Issuer, the Note Insurer or the Indenture Trustee shall
be affected by notice to the contrary.
Section 2.10. Cancellation.
All Notes surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other than the Note Registrar, be
delivered to the Note Registrar and shall be promptly canceled by it. The Issuer
may at any time deliver to the Note Registrar for cancellation any Note
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Note Registrar. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes held by the Note Registrar shall
be held by the Note Registrar in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.
Section 2.11. Authentication and Delivery of Notes.
The Notes shall be executed by an Authorized Officer of the Owner Trustee
on behalf of the Issuer and delivered to the Authenticating Agent for
authentication, and thereupon the same shall be authenticated and delivered by
the Authenticating Agent, upon Issuer Request and upon receipt by the
Authenticating Agent of all of the following:
(a) An Issuer Order authorizing the execution, authentication and delivery
of the Notes and specifying the Final Maturity Date, the principal amount and
the Note Interest Rate (or the manner in which such Note Interest Rate is to be
determined) of such Notes to be authenticated and delivered.
(b) An Issuer Order authorizing the execution and delivery of this
Indenture.
31
<PAGE>
(c) One or more Opinions of Counsel addressed to the Authenticating Agent
and the Note Insurer or upon which the Authenticating Agent and the Note Insurer
is expressly permitted to rely, complying with the requirements of Section
11.01, reasonably satisfactory in form and substance to the Authenticating Agent
and the Note Insurer.
In rendering the opinions set forth above, such counsel may rely upon
officer's certificates of the Issuer, the Owner Trustee, the Servicer and the
Indenture Trustee, without independent confirmation or verification with respect
to factual matters relevant to such opinions. In rendering the opinions set
forth above, such counsel need express no opinion as to (A) the existence of, or
the priority of the security interest created by the Indenture against, any
liens or other interests that arise by operation of law and that do not require
any filing or similar action in order to take priority over a perfected security
interest or (B) the priority of the security interest created by this Indenture
with respect to any claim or lien in favor of the United States or any agency or
instrumentality thereof (including federal tax liens and liens arising under
Title IV of the Employee Retirement Income Security Act of 1974).
The acceptability to the Note Insurer of the Opinion of Counsel delivered
to the Indenture Trustee and the Note Insurer at the Closing Date shall be
conclusively evidenced by the delivery on the Closing Date of the MBIA Insurance
Policy.
(d) An Officers' Certificate of the Issuer complying with the requirements
of Section 11.01 and stating that:
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, the Issuer's
Certificate of Trust or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by which it is
bound, or any order of any court or administrative agency entered in any
proceeding to which the Issuer is a party or by which it may be bound or
to which it may be subject, and that all conditions precedent provided in
this Indenture relating to the authentication and delivery of the Notes
have been complied with;
(ii) the Issuer is the owner of each Mortgage Loan, free and clear
of any lien, security interest or charge, has not assigned any interest or
participation in any such Mortgage Loan (or, if any such interest or
participation has been assigned, it has been released) and has the right
to Grant each such Mortgage Loan to the Indenture Trustee; (iii) the
information set forth in the Mortgage Loan Schedule attached as Schedule I
to this Indenture is correct;
(iv) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in each Mortgage Loan;
32
<PAGE>
(v) as of the Closing Date, no lien in favor of the United States
described in Section 6321 of the Code, or lien in favor of the Pension
Benefit Guaranty Corporation described in Section 4068(a) of the Employee
Retirement Income Security Act of 1974, as amended, has been filed as
described in subsections 6323(f) and 6323(g) of the Code upon any property
belonging to the Issuer; and
(vi) attached thereto is a true and correct copy of letters signed
by each Rating Agency confirming that the Notes have been rated in the
highest rating category of such Rating Agency.
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of the Mortgage Loan Sale Agreement.
(g) An executed counterpart of the Mortgage Loan Contribution Agreement.
(h) An executed counterpart of the Trust Agreement.
(i) An executed counterpart of the Demand Note.
Section 2.12. Book-Entry Note.
The Notes will be issued initially as one or more certificates in the name
of the Cede & Co., as nominee for the Clearing Agency maintaining book-entry
records with respect to ownership and transfer of such Notes, and registration
of the Notes may not be transferred by the Note Registrar except upon Book-Entry
Termination. In such case, the Note Registrar shall deal with the Clearing
Agency as representatives of the Beneficial Owners of such Notes for purposes of
exercising the rights of Noteholders hereunder. Each payment of principal of and
interest on a Book-Entry Note shall be paid to the Clearing Agency, which shall
credit the amount of such payments to the accounts of its Clearing Agency
Participants in accordance with its normal procedures. Each Clearing Agency
Participant shall be responsible for disbursing such payments to the Beneficial
Owners of the Book-Entry Notes that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Beneficial Owners of the Book-Entry Notes that it
represents. All such credits and disbursements are to be made by the Clearing
Agency and the Clearing Agency Participants in accordance with the provisions of
the Notes. None of the Indenture Trustee, the Note Registrar, if any, the
Issuer, or any Paying Agent or the Note Insurer shall have any responsibility
therefor except as otherwise provided by applicable law. Requests and directions
from, and votes of, such representatives shall not be deemed to be inconsistent
if they are made with respect to different Beneficial Owners.
Section 2.13. Termination of Book Entry System.
(a) The book-entry system through the Clearing Agency with respect to the
Book-Entry Notes may be terminated upon the happening of any of the following:
33
<PAGE>
(i) The Clearing Agency advises the Indenture Trustee that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities as nominee and depositary with respect to the Notes and
the Indenture Trustee is unable to locate a qualified successor clearing
agency satisfactory to the Issuer;
(ii) The Issuer, in its sole discretion, elects to terminate the
book-entry system by notice to the Clearing Agency and the Indenture
Trustee; or
(iii) After the occurrence of an Event of Default (at which time the
Indenture Trustee shall use all reasonable efforts to promptly notify each
Beneficial Owner through the Clearing Agency of such Event of Default),
the Beneficial Owners of no less than 51% of the Note Balance of the
Book-Entry Notes advise the Indenture Trustee in writing, through the
related Clearing Agency Participants and the Clearing Agency, that the
continuation of a book-entry system through the Clearing Agency to the
exclusion of any Definitive Notes being issued to any person other than
the Clearing Agency or its nominee is no longer in the best interests of
the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection (a) above,
the Indenture Trustee shall use all reasonable efforts to notify all Beneficial
Owners, through the Clearing Agency, of the occurrence of such event and of the
availability of Definitive Notes to Beneficial Owners requesting the same, in an
aggregate Current Note Balance representing the interest of each, making such
adjustments and allowances as it may find necessary or appropriate as to accrued
interest and previous calls for redemption. Definitive Notes shall be issued
only upon surrender to the Indenture Trustee of the global Note by the Clearing
Agency, accompanied by registration instructions for the Definitive Notes.
Neither the Issuer nor the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon issuance of the Definitive
Notes, all references herein to obligations imposed upon or to be performed by
the Clearing Agency shall cease to be applicable and the provisions relating to
Definitive Notes shall be applicable.
ARTICLE III
COVENANTS
Section 3.01. Payment of Notes.
The Issuer will pay or cause to be duly and punctually paid the principal
of, and interest on, the Notes in accordance with the terms of the Notes and
this Indenture. The Notes shall be non-recourse obligations of the Issuer and
shall be limited in right of payment to amounts available from the Trust Estate
as provided in this Indenture and the Issuer shall not otherwise be liable for
payments on the Notes. No person shall be personally liable for any amounts
payable under the Notes. If any other provision of this Indenture conflicts or
is deemed to conflict with the provisions of this Section 3.01, the provisions
of this Section 3.01 shall control.
34
<PAGE>
Section 3.02. Maintenance of Office or Agency.
The Issuer will cause the Note Registrar to maintain its corporate trust
office at a location where Notes may be surrendered for registration of transfer
or exchange, and where notices and demands to or upon the Issuer in respect of
the Notes and this Indenture may be served.
The Issuer may also from time to time at its own expense designate one or
more other offices or agencies within the United States of America where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided, however, any designation of an
office or agency for payment of Notes shall be subject to Section 3.03. The
Issuer will give prompt written notice to the Indenture Trustee and the Note
Insurer of any such designation or rescission and of any change in the location
of any such other office or agency.
Section 3.03. Money for Note Payments to Be Held In Trust.
All payments of amounts due and payable with respect to any Notes that are
to be made from amounts withdrawn from the Note Account pursuant to Section
8.02(c) or Section 5.07 shall be made on behalf of the Issuer by the Paying
Agent, and no amounts so withdrawn from the Note Account for payments of Notes
shall be paid over to the Issuer under any circumstances except as provided in
this Section 3.03 or in Section 5.07 or Section 8.02.
With respect to Definitive Notes, if the Issuer shall have a Paying Agent
that is not also the Note Registrar, such Note Registrar shall furnish, no later
than the fifth calendar day after each Record Date, a list, in such form as such
Paying Agent may reasonably require, of the names and addresses of the Holders
of Notes and of the number of Individual Notes held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Indenture
Trustee, it will, on or before the Business Day next preceding each Payment Date
direct the Indenture Trustee to deposit with such Paying Agent an aggregate sum
sufficient to pay the amounts then becoming due (to the extent funds are then
available for such purpose in the Note Account), such sum to be held in trust
for the benefit of the Persons entitled thereto. Any moneys deposited with a
Paying Agent in excess of an amount sufficient to pay the amounts then becoming
due on the Notes with respect to which such deposit was made shall, upon Issuer
Order, be paid over by such Paying Agent to the Indenture Trustee for
application in accordance with Article VIII.
Subject to the prior consent of the Note Insurer, any Paying Agent other
than the Indenture Trustee may be appointed by Issuer Order and at the expense
of the Issuer. The Issuer shall not appoint any Paying Agent (other than the
Indenture Trustee) that is not, at the time of such appointment, a depository
institution or trust company whose obligations would be Permitted Investments
pursuant to clause (c) of the definition of the term Permitted Investments. The
Issuer will cause each Paying Agent other than the Indenture Trustee to execute
and deliver to the Indenture Trustee an instrument in which
35
<PAGE>
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(1) allocate all sums received for payment to the Holders of Notes
on each Payment Date among such Holders in the proportion specified in the
applicable Payment Date Statement, in each case to the extent permitted by
applicable law;
(2) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided;
(3) if such Paying Agent is not the Indenture Trustee, immediately
resign as a Paying Agent and forthwith pay to the Indenture Trustee all
sums held by it in trust for the payment of the Notes if at any time the
Paying Agent ceases to meet the standards set forth above required to be
met by a Paying Agent at the time of its appointment;
(4) if such Paying Agent is not the Indenture Trustee, give the
Indenture Trustee notice of any Default by the Issuer (or any other
obligor upon the Notes) in the making of any payment required to be made
with respect to any Notes for which it is acting as Paying Agent;
(5) if such Paying Agent is not the Indenture Trustee, 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
(6) comply with all requirements of the Code, and all regulations
thereunder, with respect to withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith;
provided, however, that with respect to withholding and reporting
requirements applicable to original issue discount (if any) on any of the
Notes, the Issuer has provided the calculations pertaining thereto to the
Indenture Trustee and the Paying Agent. The Issuer may at any time, for
the purpose of obtaining the satisfaction and discharge of this Indenture
or any other purpose, by Issuer Order direct any Paying Agent, if other
than the Indenture Trustee, 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.
Any money held by the Indenture Trustee or any Paying Agent in trust for
the payment of any amount due with respect to any Note and remaining unclaimed
for two
36
<PAGE>
and one-half years after such amount has become due and payable to the Holder of
such Note (or if earlier, three months before the date on which such amount
would escheat to a governmental entity under applicable law) shall be discharged
from such trust and paid to the Issuer; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease. The Indenture Trustee may adopt and
employ, at the expense of the Issuer, any reasonable means of notification of
such repayment (including, but not limited to, mailing notice of such repayment
to Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or any Agent,
at the last address of record for each such Holder).
Section 3.04. Existence of Issuer.
(a) Subject to Sections 3.04(b) and (c), the Issuer will keep in full
effect its existence, rights and franchises as a business trust under the laws
of the State of Delaware or under the laws of any other state or the United
States of America, and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes, the
Servicing Agreement, the Insurance Agreement and the Mortgage Loan Contribution
Agreement.
(b) Subject to Section 3.09(vii) and the prior written consent of the Note
Insurer, any entity into which the Issuer may be merged or with which it may be
consolidated, or any entity resulting from any merger or consolidation to which
the Issuer shall be a party, shall be the successor Issuer under this Indenture
without the execution or filing of any paper, instrument or further act to be
done on the part of the parties hereto, anything in any agreement relating to
such merger or consolidation, by which any such Issuer may seek to retain
certain powers, rights and privileges therefore obtaining for any period of time
following such merger or consolidation to the contrary notwithstanding (other
than Section 3.09(vii)).
(c) Upon any consolidation or merger of or other succession to the Issuer
in accordance with this Section 3.04, the Person formed by or surviving such
consolidation or merger (if other than the Issuer) may exercise every right and
power of, and shall have all of the obligations of, the Issuer under this
Indenture with the same effect as if such Person had been named as the Issuer
herein.
Section 3.05. Protection of Trust Estate.
(a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
37
<PAGE>
(ii) maintain or preserve the lien of this Indenture or carry out
more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Loans, the Servicing Agreement, the
Mortgage Loan Sale Agreement or the Mortgage Loan Contribution Agreement;
or
(v) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee, and of the Noteholders, in the Mortgage Loans and
the other property held as part of the Trust Estate against the claims of
all Persons and parties.
(b) The Indenture Trustee shall not remove any portion of the Trust Estate
that consists of money or is evidenced by an instrument, certificate or other
writing from the jurisdiction in which it was held at the date of the most
recent Opinion of Counsel delivered pursuant to Section 3.06 (or from the
jurisdiction in which it was held, or to which it is intended to be removed, as
described in the Opinion of Counsel delivered at the Closing Date pursuant to
Section 2.1l(c), if no Opinion of Counsel has yet been delivered pursuant to
Section 3.06) or cause or permit ownership or the pledge of any portion of the
Trust Estate that consists of book-entry securities to be recorded on the books
of a Person located in a different jurisdiction from the jurisdiction in which
such ownership or pledge was recorded at such time unless the Indenture Trustee
shall have first received an Opinion of Counsel to the effect that the lien and
security interest created by this Indenture with respect to such property will
continue to be maintained after giving effect to such action or actions.
Section 3.06. Opinions as to Trust Estate.
On or before April 30th in each calendar year, beginning in 1999, the
Issuer shall furnish to the Indenture Trustee and the Note Insurer an Opinion of
Counsel reasonably satisfactory in form and substance to the Indenture Trustee
and the Note Insurer either stating that, in the opinion of such counsel, such
action has been taken as is necessary to maintain the lien and security interest
created by this Indenture and reciting the details of such action or stating
that in the opinion of such counsel no such action is necessary to maintain such
lien and security interest. Such Opinion of Counsel shall also describe all such
action, if any, that will, in the opinion of such counsel, be required to be
taken to maintain the lien and security interest of this Indenture with respect
to the Trust Estate until May 1st in the following calendar year.
Section 3.07. Performance of Obligations; Servicing Agreement.
(a) The Issuer shall punctually perform and observe all of its obligations
under this Indenture and the Servicing Agreement.
38
<PAGE>
(b) The Issuer shall not take any action and will use its Best Efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's covenants or obligations under any of the Mortgage Files or
under any instrument included in the Trust Estate, or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any of the documents or instruments contained
in the Mortgage Files, except as expressly permitted in this Indenture, the
Servicing Agreement or such document included in the Mortgage File or other
instrument or unless such action will not adversely affect the interests of the
Holders of the Notes.
(c) If the Issuer shall have knowledge of the occurrence of a default
under the Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee, the Note Insurer and the Rating Agencies thereof, and shall specify in
such notice the action, if any, the Issuer is taking with respect to such
default.
(d) Upon any termination of the Servicer's rights and powers pursuant to
the Servicing Agreement, the Indenture Trustee shall promptly notify the Rating
Agencies. As soon as any successor Servicer is appointed, the Indenture Trustee
shall notify the Rating Agencies, specifying in such notice the name and address
of such successor Servicer.
Section 3.08. Investment Company Act.
The Issuer shall at all times conduct its operations so as not to be
subject to, or shall comply with, the requirements of the Investment Company Act
of 1940, as amended (or any successor statute), and the rules and regulations
thereunder.
Section 3.09. Negative Covenants.
The Issuer shall not:
(i) sell, transfer, exchange or otherwise dispose of any portion of
the Trust Estate except as expressly permitted by this Indenture or the
Servicing Agreement;
(ii) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Notes by reason of the payment of any taxes
levied or assessed upon any portion of the Trust Estate;
(iii) engage in any business or activity other than as permitted by
the Trust Agreement or other than in connection with, or relating to, the
issuance of the Notes pursuant to this Indenture or amend the Trust
Agreement, as in effect on the Closing Date, other than in accordance with
Section 11.01;
(iv) incur, issue, assume or otherwise become liable for a
indebtedness other than the Notes;
39
<PAGE>
(v) incur, assume, guaranty or agree to indemnify any Person with
respect to any indebtedness of any Person, except for such indebtedness as
may be incurred by the Issuer in connection with the issuance of the Notes
pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part (until the Notes are
paid in full);
(vii) (1) permit the validity or effectiveness of this Indenture or
any Grant to be impaired, or permit the lien of this Indenture to be
impaired, amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or obligations
under this Indenture, except as may be expressly permitted hereby, (2)
permit any lien, charge, security interest, mortgage or other encumbrance
(other than the lien of this Indenture or any Permitted Encumbrance) to be
created on or extend to or otherwise arise upon or burden the Trust Estate
or any part thereof or any interest therein or the proceeds thereof, or
(3) permit the lien of this Indenture not to constitute a valid perfected
first priority security interest in the Trust Estate; or
(viii) take any other action that should reasonably be expected to,
or fail to take any action if such failure should reasonably be expected
to, cause the Issuer to be taxable as (a) an association pursuant to
Section 7701 of the Code or (b) a taxable mortgage pool pursuant to
Section 7701(i) of the Code.
Section 3.10. Annual Statement as to Compliance.
On or before March 31, 1999, and each March 31st thereafter, the Issuer
shall deliver to the Indenture Trustee, the Note Insurer and the Underwriters a
written statement, signed by an Authorized Officer of the Owner Trustee, stating
that:
(1) a review of the fulfillment by the Issuer during such year of
its obligations under this Indenture has been made under such Authorized
Officer's supervision; and
(2) 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 the fulfillment of any such covenant or condition, specifying each such
Default known to such Authorized Officer and the nature and status
thereof.
Section 3.11. Restricted Payments.
The Issuer shall not, directly or indirectly, (i) pay any dividend or make
any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to the Owner Trustee or any owner
of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Servicer,
(ii) redeem, purchase, retire or otherwise acquire for value any such ownership
or equity interest or security or (iii) set aside or otherwise segregate
40
<PAGE>
any amounts for any such purpose; provided, however, that the Issuer may make,
or cause to be made, distributions to the Servicer, the Indenture Trustee, the
Owner Trustee, the Note Insurer and the Certificateholders as contemplated by,
and to the extent funds are available for such purpose under this Indenture, the
Servicing Agreement or the Trust Agreement and the Issuer will not, directly or
indirectly, make or cause to be made payments to or distributions from the Note
Account except in accordance with this Indenture.
Section 3.12. Treatment of Notes as Debt for Tax Purposes.
The Issuer shall treat the Notes as indebtedness for all federal and state
tax purposes.
Section 3.13. Notice of Events of Default.
The Issuer shall give the Indenture Trustee, the Note Insurer, the Rating
Agencies and the Underwriters prompt written notice of each Event of Default
hereunder, each default on the part of the Servicer of its obligations under the
Servicing Agreement and each default on the part of the Mortgage Loan Seller of
its obligations under the Mortgage Loan Sale Agreement.
Section 3.14. Further Instruments and Acts.
Upon request of the Indenture Trustee or the Note Insurer, the Issuer will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.
Whenever the following conditions shall have been satisfied:
(1) either
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 2.07, and (ii)
Notes for whose payment money has theretofore been deposited in
trust and thereafter repaid to the Issuer, as provided in Section
3.03) have been delivered to the Note Registrar for cancellation; or
(B) all Notes not theretofore delivered to the Note Registrar
for cancellation
(i) have become due and payable, or
41
<PAGE>
(ii) will become due and payable at the Final Maturity
Date within one year, or
(iii) are to be called for redemption within one year
under irrevocable arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of the
Issuer or the Servicer,
and the Issuer or the Servicer, in the case of clauses (B)(i),
(B)(ii) or (B)(iii) above, has irrevocably deposited or caused to be
deposited with the Indenture Trustee, in trust for such purpose, an
amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee for
cancellation, for principal and interest to the Final Maturity Date
or to the applicable Redemption Date, as the case may be, and in the
case of Notes that were not paid at the Final Maturity Date of their
entire unpaid principal amount, for all overdue principal and all
interest payable on such Notes to the next succeeding Payment Date
therefor;
(2) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer (including, without limitation, amounts due the
Note Insurer hereunder); and
(3) the Issuer has delivered to the Indenture Trustee and the Note
Insurer an Officers' Certificate and an Opinion of Counsel satisfactory in
form and substance to the Indenture Trustee and the Note Insurer each
stating that all conditions precedent herein providing for the
satisfaction and discharge of this Indenture have been complied with;
then, upon Issuer Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Issuer (or of the Servicer in the
case of a redemption by the Servicer), execute and deliver all such instruments
as may be necessary to acknowledge the satisfaction and discharge of this
Indenture and shall pay, or assign or transfer and deliver, to the Issuer or
upon Issuer Order all cash, securities and other property held by it as part of
the Trust Estate remaining after satisfaction of the conditions set forth in
clauses (1) and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Indenture Trustee and the Paying Agent to the Issuer and the
Holders of Notes under Section 3.03, the obligations of the Indenture Trustee to
the Holders of Notes under Section 4.02 and the provisions of Section 2.07 with
respect to lost, stolen, destroyed or mutilated Notes, registration of transfers
of Notes and rights to receive payments of principal of and interest on the
Notes shall survive.
42
<PAGE>
Section 4.02. Application of Trust Money.
All money deposited with the Indenture Trustee pursuant to Sections 3.03
and 4.01 shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent, as the Indenture Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event of Default.
"Event of Default", wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) if the Issuer shall default in the payment on any Payment Date
of any Required Payment Amount or fail to pay the Notes in full on or
before the Final Maturity Date (and in the case of any such default, such
default or failure shall continue for a period of 5 days unremedied);
(2) if the Issuer shall breach or default in the due observance of
any one or more of the covenants set forth in clauses (i) through (viii)
of Section 3.09;
(3) if the Issuer shall breach, or default in the due observance or
performance of, any other of its covenants in this Indenture, and such
Default shall continue for a period of 30 days after there shall have been
given, by registered or certified mail, to the Issuer and the Note Insurer
by the Indenture Trustee at the direction of the Note Insurer, or to the
Issuer and the Indenture Trustee by the Holders of Notes representing at
least 25% of the Note Balance of the Outstanding Notes, with the prior
written consent of the Note Insurer, a written notice specifying such
Default and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(4) if any representation or warranty of the Issuer made in this
Indenture or any certificate or other writing, delivered by the Issuer
pursuant hereto or in connection herewith shall prove to be incorrect in
any material respect as of the time when the same shall have been made
and, within 30 days after there shall have been given, by registered or
certified mail, written notice thereof to the Issuer and the Note Insurer
by the Indenture Trustee at the direction of the Note Insurer, or to the
Issuer and the Indenture Trustee by the Holders of Notes representing at
least 25% of the Note Balance of the Outstanding Notes, with the prior
written consent of the Note Insurer, the circumstance or condition in
respect of which such representation or warranty was incorrect shall not
have been
43
<PAGE>
eliminated or otherwise cured; provided, however, that in the event that
there exists a remedy with respect to any such breach that consists of a
purchase obligation, repurchase obligation or right to substitute under
the Basic Documents, then such purchase obligation, repurchase obligation
or right to substitute shall be the sole remedy with respect to such
breach and shall not constitute an Event of Default hereunder;
(5) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law,
or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any substantial
part of its property, or ordering the winding up or liquidation of the
affairs of the Issuer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(6) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law,
or the consent by the Issuer to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or of any substantial part of its
property or the making by the Issuer of an assignment for the benefit of
creditors or the failure by the Issuer generally to pay its debts as such
debts become due or the taking of corporate action by the Issuer in
furtherance of any of the foregoing.
The payment by the Note Insurer of any Insured Payment in an amount
sufficient to cover the related Required Payment Amount pursuant to the MBIA
Insurance Policy in respect of any Payment Date shall, at the option of the Note
Insurer, constitute an Event of Default with respect to the Notes.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case, but with the consent of the Note Insurer in the absence of a Note Insurer
Default, the Indenture Trustee may, and on request of the Holders of Notes
representing not less than 50% of the Note Balance of the Outstanding Notes,
shall, declare all the Notes to be immediately due and payable by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration such Notes, in an amount equal to the Note Balance
of such Notes, together with accrued and unpaid interest thereon to the date of
such acceleration, shall become immediately due and payable, all subject to the
prior written consent of the Note Insurer in the absence of a Note Insurer
Default.
At any time after such a declaration of acceleration of maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Indenture Trustee as hereinafter in this Article
provided the Note Insurer
44
<PAGE>
or the Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes, with the prior written consent of the Note Insurer, by
written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(1) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of, and interest on, all Notes
and all other amounts that would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of Notes that have become due solely by such acceleration, have
been cured or waived as provided in Section 5.14.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
Subject to the provisions of Section 3.01 and the following sentence, if
an Event of Default occurs and is continuing, the Indenture Trustee may, with
the prior written consent of the Note Insurer, proceed to protect and enforce
its rights and the rights of the Noteholders and the Note Insurer by any
Proceedings the Indenture Trustee deems appropriate to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or
enforce any other proper remedy. Any proceedings brought by the Indenture
Trustee on behalf of the Noteholders and the Note Insurer or any Noteholder
against the Issuer shall be limited to the preservation, enforcement and
foreclosure of the liens, assignments, rights and security interests under the
Indenture and no attachment, execution or other unit or process shall be sought,
issued or levied upon any assets, properties or funds of the Issuer, other than
the Trust Estate relative to the Notes in respect of which such Event of Default
has occurred. If there is a foreclosure of any such liens, assignments, rights
and security interests under this Indenture, by private power of sale or
otherwise, no judgment for any deficiency upon the indebtedness represented by
the Notes may be sought or obtained by the Indenture Trustee or any Noteholder
against the Issuer. The Indenture Trustee shall be entitled to recover the costs
and expenses expended by it pursuant to this Article V including reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel.
45
<PAGE>
Section 5.04. Remedies.
If an Event of Default shall have occurred and be continuing and the Notes
have been declared due and payable and such declaration and its consequences
have not been rescinded and annulled, the Indenture Trustee, at the direction of
the Note Insurer (subject to Section 5.17, to the extent applicable) may, for
the benefit of the Noteholders and the Note Insurer, do one or more of the
following:
(a) institute Proceedings for the collection of all amounts then payable
on the Notes, or under this Indenture, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer moneys adjudged due,
subject in all cases to the provisions of Sections 3.01 and 5.03;
(b) in accordance with Section 5.17, sell the Trust Estate or any portion
thereof or rights or interest therein, at one or more public or private Sales
called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the Uniform Commercial
Code and take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee or the Holders of the Notes and the Note
Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all Remittable Funds
pursuant to Section 5.07.
Section 5.05. Indenture Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Indenture Trustee shall have made any demand on the Issuer for the
payment of any overdue principal or interest) shall, with the prior written
consent of the Note Insurer, be entitled and empowered, by intervention in such
Proceeding or otherwise to:
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and 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 the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel) and of the Noteholders and the Note
Insurer allowed in such Proceeding, and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
receiver,
46
<PAGE>
assignee, trustee, liquidator, or sequestrator (or other similar official)
in any such Proceeding is hereby authorized by each Noteholder and the
Note Insurer to make such payments to the Indenture Trustee and, in the
event that the Indenture Trustee shall consent to the making of such
payments directly to the Noteholders and the Note Insurer, to pay to the
Indenture Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee, its agents
and counsel. Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf
of any Noteholder or the Note Insurer any plan of reorganization,
arrangement, adjustment or composition affecting any of the Notes or the
rights of any Holder thereof, or the Note Insurer, or to authorize the
Indenture Trustee to vote in respect of the claim of any Noteholder or the
Note Insurer in any such Proceeding.
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or any of the Notes
may be prosecuted and enforced by the Indenture Trustee without the possession
of any of the Notes or the production thereof in any Proceeding relating
thereto, and any such Proceeding instituted by the Indenture Trustee, at the
direction of the Note Insurer, shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the Holders of the Notes and the Note Insurer in respect of which such judgment
has been recovered after payment of amounts required to be paid pursuant to
clause (i) Section 5.07.
Section 5.07. Application of Money Collected.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Indenture Trustee with respect to such
Notes pursuant to this Article or otherwise and any other monies that may then
be held or thereafter received by the Indenture Trustee as security for such
Notes shall be applied in the following order, at the date or dates fixed by the
Indenture Trustee and, in case of the payment of the entire amount due on
account of principal of, and interest on, such Notes, upon presentation and
surrender thereof:
(i) first, to the Indenture Trustee, any unpaid Indenture Trustee's
Fees then due and any other amounts payable and due to the Indenture
Trustee under this Indenture, including any costs or expenses incurred by
it in connection with the enforcement of the remedies provided for in this
Article V;
(ii) second, to the Servicer, any amounts required to pay the
Servicer for any unpaid Servicing Fees then due and to reimburse the
Servicer for Monthly Advances previously made by, and not previously
reimbursed or retained by, the Services and, upon the final liquidation of
the related Mortgage Loan or the final
47
<PAGE>
liquidation of the Trust Estate, Servicing Advances previously made by,
and not previously reimbursed or retained by, the Servicer;
(iii) third, to the payment of Note Interest then due and unpaid
upon the Outstanding Notes through the day preceding the date on which
such payment is made;
(iv) fourth, to the payment of the Note Balance of the Outstanding
Notes, up to the amount of their respective Current Note Balances,
ratably, without preference or priority of any kind;
(v) fifth, to the payment to the Note Insurer, as subrogee to the
rights of the Noteholders, (A) the aggregate amount necessary to reimburse
the Note Insurer for any unreimbursed Insured Payments paid by the Note
Insurer on prior Payment Dates, together with interest thereon at the
"Late Payment Rate" specified in the Insurance Agreement from the date
such Insured Payments were paid by the Note Insurer to such Payment Date,
(B) the amount of any unpaid Note Insurer Premium then due, together with
interest thereon at the "Late Payment Rate" specified in the Insurance
Agreement from the date such amounts were due and (C) any other amounts
due and owing to the Note Insurer under the Insurance Agreement; and
(vi) sixth, the remainder to the Certificate Distribution Account
for payment to the Certificateholders.
Section 5.08. Limitation on Suits.
No Holder of a Note shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Indenture
Trustee and the Note Insurer of a continuing Event of Default;
(2) the Holders of Notes representing not less than 25% of the Note
Balance of the Outstanding Notes shall have made written request to the
Indenture Trustee to institute Proceedings in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(3) such Holder or Holders have offered to the Indenture Trustee
indemnity in full against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
Proceeding;
48
<PAGE>
(5) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
Notes representing more than 50% of the Note Balance of the Outstanding
Notes; and
(6) the consent of the Note Insurer shall have been obtained; it
being understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and
ratable benefit of all the Holders of Notes.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than 50% of the Note Balances of the Outstanding Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken notwithstanding any other provision herein to the contrary.
Section 5.09. Unconditional Rights of Noteholders to Receive Principal and
Interest.
Subject to the provisions in this Indenture (including Sections 3.01 and
5.03) limiting the right to recover amounts due on a Note to recovery from
amounts in the Trust Estate, the Holder of any Note shall have the right, to the
extent permitted by applicable law, which right is absolute and unconditional,
to receive payment of each installment of interest on such Note on the
respective Payment Date for such installments of interest, to receive payment of
each installment of principal of such Note when due (or, in the case of any Note
called for redemption, on the date fixed for such redemption) and to institute
suit for the enforcement of any such payment, and such right shall not be
impaired without the consent of such Holder.
Section 5.10. Restoration of Rights and Remedies.
If the Indenture Trustee, the Note Insurer or any Noteholder has
instituted any Proceeding to enforce any right or remedy under this Indenture
and such Proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Indenture Trustee, the Note Insurer or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee, the
Note Insurer 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, the
Note Insurer and the Noteholders shall continue as though no such Proceeding had
been instituted.
Section 5.11. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Note Insurer 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
49
<PAGE>
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 5.12. Delay or Omission Not Waiver.
No delay or omission of the Indenture Trustee, the Note Insurer or of any
Holder of any Note to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Indenture Trustee, the Note Insurer or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Note Insurer or by the Noteholders with
the prior consent of the Note Insurer, as the case may be.
Section 5.13. Control by Noteholders.
The Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes on the applicable Record Date shall, with the consent of the
Note Insurer, have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee; provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture;
(2) any direction to the Indenture Trustee to undertake a Sale of
the Trust Estate shall be by the Holders of Notes representing the
percentage of the Note Balance of the Outstanding Notes specified in
Section 5.17(b)(1), unless Section 5.17(b)(2) is applicable; and
(3) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01, the Indenture Trustee
need not take any action that it determines might involve it in liability
or be unjustly prejudicial to the Noteholders not consenting.
Section 5.14. Waiver of Past Defaults.
The Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes on the applicable Record Date may on behalf of the Holders of
all the Notes, and with the consent of the Note Insurer, waive any past Default
hereunder and its consequences, except a Default:
(1) in the payment of principal or any installment of interest on
any Note; or
50
<PAGE>
(2) in respect of a covenant or provision hereof that under Section
9.02 cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 5.15. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Indenture Trustee for any action
taken, suffered or omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate Notes representing more than 10% of the
Note Balance of the Outstanding Notes, or to any suit instituted by any
Noteholder for the enforcement of the payment of any Required Payment Amount on
any Note on or after the related Payment Date or for the enforcement of the
payment of principal of any Note on or after the Final Maturity Date (or, in the
case of any Note called for redemption, on or after the applicable Redemption
Date).
Section 5.16. 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 of law wherever enacted,
now or at any time hereafter in force, that may affect the covenants in, or the
performance of, this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.17. Sale of Trust Estate.
(a) The power to effect any sale (a "Sale") of any portion of the Trust
Estate pursuant to Section 5.04 shall not be exhausted by any one or more Sales
as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate shall have been sold or all amounts
payable on the Notes and under this Indenture with respect thereto shall have
been paid. The Indenture Trustee may from
51
<PAGE>
time to time postpone any public Sale by public announcement made at the time
and place of such Sale.
(b) To the extent permitted by law, the Indenture Trustee shall not in any
private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:
(1) the Holders of Notes representing not less than 50% of the Note
Balance of the Notes then Outstanding consent to or direct the Indenture
Trustee to make such Sale; or
(2) the proceeds of such Sale would be not less than the entire
amount that would be payable to the Holders of the Notes, in full payment
thereof in accordance with Section 5.07, on the Payment Date next
succeeding the date of such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or disposition thereof for
purposes of this Section 5.17(b). In the absence of a Note Insurer Default, no
sale hereunder shall be effective without the consent of the Note Insurer.
(c) Unless the Holders of all Outstanding Notes have otherwise consented
or directed the Indenture Trustee, at any public Sale of all or any portion of
the Trust Estate at which a minimum bid equal to or greater than the amount
described in paragraph (2) of subsection (b) of this Section 5.17 has not been
established by the Indenture Trustee and no Person bids an amount equal to or
greater than such amount, the Indenture Trustee, acting in its capacity as
Indenture Trustee on behalf of the Noteholders, shall prevent such sale and bid
an amount (which shall include the Indenture Trustee's right, in its capacity as
Indenture Trustee, to credit bid) at least $1.00 more than the highest other bid
in order to preserve the Trust Estate on behalf of the Noteholders.
(d) In connection with a Sale of all or any portion of the Trust Estate:
(1) any Holder or Holders of Notes may bid for and purchase the
property offered for Sale, and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property, without further
accountability, and may, in paying the purchase money therefor, deliver
any Outstanding Notes or claims for interest thereon in lieu of cash up to
the amount that shall, upon distribution of the net proceeds of such Sale,
be payable thereon, and such Notes, in case the amounts so payable thereon
shall be less than the amount due thereon, shall be returned to the
Holders thereof after being appropriately stamped to show such partial
payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any public Sale thereof, and, in lieu
of paying cash therefor, may make settlement for the purchase price by
crediting the gross Sale price against the sum of (A) the amount that
would be payable to the Holders of the Notes as a result of such Sale in
accordance with Section 5.07 on the Payment Date next succeeding the date
of such Sale and (B) the expenses of the Sale and of
52
<PAGE>
any Proceedings in connection therewith which are reimbursable to it,
without being required to produce the Notes in order to complete any such
Sale or in order for the net Sale price to be credited against such Notes,
and any property so acquired by the Indenture Trustee shall be held and
dealt with by it in accordance with the provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the
Trust Estate in connection with a Sale thereof,
(4) the Indenture Trustee is hereby irrevocably appointed the agent
and attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Trust Estate in connection with a Sale thereof, and to
take all action necessary to effect such Sale; and
(5) 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 moneys.
Section 5.18. Action on Notes.
The Indenture Trustee's right to seek and recover judgment under this
Indenture shall not be affected by the seeking, obtaining or application of any
other relief under or with respect to this Indenture. Neither the lien of this
Indenture nor any rights or remedies of the Indenture Trustee, the Note Insurer
or the Holders of Notes shall be impaired by the recovery of any judgment by the
Indenture Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate.
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the
Issuer.
The Trust Estate Granted to the Indenture Trustee as security for the
Notes serves as security only for the Notes. Holders of the Notes shall have no
recourse against the trust estate granted as security for any other series of
Notes issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Notes may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
Section 5.20. Application of the Trust Indenture Act.
Pursuant to Section 316(a) of the TIA, all provisions automatically
provided for in Section 316(a) are hereby expressly excluded.
53
<PAGE>
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Indenture Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(2) In the absence of bad faith on its part, the Indenture Trustee
may request and conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture. The Indenture Trustee shall, however,
examine such certificates and opinions to determine whether they conform
on their face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of subsection (b) of
this Section 6.01;
(2) The Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(3) The Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.13 or 5.17 or exercising
any trust or power conferred upon the Indenture Trustee under this
Indenture.
(d) Except with respect to duties of the Indenture Trustee prescribed by
the TIA, as to which this Section 6.01(d) shall not apply, for all purposes
under this Indenture, the Indenture Trustee shall not be deemed to have notice
or knowledge of any Event of Default described in Section 5.01(2), 5.01(5) or
5.01(6) or any Default described in Section 5.01(3) or 5.01(4) or of any event
described in Section 3.05 unless a Responsible Officer assigned to and working
in the Indenture Trustee's corporate trust department has actual knowledge
thereof or unless written notice of any event that is in fact such an
54
<PAGE>
Event of Default or Default is received by the Indenture Trustee at the
Corporate Trust Office, and such notice references the Notes generally, the
Issuer, the Trust Estate or this Indenture.
(e) 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 under the Servicing Agreement or otherwise.
(f) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and interest of
the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration of the Maturity of the Notes, whether
such extinguishment occurs through a Sale of the Trust Estate to another Person,
the acquisition of the Trust Estate by the Indenture Trustee or otherwise, the
rights, powers and duties of the Indenture Trustee with respect to the Trust
Estate (or the proceeds thereof) and the Noteholders and the Note Insurer and
the rights of Noteholders and the Note Insurer shall continue to be governed by
the terms of this Indenture.
(h) The Indenture Trustee or any Custodian appointed pursuant to Section
8.13 shall at all times retain possession of the Mortgage Files in the State of
Minnesota or the State of Massachusetts, except for those Mortgage Files or
portions thereof released to the Servicer or the Note Insurer pursuant to this
Indenture or the Servicing Agreement.
Section 6.02. Notice of Default.
Immediately after the occurrence of any Default known to the Indenture
Trustee, the Indenture Trustee shall transmit by mail to the Note Insurer and
the Underwriters notice of each such Default and, within 90 days after the
occurrence of any Default known to the Indenture Trustee, the Indenture Trustee
shall transmit by mail to all Holders of Notes notice of each such Default,
unless such Default shall have been cured or waived; provided, however, that in
no event shall the Indenture Trustee provide notice, or fail to provide notice
of a Default known to the Indenture Trustee in a manner contrary to the
requirements of the Trust Indenture Act. Concurrently with the mailing of any
such notice to the Holders of the Notes, the Indenture Trustee shall transmit by
mail a copy of such notice to the Rating Agencies.
Section 6.03. Rights of Indenture Trustee.
(a) Except as otherwise provided in Section 6.01, the Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in any such document.
55
<PAGE>
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on any such Officer's Certificate or Opinion of Counsel.
(c) With the consent of the Note Insurer, which consent shall not be
unreasonably withheld, the Indenture Trustee may act through agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers.
Section 6.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the certificates of
authentication on the Notes, shall be taken as the statements of the Issuer, and
the Indenture Trustee and the Authenticating Agent assume no responsibility for
their correctness. The Indenture Trustee makes no representations with respect
to the Trust Estate or as to the validity or sufficiency of this Indenture or of
the Notes. The Indenture Trustee shall not be accountable for the use or
application by the Issuer of the Notes or the proceeds thereof or any money paid
to the Issuer or upon Issuer Order pursuant to the provisions hereof.
Section 6.05. May Hold Notes.
The Indenture Trustee, any Agent, or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 6.07 and 6.13, may otherwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not
Indenture Trustee, Agent or such other agent.
Section 6.06. Money Held in Trust.
Money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds except to the extent required by this Indenture or
by law. The Indenture Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Issuer and
except to the extent of income or other gain on investments that are obligations
of the Indenture Trustee, in its commercial capacity, and income or other gain
actually received by the Indenture Trustee on investments, which are obligations
of others.
Section 6.07. Eligibility, Disqualification.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Indenture Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). The Indenture Trustee shall always have
a combined capital and
56
<PAGE>
surplus as stated in Section 6.08. The Indenture Trustee shall be subject to TIA
Section 310(b).
Section 6.08. Indenture Trustee's Capital and Surplus.
The Indenture Trustee shall at all times have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$100,000,000 and shall at all times be rated "BBB" or better by Standard &
Poor's and "Baa2" by Moody's; provided, however, that the Indenture Trustee's
separate capital and surplus shall at all times be at least the amount required
by TIA Section 310(a)(2). If the Indenture Trustee publishes annual reports of
condition of the type described in TIA Section 310(a)(1), its combined capital
and surplus for purposes of this Section 6.08 shall be as set forth in the
latest such report. If at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.08 and TIA Section
310(a)(2), it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 6.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Indenture Trustee and no appointment
of a successor Indenture Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Indenture Trustee under
Section 6.10.
(b) The Indenture Trustee may resign at any time by giving written notice
thereof to the Issuer, the Note Insurer and each Rating Agency. If an instrument
of acceptance by a successor Indenture Trustee shall not have been delivered to
the Indenture Trustee within 30 days after the giving of such notice of
resignation, the resigning Indenture Trustee may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by the Note Insurer
or, with the consent of the Note Insurer, by Act of the Holders representing
more than 50% of the Note Balance of the Outstanding Notes, by written notice
delivered to the Indenture Trustee and to the Issuer.
(d) If at any time:
(1) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 and shall fail to resign or eliminate such
conflicting interest in accordance with Section 6.07 after written request
therefor by the Issuer or by any Noteholder; or
(2) the Indenture Trustee shall cease to be eligible under Section
6.08 or shall become incapable of acting or shall be adjudged a bankrupt
or insolvent, or a receiver of the Indenture Trustee or of its property
shall be appointed, or any public officer shall take charge or control of
the Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
57
<PAGE>
then, in any such case, (i) the Issuer by an Issuer Order, with the consent of
the Note Insurer, may remove the Indenture Trustee, and the Issuer shall join
with the Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint a successor Indenture
Trustee acceptable to the Note Insurer and to vest in such successor Indenture
Trustee any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Indenture; provided, however, if the
Issuer and the Note Insurer do not join in such appointment within fifteen (15)
days after the receipt by it of a request to do so, or in case an Event of
Default has occurred and is continuing, the Indenture Trustee may petition a
court of competent jurisdiction to make such appointment, or (ii) subject to
Section 5.15, and, in the case of a conflicting interest as described in clause
(1) above, unless the Indenture Trustee's duty to resign has been stayed as
provided in TIA Section 310(b), the Note Insurer or any Noteholder who has been
a bona fide Holder of a Note for at least six months may, on behalf of himself
and all others similarly situated, with the consent of the Note Insurer,
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of the Indenture Trustee
for any cause, the Issuer, by an Issuer Order shall promptly appoint a successor
Indenture Trustee acceptable to the Note Insurer. If within one year after such
resignation, removal or incapability or the occurrence of such vacancy a
successor Indenture Trustee shall be appointed by the Note Insurer or, with the
consent of the Note Insurer, by Act of the Holders of Notes representing more
than 50% of the Note Balance of the Outstanding Notes delivered to the Issuer
and the retiring Indenture Trustee, the successor Indenture Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Indenture Trustee and supersede the successor Indenture Trustee appointed by the
Issuer. If no successor Indenture Trustee shall have been so appointed by the
Issuer, the Note Insurer or Noteholders and shall have accepted appointment in
the manner hereinafter provided, any Noteholder who has been a bona fide Holder
of a Note for at least six months may, on behalf of himself and all others
similarly situated, with the consent of the Note Insurer, petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Issuer shall give notice of each resignation and each removal of
the Indenture Trustee and each appointment of a successor Indenture Trustee to
the Holders of Notes and the Note Insurer. Each notice shall include the name of
the successor Indenture Trustee and the address of its Corporate Trust Office.
Section 6.10. Acceptance of Appointment by Successor.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, the Note Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Indenture Trustee. Notwithstanding the
58
<PAGE>
foregoing, on request of the Issuer or the successor Indenture Trustee, such
retiring Indenture Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Indenture Trustee all the
rights, powers and trusts of the retiring Indenture Trustee, and shall duly
assign, transfer and deliver to such successor Indenture Trustee all property
and money held by such retiring Indenture Trustee hereunder. Upon request of any
such successor Indenture Trustee, the Issuer shall execute and deliver any and
all instruments for more fully and certainly vesting in and confirming to such
successor Indenture Trustee all such rights, powers and trusts.
No successor Indenture Trustee shall accept its appointment unless at the
time of such acceptance such successor Indenture Trustee shall be qualified and
eligible under this Article.
Section 6.11. Merger, Conversion, Consolidation or Succession to Business
of Indenture Trustee.
Any corporation into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Indenture Trustee, shall be the successor of
the Indenture Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Notes have been authenticated, but not delivered, by the Indenture Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Indenture Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Indenture
Trustee had authenticated such Notes.
Section 6.12. Preferential Collection of Claims Against Issuer.
The Indenture Trustee (and any co-trustee or separate trustee) shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 31l(b), and an Indenture Trustee (and any co-trustee or separate
trustee) who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees.
At any time or times, for the purpose of meeting the legal requirements of
the TIA or of any jurisdiction in which any of the Trust Estate may at the time
be located, the Indenture Trustee shall have power to appoint, and, upon the
written request of the Indenture Trustee, of the Note Insurer or of the Holders
of Notes representing more than 50% of the Note Balance of the Outstanding Notes
with respect to which a co-trustee or separate trustee is being appointed with
the consent of the Note Insurer, the Issuer shall for such purpose jointly with
the Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Indenture Trustee either to act as co-trustee, jointly with
59
<PAGE>
the Indenture Trustee, of all or any part of the Trust Estate, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such Person or Persons
in the capacity aforesaid, any property, title, right or power deemed necessary
or desirable, subject to the other provisions of this Section. If the Issuer
does not join in such appointment within 15 days after the receipt by it of a
request to do so, or in case an Event of Default has occurred and is continuing,
the Indenture Trustee alone shall have power to make such appointment. All fees
and expenses of any co-trustee or separate trustee shall be payable by the
Issuer.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Notes shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Indenture Trustee hereunder, shall be
exercised, solely by the Indenture Trustee.
(2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Indenture Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee or by the Indenture Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular act
is to be performed, the Indenture Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such co-trustee
or separate trustee.
(3) The Indenture Trustee at any time, by an instrument in writing,
executed by it, with the concurrence of the Issuer evidenced by an Issuer
Order, may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case an Event of Default has
occurred and is continuing, the Indenture Trustee shall have power to
accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Issuer upon the written request of
the Indenture Trustee, the Issuer shall join with the Indenture Trustee in
the execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section.
60
<PAGE>
(4) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Indenture Trustee, or any
other such trustee hereunder.
(5) Any Act of Noteholders delivered to the Indenture Trustee shall
be deemed to have been delivered to each such co-trustee and separate
trustee.
Section 6.14. Authenticating Agents.
The Issuer shall appoint an Authenticating Agent with power to act on its
behalf and subject to its direction in the authentication and delivery of the
Notes designated for such authentication by the Issuer and containing provisions
therein for such authentication (or with respect to which the Issuer has made
other arrangements, satisfactory to the Indenture Trustee and such
Authenticating Agent, for notation on the Notes of the authority of an
Authenticating Agent appointed after the initial authentication and delivery of
such Notes) in connection with transfers and exchanges under Section 2.06, as
fully to all intents and purposes as though the Authenticating Agent had been
expressly authorized by that Section to authenticate and deliver Notes. For all
purposes of this Indenture (other than in connection with the authentication and
delivery of Notes pursuant to Sections 2.05 and 2.11 in connection with their
initial issuance), the authentication and delivery of Notes by the
Authenticating Agent pursuant to this Section shall be deemed to be the
authentication and delivery of Notes "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 for the Indenture Trustee hereunder and has an
office for presentation of Notes in the United States of America. The Indenture
Trustee shall initially be the Authenticating Agent and shall be the Note
Registrar as provided in Section 2.06. The office from which the Indenture
Trustee shall perform its duties as Note Registrar and Authenticating Agent
shall be the Corporate Trust Office. Any Authenticating Agent appointed pursuant
to the terms of this Section 6.14 or pursuant to the terms of any supplemental
indenture shall deliver to the Indenture Trustee as a condition precedent to the
effectiveness of such appointment an instrument accepting the trusts, duties and
responsibilities of Authenticating Agent and of Note Registrar or co-Note
Registrar and indemnifying the Indenture Trustee for and holding the Indenture
Trustee harmless against, any loss, liability or expense (including reasonable
attorneys' fees) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance, administration of the trust or
exercise of authority by such Authenticating Agent, Note Registrar or co-Note
Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.
61
<PAGE>
Any Authenticating Agent may at any time resign by giving written notice
of resignation to the Issuer. The Issuer may at any time terminate the agency of
any Authenticating Agent by giving written notice of termination to such
Authenticating Agent and the Issuer. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time any Authenticating Agent
shall cease to be eligible under this Section, the Issuer shall promptly appoint
a successor Authenticating Agent, shall give written notice of such appointment
to the Indenture Trustee, and shall mail notice of such appointment to all
Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Indenture Trustee shall be entitled to be reimbursed for such payments
pursuant to Section 6.04 of the Servicing Agreement. The provisions of Sections
2.09, 6.04 and 6.05 shall be applicable to any Authenticating Agent.
Section 6.15. Review of Mortgage Files.
(a) Initial Certification. The Indenture Trustee shall, for the benefit of
the Noteholders and the Note Insurer, cause the Custodian to review each
Mortgage File prior to the Closing Date to ascertain that all documents required
to be included in the Mortgage File are included therein, and shall cause the
Custodian to deliver to the Mortgage Loan Seller, the Note Insurer, the
Indenture Trustee and the Servicer on the Closing Date an Initial Certification
in the form attached as Exhibit E-1 to the Custodial Agreement with respect to
each Mortgage Loan to the effect that, except as specifically noted on a
schedule of exceptions thereto, (A) all documents required to be contained in
the Mortgage File are in its possession, (B) such documents have been reviewed
by it and appear regular on their face and relate to such Mortgage Loan, and (C)
based on its examination and only as to the foregoing documents, the information
set forth on the related Mortgage Loan Schedule accurately reflects information
set forth in the Mortgage File.
It is understood that before making the Initial Certification, the
Indenture Trustee shall cause the Custodian to examine the related Mortgage Loan
Documents to confirm that:
(1) each Mortgage Note and Mortgage bears an original signature or
signatures purporting to be that of the Person or Persons named as the
maker and mortgagor/trustor or, if photocopies are permitted, that such
copies bear a reproduction of such signature or signatures;
(2) except for the endorsement in blank, neither the Mortgage nor
any Assignment, on the face or the reverse side(s) thereof, contains
evidence of any unsatisfied claims, liens, security interests,
encumbrances or restrictions on transfer;
62
<PAGE>
(3) the principal amount of the indebtedness secured by the related
Mortgage is identical to the original principal amount of the related
Mortgage Note;
(4) the Assignment of the related Mortgage from the Mortgage Loan
Seller to the Indenture Trustee is in the form required pursuant to clause
(e) of the definition of "Mortgage Loan Documents" in the Mortgage Loan
Sale Agreement, and bears an original signature of the Mortgage Loan
Seller and any other necessary party (or signatures purporting to be that
of the Mortgage Loan Seller and any such other party) or, if photocopies
are permitted, that such copies bear a reproduction of such signature or
signatures;
(5) if intervening Assignments are included in the Mortgage File,
each such intervening Assignment bears an original signature of the
related mortgagee and/or the assignee (and any other necessary party) (or
signatures purporting to be that of each such party) or, if photocopies
are permitted, that such copies bear a reproduction of such signature or
signatures;
(6) if either a title insurance policy, a preliminary title report
or a written commitment to issue a title insurance policy is delivered,
the address of the real property set forth in such policy, report or
written commitment is identical to the real property address contained in
the related Mortgage; and
(7) if any of a title insurance policy, certificate of title
insurance or a written commitment to issue a title insurance policy is
delivered, such policy, certificate or written commitment is for an amount
not less than the original principal amount of the related Mortgage Note
and such title insurance policy insures that the related Mortgage creates
a first or second lien, senior in priority to all other deeds of trust,
mortgages, deeds to secure debt, financing statements and security
agreements and to any mechanics' liens, judgment liens or writs of
attachment other than the related senior lien, if applicable, (or if the
title insurance policy or certificate of title insurance has not been
issued, the written commitment for such insurance obligates the insurer to
issue such policy for an amount not less than the original principal
amount of the related Mortgage Note).
(b) Final Certification. On or before one year following the Closing Date,
the Indenture Trustee shall cause the Custodian to deliver to the Mortgage Loan
Seller, the Note Insurer, the Indenture Trustee and the Servicer a Final
Certification in the form attached as Exhibit E-2 to the Custodial Agreement
evidencing the completeness of the Mortgage File for each Mortgage Loan, except
as specifically noted on a schedule of exceptions thereto.
(c) In giving each of the Initial Certification and the Final
Certification, neither the Indenture Trustee nor the Custodian shall be under
any duty or obligation (1) to inspect, review or examine any such documents,
instruments, securities or other papers to determine that they or the signatures
thereto are genuine, enforceable, or appropriate for the represented purpose or
that they have actually been recorded or that they are other
63
<PAGE>
than what they purport to be on their face or (2) to determine whether any
Mortgage File should include a flood insurance policy, any rider, addenda,
surety or guaranty agreement, power of attorney, buy down agreement, assumption
agreement, modification agreement, written assurance or substitution agreement.
(d) Recordation Report. In the event that the Mortgage Loans are required
to be recorded in accordance with the provisions of the Mortgage Loan Sale
Agreement, no later than the fifth Business Day of each third month, commencing
in June 1998, the Indenture Trustee shall cause the Custodian to deliver to the
Servicer and the Note Insurer a recordation report dated as of the first day of
such month, identifying those Mortgage Loans for which it has not yet received
(1) an original recorded Mortgage or a copy thereof certified to be true and
correct by the public recording office in possession of such Mortgage or (2) an
original recorded Assignment of the Mortgage to the Indenture Trustee and any
required intervening Assignments or a copy thereof certified to be a true and
correct copy by the public recording office in possession of such Assignment.
Section 6.16. Indenture Trustee Fees and Expenses.
The Indenture Trustee shall be entitled to receive the Indenture Trustee
Fee on each Payment Date as provided herein. The Indenture Trustee also shall be
entitled, pursuant to the provisions of Section 6.04 of the Servicing Agreement,
to (i) payment of or reimbursement for expenses, disbursements and advances
incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Agreement (including but not limited to the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) as provided in the Servicing Agreement, and
(ii) indemnification against losses, liability and expenses, including
reasonable attorney's fees, incurred, arising out of or in connection with this
Agreement and the Notes as provided in the Servicing Agreement.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders.
(a) The Issuer shall furnish or cause to be furnished to the Indenture
Trustee (i) semiannually, not less than 45 days nor more than 60 days after the
Payment Date occurring closest to six months after the Closing Date and each
Payment Date occurring at six-month intervals thereafter, all information in the
possession or control of the Issuer, in such form as the Indenture Trustee may
reasonably require, as to names and addresses of the Holders of Notes, and (ii)
at such other times, as the Indenture Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
64
<PAGE>
(b) in addition to furnishing to the Indenture Trustee the Noteholder
lists, if any, required under subsection (a), the Issuer shall also furnish all
Noteholder lists, if any, required under Section 3.03 at the times required by
Section 3.03.
Section 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list, if any, furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of the Holders of Notes
received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in Section
7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
Section 7.03. Reports by Indenture Trustee.
(a) Within 60 days after December 31 of each year (the "reporting date"),
commencing with the year after the issuance of the Notes, (i) the Indenture
Trustee shall, if required by TIA Section 313(a), mail to all Holders a brief
report dated as of such reporting date that complies with TIA Section 313(a);
(ii) the Indenture Trustee shall, to the extent not set forth in the Payment
Date Statement pursuant to Section 2.08(d), also mail to Holders of Notes and
the Note Insurer with respect to which it has made advances, any reports with
respect to such advances that are required by TIA Section 313(b)(2); and, the
Indenture Trustee shall also mail to Holders of Notes and the Note Insurer any
reports required by TIA Section 313(b)(1). For purposes of the information
required to be included in any such reports pursuant to TIA Sections 313(a)(2),
313(b)(1) (if applicable), or 313(b)(2), the principal amount of indenture
securities outstanding on the date as of which such information is provided
shall be the Note Balance of the then Outstanding Notes covered by the report.
(b) A copy of each report required under this Section 7.03 shall, at the
time of such transmission to Holders of Notes and the Note Insurer be filed by
the Indenture Trustee with the Commission and with each securities exchange upon
which the Notes are listed. The Issuer will notify the Indenture Trustee when
the Notes are listed on any securities exchange.
Section 7.04. Reports by Issuer.
The Issuer (a) shall deliver to the Indenture Trustee within 15 days after
the Issuer is required to file the same with the Commission copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) that the Issuer is required to file with the Commission pursuant to
Section 13 or 15(d) of the Securities
65
<PAGE>
Exchange Act of 1934, as amended, and (b) shall also comply with the other
provisions of TIA Section 314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Collection of Moneys.
Except as otherwise expressly provided herein, the Indenture Trustee may
demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee shall hold all such money and
property received by it as part of the Trust Estate and shall apply it as
provided in this Indenture.
If the Indenture Trustee shall not have received the Remittable Funds by
close of business on any related Deposit Date, the Indenture Trustee shall,
unless the Issuer or the Servicer shall have made provisions satisfactory to the
Indenture Trustee for delivery to the Indenture Trustee of an amount equal to
such Remittable Funds, deliver a notice, with a copy to the Note Insurer, to the
Issuer and the Servicer of their failure to remit such Remittable Funds and that
such failure, if not remedied by the close of business on the Business Day after
the date upon which such notice is delivered to the Servicer, shall constitute
an event of default under the Servicing Agreement. If the Indenture Trustee
shall subsequently receive any such Remittable Funds by 2:00 p.m. Eastern Time
on such Business Day, such Event of Default shall not be deemed to have
occurred. Notwithstanding any other provision hereof, the Indenture Trustee
shall deliver to the Issuer or the Servicer, or their respective designee or
assignee, any Remittable Funds received with respect to a Mortgage Loan after
the related Deposit Date to the extent that the Issuer or the Servicer,
respectively, previously made payment or provision for payment with respect to
such Remittable Funds in accordance with this Section 8.01, and any such
Remittable Funds shall not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and the Servicing
Agreement, if, following delivery by the Indenture Trustee of the notice
described above, the Servicer shall fail to remit the Remittable Funds on any
Deposit Date, the Indenture Trustee shall deliver a second notice to the
Servicer, the Issuer and the Note Insurer by 2:00 p.m. Eastern Time on the third
Business Day prior to the related Payment Date indicating that an event of
default occurred and is continuing under the Servicing Agreement. Thereupon, the
Indenture Trustee shall take such actions as are required of the Indenture
Trustee under Article VI of the Servicing Agreement. In addition, if a default
occurs in any other performance required under the Servicing Agreement, the
Indenture Trustee may, and upon the request of the Note Insurer or, with the
consent of the Note Insurer, the Holders of Notes representing more than 50% of
the Note Balance of the Outstanding Notes shall, take such action as may be
appropriate to enforce such payment or performance including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default
66
<PAGE>
or Event of Default under this Indenture and to proceed thereafter as provided
in Article V.
Section 8.02. Note Account.
(a) The Issuer hereby directs the Indenture Trustee to establish, at the
Corporate Trust Office one or more accounts that shall collectively be the "Note
Account" on or before the Closing Date. The Indenture Trustee shall promptly
deposit in the Note Account (i) all Remittable Funds received by it from the
Servicer pursuant to the Servicing Agreement, (ii) any other funds from any
deposits to be made by the Servicer pursuant to the Servicing Agreement, (iii)
any amount required to be deposited in the Note Account pursuant to Section
8.01, (iv) all amounts received pursuant to Section 8.03, (v) any amount
required to be deposited pursuant to Section 8.16 and (vi) all other amounts
received for deposit in the Note Account, including the payment of any Purchase
Price received by the Indenture Trustee. All amounts that are deposited from
time to time in the Note Account are subject to withdrawal by the Indenture
Trustee for the purposes set forth in subsections (c) and (d) of this Section
8.02. All funds withdrawn from the Note Account pursuant to subsection (c) of
this Section 8.02 for the purpose of making payments to the Holders of Notes
shall be applied in accordance with Section 3.03.
(b) So long as no Default or Event of Default shall have occurred and be
continuing, amounts held in the Note Account shall be invested in Permitted
Investments, which Permitted Investments shall mature no later than the Business
Day preceding the immediately following Payment Date.
All income or other gains, if any, from investment of moneys deposited in
the Note Account shall be for the benefit of the Servicer and on each Payment
Date, any such amounts may be released from the Note Account and paid to the
Servicer as part of its compensation for acting as Servicer. Any loss resulting
from such investment of moneys deposited in the Note Account shall be reimbursed
immediately as incurred to the Note Account by the Servicer. Subject to Section
6.01 and the preceding sentence, neither the Indenture Trustee nor the Servicer
shall in any way be held liable by reason of any insufficiency in the Note
Account.
(c) On each Payment Date, the Indenture Trustee shall withdraw amounts on
deposit in the Note Account and pay on a pari passu basis the Note Insurer
Premium, the Indenture Trustee Fee, Transition Expenses, if any not paid by the
Servicer pursuant to the Servicing Agreement (not to exceed $50,000 in the
aggregate), any gains or income from investments on the Note Account to the
Servicer and, provided notice is given to the Indenture Trustee no later than
the 4th Business Day prior to the Payment Date and to the extent such amounts
have not been withdrawn pursuant to Sections 2.02 and 4.01 of the Servicing
Agreement, amounts required to pay the Servicer any unpaid Servicing Fees then
due and to reimburse the Servicer for Monthly Advances and Servicing Advances
previously made by, and not previously reimbursed to or retained by, the
Servicer, which are so reimbursable to the Servicer pursuant to the Servicing
Agreement (as reported in writing by the Servicer to the Indenture Trustee).
After payment of such amounts, unless the Notes have been declared due and
payable pursuant to Section 5.02 and moneys
67
<PAGE>
collected by the Indenture Trustee are being applied in accordance with Section
5.07, Available Funds on deposit in the Note Account on any Payment Date or
Redemption Date shall be withdrawn from the Note Account, in the amounts
required, for application on such Payment Date as follows:
(i) first, to the payment to the Note Insurer, as subrogee to the
rights of the Noteholders, the aggregate amount necessary to reimburse the
Note Insurer for any unreimbursed Insured Payments paid by the Note
Insurer on prior Payment Dates, together with interest thereon at the
"Late Payment Rate" specified in the Insurance Agreement from the date
such Insured Payments were paid by the Note Insurer to such Payment Date
and the amount of any unpaid Note Insurer Premium for any prior Payment
Date together with interest thereon at the "Late Payment Rate" specified
in the Insurance Agreement from the date such amounts were due; provided,
however, that the Note Insurer shall be paid such amounts only after the
Noteholders have received the Required Payment Amount with respect to such
Payment Date;
(ii) second, to the Noteholders, the Note Interest for such Payment
Date;
(iii) third, to the Noteholders, the Monthly Principal for such
Payment Date in reduction of the Note Balance until such Note Balance is
reduced to zero;
(iv) fourth, to the Noteholders, in reduction of the Note Balance,
the amount, if any, equal to the lesser of (A) Excess Cash with respect to
such Payment Date, and (B) the lesser of (1) the amount necessary for the
Overcollateralization Amount to equal the Required Overcollateralization
Amount on such Payment Date (after giving effect to application of Monthly
Principal for such Payment Date) and (2) the amount necessary to reduce
the Note Balance to zero (the "Excess Cash Payment"); and
(v) fifth, to the Note Insurer, any amounts due and owing under the
Insurance Agreement that are not described in clause "first".
(d) On or after each Payment Date, so long as the Indenture Trustee shall
have prepared a Payment Date Statement in respect of such Payment Date and (1)
shall have made, or, in accordance with Section 3.03, set aside from amounts in
the Note Account an amount sufficient to make, the payments required to be made
as set forth in Section 8.02(c) as indicated in such Payment Date Statement, and
(2) shall have set aside any amounts that have been deposited in the Note
Account prior to such time that represent amounts that are to be used to make
payments on the Notes on the next succeeding Payment Date, the cash balance, if
any, then remaining in the Note Account shall be withdrawn from the Note Account
by the Indenture Trustee and, so long as no Default or Event of Default shall
have occurred and be continuing, shall be released from the lien of this,
Indenture and paid by the Indenture Trustee to the Issuer.
68
<PAGE>
(e) Any payments made by the Indenture Trustee to the Issuer pursuant to
this Section 8.02 shall be remitted to the Certificate Distribution Account
established and maintained pursuant to the Trust Agreement.
(f) In the event the Indenture Trustee is required to establish a
Collection Account pursuant to the Servicing Agreement, the Indenture Trustee
shall establish and maintain such account in the manner required under the
Servicing Agreement. The Indenture Trustee shall reinvest amounts in the
Collection Account at the direction of the Servicer in Permitted Investments.
All income or other gains, if any, from investment of moneys deposited in the
Collection Account shall be for the benefit of the Servicer and the Indenture
Trustees shall release any such amounts from the Collection Account to the
Servicer on each Deposit Date.
Section 8.03. Claims against the MBIA Insurance Policy.
(a) (i) The Indenture Trustee shall (A) receive as attorney-in-fact of
each Noteholder any Insured Payment from the Note Insurer or on behalf of
the Note Insurer and (B) disburse such Insured Payment to such Noteholders
in accordance with Section 8.02(c) hereof for the benefit of the related
Noteholders. Any Insured Payment received by the Indenture Trustee shall
be held by the Indenture Trustee uninvested. Insured Payments disbursed by
the Indenture Trustee from proceeds of the MBIA Insurance Policy shall not
be considered payment by the Issuer with respect to the Notes, nor shall
such payments discharge the obligation of the Issuer with respect to such
Notes, and the Note Insurer shall become the owner of such unpaid amounts
due from the Issuer in respect of such Insured Payments as the deemed
assignee and subrogee of such Noteholders and shall be entitled to receive
the reimbursement in respect thereof. The Indenture Trustee hereby agrees
on behalf of each Noteholder for the benefit of the Note Insurer that it
recognizes that to the extent the Note Insurer makes Insured Payments for
the benefit of the Noteholders, the Note Insurer will be entitled to
receive the related reimbursement in accordance with the priority of
distributions referenced in Section 8.02(c) hereof.
(ii) The Indenture Trustee shall promptly notify the Note Insurer of
any proceeding or the institution of any action, of which a Responsible
Officer of the Indenture Trustee has actual knowledge, constituting a
Preference Amount in respect of any payment made on the Notes. Each
Noteholder that pays any amount pursuant to a Preference Amount
theretofore received by such Noteholder on account of a Note will be
entitled to receive reimbursement for such amounts from the Note Insurer
in accordance with the terms of the MBIA Insurance Policy. Each
Noteholder, by its purchase of Notes, and the Indenture Trustee hereby
agree that, the Note Insurer (so long as no MBIA Payment Default exists)
may at any time during the continuation of any proceeding relating to a
Preference Amount direct all matters relating to such Preference Amount,
including, without limitation, (i) the direction of any appeal of any
order relating to such Preference Amount and (ii) the posting of any
surety, supersedes or performance Note pending any such appeal. In
addition and without limitation of
69
<PAGE>
the foregoing, the Note Insurer shall be subrogated to the rights of the
Indenture Trustee and each Noteholder in the conduct of any such
Preference Amount, including, without limitation, all rights of any party
to any adversary proceeding action with respect to any court order issued
in connection with any such Preference Amount.
(iii) Each Noteholder, by its purchase of Notes, and the Indenture
Trustee hereby agree that, unless an MBIA Payment Default exists and is
continuing, the Note Insurer shall have the right to direct all matters
relating to the Notes in any proceeding in a bankruptcy of the Issuer,
including without limitation any proceeding relating to a Preference
Amount and the posting of any surety or Note pending any such appeal.
(iv) With respect to a Preference Amount, the Indenture Trustee
shall be responsible for procuring and delivering the items set forth in
the MBIA Insurance Policy to the Note Insurer.
(b) Unless a Note Insurer Default exists and is continuing, the Indenture
Trustee shall cooperate in all respects with any reasonable request by the Note
Insurer for action to preserve or enforce the Note Insurer's rights or interests
hereunder without limiting the rights or affecting the interests of the
Noteholders as otherwise set forth herein.
(c) The Indenture Trustee shall surrender the MBIA Insurance Policy to the
Note Insurer for cancellation upon the expiration of the term of the MBIA
Insurance Policy as provided in the Insurance Agreement.
(d) With respect to any Payment Date on which an Insured Payment is
required to be made, the Indenture Trustee shall deliver to the Note Insurer a
Notice of Claim by no later than noon on the third Business Day prior to such
Payment Date in the manner set forth in the MBIA Insurance Policy.
Section 8.04. General Provisions Regarding the Note Account and Mortgage
Loans.
(a) The Note Account shall relate solely to the Notes and to the Mortgage
Loans, Permitted Investments and other property securing the Notes. Funds and
other property in the Note Account shall not be commingled with any other moneys
or property of the Issuer or any Affiliate thereof. Notwithstanding the
foregoing, the Indenture Trustee may hold any funds or other property received
or held by it as part of the Note Account in collective accounts maintained by
it in the normal course of its business and containing funds or property held by
it for other Persons (which may include the Issuer or an Affiliate), provided
that such accounts are under the sole control of the Indenture Trustee and the
Indenture Trustee maintains adequate records indicating the ownership of all
such funds or property and the portions thereof held for credit to the Note
Account.
(b) If any amounts are needed for payment from the Note Account and
sufficient uninvested funds are not available therein to make such payment, the
Indenture
70
<PAGE>
Trustee shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in the Note Account.
(c) The Indenture Trustee shall, at all times while any Notes are
Outstanding, maintain in its possession, or in the possession of an agent whose
actions with respect to such items are under the sole control of the Indenture
Trustee, all certificates or other instruments, if any, evidencing any
investment of funds in the Note Account. The Indenture Trustee shall relinquish
possession of such items, or direct its agent to do so, only for purposes of
collecting the final payment receivable on such investment or certificate or, in
connection with the sale of any investment held in the Note Account, against
delivery of the amount receivable in connection with any sale.
(d) The Indenture Trustee shall not invest any part of the Trust Estate in
Permitted Investments that constitute uncertificated securities (as defined in
Section 8-102 of the Uniform Commercial Code, as enacted in the relevant
jurisdiction) or in any other book-entry securities unless it has received an
Opinion of Counsel reasonably satisfactory in form and substance to the
Indenture Trustee setting forth, with respect to each type of security for which
authority to invest is being sought, the procedures that must be followed to
maintain the lien and security interest created by this Indenture with respect
to the Trust Estate.
Section 8.05. Releases of Defective Mortgage Loans.
Upon notice or discovery that any of the representations or warranties of
the Mortgage Loan Seller set forth in Section 4(b) and Exhibit B of the Mortgage
Loan Sale Agreement was materially incorrect or otherwise misleading with
respect to any Mortgage Loan as of the time made, the Indenture Trustee shall
direct the Mortgage Loan Seller to either (i) within 60 days after the Mortgage
Loan Seller receives actual knowledge of such incorrectness, eliminate or
otherwise cure the circumstance or condition in respect of which such
representation or warranty was incorrect as of the time made, (ii) withdraw such
Defective Mortgage Loan from the lien of this Indenture following the expiration
of such 60-day period by depositing to the Note Account an amount equal to the
Purchase Price for such Mortgage Loan or (iii) substitute a Qualified
Replacement Mortgage Loan for such Defective Mortgage Loan and deposit any
Purchase Price required to be paid in connection with such substitution pursuant
to Section 7 of the Mortgage Loan Sale Agreement, all as provided in Section 7
of the Mortgage Loan Sale Agreement. Upon any purchase of or substitution for a
Defective Mortgage Loan by the Mortgage Loan Seller in accordance with Section 7
of the Mortgage Sale Agreement, the Indenture Trustee shall deliver the Mortgage
File relating to such Defective Mortgage Loan to the Mortgage Loan Seller, and
the Issuer and the Indenture Trustee shall execute such instruments of transfer
as are necessary to convey title to such Defective Mortgage Loan to the Mortgage
Loan Seller from the lien of this Indenture.
71
<PAGE>
Section 8.06. Reports by Indenture Trustee to Noteholders; Access to
Certain Information.
On each Payment Date, the Indenture Trustee shall deliver the written
report required by Section 2.08(d) to Noteholders of record as of the related
Record Date (including the Clearing Agency, if any).
The Indenture Trustee shall make available at its Corporate Trust Office,
during normal business hours, for review by any Noteholder or any person
identified to the Indenture Trustee as a prospective Noteholder, originals or
copies of the following items: (a) the Indenture and any amendments thereto, (b)
all Payment Date Statements delivered to the Issuer since the Closing Date, (c)
any Officers' Certificates delivered to the Indenture Trustee since the Closing
Date as described in the Indenture and (d) any Accountants' reports delivered to
the Indenture Trustee since the Closing Date as required under the Servicing
Agreement. Copies of any and all of the foregoing items will be available from
the Indenture Trustee upon request; however, the Indenture Trustee will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing such copies and shall not be required to provide such
copies without reasonable assurances that such sum will be paid.
Section 8.07. Trust Estate Mortgage Files.
(a) The Indenture Trustee shall release Mortgage Files or portions thereof
to the Servicer on the terms specified in the Servicing Agreement.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding, release all of the Trust Estate to the Issuer (other than any cash
held for the payment of the Notes pursuant to Section 3.03 or 4.02). Section
8.08. Amendment to Servicing Agreement.
The Indenture Trustee may, without the consent of any Holder, enter into
or consent to any amendment or supplement to the Servicing Agreement for the
purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Notes. The Indenture Trustee may, in its
discretion, decline to enter into or consent to any such supplement or
amendment: (i) unless the Indenture Trustee receives an Opinion of Counsel that
the position of the Holders would not be materially adversely affected or
written confirmation from the Rating Agencies that the then-current implied
ratings on the Notes (without taking into account the MBIA Insurance Policy)
would not be adversely affected by such supplement or amendment or (ii) if its
own rights, duties or immunities would be adversely affected.
Section 8.09. Delivery of the Mortgage Files Pursuant to Servicing
Agreement.
As is appropriate for the servicing or foreclosure of any Mortgage
Loan, the Indenture Trustee shall cause the Custodian to deliver to the Servicer
of such Mortgage
72
<PAGE>
the Mortgage Files for such Mortgage Loan upon receipt by the
Indenture Trustee and the Custodian on or prior to the date such release is to
be made of:
(a) such Officers' Certificates, if any, as are required by the
Servicing Agreement; and
(b) a "Request for Release" in the form prescribed by the Servicing
Agreement, executed by the Servicer, providing that the Servicer will hold
or retain the Mortgage Files in trust for the benefit of the Indenture
Trustee, the Note Insurer and the Holders of Notes.
Section 8.10. Servicer as Agent.
In order to facilitate the servicing of the Mortgage Loans by the Servicer
of such Mortgage Loans, the Servicer of the Mortgage Loans has been appointed by
the Issuer to retain, in accordance with the provisions of the Servicing
Agreement and this Indenture, all Remittable Funds on such Mortgage Loans prior
to their deposit into the Note Account on or prior to the related Deposit Date.
Section 8.11. Termination of Servicer.
In the event of an event of default specified in Section 6.01 of the
Servicing Agreement, the Indenture Trustee may, with the consent of the Note
Insurer, and shall, upon the direction of the Note Insurer (or as otherwise
provided in the Servicing Agreement), terminate the Servicer as provided in
Section 6.01 and Section 6.02 of the Servicing Agreement. If the Indenture
Trustee terminates the Servicer, the Indenture Trustee shall, pursuant to
Section 6.02 of the Servicing Agreement, assume the duties of the Servicer or
appoint a successor servicer acceptable to the Issuer, the Note Insurer and the
Rating Agencies and meeting the requirements set forth in the Servicing
Agreement.
Section 8.12. Opinion of Counsel.
The Indenture Trustee shall be entitled to receive at least five Business
Days' notice of any action to be taken pursuant to Sections 8.07(a) (other than
in connection with releases of Mortgage Loans that were the subject of a Full
Prepayment of the type described in clause (i) of the definition of the term
"Full Prepayment") and 8.08, accompanied by copies of any instruments involved,
and the Indenture Trustee shall be entitled to receive an Opinion of Counsel, in
form and substance reasonably satisfactory to the Indenture Trustee, stating the
legal effect of any such action, outlining the steps required to complete the
same, and concluding that all conditions precedent to the taking of such action
have been complied with. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.13. Appointment of Custodians.
The Indenture Trustee may, at no additional cost to the Issuer or to
the Indenture Trustee, with the consent of the Issuer and the Note Insurer,
appoint one or more
73
<PAGE>
Custodians to hold all or a portion of the Mortgage Files as agent for the
Indenture Trustee. Each Custodian shall (i) be a financial institution
supervised and regulated by the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Office of Thrift Supervision, or
the Federal Deposit Insurance Corporation; (ii) have combined capital and
surplus of at least $10,000,000; (iii) be equipped with secure, fireproof
storage facilities, and have adequate controls on access to assure the safety
and security of the Mortgage Files; (iv) utilize in its custodial function
employees who are knowledgeable in the handling of mortgage documents and of the
functions of a mortgage document custodian; and (v) satisfy any other reasonable
requirements that the Issuer may from time to time deem necessary to protect the
interests of Noteholders and the Note Insurer in the Mortgage Files. Each
Custodian shall be subject to the same obligations and standard of care as would
be imposed on the Indenture Trustee hereunder assuming the Indenture Trustee
retained the Mortgage Files directly. The appointment of one or more Custodians
shall not relieve the Indenture Trustee from any of its obligations hereunder.
If the Servicer is appointed as a Custodian in accordance with this Section
8.14, it shall fulfill its servicing and custodial duties and obligations
through separate departments and, if it maintains a trust department, shall
fulfill its custodial duties and obligations through such trust department.
Section 8.14. Rights of the Note Insurer to Exercise Rights of
Noteholders.
By accepting its Notes, each Noteholder agrees that unless a Note Insurer
Default exists, the Note Insurer shall have the right to exercise all rights of
the Noteholders under this Agreement without any further consent of the
Noteholders, including, without limitation:
(i) the right to require the Servicer to effect foreclosures upon
Mortgage Loans upon failure of the Servicer to do so;
(ii) the right to require the Mortgage Loan Seller to repurchase or
substitute for Defective Mortgage Loans pursuant to Section 8.05; (iii)
the right to direct the actions of the Indenture Trustee during the
continuance of an Event of Default; and
(iv) the right to vote on proposed amendments to this Indenture.
In addition, each Noteholder agrees that, unless a Note Insurer Default
exists, the rights specifically set forth above may be exercised by the
Noteholders only with the prior written consent of the Note Insurer.
Except as otherwise provided in Section 8.03 and notwithstanding any
provision in this Indenture to the contrary, so long as a Note Insurer Default
has occurred and is continuing, the Note Insurer shall have no rights to
exercise any voting rights of the Noteholders hereunder, nor shall the Indenture
Trustee be required to obtain the consent of, or act at the direction of, the
Note Insurer.
74
<PAGE>
Section 8.15. Trust Estate and Accounts Held for Benefit of the Note
Insurer.
The Indenture Trustee shall hold the Trust Estate and the Mortgage Files
for the benefit of the Noteholders and the Note Insurer and all references in
this Agreement and in the Notes to the benefit of Holders of the Notes shall be
deemed to include the Note Insurer (provided there does not exist a Note Insurer
Default).
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Noteholders shall
also be sent to the Note Insurer.
Section 8.16. Demand Note.
(a) On any Determination Date on which a Note Insurer Default shall have
occurred and be continuing, in the event that the Servicer's Remittance Report
with respect to such Determination Date shall state that Available Funds with
respect to such Determination Date is less than the sum of the Required Payment
Amount and, if such Payment Date occurs on the date of Maturity, the Note
Balance (such deficiency, a "Demand Note Claim Amount"), the Indenture Trustee
shall deliver to Mortgage Lenders Network USA, Inc. and MLN Capital Corporation
I a Notice of Draw in the manner set forth in the Demand Note. Such Notice of
Draw for the related Payment Date shall request an amount equal to the lesser of
(i) the Deficiency Amount for the related Payment Date and (ii) the Demand Note
Limit for the related Payment Date. Amounts paid by Mortgage Lenders Network
USA, Inc. pursuant to a claim submitted under this Section 8.16(a) shall be
deposited by the Indenture Trustee into the Note Account for payment pursuant to
Section 8.02(c). Any payment made by Mortgage Lenders Network USA, Inc. under
the Demand Note shall be applied solely to the payment of the Notes and for no
other purpose.
(b) The Indenture Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of Mortgage Lenders Network USA, Inc. under the
Demand Note. Notwithstanding any other provision of this Indenture or any other
Basic Document, the Noteholders are not entitled to make any claims under the
Demand Note or institute proceedings directly against Mortgage Lenders Network
USA, Inc. with respect to the Demand Note.
(c) The Indenture Trustee shall surrender the Demand Note to Mortgage
Lenders Network USA, Inc. for cancellation on the Target Date as provided in the
Demand Note.
75
<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
With the consent of the Note Insurer and without the consent of the
Holders of any Notes, the Issuer and the Indenture Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(1) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the 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;
(2) to add to the conditions, limitations and restrictions on the
authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes, as herein set forth, additional conditions,
limitations and restrictions thereafter to be observed;
(3) to evidence the succession of another Person to the Issuer to
the extent permitted herein, and the assumption by any such successor of
the covenants of the Issuer herein and in the Notes contained;
(4) to add to the covenants of the Issuer, for the benefit of the
Holders of all Notes and the Note Insurer or to surrender any right or
power herein conferred upon the Issuer;
(5) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision
herein, or to amend any other provisions with respect to matters or
questions arising under this Indenture, which shall not be inconsistent
with the provisions of this Indenture, provided that such action shall not
adversely affect in any material respect the interests of the Holders of
the Notes or the Holders of the Certificates; and provided, further, that
the amendment shall not be deemed to adversely affect in any material
respect the interests of the Holders of the Notes and the Note Insurer if
the Person requesting the amendment obtains letters from the Rating
Agencies that the amendment would not result in the downgrading or
withdrawal of the implied ratings then assigned to the Notes (without
taking into account the MBIA Insurance Policy); or
(6) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted, and to add to this Indenture such other provisions as may be
expressly required by the TIA.
76
<PAGE>
Section 9.02. Supplemental Indentures With Consent of Noteholders.
With the consent of the Note Insurer and with the consent of Holders of
Notes representing not less than a majority of the Note Balance of all
Outstanding Notes by Act of said Holders delivered to the Issuer and the
Indenture Trustee, the Issuer and the Indenture Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(1) change any Payment Date or the Final Maturity Date of the Notes
or reduce the principal amount thereof, the Note Interest Rate thereon or
the Redemption Price with respect thereto, change the earliest date on
which any Note may be redeemed at the option of the Issuer, change any
place of payment where, or the coin or currency in which, any Note or any
interest thereon is payable, or impair the right to institute suit for the
enforcement of the payment of any installment of interest due on any Note
on or after the Final Maturity Date thereof or for the enforcement of the
payment of the entire remaining unpaid principal amount of any Note on or
after the Final Maturity Date (or, in the case of redemption, on or after
the applicable Redemption Date);
(2) reduce the percentage of the Note Balance of the Outstanding
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with provisions of this Indenture or Defaults
hereunder and their consequences provided for in this Indenture;
(3) modify any of the provisions of this Section, Section 5.13 or
Section 5.17(b), except to increase any percentage specified therein or to
provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(4) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(5) permit the creation of any lien other than the lien of this
Indenture with respect to any part of the Trust Estate (except for
Permitted Encumbrances) or terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Note of
the security afforded by the lien of this Indenture;
(6) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the Required Payment Amount for any Payment
Date (including the calculation of any of the individual components of
such Required Payment Amount) or to affect rights of the Holders of the
Notes to the benefits of any provisions for the mandatory redemption of
Notes contained herein; or
77
<PAGE>
(7) incur any indebtedness, other than the Notes, that would cause
the Issuer or the Trust Estate to be treated as a "taxable mortgage pool"
within the meaning of Code Section 7701(i). The Indenture Trustee may in
its discretion determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon
the Holders of all Notes, whether theretofore or thereafter authenticated
and delivered hereunder. The Indenture Trustee shall not be liable for any
such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties or immunities under this
Indenture or otherwise. The Issuer shall cause executed copies of any
Supplemental Indentures to be delivered to the Rating Agencies.
Section 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes to which such supplemental indenture relates that have theretofore been
or thereafter are authenticated and delivered hereunder shall be bound thereby.
Section 9.05. Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
78
<PAGE>
Section 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer shall so
determine, new Notes so modified as to conform, in the opinion of Indenture
Trustee and the Issuer, to any such supplemental indenture may be prepared and
executed by the Issuer and authenticated and delivered by the Indenture Trustee
in exchange for Outstanding Notes.
Section 9.07. Amendments to Governing Documents.
The Indenture Trustee shall, upon Issuer Request, consent to any proposed
amendment to the Issuer's governing documents, or an amendment to or waiver of
any provision of any other document relating to the Issuer's governing
documents, such consent to be given without the necessity of obtaining the
consent of the Holders of any Notes upon receipt by the Indenture Trustee of:
(i) an Officers' Certificate, to which such proposed amendment or
waiver shall be attached, stating that such attached copy is a true copy
of the proposed amendment or waiver and that all conditions precedent to
such consent specified in this Section 9.07 have been satisfied; and
(ii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their implied ratings of the Notes (without taking into account the
MBIA Insurance Policy).
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
Nothing in this Section 9.07 shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the subject
of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
(a) All the Notes may be redeemed in whole, but not in part, on the
Redemption Date as provided in clause (i) of the definition thereof at the
Redemption Price at the option of the holders of a majority of the ownership
interest of the Issuer (the "Residual Majority"), or at the option of the
Servicer if the Residual Majority shall not have
79
<PAGE>
exercised its option to direct the Servicer to redeem the Notes on such
Redemption Date or, if such option is not exercised by the Servicer, at the
option of the Note Insurer; provided, however, that funds in an amount equal to
the Redemption Price, plus any amounts owed to the Note Insurer under the
Insurance Agreement any unreimbursed Nonrecoverable Advances and any
unreimbursed amounts due and owing to the Indenture Trustee hereunder, must have
been deposited with the Indenture Trustee prior to the Indenture Trustee's
giving notice of such redemption pursuant to Section 10.02 or the Issuer shall
have complied with the requirements for satisfaction and discharge of the Notes
specified in Section 4.01. Notice of the election to redeem the Notes shall be
furnished to the Indenture Trustee not later than thirty (30) days prior to the
Payment Date selected for such redemption, whereupon all such Notes shall be due
and payable on such Payment Date upon the furnishing of a notice pursuant to
Section 10.02 to each Holder of such Notes and the Note Insurer. Any expenses
associated with the compliance of the provisions hereof in connection with a
redemption of the Notes shall be paid by the Note Insurer or the Servicer,
depending upon which party redeems the Notes. In no event shall the Note Insurer
redeem the Notes unless the proceeds received from the Note Insurer would be not
less than the greater of (x) the entire amount that would be payable to the
Holders of the Notes, in full payment thereof on the Payment Date next
succeeding the date of such Sale and (y) the fair market value of the Mortgage
Loans as of the related Payment Date. Upon the redemption of the Notes, Mortgage
Loans in the Trust Estate shall be released and delivered to the party
requesting the redemption.
(b) Upon receipt of the notice from the Servicer or the Note Insurer of
its election to redeem the Notes pursuant to Section 10.01(a), the Indenture
Trustee shall prepare and deliver to the Issuer, the Servicer and the Note
Insurer, no later than the related Redemption Date, a Payment Date Statement
stating therein that it has determined that the conditions to redemption at the
option of the Servicer or Note Insurer have been satisfied and setting forth the
amount, if any, to be withdrawn from the Note Account and paid to the Servicer
as reimbursement for Nonrecoverable Advances and such other information as may
be required to accomplish such redemption.
(c) (i) Following the first Payment Date on which the Aggregate Principal
Balance of the Mortgage Loans as of the related Determination Date is less than
20% of the Aggregate Principal Balance of the Mortgage Loans as of the
applicable Cut-off Dates, the Indenture Trustee shall solicit bids for the
purchase of the Mortgage Loans and the Trust Estate. If the highest bid received
by the Indenture Trustee from a qualified bidder is not less than the fair
market value of the Mortgage Loans and would equal or exceed the amount set
forth in clause (ii) below, the Indenture Trustee shall sell and assign such
Mortgage Loans without recourse to the highest bidder and shall apply the
proceeds of such sale to redeem the Notes pursuant to the terms set forth in
this Article X.
(ii) The Indenture Trustee shall not accept an offer to purchase the
Mortgage Loans and the Trust Estate unless (1) at least three potential
purchasers have made offers to purchase the Mortgage Loans, (2) the purchaser of
the Mortgage Loans agrees to the continuation of the Servicer or any successor
servicer then acting as servicer of the Mortgage Loans on terms substantially
similar to those contained in the Servicing
80
<PAGE>
Agreement (3) the highest bid to purchase the Mortgage Loans is at least equal
to an amount, which, when added to Available Funds for the related Payment Date,
would equal the sum, without duplication, of (i) the accrued interest then due
on the Notes on such Payment Date, (ii) the Note Balance as of such Payment
Date, (iii) the aggregate of all Insured Payments made by the Note Insurer to
the Noteholders remaining unreimbursed as of such Payment Date and any amounts
owing to the Note Insurer under the agreement governing the issuance of the
Insurance Policy, plus interest on such amount calculated at the Late Payment
Rate as set forth in agreement governing the issuance of the Insurance Policy,
(iv) any accrued and unpaid Servicing Fees and any Servicing Advances or any
Monthly Advances previously made by the Servicer and remaining unreimbursed as
of such Payment Date and (v) any accrued and unpaid fees owing to the Indenture
Trustee or the Owner Trustee as of such Payment Date.
(iii) The Indenture Trustee shall not be required to consummate a sale of
the Mortgage Loans unless it receives an Opinion of Counsel (which Opinion of
Counsel shall not be at the expense of the Indenture Trustee) that such sale
will not give rise to any adverse tax consequences to the Issuer or the
Noteholders or adversely affect the opinion that the Notes will evidence
indebtedness of the Issuer under the Code.
(iv) In the event that a sale is not consummated in accordance with this
Section 10.01(c), the Indenture Trustee shall solicit bids on a quarterly basis
for the purchase of such assets upon the terms described in this Section.
(v) The proceeds of the sale of the Mortgage Loans shall be used to redeem
the Notes and to pay all amounts set forth in clause (ii) above then due and
owing, and any excess shall be deposited in the Certificate Distribution Account
for payment to the Certificateholders.
Section 10.02. Form of Redemption Notice.
Notice of redemption shall be given by the Indenture Trustee in the name
of and at the expense of the Issuer by first class mail, postage prepaid, mailed
not less than ten days prior to the Redemption Date to each Holder of Notes to
be redeemed, such Holders being determined as of the Record Date for such
Payment Date, and to the Note Insurer.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Notes of such Series will be
redeemed,
(3) the fact of payment in full on such Notes, the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as provided
in Section 3.02), and
81
<PAGE>
that no interest shall accrue on such Note for any period after the date
fixed for redemption. Failure to give notice of redemption, or any defect
therein, to any Holder of any Note selected for redemption shall not
impair or affect the validity of the redemption of any other Note.
Section 10.03. Notes Payable on Optional Redemption.
Notice of redemption having been given as provided in Section 10.02, the
Notes to be redeemed shall, on the applicable Redemption Date, become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on such Redemption
Price for any period after such Redemption Date; provided, however, that if such
Redemption Price is not paid on the Redemption Date, the Note Balance shall,
until paid, bear interest from the Redemption Date at the Note Interest Rate.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions.
(a) Upon any application or request by the Issuer to the Indenture Trustee
to take any action under any provision of this Indenture, the Issuer shall
furnish to the Indenture Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel, if requested
by the Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
(b) Every certificate, opinion or letter with respect to compliance with a
condition or covenant provided for in this Indenture, including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request (other than certificates provided pursuant to TIA Section
314(a)(4)) shall include and shall be deemed to include (regardless of whether
specifically stated therein) the following:
(1) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate, opinion or letter are based;
82
<PAGE>
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with. Section
11.02. Form of Documents Delivered to Indenture Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
Opinion of Counsel may be based on the written opinion of other counsel, in
which event such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion and shall include a statement to the effect that such counsel
believes that such counsel and the Indenture Trust may reasonably rely upon the
opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 6.01(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request or
direction of the Issuer, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Issuer's right to make such request or
direction, the Indenture Trustee shall be protected
83
<PAGE>
in acting in accordance with such request or direction if it does not have
knowledge of the occurrence and continuation of such Default or Event of Default
as provided in Section 6.01(d).
Section 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by an agent duly appointed
in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Notes.
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer and
Issuer.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Noteholders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(1) the Indenture Trustee by any Noteholder or by the Issuer shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with and received by the Indenture Trustee at its
Corporate Trust Office and at 11000 Broken Land Parkway, Columbia,
Maryland 21044-3562; or
84
<PAGE>
(2) the Issuer by the Indenture Trustee or by any Noteholder shall
be sufficient for every purpose hereunder (except as provided in Section
5.01(3) and (4)) if in writing and mailed, first-class postage prepaid, to
the Issuer addressed to it at Mortgage Lenders Network Home Equity Loan
Trust 1998-1), in care of Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, or at any other address previously
furnished in writing to the Indenture Trustee by the Issuer.
(3) the Note Insurer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to MBIA Insurance Corporation addressed to
it at 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management-SF (IPM-SF) (Mortgage Lenders Network Home Equity
Loan Trust 1998-1), or at any other address previously furnished in
writing to the Indenture Trustee by the Note Insurer; or
(4) the Depositor by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage paid, to Prudential Securities Secured Financing
Corporation c/o Prudential Securities Incorporated, One New York Plaza,
New York, New York 10192; Attention: Len Blum or at any other address
previously furnished in writing to the Indenture Trustee by the Depositor;
or
(5) the Mortgage Loan Seller or the Servicer by the Indenture
Trustee or by any Noteholder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class, postage paid, to Mortgage
Lenders Network USA, Inc., Middlesex Corporate Center, 11th Floor, 213
Court Street, Middletown, Connecticut 06457, Attention: General Counsel or
at any other address previously furnished in writing to the Indenture
Trustee by the Mortgage Loan Seller or the Servicer; or
(6) the Underwriters by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to (a) Prudential Securities Incorporated,
One New York Plaza, New York, New York 10292, Attention: Len Blum, fax:
(212) 778-7401, and (b) First Union Capital Markets Corp. 301 South
College Street, TW-06, Charlotte, North Carolina 28288.
Notices required to be given to the Rating Agencies by the Issuer or the
Indenture Trustee shall be in writing, personally delivered or mailed
first-class postage pre-paid, to (i) in the case of Moody's, at the following
address: Moody's Investors Service, Inc., Residential Mortgage Monitoring
Department, 99 Church Street, New York, New York 10007 and (ii) in the case of
Standard & Poor's, at the following address: Standard & Poor's Ratings Group, 26
Broadway (15th Floor), New York, New York, 10004, Attention: Asset Bankers
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designed by written notice to the other parties.
85
<PAGE>
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices.
Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder as
it appears on the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Section 11.06. Rules by Indenture Trustee.
The Indenture Trustee may make reasonable rules for any meeting of
Noteholders.
Section 11.07. Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of the
provisions of the TIA, such required provision shall control.
Section 11.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
86
<PAGE>
Section 11.10. Separability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.11. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or Co-trustee appointed under Section 6.14 and
the Noteholders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.12. Legal Holidays.
In any case where the date of any Payment Date, Redemption Date or any
other date on which principal of or interest on any Note is proposed to be paid
shall not be a Business Day, then (notwithstanding any other provision of the
Notes or this Indenture) payment need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the nominal date of any such Payment Date, Redemption Date or other date for the
payment of principal of or interest on any Note and no interest shall accrue for
the period from and after any such nominal date, provided such payment is made
in full on such next succeeding Business Day.
Section 11.13. Governing Law.
IN VIEW OF THE FACT THAT NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY STATES
AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY THAT
THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL
LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND
EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
Section 11.14. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 11.15. Recording of Indenture.
This Indenture is subject to recording in any appropriate public recording
offices, such recording to be effected by the Issuer and at its expense in
compliance with any Opinion of Counsel delivered pursuant to Section 2.11(c) or
3.06.
87
<PAGE>
Section 11.16. Issuer Obligation.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Indenture Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director,
employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of the
Trust Agreement.
Section 11.17. No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder and Beneficial Owner, by accepting a Note, hereby covenant and agree
that they will not at any time institute against MLN Capital Corporation I or
the Issuer, or join in any institution against MLN Capital Corporation I or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, this Indenture or any of the Basic Documents. In addition, the
Indenture Trustee will on behalf of the holders of the Notes, (a) file a written
objection to any motion or other proceeding seeking the substantive
consolidation of the Mortgage Loan Seller with, MLN Capital Corporation I or the
Issuer, (b) file an appropriate memorandum of points and authorities or other
brief in support of such objection, or (c) endeavor to establish at the hearing
on such objection that the substantive consolidation of such entity would be
materially prejudicial to the Noteholders.
This Section 11.17 will survive for one year and one day following the
termination of this Indenture.
Section 11.18. Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee and the Note Insurer, during the
Issuer's normal business hours, to examine all of books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent Accountants selected by the
Indenture Trustee or the Note Insurer, as the case may be,
88
<PAGE>
and to discuss its affairs, finances and accounts with its officers, employees
and Independent Accountants (and by this provision the Issuer hereby authorizes
its Accountants to discuss with such representatives such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any expense incident to the exercise by the Indenture Trustee of any
right under this Section 11.18 shall be borne by the Issuer.
Section 11.19. Usury.
The amount of interest payable or paid on any Note under the terms of this
Indenture shall be limited to an amount that shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United States
or the State of New York (whichever shall permit the higher rate), that could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Note exceeds the Highest Lawful Rate,
the Issuer stipulates that such excess amount will be deemed to have been paid
as a result of an error on the part of both the Indenture Trustee, acting on
behalf of the Holder of such Note, and the Issuer, and the Holder receiving such
excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Issuer or the Indenture Trustee, refund the amount of such
excess or, at the option of the Indenture Trustee, apply the excess to the
payment of principal of such Note, if any, remaining unpaid. In addition, all
sums paid or agreed to be paid to the Indenture Trustee for the benefit of
Holders of Notes for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Notes.
Section 11.20. Third Party Beneficiary.
The Note Insurer is intended as a third party beneficiary of this
Indenture shall be binding upon and inure to the benefit of the Note Insurer;
provided that, notwithstanding the foregoing, for so long as a Note Insurer
Default is continuing with respect to its obligations under the MBIA Insurance
Policy, the Noteholders shall succeed to the Note Insurer's rights hereunder.
Without limiting the generality of the foregoing, all covenants and agreements
in this Indenture that expressly confer rights upon the Note Insurer shall be
for the benefit of and run directly to the Note Insurer, and the Note Insurer
shall be entitled to rely on and enforce such covenants to the same extent as if
it were a party to this Indenture.
89
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee and the have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
MORTGAGE LENDERS NETWORK HOME
EQUITY LOAN TRUST 1998-1
By: Wilmington Trust Company,
as Owner Trustee
By: /s/ DONALD G. MACKELCAN
--------------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Indenture Trustee
By: /s/ AMY WAHL
--------------------------------
Name: Amy Wahl
Title: Assistant Vice President
90
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT A
FORM OF NOTE
<PAGE>
[SPECIMEN]
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE NOTE INSURANCE POLICY
AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
Date of Indenture: As of March 1, 1998 Original Note Balance: $120,000,000
First Payment Date: April 27, 1998 CUSIP No.: 61913JAA4
Denomination: $120,000,000 Note No.: A-1
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
HOME EQUITY LOAN BACKED NOTES, SERIES 1998-1
Mortgage Lenders Network Home Equity Loan Trust 1998-1, a business
trust organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to Cede
& Co., or registered assigns, the principal sum of ONE HUNDRED TWENTY MILLION
DOLLARS ($120,000,000) payable on each Payment Date in an amount equal to the
result obtained by multiplying (i) a fraction the numerator of which is
$120,000,000 and the denominator of which is $120,000,000 (this Note's
"Percentage Interest") by (ii) the aggregate amount, if any, payable from the
Note Account in respect of principal on the Notes pursuant to the Indenture
dated as of March 1, 1998, between the Issuer and Norwest Bank Minnesota,
National Association, a national banking association, as Indenture Trustee (the
"Indenture Trustee"); provided, however, that the entire unpaid principal amount
of this Note shall be due and payable on the earlier of (i) the Payment Date
occurring in April, 2029 (the "Final Maturity Date"), (ii) the Redemption Date,
if any, pursuant to Article X of the Indenture or (iii) the date on which an
Event of Default shall have occurred and be
<PAGE>
continuing, if the Notes have been declared to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. Capitalized terms used but
not defined herein are defined in Article I of the Indenture.
<PAGE>
[SPECIMEN]
Pursuant to the terms of the Indenture, payments will be made on the 25th
day of each month or, if such day is not a Business Day, on the Business Day
immediately following such 25th day (each a "Payment Date"), commencing on the
first Payment Date specified above, to the Person in whose name this Note is
registered at the close of business on the applicable Record Date, in an amount
equal to the product of (a) the Percentage Interest evidenced by this Note and
(b) the sum of the amounts to be paid on the Notes with respect to such Payment
Date, all as more specifically set forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five days prior to the related Record Date with
appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Balance of at least $1,000,000), any payment of principal or
interest, other than the final installment of principal or interest, shall be
made by wire transfer to an account in the United States designated by such
Holder reasonably satisfactory to the Indenture Trustee.
Payments of principal and interest on the Notes will be made on each
Payment Date to Noteholders of record as of the related Record Date. On each
Payment Date, Noteholders will be entitled to receive interest payments in an
aggregate amount equal to the Note Interest for such Payment Date, together with
principal payments in an aggregate amount equal to the Monthly Principal plus,
until the related Overcollateralization Amount is equal to the Required
Overcollateralization Amount, Excess Cash, if any, for such Payment Date. The
"Note Balance" of a Note as of any date of determination is equal to the initial
principal balance thereof as of the Closing Date, reduced by the aggregate of
all amounts previously paid with respect to such Note on account of principal.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Asset Backed Notes, Series 1998-1 (herein called the "Notes"),
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. To the extent that any provision of this Note contradicts or is
inconsistent with the provisions of the Indenture, the provisions of the
Indenture shall control and supersede such contradictory or inconsistent
provision herein. The Notes are subject to all terms of the Indenture.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
<PAGE>
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Maturity Date and the Redemption
Date, if any, pursuant to Article X of the Indenture. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing if the Indenture Trustee, at the direction or upon the prior written
consent of MBIA Insurance Corporation (the "Note Insurer") in the absence of a
Note Insurer Default, or the Holders of the Notes representing not less than 50%
of the Note Balance of the Outstanding Notes (with the prior written consent of
the Note Insurer in the absence of a Note Insurer Default), shall have declared
the Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. All principal payments on the Notes shall be made pro
rata to the Noteholders entitled thereto.
MBIA Insurance Corporation (the "Note Insurer"), in consideration of the
payment of the premium and subject to the terms of the Note Guaranty Insurance
Policy (the "MBIA Insurance Policy") thereby has unconditionally and irrevocably
guaranteed the payment of the Insured Payments as described in the statement of
insurance attached hereto.
Pursuant to the Indenture, unless a Note Insurer Default exists (i) the
Note Insurer shall be deemed to be the holder of the Notes for certain purposes
specified in the Indenture and will be entitled to exercise all rights of the
Noteholders thereunder, including the rights of Noteholders relating to the
occurrence of, and the remedies with respect to, an Event of Default, without
the consent of such Noteholders, and (ii) the Indenture Trustee may take actions
which would otherwise be at its option or within its discretion, including
actions relating to the occurrence of, and the remedies with respect to, an
Event of Default, only at the direction of the Note Insurer. In addition, on
each Payment Date, after the Noteholders have been paid all amounts to which
they are entitled, the Note Insurer will be entitled to be reimbursed for any
unreimbursed Insured Payments, unreimbursed Premium Amounts (each with interest
thereon at the "Late Payment Rate" specified in the Insurance Agreement) and any
other amounts owed under the MBIA Insurance Policy.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate and payments under the MBIA Insurance Policy will be sole source of
payments on the Notes, and each Holder hereof, by its acceptance of this Note,
agrees that (i) such Note will be limited in right of payment to amounts
available from the Trust Estate and the MBIA Insurance Policy as provided in the
Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner
Trustee, the Indenture Trustee, the Depositor, the Mortgage Loan Seller, the
Servicer or any of their respective affiliates, or to the assets of any of the
foregoing entities, except the assets of the Issuer pledged to secure the Notes
pursuant to the Indenture.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this
<PAGE>
Note, shall be made by check mailed to the Person whose name appears as the
Holder of this Note (or one or more Predecessor Notes) on the Note Register as
of the close of business on each Record Date, except that with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Such checks shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Note Register as of the applicable
Record Date without requiring that this Note be submitted for notation of
payment. Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five days prior to the related Record Date with
appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Balance of at least $1,000,000), any payment of principal or
interest, other than the final installment of principal or interest, shall be
made by wire transfer to an account in the United States designated by such
Holder reasonably satisfactory to the Indenture Trustee. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Holder hereof as of the Record Date preceding such
Payment Date by notice mailed or transmitted by facsimile prior to such Payment
Date, and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's principal
Corporate Trust Office or at the office of the Indenture Trustee's agent
appointed for such purposes.
As provided in the Indenture, the Notes may be redeemed in whole, but not
in part, at the option of the Issuer, on any Payment Date on and after the date
on which the Aggregate Principal Balance of the Mortgage Loans is less than 10%
of the Aggregate Principal Balance of the Mortgage Loans as of the respective
Cut-off Dates. As provided in the Indenture, on any Payment Date on and after
the date on which the Aggregate Principal Balance of the Mortgage Loans is less
than 20% of the Aggregate Principal Balance of the Mortgage Loans as of the
respective Cut-off Dates, and quarterly thereafter, the Indenture Trustee is
required to solicit competitive bids for the purchase of the Mortgage Loans. In
the event that satisfactory bids are received as described in the Indenture, the
Notes will be redeemed.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be
<PAGE>
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended, and
thereupon one or more new Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
The Note Registrar shall not register the transfer of this Note unless the
Note Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not, and is not acquiring the Note on
behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of this Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner, by acceptance of a beneficial interest herein, shall be deemed
to make one of the foregoing representations.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees by accepting the benefits of the Indenture that such Noteholder or
Beneficial Owner will not at any time institute against the MLN Capital
Corporation I or the Issuer, or join in any institution against the MLN Capital
Corporation I or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture, the Mortgage Loan Sale Agreement, the Mortgage Loan
Contribution Agreement, the Servicing Agreement, the Management Agreement, the
Insurance Agreement and the Indemnification Agreement (the "Basic Documents").
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each
<PAGE>
Noteholder, by acceptance of a Note (and each Beneficial Owner by acceptance of
a beneficial interest in a Note), agrees to treat the Notes for federal, state
and local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and the Holders of Notes
representing a majority of the Note Balance of all Outstanding Notes. The
Indenture also contains provisions permitting the (i) Note Insurer or (ii) if a
Note Insurer Default exists, the Holders of Notes representing specified
percentages of the Note Balance of Outstanding Notes, on behalf of the Holders
of all the Notes, to waive compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Note Insurer or by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the amendment thereof, in certain limited circumstances,
or the waiver of certain terms and conditions set forth in the Indenture,
without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
Initially, the Notes will be represented by one Note registered in the
name of CEDE & Co. as nominees of the Clearing Agency. The Notes will be
delivered in denominations as provided in the Indenture and subject to certain
limitations therein set forth. The Notes are exchangeable for a like aggregate
initial Note Balance of Notes of different authorized denominations, as
requested by the Holder surrendering the same.
THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and
<PAGE>
unconditional, to pay the principal of and interest on this Note at the times,
place and rate, and in the coin or currency herein prescribed.
Unless the certificate of authentication hereon has been executed by the
Authenticating Agent whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
DATE: March 13, 1998
<PAGE>
MORTGAGE LENDERS NETWORK HOME EQUITY
LOAN TRUST 1998-1
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:_____________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: March 13, 1998
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
Authenticating Agent
By:_________________________________
Authorized Signatory
<PAGE>
STATEMENT OF INSURANCE
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints , attorney, to transfer said Note on the books kept for
registration thereof, with full power of substitution in the premises.
Dated: ____________________*/
Signature Guaranteed:
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B
MBIA INSURANCE POLICY
<PAGE>
EXHIBIT C
FORM OF NOTICE OF CLAIM
<PAGE>
EXHIBIT D
FORM OF NOTICE OF DRAW
Exhibit 4.2
- --------------------------------------------------------------------------------
DEPOSIT TRUST AGREEMENT
between
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
WILMINGTON TRUST COMPANY,
as Owner Trustee
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trust Paying Agent,
and
MORTGAGE LENDERS NETWORK USA, INC.,
as Servicer
- --------------------------------------------------------------------------------
Mortgage Lenders Network Home Equity Loan Trust 1998-1
Asset Backed Notes
Series 1998-1
Dated as of March 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS........................................................1
SECTION 1.1 Capitalized Terms..............................................1
SECTION 1.2 Other Definitional Provisions..................................6
ARTICLE II ORGANIZATION.......................................................7
SECTION 2.1 Name...........................................................7
SECTION 2.2 Office.........................................................7
SECTION 2.3 Purposes and Powers............................................7
SECTION 2.4 Appointment of Owner Trustee...................................8
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate.............8
SECTION 2.6 Declaration of Trust...........................................8
SECTION 2.7 Liability of the Holders.......................................8
SECTION 2.8 Title to Trust Property........................................9
SECTION 2.9 Situs of Trust.................................................9
SECTION 2.10 Representations and Warranties of the Depositor;
Covenant of the Depositor.....................................9
SECTION 2.11 Federal Income Tax Provisions.................................10
ARTICLE III CERTIFICATES AND TRANSFER OF INTERESTS...........................13
SECTION 3.1 Initial Ownership.............................................13
SECTION 3.2 The Certificates..............................................13
SECTION 3.3 Execution, Authentication and Delivery of Trust
Certificates.................................................14
SECTION 3.4 Registration of Transfer and Exchange of Trust
Certificates.................................................14
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen
Certificates.................................................15
SECTION 3.6 Persons Deemed Owners.........................................16
SECTION 3.7 Access to List of Holders' Names and Addresses................16
SECTION 3.8 Maintenance of Office or Agency...............................16
SECTION 3.9 Appointment of Trust Paying Agent.............................16
SECTION 3.10 Restrictions on Transfer of Certificates......................17
ARTICLE IV ACTIONS BY OWNER TRUSTEE.........................................19
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters.......19
SECTION 4.2 Action by Holders with Respect to Bankruptcy..................21
SECTION 4.3 Restrictions on Holders' Power................................21
SECTION 4.4 Majority Control..............................................21
i
<PAGE>
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES.......................22
SECTION 5.1 Establishment of Certificate Distribution Account.............22
SECTION 5.2 Application Of Trust Funds....................................22
SECTION 5.3 Method of Payment.............................................24
SECTION 5.4 Segregation of Moneys; No Interest............................24
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE............................24
SECTION 6.1 General Authority.............................................24
SECTION 6.2 General Duties................................................25
SECTION 6.3 Action upon Instruction.......................................25
SECTION 6.4 No Duties Except as Specified in this Agreement,
the Basic Documents or any Instructions......................26
SECTION 6.5 No Action Except Under Specified Documents
or Instructions..............................................27
SECTION 6.6 Restrictions..................................................27
ARTICLE VII CONCERNING THE OWNER TRUSTEE.....................................27
SECTION 7.1 Acceptance of Trusts and Duties...............................27
SECTION 7.2 Furnishing of Documents.......................................29
SECTION 7.3 Representations and Warranties................................29
SECTION 7.4 Reliance; Advice of Counsel...................................30
SECTION 7.5 Not Acting in Individual Capacity.............................31
SECTION 7.6 Owner Trustee Not Liable for Certificates
or Mortgage Loans............................................31
SECTION 7.7 Owner Trustee May Own Certificates and Notes..................31
SECTION 7.8 Licenses......................................................32
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE....................................32
SECTION 8.1 Owner Trustee's Fees and Expenses.............................32
SECTION 8.2 Indemnification...............................................32
SECTION 8.3 Payments to the Owner Trustee.................................33
SECTION 8.4 Servicer Liability............................................33
ARTICLE IX TERMINATION OF TRUST AGREEMENT...................................33
SECTION 9.1 Termination of Trust Agreement................................33
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL
OWNER TRUSTEES..................................................34
SECTION 10.1 Eligibility Requirements for Owner Trustee....................34
SECTION 10.2 Resignation or Removal of Owner Trustee.......................35
SECTION 10.3 Successor Owner Trustee.......................................36
SECTION 10.4 Merger or Consolidation of Owner Trustee......................36
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee.................37
ii
<PAGE>
ARTICLE XI MISCELLANEOUS....................................................38
SECTION 11.1 Supplements and Amendments....................................38
SECTION 11.2 No Legal Title to Owner Trust Estate in Holders...............39
SECTION 11.3 Limitations on Rights of Others...............................39
SECTION 11.4 Notices.......................................................40
SECTION 11.5 Severability..................................................40
SECTION 11.6 Separate Counterparts.........................................40
SECTION 11.7 Successors and Assigns........................................40
SECTION 11.8 No Petition...................................................41
SECTION 11.9 No Recourse...................................................41
SECTION 11.10 Headings......................................................41
SECTION 11.11 GOVERNING LAW.................................................41
SECTION 11.12 Grant of Certificateholder Rights to Note Insurer.............41
SECTION 11.13 Third-Party Beneficiary.......................................42
SECTION 11.14 Suspension and Termination of Note Insurer's Rights...........42
<PAGE>
DEPOSIT TRUST AGREEMENT
This DEPOSIT TRUST AGREEMENT, dated as of March 1, 1998, among PRUDENTIAL
SECURITIES SECURED FINANCING CORPORATION, a Delaware corporation, as depositor
(the "Depositor"), WILMINGTON TRUST COMPANY, a Delaware banking corporation, as
owner trustee (the "Owner Trustee"), NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as trust paying agent (the "Trust
Paying Agent"), and MORTGAGE LENDERS NETWORK USA, INC., as servicer (the
"Servicer"), for the limited purposes set forth herein.
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Accounts" shall mean, collectively, the Collection Account and the Note
Account.
"Agreement" shall mean this Deposit Trust Agreement, as may be amended and
supplemented from time to time.
"Annual Tax Reports" shall have the meaning assigned thereto in Section
2.11(k).
"Authorized Officer" shall have the meaning assigned thereto in the
Indenture.
"Basic Documents" shall mean this Agreement, the Servicing Agreement, the
Mortgage Loan Sale Agreement, the Mortgage Loan Contribution Agreement, the
Management Agreement, the Insurance Agreement and the Indenture.
"Business Day" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day that is either a legal holiday or a day on which the Note Insurer or
banking institutions in the State of New York, the State of Connecticut, the
State of Maryland, the State of Delaware, or the state in which the Trust Paying
Agent's office from which payments will be made to Certificateholders are
authorized or obligated by law, regulation or executive order to be closed.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of I the
Delaware Code, 12 Del. Code S 3801 et seq., as the same may be amended from time
to time.
"Capital Account" shall have the meaning assigned thereto in Section
2.1l(a).
<PAGE>
"Certificate" shall mean a certificate evidencing the beneficial interest
of a Certificateholder in the Trust, substantially in the form attached hereto
as Exhibit A.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Certificate is registered.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and,
where appropriate in context, Treasury Regulations promulgated thereunder.
"Collection Account" shall have the meaning assigned thereto in the
Servicing Agreement.
"Company" shall mean MLN Capital Corporation I, a Delaware corporation.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration; or at such other address in the State
of Delaware as the Owner Trustee may designate by notice to the
Certificateholders and the Depositor, or the principal corporate trust office of
any successor Owner Trustee (the address (which shall be in the State of
Delaware) of which the successor owner trustee will notify the Certificateholder
and the Depositor).
"Depositor" shall mean Prudential Securities Secured Financing Corp., a
Delaware corporation.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Holder Nonrecourse Debt Minimum Gain" shall have the meaning set forth
for "partner nonrecourse debt minimum gain" in Treasury Regulations Section
2
<PAGE>
1.704-2(i)(2). A Holder's share of Holder Nonrecourse Debt Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(i)(5).
"Indenture" shall mean the Indenture, dated as of March 1, 1998, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means Norwest Bank Minnesota, National Association, as
Indenture Trustee under the Indenture.
"Insurance Agreement" means the Insurance Agreement, dated as of March 1,
1998, among MBIA Insurance Corporation, as insurer, the Issuer, Mortgage Lenders
Network USA, Inc., as Seller and Servicer, the Depositor and the Indenture
Trustee.
"Insurance Policy" shall mean the policy issued by the Note Insurer for
the benefit of the holders of the Notes.
"Issuer" shall mean Mortgage Lenders Network Home Equity Loan Trust
1998-1, the Delaware business trust created pursuant to this Agreement.
"Management Agreement" shall mean the Management Agreement dated as of
March 1, 1998, between the Trust and Norwest Bank Minnesota, National
Association, as Manager.
"Mortgage Lenders Network" shall mean Mortgage Lenders Network USA, Inc. a
Delaware corporation.
"Mortgage Loan Contribution Agreement" shall mean that certain Mortgage
Loan Contribution Agreement, dated as of March 1, 1998, between the Depositor,
as transferor, and the Issuer, as transferee.
"Mortgage Loan Sale Agreement" shall mean that certain Mortgage Loan Sale
Agreement, dated as of March 1, 1998, between Mortgage Lenders Network USA,
Inc., as seller, and the Depositor, as purchaser.
"Non-U.S. Person" shall mean an individual, corporation, partnership or
other person other than a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if (i) a court in the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
"Note Account" shall have the meaning assigned thereto in the Indenture.
"Note Insurer" shall mean MBIA Insurance Corporation, a New York stock
insurance company.
3
<PAGE>
"Note Insurer Default" shall have the meaning assigned to such term in the
Indenture.
"Notes" shall mean the Issuer's Asset Backed Notes, Series 1998-1.
"Owner Trust Estate" shall mean the Trust Estate (as defined in the
Indenture), including the contribution of $1 referred to in Section 2.5 hereof.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor owner trustee hereunder.
"Payment Date" shall mean the twenty-fifth day of each month or, if such
twenty-fifth day is not a Business Day, the next succeeding Business Day,
commencing April 27, 1998.
"Percentage Interest" shall mean with respect to any Certificate the
percentage portion of all of the Trust Interest evidenced thereby as stated on
the face of such Certificate.
"Permitted Investments" shall have the meaning assigned to such term in
the Indenture.
"Prospective Holder" shall have the meaning set forth in Section 3.1 l(a).
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Depositor, the Servicer, the Note Insurer, the Owner Trustee and the Issuer in
writing that such action will not result in a reduction or withdrawal of the
then current "implied" rating of the Notes that it maintains without taking into
account the Note Insurance.
"Record Date" shall mean as to each Payment Date the last Business Day of
the month immediately preceding the month in which such Payment Date occurs.
"Servicing Agreement" shall mean the Servicing Agreement dated as of March
1, 1998, among the Trust, as Issuer, the Indenture Trustee, and Mortgage Lenders
Network USA, Inc., as Servicer.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Taxable Year" shall have the meaning assigned thereto in Section 2.11(j).
4
<PAGE>
"Tax Matters Partner" shall have the meaning assigned thereto in Section
2.11(l).
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Interest" shall mean the right to receive, on each Payment Date,
distributions of the amounts, if any, released to the Issuer pursuant to Section
8.02(d) of the Indenture or pursuant to Section 2.05 of the Servicing Agreement.
"Trust Minimum Gain" shall have the meaning set forth for "partnership
minimum gain" in Treasury Regulations 1.704-2(b)(2) and 1.704-2(d). In
accordance with Treasury Regulations Section 1.704-2(d), the amount of Trust
Minimum Gain is determined by first computing, for each nonrecourse liability of
the Trust, any gain the Trust would realize if it disposed of the property
subject to that liability for no consideration other than full satisfaction of
the liability, and then aggregating the separately computed gains. A Holder's
share of Trust Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(g)(1).
"Trust Paying Agent" shall mean any paying agent or co-paying agent
appointed pursuant to Section 3.9 and authorized by the Owner Trustee to make
payments to and distributions from the Certificate Distribution Account.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Servicing Agreement or, if not defined
therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
5
<PAGE>
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as "Mortgage Lenders
Network Home Equity Loan Trust 1998-1," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in Delaware as
the Owner Trustee may designate by written notice to the Certificateholders, the
Note Insurer and the Depositor.
SECTION 2.3 Purposes and Powers. The purpose of the Trust is to engage in the
following activities:
(i) to issue the Notes pursuant to the Indenture and to sell such
Notes;
(ii) with the proceeds of the sale of the Notes, to pay the
organizational, startup and transactional expenses of the Trust and to pay
the balance to the Depositor pursuant to the Mortgage Loan Contribution
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Owner Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Holders any portion of the Owner Trust Estate released
from the lien of, and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is or is to be a party;
6
<PAGE>
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith;
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Owner Trust Estate and the making of distributions and payments to
the Holders and the Noteholders; and
(vii) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial Certificateholders to engage in
the foregoing activities. The Trust shall not engage in any activity other than
in connection with the foregoing or other than as required or authorized by the
terms of this Agreement or the Basic Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The Depositor
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt
in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Distribution Account. The Certificateholders shall
pay organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares that it will
hold the Owner Trust Estate in trust upon and subject to the conditions set
forth herein for the use and benefit of the Holders, subject to the obligations
of the Trust under the Basic Documents. It is the intention of the parties
hereto that the Trust constitute a business trust under the Business Trust
Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, after issuance of the Certificates, the Trust
shall be treated as a partnership, with the assets of the partnership being the
Mortgage Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Certificates and the Notes being
non-recourse debt of the partnership (or, if there is only one
Certificateholder, that the Trust shall be disregarded as an entity separate
from such Holder, with the assets held by the Trust being treated as assets of
the Holder and the Notes being treated as non-recourse debt of the Holder). The
parties agree that, unless otherwise required by appropriate tax authorities or
unless the Trust is disregarded as an entity separate from its sole
Certificateholder for income and franchise tax purposes, the Owner Trustee will
file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Trust as a partnership for
such tax purposes pursuant to
7
<PAGE>
Section 2.11(k). The parties agree that no election will be made to treat the
Trust or the Owner Trust Estate as a real estate mortgage investment conduit as
defined in Section 860D of the Code. Effective as of the date hereof, the Owner
Trustee shall have all rights, powers and duties set forth herein and in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
The Owner Trustee shall file the Certificate of Trust with the Secretary of
State.
SECTION 2.7 Liability of the Holders. No Holder shall have any personal
liability for any liability or obligation of the Trust. The Certificates shall
be fully paid and nonassessable.
SECTION 2.8 Title to Trust Property.
(a) Legal title to all of the Owner Trust Estate shall be vested at all
times in the Trust as a separate legal entity except where applicable law in any
jurisdiction requires title to any part of the Owner Trust Estate to be vested
in a trustee or trustees, in which case title shall be deemed to be vested in
the Owner Trustee and/or a separate trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any interest
of the Certificateholders shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an Accounting or to the transfer
to it of any part of the Owner Trust Estate.
SECTION 2.9 Situs of Trust. The Trust will be located and administered in the
state of Delaware. All accounts maintained at a bank by the Owner Trustee or the
Indenture Trustee on behalf of the Trust shall be located in the State of
Delaware, the State of Minnesota or the State of Connecticut. The Trust shall
not have any employees; provided, however, nothing herein shall restrict or
prohibit the Owner Trustee from having employees within or without the State of
Delaware. Payments will be received by the Trust only in Delaware, Minnesota or
Connecticut, and payments will be made by the Trust only from Delaware,
Minnesota or Connecticut. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Depositor; Covenant of the
Depositor.
(a) The Depositor hereby represents and warrants to the Owner Trustee and
the Note Insurer that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
8
<PAGE>
(ii) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has full
power and authority to transfer and assign the property to be transferred
and assigned to and deposited with the Trust and the Depositor has duly
authorized such transfer and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by the Depositor by all necessary
corporate action.
(iii) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the certificate
of incorporation or by-laws of the Depositor, or any indenture, agreement
or other instrument to which the Depositor is a party or by which it is
bound; nor result in the creation or imposition of any lien upon any of
its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties.
(iv) There are no proceedings or investigations pending or notice of
which has been received in writing before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (x) asserting the
invalidity of this Agreement, (y) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (z) seeking any
determination or ruling that should reasonably be expected to materially
and adversely affect the performance by the Depositor of its obligations
under, or the validity or enforceability of, this Agreement.
(v) The representations and warranties of the Depositor in Section
3(a) of the Mortgage Loan Contribution Agreement are true and correct.
(vi) The Depositor has duly executed and delivered this Agreement,
and this Agreement constitutes the legal, valid and binding obligation of
the Depositor, enforceable against the Depositor, in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by the application of
equitable principles.
(b) Each Certificateholder covenants with the Owner Trustee and the Note
Insurer that during the continuance of this Agreement, and while it holds
Certificates, it will comply in all respects with the provisions of its
Certificate of Incorporation in effect from time to time.
9
<PAGE>
SECTION 2.11 Federal Income Tax Provisions. If the Trust is treated as a
partnership (rather than disregarded as a separate entity) for federal income
tax purposes pursuant to Section 2.6, the following provisions shall apply:
(a) A separate capital account (a "Capital Account") shall be established
and maintained for each Certificateholder in accordance with Treasury
Regulations Section 1.704-1 (b)(2)(iv). No Certificateholder shall be entitled
to interest on its Capital Account or any capital contribution made by such
Holder to the Trust.
(b) Upon termination of the Trust pursuant to Article IX, any amounts
available for distribution to Holders shall be distributed to the Holders with
positive Capital Account balances in accordance with such balances. For purposes
of this Section 2.1l(b), the Capital Account of each Holder shall be determined
after all adjustments made in accordance with this Section 2.11 resulting from
the Trust's operations and from all sales and dispositions of all or any part of
the assets of the Trust. Any distributions pursuant to this Section 2.1l(b)
shall be made by the end of the Taxable Year in which the termination occurs
(or, if later, within 90 days after the date of the termination).
(c) No Certificateholder shall be required to restore any deficit balance
in its Capital Account. Furthermore, no Holder shall be liable for the return of
the Capital Account of, or of any capital contribution made to the Trust by,
another Holder.
(d) Profit and loss of the Trust for each Taxable Year shall be allocated
to the Certificateholders in accordance with their respective Percentage
Interests.
(e) Notwithstanding any provision to the contrary, (i) any expense of the
Trust that is a "nonrecourse deduction" within the meaning of Treasury
Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the
Holders' respective Percentage Interests, (ii) any expense of the Trust that is
a "partner nonrecourse deduction" within the meaning of Treasury Regulations
Section 1.704-2(i)(2) shall be allocated in accordance with Treasury Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Trust Minimum Gain
within the meaning of Treasury Regulations Section 1.704-2(f)(1) for any Taxable
Year, items of gain and income shall be allocated among the Holders in
accordance with Treasury Regulations Section 1.704-2(f) and the ordering rules
contained in Treasury Regulations Section 1.704-2(i), and (iv) if there is a net
decrease in Holder Nonrecourse Debt Minimum Gain within the meaning of Treasury
Regulations Section 1.704-2(i)(4) for any Taxable Year, items of gain and income
shall be allocated among the Holders in accordance with Treasury Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Treasury Regulations
Section 1.704-2(j). A Holder's "interest in partnership profits" for purposes of
determining its share of the nonrecourse liabilities of the Trust within the
meaning of Treasury Regulations Section 1.752-3(a)(3) shall be such Holder's
Percentage Interest.
(f) If a Holder receives in any Taxable Year an adjustment, allocation, or
distribution described in subparagraphs (4), (5), or (6) of Treasury Regulations
Section 1.704-l(b)(2)(ii)(d) that causes or increases a negative balance in such
Holder's Capital Account that exceeds the sum of such Holder's shares of Trust
Minimum Gain and
10
<PAGE>
Holder Nonrecourse Debt Minimum Gain, as determined in accordance with Treasury
Regulations Sections 1.704-2(g) and 1.704-2(i), such Holder shall be allocated
specially for such Taxable Year (and, if necessary, later Taxable Years) items
of income and gain in an amount and manner sufficient to eliminate such negative
Capital Account balance as quickly as possible as provided in Treasury
Regulations Section 1.704-l(b)(2)(ii)(d). After the occurrence of an allocation
of income or gain to a Holder in accordance with this Section 2.11(f), to the
extent permitted by Regulations Section 1.704-l(b), items of expense or loss
shall be allocated to such Holder in an amount necessary to offset the income or
gain previously allocated to such Holder under this Section 2.11(f).
(g) Loss shall not be allocated to a Holder to the extent that such
allocation would cause a deficit in such Holder's Capital Account (after
reduction to reflect the items described in Treasury Regulations Section
1.704-l(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Holder's shares
of Trust Minimum Gain and Holder Nonrecourse Debt Minimum Gain. Any loss in
excess of that limitation shall be allocated to all the Holders in accordance
with their respective Percentage Interests. After the occurrence of an
allocation of loss to a Holder in accordance with this Section 2.11(g), to the
extent permitted by Treasury Regulations Section 1.704-l(b), profit shall be
allocated to such Holder in an amount necessary to offset the loss previously
allocated to such Holder under this Section 2.11(g).
(h) If a Holder transfers any part or all of its Percentage Interest and
the transferee is admitted as provided herein (a "Transferee Holder"), the
distributive shares of the various items of profit and loss allocable among the
Holders during such Taxable Year shall be allocated between the transferor and
the Transferee Holder (at the election of the Holders (including the transferor,
but excluding the Transferee Holder)) either (i) as if the Taxable Year had
ended on the date of the transfer or (ii) based on the number of days of such
Taxable Year that each was a Holder without regard to the results of Trust
activities in the respective portions of such Taxable Year in which the
transferor and Transferee Holder were Holders.
(i) "Profit" and "loss" and any items of income, gain, expense or loss
referred to in this Section 2.11 shall be determined in accordance with federal
income tax accounting principles as modified by Treasury Regulations Section
1.704-l(b)(2)(iv), except that profits and losses shall not include items of
income, gain, and expense that are specially allocated pursuant to Sections
2.11(e), 2.11(f) or 2.11(g) hereof. All allocations of income, profits, gains,
expenses, and losses (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set forth in this
Section 2.11, except as otherwise required by Section 704(c) of the Code and
Section 1.704-l(b)(4) of the Treasury Regulations.
(j) The taxable year of the Trust (the "Taxable Year") shall be the
calendar year or such other taxable year as may be required by Section 706(b) of
the Code.
(k) At the Trust's expense, the Owner Trustee shall (i) prepare, or cause
to be prepared, and file or cause to be filed such tax returns relating to the
Trust (including a
11
<PAGE>
partnership information return, IRS Form 1065) as are required by applicable
federal, state, and local law, (ii) cause such returns to be signed in the
manner required by law, (iii) make such elections as may from time to time be
required or appropriate under any applicable law so as to maintain the Trust's
classification as a partnership for tax purposes, (iv) prepare and deliver, or
cause to be prepared and delivered, to the Holders, no later than 120 days after
the close of each Taxable Year (or no later than April 15th), a Schedule K-1, a
copy of the Trust's informational tax return (IRS Form 1065), and such other
reports (collectively, the "Annual Tax Reports") setting forth in sufficient
detail all such information and data with respect to the transactions effected
by or involving the Trust during such Taxable Year as shall enable the each
Holder to prepare its federal, state, and local income tax returns in accordance
with the laws then prevailing, and (v) collect, or cause to be collected, any
withholding tax as described in Section 5.2(c) with respect to income or
distributions to Certificateholders.
(l) Mortgage Lenders Network USA, Inc. shall be designated as the tax
matters partner for the Trust within the meaning of Section 6231(a)(7) of the
Code (the "Tax Matters Partner"). The Tax Matters Partner shall have the right
and obligation to take all actions authorized and required, respectively, by the
Code for the Tax Matters Partner. The Tax Matters Partner shall have the right
to retain professional assistance in respect of any audit or controversy
proceeding initiated with respect to the Trust by the Internal Revenue Service
or any state or local taxing authority, and all expenses and fees incurred by
the Tax Matters Partner on behalf of the Trust shall constitute expenses of the
Trust. In the event the Tax Matters Partner receives notice of a final
partnership adjustment under Section 6223(a)(2) of the Code, the Tax Matters
Partner shall either (i) file a court petition for judicial review of such
adjustment within the period provided under Section 6226(a) of the Code, a copy
of which petition shall be mailed to all other Holders on the date such petition
is filed, or (ii) mail a written notice to all other Holders, within such
period, that describes the Tax Matters Partner's reasons for determining not to
file such a petition.
(m) Except as otherwise provided in this Section 2.11, the Holders shall
instruct the Owner Trustee as to whether to make any available election under
the Code or any applicable state or local tax law on behalf of the Trust.
Notwithstanding the foregoing, any Holder may request that the Owner Trustee
make an election under section 754 of the Code; provided that the requesting
Holder shall agree to bear the cost of preparing such election and any
additional accounting expenses of the Trust incurred as a result of such
election.
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Certificates, the Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2 The Certificates. The Certificates shall be issued without a
principal amount and shall evidence beneficial ownership interests in the Trust.
12
<PAGE>
The Certificates shall be printed, lithographed or engraved or may be produced
in any other manner as is reasonably acceptable to the Owner Trustee, as
evidenced by its execution thereof. The Certificates shall be executed on behalf
of the Trust by manual or facsimile signature of an Authorized Officer of the
Owner Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid, notwithstanding that
such individuals or any of them shall have ceased to be so authorized prior to
the authentication and delivery of such Certificates or did not hold such
offices at the date of authentication and delivery of such Certificates.
A transferee of a Certificate shall become a Certificateholder, and shall
be entitled to the rights and subject to the obligations of a Certificateholder
hereunder upon such transferee's acceptance of a Certificate duly registered in
such transferee's name pursuant to Section 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates.
Concurrently with the initial transfer of the Mortgage Loans to the Trust
pursuant to the Mortgage Loan Contribution Agreement, the Owner Trustee shall
cause the Certificates, representing 100% of the Percentage Interests of the
Trust Interest, to be executed on behalf of the Trust, authenticated and
delivered to the Company, as the designee of the Depositor. No Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates of a like Percentage Interest dated
the date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of a like Percentage Interest upon surrender of the Certificates to
be exchanged at the office or agency maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to
13
<PAGE>
the Owner Trustee and the Certificate Registrar duly executed by the
Certificateholder or his attorney duly authorized in writing. In addition, each
Certificate presented or surrendered for registration of transfer and exchange
must be accompanied by a representation letter from the Prospective Holder
certifying as to the representations set forth in Section 3.11(a), (b) and (c).
Each Certificate surrendered for registration of transfer or exchange shall be
canceled and disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register
transfers or exchanges of Certificates for a period of 15 days preceding the
Payment Date with respect to the Certificates.
Notwithstanding anything contained herein to the contrary, the Owner
Trustee shall not be responsible for ascertaining whether any transfer complies
with the registration provisions or exemptions from the Securities Act of 1933,
as amended, the Securities Act of 1934, as amended, applicable state securities
law or the Investment Company Act of 1940; provided, however, that if a
certificate is specifically required to be delivered to the Owner Trustee by a
purchaser or transferee of a Certificate, the Owner Trustee shall be under a
duty to examine the same to determine whether it conforms to the requirements of
this Trust Agreement and shall promptly notify the party delivering the same if
such certificate does not so conform.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate shall be surrendered to the Certificate Registrar, or if
the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Percentage Interest. In connection with
the issuance of any new Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Owners. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be
14
<PAGE>
bound by the terms of this Agreement. Prior to due presentation of a Certificate
for registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.2 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
SECTION 3.7 Access to List of Holders' Names and Addresses. The Owner Trustee
shall furnish or cause to be furnished to the Servicer, the Depositor and the
Trust Paying Agent immediately prior to each Payment Date, a list of the names
and addresses of the Certificateholders as of the most recent Record Date. If
three or more Certificateholders or one or more Holders of Certificates,
together evidencing Percentage Interests totaling not less than 25%, apply in
writing to the Owner Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their rights
under this Agreement or under the Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each
Certificateholder, by receiving and holding a Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall maintain an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Owner Trustee in respect of the Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the Corporate Trust Office
of Wilmington Trust Company as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Depositor
and to the Certificateholders of any change in the location of the Certificate
Register or any such office or agency.
SECTION 3.9 Appointment of Trust Paying Agent. The Owner Trustee hereby appoints
Norwest Bank Minnesota, National Association, as Trust Paying Agent under this
Agreement. The Trust Paying Agent shall make distributions to Certificateholders
from the Certificate Distribution Account pursuant to Section 5.2 and shall
report to the Owner Trustee on the Payment Date via facsimile transmission of a
distribution statement the amounts of such distributions to the
Certificateholders. The Trust Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. In the event that Norwest Bank
Minnesota, National Association, shall no longer be the Trust Paying Agent
hereunder, the Owner Trustee shall appoint a successor to act as Trust Paying
Agent (which shall be a bank or trust company) acceptable to the
Certificateholders, Mortgage Lenders Network, so long as Mortgage Lenders
Network is acting as Servicer, and the Note Insurer. The Owner Trustee shall
cause such successor Trust Paying Agent or any additional Trust Paying Agent
appointed by the Owner
15
<PAGE>
Trustee to execute and deliver to the Owner Trustee an instrument in which such
successor Trust Paying Agent or additional Trust Paying Agent shall agree with
the Owner Trustee that as Trust Paying Agent, such successor Trust Paying Agent
or additional Trust Paying Agent will hold all sums, if any, held by it for
payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. After one year from the date of receipt, the Trust Paying
Agent shall promptly return all unclaimed funds to the Owner Trustee, and upon
removal of a Trust Paying Agent, such Trust Paying Agent shall also return all
funds in its possession to the Owner Trustee. The provisions of Sections 7.1,
7.3(b), 7.4, 8.1, and 10.2 as to resignations, shall apply to the Trust Paying
Agent to the same extent as if it were named therein and, to the extent
applicable, to any other paying agent appointed hereunder. Any reference in this
Agreement to the Trust Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION 3.10 Restrictions on Transfer of Certificates.
(a) Each prospective purchaser and any subsequent transferee of a
Certificate (each, a "Prospective Holder"), other than the Company, shall
represent and warrant, in writing, to the Owner Trustee and the Certificate
Registrar and any of their respective successors that:
(i) Such Person is (A) a "qualified institutional buyer" as defined
in Rule 144A under the Securities Act of 1933, as amended (the "Securities
Act"), and is aware that the seller of the Certificate may be relying on
the exemption from the registration requirements of the Securities Act
provided by Rule 144A and is acquiring such Certificate for its own
account or for the account of one or more qualified institutional buyers
for whom it is authorized to act, or (B) a Person involved in the
organization or operation of the Trust or an affiliate of such Person
within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as
amended (including, but not limited to, the Depositor).
(ii) Such Person understands that the Certificates have not been and
will not be registered under the Securities Act and may be offered, sold,
pledged or otherwise transferred only to a person whom the seller
reasonably believes is (C) a qualified institutional buyer or (D) a Person
involved in the organization or operation of the Trust or an affiliate of
such Person, in a transaction meeting the requirements of Rule 144A under
the Securities Act and in accordance with any applicable securities laws
of any state of the United States.
(iii) Such Person understands that the Certificates bear a legend to
the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. THIS CERTIFICATE
MAY BE DIRECTLY OR INDIRECTLY OFFERED OR
16
<PAGE>
SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I)
A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE ACT, IN A
TRANSACTION THAT IS REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS
OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE
144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR
AN AFFILIATE OF SUCH A PERSON WITHIN THE
MEANING OF RULE 3a-7 OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, MLN
RESIDUAL HOLDING CORPORATION I) IN A
TRANSACTION THAT IS REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS
OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO
PERSON IS OBLIGATED TO REGISTER THIS
CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(b) By its acceptance of a Certificate, each Prospective Holder agrees and
acknowledges that no legal or beneficial interest in all or any portion of any
Certificate may be transferred directly or indirectly to an entity that holds
residual securities as nominee to facilitate the clearance and settlement of
such securities through electronic book-entry changes in Accounts of
participating organizations (a "Book-Entry Nominee") and any such purported
transfer shall be void and have no effect.
(c) No transfer of a Certificate or any beneficial interest therein shall
be made to any person unless the Note Insurer has given its prior written
consent to such transfer and the Owner Trustee has received a representation
letter from the Transferee to the effect that such transferee (i) is not a
person which is an employee benefit plan, trust or account subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 4975 of the Code or a governmental plan, as defined in Section 3(32) of
ERISA, subject to any federal, state or local law which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code (any such
person being a "Plan"), (ii) is not an entity, including an insurance company
separate account or general account, whose underlying assets include "plan
assets" by reason of a Plan's investment in the entity and (iii) is not directly
or indirectly purchasing such Certificate or interest therein on behalf of, as
investment manager of, as named fiduciary of, as trustee of, or with the assets
of a Plan.
(d) The Owner Trustee shall not execute, and shall not countersign and
deliver, a Certificate in connection with any transfer thereof unless the
transferor shall have provided to the Owner Trustee a certificate, substantially
in the form attached as
17
<PAGE>
Exhibit C to this Agreement, signed by the transferee, which certificate shall
contain the consent of the transferee to any amendments of this Agreement as may
be required to effectuate further the foregoing restrictions on transfer of the
Certificates to Book-Entry Nominees, and an agreement by the transferee that it
will not transfer a Certificate without providing to the Owner Trustee a
certificate substantially in the form attached as Exhibit C to this Agreement.
(e) The Certificates shall bear an additional legend referring to the
restrictions contained in paragraph (b) above.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take
action, and the Certificateholders shall not direct the Owner Trustee to take
any action, unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders and the Note Insurer in
writing of the proposed action and neither the Certificateholders nor the Note
Insurer shall have notified the Owner Trustee in writing prior to the 30th day
after such notice is given that such Certificateholders and/or the Note Insurer
have withheld consent or the Certificateholders have provided alternative
direction (any direction by the Certificateholders shall require the prior
consent of the Note Insurer):
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of the Mortgage Loans) and
the compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Mortgage Loans);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment or other change to this Agreement or any Basic Document
in circumstances where the consent of any Holder or the Note Insurer is
required;
(d) the amendment or other change to this Agreement or any Basic Document
in circumstances where the consent of any Holder or the Note Insurer is not
required and such amendment materially adversely affects the interest of the
Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Trust Paying Agent or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Registrar or Paying Agent, or the consent to the
assignment by the
18
<PAGE>
Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar or
Trust Paying Agent of its obligations under the Indenture or this Agreement, as
applicable.
(f) the consent to the calling or waiver of any default of any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or Servicer of
their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve, terminate or
liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity, or
convey or transfer all or substantially all of the Trust's assets to any other
entity;
(j) cause the Trust to incur, assume or guaranty any indebtedness other
than as set forth in this Agreement or the Basic Documents;
(k) do any act that conflicts with any other Basic Document;
(l) do any act which would make it impossible to carry on the ordinary
business of the Trust as described in Section 2.3 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to property, for
other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth in this
Trust Agreement.
In addition the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses and liabilities
from its own funds, and the Trust shall not pay the indebtedness, operating
expenses and liabilities of any other entity. The Trust shall maintain
appropriate minutes or other records of all appropriate actions and shall
maintain its office separate from the offices of the Depositor, the Company and
Mortgage Lenders Network.
The Owner Trustee shall not have the power, except upon the direction of
the Certificateholders with the consent of the Note Insurer, and to the extent
otherwise consistent with the Basic Documents, to (i) remove or replace the
Servicer or the Indenture Trustee, (ii) institute proceedings to have the Trust
declared or adjudicated a bankruptcy or insolvent, (iii) consent to the
institution of bankruptcy or insolvency proceedings against the Trust, (iv) file
a petition or consent to a petition seeking
19
<PAGE>
reorganization or relief on behalf of the Trust under any applicable federal or
state law relating to bankruptcy, (v) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or any similar official) of the
Trust or a substantial portion of the property of the Trust, (vi) make any
assignment for the benefit of the Trust's creditors, (vii) cause the Trust to
admit in writing its inability to pay its debts generally as they become due,
(viii) take any action, or cause the Trust to take any action, in furtherance of
any of the foregoing (any of the above, a "Bankruptcy Action"). So long as the
Indenture and the Insurance Agreement remain in effect and no Note Insurer
Default exists, no Certificateholder shall have the power to take, and shall not
take, any Bankruptcy Action with respect to the Trust or direct the Owner
Trustee to take any Bankruptcy Action with respect to the Trust.
SECTION 4.2 Action by Holders with Respect to Bankruptcy. The Owner Trustee
shall not have the power to commence a voluntary proceeding in bankruptcy
relating to the Trust without the consent and approval of the Note Insurer, the
unanimous prior approval of all Certificateholders and the Note Insurer and the
delivery to the Owner Trustee by each such Certificateholder of a certification
that such Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.3 Restrictions on Holders' Power. The Certificateholders shall not
direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement or any of the Basic Documents or would be contrary
to Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.4 Majority Control. Except as expressly provided herein, any action
that may be taken by the Certificateholders under this Agreement may be taken by
the Holders of Certificates evidencing more than 50% of the Percentage Interest
in the Trust Interest and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust Interest at the time of the delivery of such notice and
such action shall be binding upon all Certificateholders.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Certificate Distribution Account. The Owner Trustee
shall cause the Trust Paying Agent, for the benefit of the Certificateholders,
to establish and maintain with Norwest Bank Minnesota, National Association, for
the benefit of the Owner Trustee one or more Accounts that while the Trust
Paying Agent holds such Account shall be entitled "Certificate Distribution
Account, Norwest Bank Minnesota, National Association, as Trust Paying Agent, in
trust for the Holders of Certificates evidencing beneficial interests in
Mortgage Lenders Network Home Equity Loan Trust 1998-1." Funds shall be
deposited in the Certificate
20
<PAGE>
Distribution Account as required by the Indenture or, following satisfaction and
release of the Indenture, by the Servicing Agreement.
All of the right, title and interest of the Owner Trustee in all funds on
deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof shall be held for the benefit of the Certificateholders, the
Note Insurer and such other persons entitled to distributions therefrom. Except
as otherwise expressly provided herein, the Certificate Distribution Account
shall be under the sole dominion and control of the Owner Trustee for the
benefit of the Certificateholders and the Note Insurer.
SECTION 5.2 Application Of Trust Funds.
(a) On each Payment Date, the Trust Paying Agent shall distribute to the
Certificateholders, on the basis of their respective Percentage Interests, all
amounts then on deposit in the Certificate Distribution Account.
(b) On each Payment Date, the Trust Paying Agent shall send to
Certificateholders the statement provided to the Owner Trustee by the Indenture
Trustee pursuant to Section 2.08(d) of the Indenture with respect to such
Payment Date. If the Trust Paying Agent is an entity other than the Indenture
Trustee, the Owner Trustee shall provide a copy of such statement to the Trust
Paying Agent to enable it to perform its duties under this Section 5.2(b).
(c) In the event that any withholding tax is imposed under federal, state,
or local tax on the Trust's payment (or allocations of income) to a
Certificateholder, such tax shall reduce the amount otherwise distributable to
such Certificateholder in accordance with this Section. The Owner Trustee, and
the Trust Paying Agent on its behalf, is hereby authorized and directed to
retain in the Certificate Distribution Account from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Owner Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The Certificate Registrar will provide the Trust Paying Agent
with a statement indicating the amount of any such withholding tax. The amount
of any withholding tax imposed with respect to a Certificateholder shall be
treated as cash distributed to such Certificateholder at the time it is withheld
by the Trust and remitted to the appropriate taxing authority from the
Certificate Distribution Account at the direction of the Owner Trustee or the
Trust Paying Agent on its behalf. If there is a possibility that withholding tax
is payable with respect to a distribution (such as a distribution to a
Certificateholder who is a Non-U.S. Person), the Trust Paying Agent may in its
sole discretion withhold such amounts in accordance with this paragraph (c). In
the event that a Certificateholder wishes to apply for a refund of any such
withholding tax, the Owner Trustee and the Trust Paying Agent shall reasonably
cooperate with such Certificateholder in making such claim so long as such
Certificateholder agrees to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
21
<PAGE>
Any Holder which is organized under the laws of a jurisdiction outside the
United States shall, on or prior to the date such Holder becomes a Holder, (a)
so notify the Trust, the Owner Trustee and the Trust Paying Agent, (b) (i)
provide the Trust, the Owner Trustee and the Trust Paying Agent with Internal
Revenue Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii) notify the
Trust, the Owner Trustee and the Trust Paying Agent that it is not entitled to
an exemption from United States withholding tax or a reduction in the rate
thereof on payments of interest. Any such Holder agrees by its acceptance of a
Certificate, on an ongoing basis, to provide like certification for each taxable
year and to notify the Trust, the Owner Trustee and the Trust Paying Agent
should subsequent circumstances arise affecting the information provided in
clauses (a) and (b) above. The Trust, the Owner Trustee and the Trust Paying
Agent shall be fully protected in relying upon, and each Holder by its
acceptance of a Certificate hereunder agrees to indemnify and hold the Trust,
the Owner Trustee and the Trust Paying Agent harmless against all claims or
liability of any kind arising in connection with or related to their reliance
upon any documents, forms or information provided by any Holder. In addition, if
the Trust Paying Agent has not withheld taxes on any payment made to any Holder,
and the Trust Paying Agent is subsequently required to remit to any taxing
authority any such amount not withheld, such Holder shall return such amount to
the Trust Paying Agent upon written demand by the Trust Paying Agent. Neither
the Owner Trustee nor the Trust Paying Agent shall be liable for damages to any
Holder due to a violation of the Code unless and only to the extent such
liability is caused by the Owner Trustee's or the Trust Paying Agent's failure
to act in accordance with its standard of care under this Agreement.
(d) Notwithstanding anything to the contrary herein, at any time after the
Indenture is no longer in effect but while this Agreement remains in effect, the
manager under the Management Agreement (the "Manager") shall be entitled to a
fee on each Payment Date equal to the Indenture Trustee Fee that would have been
payable to the Indenture Trustee on such Payment Date if the Indenture were
still in effect. Such fee shall be distributed to the Manager from funds in the
Certificate Distribution Account prior to distribution of any such funds to
Certificateholders. Also, in such event, the Servicer shall provide the same
information to the Manager that it would have provided to the Indenture Trustee
pursuant to the Servicing Agreement, as well as any other information concerning
the Mortgage Loans as may be reasonably requested by the Manager to enable the
Manager to perform its obligations under the Management Agreement. On each such
Payment Date, the Trust Paying Agent shall mail to each Certificateholder a
statement detailing the amount remitted to the Trust Paying Agent by the
Servicer on the related Deposit Date and setting forth the amount of the Monthly
Servicing Fee and fees paid to the Manager with respect to such Payment Date,
and the aggregate amount distributed to Certificateholders on such Payment Date.
SECTION 5.3 Method of Payment. Distributions required to be made to
Certificateholders on any Payment Date shall be made to each Certificateholder
of record on the preceding Record Date either by wire transfer, in immediately
available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder shall have provided
to the Trust Paying Agent appropriate written instructions at least five
Business Days prior to such Payment Date,
22
<PAGE>
or, if not, by check mailed to such Certificateholder at the address of such
Holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections 5.1 and 5.2,
moneys received by the Trust Paying Agent hereunder and deposited into the
Certificate Distribution Account will be segregated except to the extent
required otherwise by law and, if the Holders of more than 50% of the
Certificates so direct, shall be invested in Permitted Investments maturing no
later than one Business Day prior to the related Payment Date at the direction
of such Certificateholders. The Trust Paying Agent shall not be liable for
payment of any interest or losses in respect of such moneys. Investment gains
shall be for the account of and paid to the Certificateholders.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and directed to
execute and deliver or cause to be executed and delivered the Notes, the
Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article III, in each case, in such
form as the Depositor and the Owner Trustee shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition, the Owner
Trustee is authorized and directed, on behalf of the Trust, to execute and
deliver to the Authenticating Agent the Issuer Request and the Issuer Order
referred to in Section 2.11 of the Indenture, in such form as the Depositor
shall approve, as evidenced conclusively by the Owner Trustee's or the
Depositor's execution thereof, directly to the Authenticating Agent to
authenticate and deliver Notes in the aggregate principal amount of
$120,000,000. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust, pursuant to
the Basic Documents.
SECTION 6.1 General Duties.
(a) It shall be the duty of the Owner Trustee:
(i) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic
Documents to which the Trust is a party and to administer the Trust in the
interest of the Certificateholders, subject to the Basic Documents and in
accordance with the provisions of this Agreement; and
(ii) to obtain and preserve the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Mortgage Loans and each other instrument and agreement included
in the Trust Estate.
23
<PAGE>
(b) The Owner Trustee shall not be responsible for taking any action on
behalf of the Trust under any Basic Document unless specifically directed in
writing to do so in accordance with Section 6.3 of this Agreement.
(c) The Owner Trustee shall not be responsible for any matter regarding
the Securities Act, the Exchange Act or the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the Basic
Documents, the Certificateholders may by written instruction direct the Owner
Trustee in the management of the Trust but only to the extent consistent with
the limited purpose of the Trust. Such direction may be exercised at anytime by
written instruction of the Certificateholders pursuant to Article IV. Without
limiting the generality of the foregoing, the Owner Trustee shall act as
directed by the Certificateholders in connection with Note redemptions requested
by the Certificateholders, and shall take all actions and deliver all documents
that the Trust is required to take and deliver in accordance with Section 4.01
and Article X of the Indenture in order to effect any redemption requested by
the Certificateholders.
(b) The Owner Trustee shall not be required to take any action hereunder
or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Certificateholders and
the Note Insurer requesting instruction from the Certificateholders as to the
course of action to be adopted, and to the extent the Owner Trustee acts in good
faith in accordance with any written instruction of the Certificateholders
received, the Owner Trustee shall not be liable on account of such action to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Certificateholders, and
shall have no liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner
24
<PAGE>
Trustee is required to take with respect to a particular set of facts, the Owner
Trustee may give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders requesting instruction and, to the
extent that the Owner Trustee acts or refrains from acting in good faith in
accordance with any such instruction received, the Owner Trustee shall not be
liable, on account of such action or inaction, to any Person. If the Owner
Trustee shall not have received appropriate instruction within 10 days of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, not inconsistent with
this Agreement or the Basic Documents, as it shall deem to be in the best
interests of the Certificateholders, and shall have no liability to any Person
for such action or inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic Documents
or any Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Trust is a party, except as expressly provided by the terms of this
Agreement, any Basic Document or in any document or written instruction received
by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Basic Document against the
Owner Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any liens
on any part of the Owner Trust Estate that result from actions by, or claims
against, the Owner Trustee in its individual capacity that are not related to
the ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or Instructions. The
Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action (a) that
violates or results in a breach of or is inconsistent with the purposes of the
Trust set forth in Section 2.3 or (b) that, to the actual knowledge of the Owner
Trustee, would result in the Trust's becoming taxable as a corporation for
Federal income tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section.
25
<PAGE>
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts the
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement and the Basic Documents.
The Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee in its individual capacity. In
particular, but not by way of limitation (and subject to the exceptions set
forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment made
by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of the
Certificateholders;
(c) no provision of this Agreement or any Basic Document shall require the
Owner Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of any of its rights or powers hereunder or under any Basic
Document if the Owner Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Certificates, and the Owner Trustee shall in no event
assume or incur any liability, duty, or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in the Basic
Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct of
the Seller, the Depositor, the Indenture Trustee, the Trust Paying Agent, the
Manager or the Servicer under any of the Basic Documents or otherwise and the
Owner Trustee shall have no obligation or liability to perform the obligations
of the Trust under this Agreement or the Basic Documents that are required to be
performed by the Indenture Trustee under the Indenture, the Servicer under the
Servicing Agreement, the Trust
26
<PAGE>
Paying Agent under this Agreement or the Manager under the Management Agreement;
and
(g) the Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Certificateholders, unless such Certificateholders have offered to the Owner
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Basic Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable for other than its gross negligence or
willful misconduct in the performance of any such act.
(h) Notwithstanding anything contained herein to the contrary, neither
Wilmington Trust Company nor the Owner Trustee shall be required to take any
action in any jurisdiction other than in the State of Delaware if the taking of
such action will (i) require the consent or approval or authorization or order
of or the giving of notice to, or the registration with or the taking of any
other action in respect of, any state or other governmental authority or agency
of any jurisdiction other than the State of Delaware; (ii) result in any fee,
tax or other governmental charge under the laws of any jurisdiction or any
political subdivisions thereof in existence on the date hereof other than the
State of Delaware becoming payable by Wilmington Trust Company; or (iii) subject
Wilmington Trust Company to personal jurisdiction in any jurisdiction other than
the State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company or the Owner
Trustee, as the case may be, contemplated hereby. The Owner Trustee shall be
entitled to obtain advice of counsel (which advice shall be an expense of
Mortgage Lenders Network) to determine whether any action required to be taken
pursuant to the Agreement results in the consequences described in clauses (i),
(ii) and (iii) of the preceding sentence. In the event that said counsel advises
the Owner Trustee that such action will result in such consequences, the Owner
Trustee will appoint an additional trustee pursuant to Section 10.5 hereof to
proceed with such action.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish to the
Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents. On behalf of the Owner Trustee, the Depositor shall
furnish to Noteholders promptly upon written request therefor, copies of the
Servicing Agreement and the Indenture.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the Depositor for
the benefit of the Certificateholders, that:
27
<PAGE>
(i) It is a banking corporation duly organized and validly existing
in good standing under the laws of the State of Delaware. It has all
requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this Agreement
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will
contravene any Federal or Delaware law, governmental rule or regulation
governing the banking or trust powers of the Owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or by-laws.
(b) The Trust Paying Agent hereby represents and warrants to the
Depositor and the Note Insurer for the benefit of the Certificateholders, that:
(i) It is a banking association duly organized and validly existing
in good standing under the laws of the United States of America. It has
all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this Agreement
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will
contravene any Federal law, governmental rule or regulation governing the
banking or trust powers of the Trust Paying Agent or any judgment or order
binding on it, or constitute any default under its charter documents or
by-laws.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, Note, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for
28
<PAGE>
all purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, Accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created, Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, of any Basic Document or of the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates and as specified in Section 7.3) or the Notes, or of any
Mortgage Loans or related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage Loan, or the perfection and priority of any
security interest created by any Mortgage Loan or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
including, without limitation, the existence, condition and ownership of any
Mortgaged Property, the existence and enforceability of any insurance thereon,
the existence and contents of any Mortgage Loan on any computer or other record
thereof, the validity of the assignment of any Mortgage Loan to the Trust or of
any intervening assignment, the completeness of any Mortgage Loan, the
performance or enforcement of any Mortgage Loan, the compliance by the Depositor
or the Servicer with any warranty or representation made under any Basic
Document or in any related document or the accuracy of any such warranty or
representation or any action of the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
29
<PAGE>
SECTION 7.7 Owner Trustee May Own Certificates and Notes. The Owner Trustee in
its individual or any other capacity may become the owner or pledgee of
Certificates or Notes and may deal with the Depositor, the Indenture Trustee and
the Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use its best
efforts to obtain and maintain the effectiveness of any licenses required in
connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner Trustee shall receive
as compensation for its services hereunder such fees as have been separately
agreed upon before the date hereof between Mortgage Lenders Network and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
Mortgage Lenders Network for its other reasonable expenses hereunder, including
the reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder. Mortgage Lenders Network shall be responsible and liable for the
payment of such fees and expenses and shall pay such fees and expenses promptly
after receipt of a written invoice therefor from the Owner Trustee.
SECTION 8.2 Indemnification. The Certificateholders shall be liable as obligor
for, and shall indemnify the Owner Trustee (in its individual and trust
capacities) and the Trust Paying Agent and their respective successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against any Indemnified Party in any way relating to or arising out of
this Agreement, the Basic Documents, the Owner Trust Estate, the administration
of the Owner Trust Estate or the action or inaction of the Owner Trustee or the
Trust Paying Agent hereunder, except only that the Certificateholders shall not
be liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.1. The indemnities contained in this Section shall survive
the resignation or termination of the Owner Trustee or the Trust Paying Agent or
the termination of this Agreement. In any event of any claim, action or
proceeding for which indemnity will be sought pursuant to this Section, the
Certificateholders will be entitled to participate therein, with counsel
selected by such Holders and reasonably satisfactory to the Indemnified Parties,
and after notice from Certificateholders to the Indemnified
30
<PAGE>
Parties of its election to assume the defense thereof, the Certificateholders
shall not be liable to the Indemnified Party under this Section 8.2 for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense of such action; provided, however, that this
sentence shall not be in effect if (1) the Certificateholders shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, (2) the Certificateholders shall have authorized the employment of
counsel for the Indemnified Party at the expense of the Certificateholders or
(3) in the event any such claim involves a possible imposition of criminal
liability or penalty or a material civil penalty on such Indemnified Party, a
conflict of interest between such Indemnified Party and the Certificateholders
or another indemnitee or the granting of material injunctive relief against such
Indemnified Party, and such Indemnified Party informs the Certificateholders
that such Indemnified Party desires to be represented by separate counsel, in
which case, the reasonable fees and expenses of such separate counsel shall be
born by the Certificateholders. If the Certificateholders assume the defense of
any such proceeding, they shall be entitled to settle such proceeding without
any liability being assessed against any Indemnified Party or, if such
settlement provides for release of any such Indemnified Party without any
liability being assessed against any Indemnified Party in connection with all
matters relating to the proceeding which have been asserted against such
Indemnified Party in such proceeding by the other parties to such settlement,
without the consent of such Indemnified Party, but otherwise only with the
consent of such Indemnified Party. Certificateholders shall be liable for this
indemnification obligation pro rata, based upon their respective Percentage
Interests.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to the Owner Trustee
or the Trust Paying Agent pursuant to this Article VIII shall be deemed not to
be a part of the Owner Trust Estate immediately after such payment.
SECTION 8.4 Servicer Liability. In the event the Certificateholders fail to pay
all or any portion of any fees, expenses or indemnification amounts to the Owner
Trustee or the Trust Paying Agent for which they are liable under this Article
VIII, the Servicer shall pay such amounts to the Owner Trustee or the Trust
Paying Agent, as the case may be, promptly after receipt of an invoice therefor
from the party entitled thereto.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall terminate
and be of no further force or effect on the earlier of: (i) the final payment or
other liquidation of the Mortgage Loans and the disposition of all REO
Properties and the remittance of all funds due hereunder with respect to such
Mortgage Loans and REO Properties or the disposition of the Mortgage Loans and
REO Properties at the direction of a majority of the Certificateholders, in
either case after the satisfaction and discharge
31
<PAGE>
of the Indenture pursuant to Section 4.01 of the Indenture; and (ii) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy (the late ambassador of the United States to the Court of St.
James's). The bankruptcy, liquidation, dissolution, death or incapacity of any
Certificateholder or the Depositor shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an Accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Owner Trust Estate nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a) above, none of the Depositor, the
Servicer, the Note Insurer nor any Certificateholder shall be entitled to revoke
or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Owner Trustee for payment of the final distributions and cancellation, shall be
given by the Owner Trustee to the Certificateholders, the Note Insurer, the
Rating Agencies and the Trust Paying Agent mailed within five Business Days of
receipt by the Owner Trustee of notice of such termination pursuant to Section
9.1(a) above, which notice given by the Owner Trustee shall state (i) the
Payment Date upon or with respect to which final payment of the Certificates
shall be made upon presentation and surrender of the Certificates at the office
of the Owner Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Payment Date
is not applicable, payments being made only upon presentation and surrender of
the Certificates at the office of the Owner Trustee therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Trust Paying Agent at the time such notice is given to
Certificateholders. The Owner Trustee shall give notice to the Trust Paying
Agent of each presentation and surrender of Certificates promptly, and the Trust
Paying Agent shall promptly cause to be distributed to the related
Certificateholders amounts distributable on such Payment Date pursuant to
Section 5.2(a).
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner Trustee shall
at all times be a corporation satisfying the provisions of Section 3807(a) of
the Business Trust Statute; authorized to exercise trust powers; having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by Federal or state authorities; and having (or having a parent
that has) a rating of at least "Baa3" by Moody's and "A-1" by Standard & Poor's
(or otherwise
32
<PAGE>
acceptable to the Rating Agencies) and being acceptable to the Note Insurer. If
such corporation shall publish reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The Owner Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer, the Indenture Trustee and the Note
Insurer. Upon receiving such notice of resignation, the Servicer shall promptly
appoint a successor Owner Trustee (acceptable to the Note Insurer) by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Owner Trustee and one copy to the successor Owner Trustee. If no
successor Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or the Note Insurer may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Certificateholders or the Servicer, or if at any time
the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt
or insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Note Insurer, or the Certificateholders or
the Servicer with the consent of the Note Insurer, may remove the Owner Trustee.
If the Certificateholders or the Servicer or the Note Insurer shall remove the
Owner Trustee under the authority of the immediately preceding sentence, the
Note Insurer, or the Servicer with the consent of the Note Insurer, shall
promptly appoint a successor Owner Trustee by written instrument in duplicate,
one copy of which instrument shall be delivered to the outgoing Owner Trustee so
removed and one copy to the successor Owner Trustee and payment of all fees owed
to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 written approval by the Note Insurer and
payment of all fees and expenses owed to the outgoing Owner Trustee. The
Servicer shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies, the Indenture Trustee, the Trust Paying
Agent and the Note Insurer.
SECTION 10.3 Successor Owner Trustee. Any successor Owner Trustee appointed
pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Indenture Trustee, the Note Insurer and to its predecessor Owner
Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee
33
<PAGE>
shall become effective and such successor Owner Trustee (if acceptable to the
Note Insurer), without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties, and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and moneys
held by it under this Agreement; and the Depositor and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Depositor shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Indenture Trustee, the Trust Paying
Agent, the Noteholders, the Note Insurer and the Rating Agencies. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor Owner Trustee, the successor Owner Trustee shall
cause such notice to be mailed at the expense of the Depositor.
Any successor Owner Trustee appointed pursuant to this Section 10.2 shall
file an amendment to the Certificate of Trust with the Secretary of State
identifying the name and principal place of business of such successor Owner
Trustee in the State of Delaware.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation into
which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, and for the purpose of performing certain duties and obligations of the
Owner Trustee with respect to the Trust and the Certificates, the Owner Trustee
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Owner
34
<PAGE>
Trustee and acceptable to the Note Insurer to act as cotrustee, jointly with the
Owner Trustee, or separate trustee or separate trustees, of all or any part of
the Owner Trust Estate, and to vest in such Person, in such capacity, such title
to the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Note Insurer
and the Owner Trustee may consider necessary or desirable. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provision and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not
authorized to act separately without the Owner Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed, the Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties, and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or cotrustee,
but solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Owner Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to the separate trustees and co-trustees, as if given
to each of them. Every instrument appointing any separate trustee or co-trustee,
other than this Agreement, shall refer to this Agreement and to the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
appointment, shall be vested with the estates specified in its instrument of
appointment, either jointly with the Owner Trustee or separately, as may be
provided therein, subject to all the provisions of this Agreement, specifically
including every provision of this Agreement relating to the conduct of,
affecting the liability of, or affording protection to, the Owner Trustee. Each
such instrument shall be filed with the Owner Trustee.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its Agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall
35
<PAGE>
vest in and be exercised by the Owner Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be amended by the
Depositor, and the Owner Trustee, with the prior consent of the Note Insurer,
and with prior written notice to the Rating Agencies, but without the consent of
any of the Noteholders or the Certificateholders or the Indenture Trustee, to
cure any ambiguity, to correct or supplement any provisions in this Agreement or
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, such action shall not adversely affect in any material respect the
interests of any Noteholder or Certificateholder or the rights of the Note
Insurer. An amendment described above shall be deemed not to adversely affect in
any material respect the interests of any Noteholder if the party requesting the
amendment satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the Depositor and
the Owner Trustee, with the prior written consent of the Rating Agencies and
with the prior written consent of the Indenture Trustee, the Note Insurer, the
Holders (as defined in the Indenture) of Notes evidencing more than 50% of the
Outstanding Amount of the Notes, the Holders of Certificates evidencing more
than 50% of the Percentage Interests of the Trust Interest and if the party
requesting such amendment satisfies the Rating Agency Condition with respect to
such amendment, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Noteholders or the Certificateholders; provided,
however, no such amendment shall (a) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, collections of payments on the
Mortgage Loans or distributions that shall be required to be made for the
benefit of the Noteholders, the Certificateholders or the Note Insurer, (b)
reduce the aforesaid percentage of the Outstanding Amount of the Notes or the
Percentage Interests required to consent to any such amendment, in either case
of clause (a) or (b) without the consent of the holders of all the outstanding
Notes, the Note Insurer and the Holders of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee, the Note Insurer and
each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic
36
<PAGE>
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in Holders. The
Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title, or interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an Accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for Section 2.7, the
provisions of this Agreement are solely for the benefit of the Owner Trustee,
the Depositor, the Certificateholders, the Note Insurer and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.7), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.4 Notices.
(a) Unless otherwise expressly specified or permitted by the terms hereof,
all communications provided for or permitted hereunder shall be in writing and
shall be deemed to have been given if (1) personally delivered, (2) upon receipt
by the intended recipient or three Business Days after mailing if mailed by
certified mail, postage prepaid (except that notice to the Owner Trustee shall
be deemed given only upon actual receipt by the Owner Trustee), (3) sent by
express courier delivery service and received by the intended recipient or (4)
except with respect to notices sent to the Owner Trustee, transmitted by telex
or facsimile transmission (or any other type of electronic transmission agreed
upon by the parties and confirmed by a writing delivered by any of the means
described in (1), (2) or (3), at the following addresses: (i) if to the Owner
Trustee, its Corporate Trust Office; (ii) if to the Depositor, Prudential
Securities Secured Financing Corporation, c/o Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Telecopy: (212)
778-7401; (iii) if to the Note Insurer,
37
<PAGE>
MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention:
Mortgage Lenders Network Home Equity Loan Trust 1998-1, Telecopy: (914)
765-3810; (iv) if to the Trust Paying Agent, Norwest Bank Minnesota, National
Association, 11000 Broken Land Parkway, Columbia, Maryland 21044, Attention:
Mortgage Lenders Network 1998-1, telecopy: (410) 884-2360; (v) if to Mortgage
Lenders Network USA, Inc., Middlesex Corporate Center, 213 Court Street,
Middletown, Connecticut 06457, Attention: General Counsel, telecopy (860)
344-5707 or, as to each such party, at such other address as shall be designated
by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Depositor, the
Note Insurer, the Owner Trustee and its successors and each owner and its
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by a Certificateholder
shall bind the successors and assigns of such Certificateholder.
SECTION 11.8 No Petition. The Owner Trustee, by entering into this Agreement,
each Certificateholder, by accepting a Certificate, and the Indenture Trustee
and each Noteholder by accepting the benefits of this Agreement, hereby covenant
and agree that they will not at any time institute against the Depositor or the
Trust, or join in any institution against MLN Capital Corporation I or the Trust
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or law in connection with any obligations relating to the
Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.9 No Recourse. Each Certificateholder by accepting a Certificate
acknowledges that such Certificateholder's Certificate represents a beneficial
interest in the Trust only and does not represent an interest in or an
obligation of the
38
<PAGE>
Servicer, the Depositor, the Owner Trustee or any Affiliate thereof and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated in this Agreement, the Certificates or the
Basic Documents.
SECTION 11.10 Headings. The headings of the various Articles and Sections herein
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
SECTION 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 Grant of Certificateholder Rights to Note Insurer.
(a) In consideration for the issuance of the Certificates and for the
guarantee of the Notes by the Note Insurer pursuant to the Insurance Policy, the
holders of the Certificates hereby grant to the Note Insurer the right to act as
the holder of 100% of the outstanding Certificates for the purpose of exercising
the rights of the Certificateholders under this Agreement without the consent of
the Certificateholders, including the voting rights of such holders hereunder,
but excluding those rights requiring the consent of all such holders under
Section 11.1 and any rights of such holders to distributions under Section
5.2(a); provided that the preceding grant of rights to the Note Insurer by the
holders of the Trust Interest shall be subject to Section 11.14.
(b) The rights of the Note Insurer to direct certain actions and consent
to certain actions of the Certificateholders hereunder will terminate at such
time as the Balance of the Notes has been reduced to zero and the Note Insurer
has been reimbursed for any amounts owed under the Insurance Policy and the
Insurance Agreement and the Note Insurer has no further obligation under the
Insurance Policy.
The duties and responsibilities of the Owner Trustee shall be limited to
those expressly provided for in this Agreement. The parties hereto agree that
except for purposes of the foregoing sentence, the Owner Trustee shall have no
management responsibilities or owe any fiduciary duties to the Note Insurer (or
the Noteholders in the event they succeed to the Note Insurer's rights).
Whenever in connection with its performance under this Agreement the Owner
Trustee receives inconsistent notices or advice from the Note Insurer and the
Certificateholders, the Owner Trustee need not take any action in respect of
such notices or advice unless and until Owner Trustee receives (a)
indemnification in respect of the matters noted in such notices or advice to its
satisfaction or (b) written direction signed by the Note Insurer and the
Certificateholders in respect thereof.
39
<PAGE>
SECTION 11.13 Third-Party Beneficiary. The Note Insurer is an intended
third-party beneficiary of this Agreement, and this Agreement shall be binding
upon and inure to the benefit of the Note Insurer; provided that,
notwithstanding the foregoing, for so long as a Note Insurer Default is
continuing with respect to its obligations under the Note Insurance Policy, the
Noteholders shall succeed to the Note Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Agreement that expressly confer rights upon the Note Insurer shall be for the
benefit of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Agreement.
In addition, the Manager is an intended third-party beneficiary of this
Agreement for purposes of enforcing Section 5.2(d) hereof.
SECTION 11.14 Suspension and Termination of Note Insurer's Rights.
During the continuation of a Note Insurer Default, rights granted or
reserved to the Note Insurer hereunder shall vest instead in the
Certificateholders; provided that the Note Insurer shall be entitled to any
distributions of reimbursements as set forth in the Insurance Agreement and the
Note Insurer shall retain those rights under Section 11.1 to consent to any
amendment of this Agreement.
At such time as either (i) the Note Balance of the Notes has been reduced
to zero or (ii) the Insurance Policy has been terminated and in either case of
(i) or (ii) the Note Insurer has been reimbursed for all amounts owed under the
Insurance Policy and the Insurance Agreement (and the Note Insurer no longer has
any obligation under the Insurance Policy, except for breach thereof by the Note
Insurer), then the rights and benefits granted or reserved to the Note Insurer
hereunder (including the rights to direct certain actions and receive certain
notices) shall terminate and the Certificateholders shall be entitled to the
exercise of such rights and to receive such benefits of the Note Insurer
following such termination to the extent that such rights and benefits are
applicable to the Certificateholders.
[Signatures follow]
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Deposit Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor
By: /s/ EDWARD J. FITZGERALD
-----------------------------------
Name: Edward J. Fitzgerald
Title: Vice President
WILMINGTON TRUST COMPANY,
in its individual capacity and as
Owner Trustee
By: /s/ DONALD G. MACKELCAN
-----------------------------------
Authorized Signatory
The Trust Paying Agent hereby acknowledges its appointment as Trust Paying
Agent under this Agreement and agrees to act in such capacity as described
herein.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By: /s/ AMY WAHL
-----------------------------------
Name: Amy Wahl
Title: Assistant Vice President
<PAGE>
The Servicer hereby acknowledges its obligations under this Agreement and
agrees to act in accordance therewith.
MORTGAGE LENDERS NETWORK USA, INC.
By: /s/ MITCHELL L. HEFFERNAN
-----------------------------------
Name: Mitchell L. Heffernan
Title: President & CEO
<PAGE>
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
<PAGE>
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, MLN CAPITAL CORPORATION I) IN A TRANSACTION THAT
IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS
OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES
LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM
THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO
THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN"),
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY AND (III) IS NOT DIRECTLY OR INDIRECTLY
PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OR, AS
INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS
NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH
ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND
A-1
<PAGE>
(C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE
TAXABLE INCOME RELATING TO THIS CERTIFICATE.
A-2
<PAGE>
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
CERTIFICATE
No. 0001
THIS CERTIFIES THAT MLN Capital Corporation I (the "Owner") is the
registered owner of a 100% Percentage Interest of the Trust Interest in Mortgage
Lenders Network Home Equity Loan Trust 1998-1 (the "Trust") existing under the
laws of the State of Delaware and created pursuant to that certain Deposit Trust
Agreement, dated as of March 1, 1998 (the "Trust Agreement"), between Prudential
Securities Secured Financing Corporation, as depositor, and Wilmington Trust
Company, in its individual capacity and in its fiduciary capacity as owner
trustee under the Trust Agreement (the "Owner Trustee"). Capitalized terms used
but not otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement. The Owner Trustee, on behalf of the Issuer and not in its
individual capacity, has executed this Certificate by one of its duly authorized
signatories as set forth below. This Certificate is one of the Certificates
referred to in the Trust Agreement and is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement to which the holder of
this Certificate by virtue of the acceptance hereof agrees and by which the
holder hereof is bound. Reference is hereby made to the Trust Agreement for the
rights of the holder of this Certificate, as well as for the terms and
conditions of the Trust created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Certificate except in accordance with terms and provisions of the Agreement.
A-3
<PAGE>
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Certificate to be duly executed.
MORTGAGE LENDERS NETWORK HOME EQUITY
LOAN TRUST 1998-1
By: Wilmington Trust Company, not in
its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:______________________________
Authorized Signatory
DATED: March 13, 1998
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee
as Authenticating Agent
By:_________________________________
Authorized Signatory
A-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
____________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
____________________________________________________________________
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing _____________ Attorney to transfer said Instrument
on the books of the Certificate Registrar, with full power of substitution in
the premises.
Dated:
____________
_______________________________*/
Signature Guaranteed:
_______________________________*/
- --------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-5
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
THIS CERTIFICATE OF TRUST OF MORTGAGE LENDERS NETWORK HOME EQUITY LOAN
TRUST 1998-1 (the "Trust"), dated as of March __, 1998, is being duly executed
and filed by Wilmington Trust Company, a Delaware banking corporation, as
trustee, to form a business trust under the Delaware Business Trust Act (12 Del.
Code, S 3801 et seq.).
1. Name. The name of the business trust formed hereby is Mortgage Lenders
Network Home Equity Loan Trust 1998-1.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001. Attention: Corporate
Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
Wilmington Trust Company, not in
its individual capacity but
solely as Owner Trustee under a
Deposit Trust Agreement, dated
as of March 1, 1998.
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF INVESTMENT LETTER
_____________, 1998
Prudential Securities Secured Financing Corporation
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Re: Mortgage Lenders Network Home Equity Loan Trust 1998-1 (the
"Issuer") Asset Backed Notes, Series 1998-1
Ladies and Gentlemen:
____________________________________ (the "Holder") has purchased or
acquired, or intends to purchase or acquire from ________________, the current
Holder (the "Current Holder"), a Certificate representing a ___% Percentage
Interest (the "___% Certificate") in the Trust Interest for the referenced
Issuer, which represents an interest in the Issuer created pursuant to that
certain Deposit Trust Agreement, dated as of March 1, 1998 (the "Trust
Agreement"), between MLN Residual Holding Corporation I, as depositor, and
Wilmington Trust Company, as Owner Trustee. Capitalized terms used and not
otherwise defined herein have the meanings assigned to such terms in the Trust
Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the Holder, hereby
certifies, represents, warrants and agrees on behalf of the Holder as follows:
1. The Holder is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it was formed and is authorized to
invest in the ___% Certificate. The person executing this letter on behalf of
the Holder is duly authorized to do so on behalf of the Holder.
2. The Holder hereby acknowledges that no transfer of the ___% Certificate
may be made unless such transfer is exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"); and applicable
state securities laws, or is made in accordance with the Securities Act and such
laws.
3. The Holder understands that the ___% Certificate has not been and will
not be registered under the Securities Act and may be offered, sold, pledged or
otherwise transferred apply to a person whom the transferor reasonably believes
is (A) a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) or (B) a
C-1
<PAGE>
Person involved in the organization or operation of the Trust or an affiliate of
such Person, in a transaction meeting the requirements of Rule 144A under the
Securities Act and in accordance with any applicable securities laws of any
state of the United States. The Holder understands that the _% Certificate bears
a legend to the foregoing effect.
4. The Holder is acquiring the ___% Certificate for its own account or for
accounts for which it exercises sole investment discretion, and not with a view
to or for sale or other transfer in connection with any distribution of the ___%
Certificate in any manner that would violate Section 5 of the Securities Act or
any applicable state securities laws, subject nevertheless to any requirement of
law that the disposition of the Holder's property shall at all times be and
remain within its control.
5. The Holder is (A) a "qualified institutional buyer" (a "QIB") as
defined in Rule 144A under the Securities Act, and is aware that the transferor
of the ___% Certificate may be relying on the exemption from the registration
requirements of the Securities Act provided by Rule 144A and is acquiring such
___% Certificate for its own Account or for the Account of one or more qualified
institutional buyers for whom it is authorized to act, or (B) a Person involved
in the organization or operation of the Trust or an affiliate of such Person
within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as
amended (including, but not limited to, the Transferor). The Holder is able to
bear the economic risks of such an investment. The Holder is a QIB because
[STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Holder sells or otherwise transfers the registered ownership of
such ___% Certificate, the Holder will comply with the restrictions and
requirements with respect to the transfer of the ownership of the ___%
Certificate under the Trust Agreement, and the Holder will obtain from any
subsequent purchaser or transferee substantially the same certifications,
representations, warranties and covenants as required under the Trust Agreement
in connection with such subsequent sale or transfer thereof.
7. The Holder is not an entity that will hold a ___% Certificate as
nominee (a "Book Entry Nominee") to facilitate the clearance and settlement of
such security through electronic book-entry changes in Accounts or participating
organizations.
8. The Holder (i) is not a person which is an employee benefit plan, trust
or account subject to Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the Code or a governmental plan,
as defined in Section 3(32) of ERISA, subject to any federal, state or local law
which is, to a material extent, similar to the foregoing provisions of ERISA or
the Code (any such person being a "Plan"), (ii) is not an entity, including an
insurance company separate account or general account, whose underlying assets
include "plan assets" by reason of a Plan's investment in the entity and (iii)
is not directly or indirectly purchasing such ___% Certificate on behalf of, as
investment manager of, as named fiduciary of, as trustee of, or with assets of a
Plan.
C-2
<PAGE>
9. The Holder hereby agrees to indemnify each of the Issuer, the Indenture
Trustee and the Owner Trustee against any liability that may result if the
Holder's transfer of a ___% Certificate (or any portion thereof) is not exempt
from the registration requirements of the Securities Act and any applicable
state securities laws or is not made in accordance with such federal and state
laws. Such indemnification of the Issuer, the Owner Trustee shall survive the
termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Holder has caused this instrument to be executed
on its behalf, pursuant to the authority of its Board of Directors, by its duly
authorized signatory this ____ day of __________, 199_.
[NAME OF HOLDER]
By:___________________________
Name:
Title:
C-3
Exhibit 5.1
March 13, 1998
To the parties listed on Annex A attached hereto
Re: Mortgage Lenders Network Home Equity Loan Trust 1998-1,
Asset Backed Notes, Series 1998-1
Ladies and Gentlemen:
We have acted as special counsel to Prudential Securities Secured
Financing Corporation (the "Depositor") and Mortgage Lenders Network Home Equity
Loan Trust 1998-1, a Delaware business trust (the "Issuer") in connection with
the execution and delivery of the following documents:
(i) the Mortgage Loan Sale Agreement dated as of March 1, 1998 (the
"Sale Agreement") between the Depositor and Mortgage Lenders Network USA,
Inc., as Seller (the "Seller")
(ii) the Deposit Trust Agreement dated as of March 1, 1998 (the
"Trust Agreement") among the Depositor, the Seller, Norwest Bank
Minnesota, National Association, as Trust Paying Agent and Wilmington
Trust Company, as Owner Trustee;
(iii) the Management Agreement dated as of March 1, 1998 (the
"Management Agreement") between the Issuer and Norwest Bank Minnesota,
National Association, as Manager;
(iv) the Mortgage Loan Contribution Agreement dated as of March 1,
1998 (the "Contribution Agreement") between the Depositor and the Issuer;
(v) the Indenture dated as of March 1, 1998 (the "Indenture")
between Norwest Bank Minnesota, National Association, as Indenture Trustee
(in such capacity, the "Indenture Trustee") and the Issuer;
<PAGE>
(vi) the Underwriting Agreement dated as of March 5, 1998 (the
"Underwriting Agreement") between the Depositor and Prudential Securities
Incorporated (the "Underwriter");
(vii) the Standard Provisions to Underwriting Agreement dated as of
March 5, 1998 between the Depositor and the Underwriter;
(viii) the Custodial Agreement dated March __, 1998 among Mortgage
Lenders Network USA, Inc., as Servicer (in such capacity, the "Servicer"),
Bank Boston, as Custodian and the Indenture Trustee;
(ix) the Servicing Agreement dated as of March 1, 1998 among the
Servicer, the Issuer and Norwest Bank Minnesota, as Trust Paying Agent;
and
(x) the Insurance Agreement dated as of March 13, 1998 (the
"Insurance Agreement") among MBIA Insurance Corporation (the "Insurer"),
the Issuer, the Seller and the Indenture Trustee.
Capitalized terms used herein, but not defined, shall have the meanings
assigned to them in the Indenture.
We have examined executed copies of the Sale Agreement, the Underwriting
Agreement, the Standard Provisions to Underwriting Agreement, the Contribution
Agreement, the Trust Agreement, the Servicing Agreement; the Custodial
Agreement, the Indenture. the Management Agreement and the Insurance Agreement
(collectively, the "Documents"). We have also examined a copy of each of the
executed Notes. We have also examined the Registration Statement No. 333-27355,
as heretofore amended (the "Registration Statement") and the Prospectus dated
June 10, 1997 the Preliminary Prospectus Supplement relating to the Notes and
the Prospectus Supplement dated March 5, 1998 relating to the Notes (such
Prospectus, Preliminary Prospectus Supplement and Prospectus Supplement being
referred to together as the "Prospectus").
We have also examined originals or photostatic or certified copies of all
such corporate records of the Depositor and such certificates of public
officials, certificates of corporate officers, and other documents, and such
questions of law, as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. As to certain issues of fact material to the
opinions expressed herein, we have, with your consent, relied to the extent we
deemed appropriate upon certificates and representations of officers of the
Depositor. In making our examinations and rendering the opinions herein
expressed, we have made the following assumptions:
(1) each party to each of the Documents (other than the Depositor) has
the corporate power to enter into and perform all of its obligations
thereunder;
(2) the due authorization, execution and delivery of the Documents by
all parties thereto (other than the Depositor) and the validity and
binding effect on all parties (other than the Depositor) of each of
the Documents, as applicable;
2
<PAGE>
(3) the genuineness of all signatures;
(4) the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as
copies;
(5) in the case of each purchaser of a Note investing assets of an
employee benefit plan covered by ERISA, such plan is a plan to which
Prohibited Transaction Exemption 90-32 is fully available.
The opinions expressed in paragraphs 3 and 4 with respect to the
enforceability of certain agreements are subject to the following additional
qualifications:
(a) The effect of bankruptcy, insolvency, reorganization,
moratorium, receivership, or other similar laws of general applicability
relating to or affecting creditors' rights generally or the rights of
creditors of national banking associations in the event of bankruptcy,
insolvency, reorganization, moratorium or receivership.
(b) The application of general principles of equity, including, but
not limited to, the right of specific performance (regardless of whether
enforceability is considered in a proceeding in equity or at law).
In addition, we wish to advise you that the enforceability of certain
provisions set forth in the Underwriting Agreement which purport to provide for
indemnification for losses due to securities laws violations may be limited by
public policy considerations.
We are admitted to the Bar of the State of New York, and we express no
opinion as to the laws of any other jurisdiction except as to matters that are
governed by federal law and with respect to paragraph 1 below, the General
Corporation Law of the State of Delaware. All opinions expressed herein are
based on laws, regulations and policy guidelines currently in force and may be
affected by future regulations. Furthermore, no opinion is expressed herein
regarding the applicable state Blue Sky, legal investment or real estate
syndication laws.
Based upon the foregoing and subject to the last paragraph hereof, we are
of the opinion that:
1. The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to do business in each State necessary to enable it to perform
its obligations under the Documents to which it is a party.
2. The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate transactions contemplated by the Documents to which it is a
party and such Documents have been duly authorized, executed and delivered
by the Depositor.
3
<PAGE>
3. Each of the Documents to which the Depositor is a party
constitutes the valid, legal and binding agreement of the Depositor, and
is enforceable against the Depositor in accordance with its terms.
4. Each of the Documents to which the Issuer is a party is
enforceable against the Issuer in accordance with its terms.
5. The Notes, assuming the due execution by the Owner Trustee on
behalf of the Trust and due authentication by the Indenture Trustee and
payment therefor pursuant to the Underwriting Agreement, are validly
issued and outstanding and are entitled to the benefits of the Indenture.
6. No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the State of New York for the execution,
delivery and performance of the Documents to which the Depositor is a
party, or the offer, issuance, sale or delivery of the Notes or the
consummation of any other transaction contemplated thereby by the
Depositor, except such which have been obtained.
7. The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration
Statement became effective, as of the date of execution of the
Underwriting Agreement and as of the date hereof comply as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder, and we do not know of any
amendment to the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus, which has not
been filed or described as required.
8. The Registration Statement is effective, and to the best of our
knowledge, the Commission has not issued any stop order suspending the
effectiveness of the Registration Statement (which for purposes of this
opinion shall not be deemed to include any exhibits filed therewith) or
any order directed to any prospectus relating to the Notes (including the
Prospectus), and has not initiated or threatened any proceeding for that
purpose.
9. The Indenture has been duly qualified under the Trust Indenture
Act of 1939 (the "TIA"), as amended, the Trust Agreement is not required
to be qualified under the TIA and neither the Depositor nor the Issuer is
required to be qualified under the Investment Company Act of 1940.
10. The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE NOTES," to the extent such statements purport
4
<PAGE>
to summarize certain provisions of the Notes or of the Indenture, are fair
and accurate in all material respects.
11. None of the sale of the Mortgage Loans to the Issuer, the
issuance or sale of the Notes, or the execution, delivery or performance
by the Depositor of its obligations under the Documents, conflicts with or
will conflict with, or results or will result in a breach of, or
constitutes or will constitute a default under the charter or bylaws of
the Depositor or any law, rule or regulation of the United States federal
government or of the State of New York.
12. The Indenture establishes in favor of the Indenture Trustee for
the benefit of the Noteholders and the Insurer, a valid and enforceable
security interest in all right, title and interest of the Issuer in the
Mortgage Loans.
Our opinions contained herein are rendered only as of the date hereof, and
we undertake no obligation to update this letter or the opinions contained
herein after the date hereof.
This opinion is furnished by us as counsel in connection with the
conveyance of the Mortgage Loans to the Issuer as of the date hereof and is
solely for the benefit of the addressees hereto, and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.
Very truly yours,
/s/ DEWEY BALLANTINE LLP
5
<PAGE>
ANNEX A
MBIA Insurance Corporation Prudential Securities Incorporated
113 King Street One New York Plaza
Armonk, New York 10504 New York, New York 10292
Norwest Bank Minnesota, National Prudential Securities Secured
Association Financing Corporation
Sixth Street and Marquette Avenue One New York Plaza
Minneapolis, Minnesota 55479-0070 New York, New York 10292
Standard & Poor's Ratings Services Moody's Investors Service, Inc.
25 Broadway 99 Church Street
New York, New York 10004 New York, New York 10007
Mortgage Lenders Network USA, Inc. Wilmington Trust Company
Middlex Corporate Center, 11th Floor Rodney Square North
213 Court Street 1100 North Market Street
Middletown, Connecticut 06457 Wilmington, Delaware 19890-0001
Mortgage Lenders Home Equity Loan Trust
1998-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Exhibit 8.1
March 13, 1998
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292-2015
First Union Capital Markets,
a division of Wheat First Securities Corp.
301 South College Street
Charlotte, North Carolina 28288
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Mortgage Lenders Network Home Equity Loan Trust 1998-1 Asset
Backed Notes, Series 1998-1
Ladies and Gentlemen:
We have acted as counsel to Prudential Securities Secured Financing
Corporation, a Delaware corporation ("PSSFC"), in connection with the formation
of Mortgage Lenders Network Home Equity Loan Trust 1998-1 (the "Trust" or the
"Issuer"), a Delaware business trust. The Trust was organized pursuant to a
Deposit Trust Agreement (the "Deposit Trust Agreement"), dated as of March 1,
1998, between PSSFC and Wilmington Trust Company, as Owner Trustee (the "Owner
Trustee"). The Trust consists primarily of mortgage loans (the "Mortgage Loans")
that are being pledged by the Trust to Norwest Bank Minnesota, National
Association, as Indenture Trustee (the "Indenture Trustee"). The Issuer is
issuing today its Asset Backed Notes, Series 1998-1 (the "Notes") pursuant to
the terms of the Indenture (the "Indenture"), dated as of March 1, 1998, between
the Issuer and the Indenture Trustee. The Notes have been registered by means of
a Registration Statement of PSSFC on Form S-3 under the Securities Act of 1933,
as amended (the "1933 Act"), under File No. 333-27355, which Registration
Statement became effective on June 10, 1997 (the "Registration Statement"), and
includes the related Prospectus (the "Base Prospectus") dated June 10, 1997, and
the Prospectus Supplement (the "Prospectus Supplement") dated March 5, 1998,
which were filed by PSSFC with the Securities and Exchange Commission (the
"Commission") pursuant to
<PAGE>
Rule 424 under the 1933 Act (the Base Prospectus and such Prospectus Supplement,
collectively, the "Prospectus").
This opinion is furnished to you in accordance with the requirements of
the Underwriting Agreement. Capitalized terms used herein but not defined herein
shall have the meanings assigned to them in the Deposit Trust Agreement or the
Indenture.
In rendering the opinions expressed below, we have examined the following
documents:
(a) The Registration Statement, the Base Prospectus, and the
Prospectus Supplement, all relating to the Notes;
(b) The Deposit Trust Agreement;
(c) The Indenture; and
(d) Such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
We do not purport to express an opinion on any laws other than the federal
income tax law of the United States of America. No opinion has been sought and
none has been given concerning the tax treatment of the issuance and sale of the
Notes under the laws of any state.
Based on the foregoing and subject to the qualifications stated herein, we
are of the opinion that if (i) the Issuer, the Indenture Trustee, the Owner
Trustee, and certain other parties to the issuance transaction comply with all
of the provisions of the Indenture (without waiver) and certain other documents
to be prepared and executed in connection with the issuance of the Notes and
(ii) the Issuer issues and sells the Notes as described in the Prospectus, the
Notes will be treated for federal income tax purposes as evidences of
indebtedness and not as ownership interests in the Mortgage Loans or in a
taxable mortgage pool or as equity interests in the Issuer or in a separate
association taxable as a corporation or as a publicly traded partnership.
There are no existing regulations under section 385 of the Code defining
instruments as equity or indebtedness for income tax purposes. Furthermore,
there are no controlling regulations, published rulings, or judicial decisions
involving securities with terms substantially the same as the Notes that
discuss, for federal income tax purposes, (i) whether the securities constitute
equity or indebtedness or (ii) whether the collateral relating to the securities
has been pledged or sold to the holders of the securities. Therefore, our
opinion regarding the characterization of the Notes as evidences of indebtedness
is based upon rulings and judicial decisions under the Code involving situations
that we consider to be analogous and an analysis of all of the facts and
circumstances surrounding the issuance and sale of the Notes.
2
<PAGE>
You should be aware that this opinion represents conclusions with respect
to the application to the Notes of existing law, regulations, administrative
rules and practices, and legislative history, including, but not limited to, the
official explanation of the Tax Reform Act of 1986. There can be no assurance,
however, that existing law will not change or that contrary positions will not
be taken by the Internal Revenue Service.
We consent to reliance on this opinion letter by you and by Richards,
Layton & Finger, for the purpose of issuing their opinion with respect to the
tax treatment of the Trust under Delaware law. Except as provided in the
proceeding sentence, this opinion letter may not be relied upon by, nor may
copies be delivered to, any person without our prior written consent. We do not
undertake to advise you of any changes in the opinions expressed herein from
matters that might hereafter arise or be brought to our attention.
Very truly yours,
/s/ DEWEY BALLANTINE LLP
3
Exhibit 10.1
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $120,000,000 (approximate) POLICY NUMBER: 25906
Mortgage Lenders Network Home
Equity Trust 1998-1, Asset Backed
Notes, Series 1998-1
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Note Guaranty Insurance
Policy (this "Policy"), hereby unconditionally and irrevocably guarantees to any
Owner that an amount equal to each full and complete Insured Payment will be
received from the Insurer by Norwest Bank Minnesota, National Association, or
its successors, as trustee under the Indenture for the Owners (the "Indenture
Trustee"), on behalf of the Owners, for distribution by the Indenture Trustee to
each Owner of each Owner's proportionate share of the Insured Payment. The
Insurer's obligations hereunder with respect to a particular Insured Payment
shall be discharged to the extent funds equal to the applicable Insured Payment
are received by the Indenture Trustee, whether or not such funds are properly
applied by the Indenture Trustee. Insured Payments shall be made only at the
time set forth in this Policy, and no accelerated Insured Payments shall be made
regardless of any acceleration of the Obligations, unless such acceleration is
at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover (a)
shortfalls, if any, attributable to the liability of the Issuer, the Trust
Estate or the Indenture Trustee for withholding taxes, if any (including
interest and penalties in respect of any such liability) (b) shortfalls
resulting from the application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended, or (c) shortfalls due to Principal Prepayments on the Mortgage
Loans.
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (a) a certified copy of the order requiring the return of a
preference payment, (b) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (c) an assignment in such form as
is reasonably required by the Insurer, irrevocably assigning to the Insurer all
rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (d) appropriate instruments to effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
<PAGE>
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of the Payment Date on which the
related Deficiency Amount is due or the third Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer, or any successor fiscal agent appointed
by the Insurer (the "Fiscal Agent"), of a Notice (as described below), provided
that if such Notice is received after 12:00 noon, New York City time, on such
Business Day, it will be deemed to be received on the following Business Day. If
any such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim hereunder, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Indenture Trustee and the Indenture Trustee may submit an
amended Notice.
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the Owners
by wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Indenture Trustee for the payment of such Insured Payment and
legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated to
the rights of each Owner to receive payments under the Obligations to the extent
of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Indenture dated as of March 1, 1998 between Mortgage
Lenders Network Home Equity Loan Trust 1998-1, as Issuer and the Indenture
Trustee, as trustee, without regard to any amendment or supplement thereto,
unless such amendment or supplement has been approved in writing by the Insurer.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which the Insurer or banking institutions in New York City, Middletown,
Connecticut, Columbia, Maryland or the city in which the corporate trust office
of the Indenture Trustee under the Agreement is located are authorized or
obligated by law or executive order to close.
"Deficiency Amount" means with respect to any Payment Date, the sum of (a)
the Note Interest for such Payment Date minus Available Funds and (b) the then
existing Overcollateralization Deficit, if any, after application of Available
Funds to reduce the Note Balance on such Payment Date.
"Insured Payment" means (a) as of any Payment Date, any Deficiency Amount
and (b) any Preference Amount.
<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A attached hereto, the
original of which is subsequently delivered by registered or certified mail,
from the Indenture Trustee specifying the Insured Payment which shall be due and
owing on the applicable Payment Date.
"Owner" means each Noteholder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner on
the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Agreement as of the date of execution
of this Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be made
at the address listed below for the Fiscal Agent or such other address as the
Insurer shall specify in writing to the Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Indenture Trustee in
writing.
This Policy is being issued under and pursuant to, and shall be construed
under, the laws of the state of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this Policy
is not refundable for any reason, including payment, or provision being made for
payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this 13th day of March 1998.
MBIA INSURANCE CORPORATION
/s/ RICHARD WEILL
-----------------------------
President
Attest: /s/ ANN D. MCKENNA
-----------------------------
Assistant Secretary
<PAGE>
EXHIBIT A
TO NOTE GUARANTY INSURANCE
POLICY NUMBER: 25906
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: 25906
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF TRUSTEE], as
trustee (the "Indenture Trustee"), hereby certifies to State Street Bank and
Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Note Guaranty Insurance Policy Number: 25906 (the
"Policy") issued by the Insurer in respect of the $120,000,000 (approximate)
Mortgage Lenders Network Home Equity Loan Trust 1998-1 Asset Backed Notes,
Series 1998-1 (the "Obligations"), that:
(a) the Indenture Trustee is the trustee under the Indenture dated
as of March 1, 1998, between Mortgage Lenders Network Home Equity Loan
Trust 1998-1, as Issuer and the Indenture Trustee, as trustee for the
Owners;
(b) the amount due under clause (a) of the definition of Deficiency
Amount for the Payment Date occurring on [____________] the "Applicable
Payment Date") is $[____________];
(c) the amount due under clause (b) of the definition of Deficiency
Amount for the Applicable Payment Date is $[______________];
(d) the sum of the amounts listed in paragraphs (b) and (c) above is
$[_________________] (the "Deficiency Amount");
(e) the amount of previously distributed payments on the Obligations
that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with
a final nonappealable order of a court having competent jurisdiction is
$[______________] (the "Preference Amount");
<PAGE>
[Logo] MBIA
(f) the total Insured Payment due is $[_________________], which
amount equals the sum of the Deficiency Amount and the Preference Amount;
(g) the Indenture Trustee is making a claim under and pursuant to
the terms of the Policy for the dollar amount of the Insured Payment set
forth in (d) above to be applied to the payment of the Deficiency Amount
for the Applicable Payment Date in accordance with the Agreement and for
the dollar amount of the Insured Payment set forth in (e) above to be
applied to the payment of any Preference Amount; and
(h) the Indenture Trustee directs that payment of the Insured
Payment be made to the following account by bank wire transfer of federal
or other immediately available funds in accordance with the terms of the
Policy: [TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined herein
shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company Or
Other Person Files An Application For Insurance Or Statement Of Claim Containing
Any Materially False Information, Or Conceals For The Purpose Of Misleading,
Information Concerning Any Fact Material Thereto, Commits A Fraudulent Insurance
Act, Which Is A Crime, And Shall Also Be Subject To A Civil Penalty Not To
Exceed Five Thousand Dollars And The Stated Value Of The Claim For Each Such
Violation. IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered
this Notice under the Policy as of the [ ] day of [ ], [ ].
[NAME OF TRUSTEE], as Indenture Trustee
By ____________________________________
Title _________________________________
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Mortgage Lenders Network Home Equity Loan Trust 1998-1, dated March 13, 1998, of
our report dated February 3, 1997, on our audits of the consolidated financial
statements of MBIA Insurance Corporation and Subsidiaries as of December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996. We also consent to the reference to our firm under the caption "Report of
Experts" in such Prospectus Supplement.
/s/ COOPERS & LYBRAND L.L.P.
------------------------
Coopers & Lybrand L.L.P.
New York, New York
March 13, 1998
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------
__ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
----------
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-1
(Exact name of obligor as specified in its charter)
Delaware 36-3555336
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
630 Dundee Road
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip code)
----------
Mortgage Lenders Network Home Equity Loan Trust 1998-1
Asset Backed Notes, Series 1998-1
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting Comptroller
of the Currency dated January 12, 1943, as to
change of corporate title of Northwestern National
Bank and Trust Company of Minneapolis to
Northwestern National Bank of Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National
Bank of Minneapolis to Norwest Bank Minneapolis,
National Association.*
e. A copy of the letter dated January 4, 1988 from the
Administrator of National Banks for the Comptroller
of the Currency certifying approval of
consolidation and merger effective January 1, 1988
of Norwest Bank Minneapolis, National Association
with various other banks under the title of
"Norwest Bank Minnesota, National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of
the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-43005.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 4th day of February 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/S/ AMY WAHL
------------------------
Amy Wahl
Assistant Vice President
<PAGE>
EXHIBIT 6
March 13, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/S/ AMY WAHL
------------------------
Amy Wahl
Assistant Vice President
