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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) June 4, 1998
Prudential Securities Secured Financing Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction 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)
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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 1998-2 (the "Trust") issued $93,325,000 in aggregate principal amount
of its Asset Backed Notes, Series 1998-2, Class A-1 and $60,000,000 in aggregate
principal amount of its Asset Backed Notes, Series 1998-2, Class A-2 (together,
the "Notes"), on June 17, 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 June 1, 1998, between Mortgage Lenders
Network Home Equity Loan Trust 1998-2, Mortgage Lenders Network USA, Inc., in
its capacity as servicer (the "Servicer"), and Norwest Bank Minnesota, National
Association, in its capacity as indenture trustee (the "Indenture 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 for the Class A-1 Notes is 6.605% for each Interest Period prior
to the Initial Redemption Date and 7.105% for each Interest Period thereafter
and the Note Interest Rate for the Class A-2 Notes is 6.585% for each Interest
Period prior to the Initial Redemption Date and 7.085% for each Interest Period
thereafter.
As of June 1, 1998, the Mortgage Loans possessed the characteristics
described in the Prospectus dated June 10, 1997 and the Prospectus Supplement
dated June 4, 1998 filed pursuant to Rule 424(b)(2) of the Act on June 15, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Not applicable
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(b) Not applicable
(c) Exhibit 1.1. Underwriting Agreement, dated June 4, 1998, between
Prudential Securities Secured Financing Corporation ("PSSFC") and
Prudential Securities Incorporated ("PSI").
Exhibit 1.2. Indemnity Agreement, dated June 4, 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 June 4, 1998, from First
Union to PSSFC and PSI.
Exhibit 4.1. Indenture, dated as of June 1, 1998, between the Issuer
and Norwest.
Exhibit 10.1. MBIA Insurance Policy, dated June 17, 1998.
Exhibit 23.1. Consent of Coopers & Lybrand L.L.P. regarding
financial statements of the MBIA Insurance Corporation and their
report.
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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 1998-2
Registrant
By: /s/ Mary Alice Kohs
---------------------------
Name: Mary Alice Kohs
Title: Vice President
Dated: June 29, 1998
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EXHIBIT INDEX
Exhibit No. Description
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Exhibit 1.1. Underwriting Agreement, dated June 4, 1998, between Prudential
Securities Secured Financing Corporation ("PSSFC") and
Prudential Securities Incorporated ("PSI").
Exhibit 1.2. Indemnity Agreement, dated June 4, 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 June 4, 1998, from First Union to
PSSFC and PSI.
Exhibit 4.1. Indenture, dated as of June 1, 1998, between the Issuer and
Norwest.
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.
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MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-2
ASSET BACKED NOTES
SERIES 1998-2
UNDERWRITING AGREEMENT
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UNDERWRITING AGREEMENT
Prudential Securities Incorporated,
as Representative of the several Underwriters
One New York Plaza
New York, New York 10292
June 4, 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 June 4, 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]
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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/ Mary Alice Kohs
---------------------------
Name: Mary Alice Kohs
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED,
as Representative of the several Underwriters
By:___________________________
Name:
Title:
[Signature Page to Underwriting Agreement]
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SCHEDULE I
Issuer: Mortgage Lenders Network Home Equity Loan Trust
1998-2
Title of Offered Securities: Mortgage Lenders Network Home Equity Loan Trust
1998-2, Asset Backed Notes, Series 1998-2.
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 June 1, 1998 among
the Issuer and Norwest Bank Minnesota, National
Association, as trustee.
Purchase Commitment: Prudential Securities Incorporated: $107,327,500
First Union Capital Markets (a division of Wheat
First Securities Corp.): $45,997,500.
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 6.605% per annum
on the aggregate principal balance of the Class
A-1 Notes and 6.585% per annum, on the aggregate
principal balance of the Class A-2 Notes, from
June 1, 1998 to, but not including, June 17, 1998.
Specified funds for
payment of Purchase
Price: Federal Funds (immediately available funds).
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about June 17, 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.
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Address for Notices, etc.: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attn: Len Blum
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
June 4, 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 June 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 June 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
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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
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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.
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(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, 1997 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:
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(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 [December 31, 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, 1997
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, 1997 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.
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(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.
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(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.
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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.
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(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.
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(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
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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
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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.
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(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
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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
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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.
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]
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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/ Mary Alice Kohs
---------------------------
Name: Mary Alice Kohs
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED,
as Representative of the several Underwriters
By:__________________________________
Name:
Title:
[Signature Page to Underwriting Agreement Standard Provisions]
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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.
A-1
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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.
B-1
<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.
C-1
<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.
D-1
INDEMNITY AGREEMENT
Reference is made to the Prospectus Supplement dated June 4, 1998 (the
"Prospectus Supplement") relating to the Asset Backed Notes, Series 1998-2 (the
"Notes"), which Notes will be issued by Mortgage Lenders Network Home Equity
Loan Trust, Series 1998-2. 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
<PAGE>
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. 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 June 4, 1998.
MORTGAGE LENDERS NETWORK USA, INC.
By: /s/ Marion Mathes
---------------------------
Name: Marion Mathes
Title: Senior Vice President
[Signature Page to the Indemnity Agreement -- MLN]
INDEMNITY AGREEMENT
Reference is made to the Prospectus Supplement dated June 4, 1998 (the
"Prospectus Supplement") relating to the Asset Backed Notes, Series 1998-2 (the
"Notes"), which Notes will be issued by Mortgage Lenders Network Home Equity
Loan Trust, Series 1998-2. 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 June 4, 1998.
FIRST UNION CAPITAL MARKETS, a division
of Wheat First Securities Corp.
By: /s/ Brian Simpson
---------------------------
Name: Brian Simpson
Title: Senior Vice President
[Signature Page to the Indemnity Agreement -- First Union]
INDENTURE
BETWEEN
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-2,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE
Dated as of June 1, 1998
Relating to
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-2
ASSET BACKED NOTES, SERIES 1998-2
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..........................................................2
Section 1.01. General Definitions....................................2
ARTICLE II THE NOTES..........................................................24
Section 2.01. Forms Generally.......................................24
Section 2.02. Forms of Certificate of Authentication................24
Section 2.03. General Provisions With Respect to
Principal and Interest Payment........................24
Section 2.04. Denominations.........................................25
Section 2.05. Execution, Authentication, Delivery and Dating........25
Section 2.06. Registration, Registration of Transfer
and Exchange..........................................26
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes............27
Section 2.08. Payments of Principal and Interest....................28
Section 2.09. Persons Deemed Owner..................................29
Section 2.10. Cancellation..........................................30
Section 2.11. Authentication and Delivery of Notes..................30
Section 2.12. Book-Entry Note.......................................31
Section 2.13. Termination of Book Entry System......................32
ARTICLE III COVENANTS.........................................................33
Section 3.01. Payment of Notes......................................33
Section 3.02. Maintenance of Office or Agency.......................33
Section 3.03. Money for Note Payments to Be Held In Trust...........33
Section 3.04. Existence of Issuer...................................35
Section 3.05. Protection of Trust Estate............................36
Section 3.06. [Reserved]............................................36
Section 3.07. Performance of Obligations; Servicing Agreement.......36
Section 3.08. Investment Company Act................................37
Section 3.09. Negative Covenants....................................37
Section 3.10. Annual Statement as to Compliance.....................38
Section 3.11. Restricted Payments...................................38
Section 3.12. Treatment of Notes as Debt for Tax Purposes...........38
Section 3.13. Notice of Events of Default...........................39
Section 3.14. Further Instruments and Acts..........................39
ARTICLE IV SATISFACTION AND DISCHARGE.........................................39
Section 4.01. Satisfaction and Discharge of Indenture...............39
Section 4.02. Application of Trust Money............................40
<PAGE>
ARTICLE V DEFAULTS AND REMEDIES...............................................40
Section 5.01. Event of Default......................................40
Section 5.02. Acceleration of Maturity; Rescission
and Annulment.........................................42
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee......................43
Section 5.04. Remedies..............................................43
Section 5.05. Indenture Trustee May File Proofs of Claim............44
Section 5.06. Indenture Trustee May Enforce Claims
Without Possession of Notes...........................44
Section 5.07. Application of Money Collected........................44
Section 5.08. Limitation on Suits...................................45
Section 5.09. Unconditional Rights of Noteholders to
Receive Principal and Interest........................46
Section 5.10. Restoration of Rights and Remedies....................46
Section 5.11. Rights and Remedies Cumulative........................47
Section 5.12. Delay or Omission Not Waiver..........................47
Section 5.13. Control by Noteholders................................47
Section 5.14. Waiver of Past Defaults...............................48
Section 5.15. Undertaking for Costs.................................48
Section 5.16. Waiver of Stay or Extension Laws......................48
Section 5.17. Sale of Trust Estate..................................49
Section 5.18. Action on Notes.......................................50
Section 5.19. No Recourse to Other Trust Estates or
Other Assets of the Issuer............................50
Section 5.20. Application of the Trust Indenture Act................50
ARTICLE VI THE INDENTURE TRUSTEE..............................................51
Section 6.01. Duties of Indenture Trustee...........................51
Section 6.02. Notice of Default.....................................52
Section 6.03. Rights of Indenture Trustee...........................52
Section 6.04. Not Responsible for Recitals or Issuance
of Notes..............................................53
Section 6.05. May Hold Notes........................................53
Section 6.06. Money Held in Trust...................................53
Section 6.07. Eligibility, Disqualification.........................53
Section 6.08. Indenture Trustee's Capital and Surplus...............53
Section 6.09. Resignation and Removal; Appointment
of Successor..........................................54
Section 6.10. Acceptance of Appointment by Successor................55
Section 6.11. Merger, Conversion, Consolidation or
Succession to Business of Indenture Trustee...........56
Section 6.12. Preferential Collection of Claims
Against Issuer........................................56
Section 6.13. Co-Indenture Trustees and Separate
Indenture Trustees....................................56
Section 6.14. Authenticating Agents.................................57
Section 6.15. Review of Mortgage Files..............................58
Section 6.16. Indenture Trustee Fees and Expenses...................60
ii
<PAGE>
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS....................................61
Section 7.01. Issuer to Furnish Indenture Trustee Names
and Addresses of Noteholders..........................61
Section 7.02. Preservation of Information; Communications
to Noteholders........................................61
Section 7.03. Reports by Indenture Trustee..........................61
Section 7.04. Reports by Issuer.....................................62
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES.......62
Section 8.01. Collection of Moneys..................................62
Section 8.02. Note Accounts.........................................63
Section 8.03. Claims against the MBIA Insurance Policy..............65
Section 8.04. General Provisions Regarding the Note Accounts
and Mortgage Loans....................................66
Section 8.05. Releases of Defective Mortgage Loans..................67
Section 8.06. Reports by Indenture Trustee to Noteholders;
Access to Certain Information.........................68
Section 8.07. Trust Estate Mortgage Files...........................68
Section 8.08. Amendment to Servicing Agreement......................68
Section 8.09. Delivery of the Mortgage Files Pursuant to
Servicing Agreement...................................68
Section 8.10. Servicer as Agent.....................................69
Section 8.11. Termination of Servicer...............................69
Section 8.12. Opinion of Counsel....................................69
Section 8.13. Appointment of Custodians.............................69
Section 8.14. Rights of the Note Insurer to Exercise
Rights of Noteholders.................................70
Section 8.15. Trust Estate and Accounts Held for Benefit
of the Note Insurer...................................70
ARTICLE IX SUPPLEMENTAL INDENTURES............................................71
Section 9.01. Supplemental Indentures Without Consent
of Noteholders........................................71
Section 9.02. Supplemental Indentures With Consent
of Noteholders........................................72
Section 9.03. Execution of Supplemental Indentures..................73
Section 9.04. Effect of Supplemental Indentures.....................73
Section 9.05. Conformity With Trust Indenture Act...................73
Section 9.06. Reference in Notes to Supplemental Indentures.........74
Section 9.07. Amendments to Governing Documents.....................74
ARTICLE X REDEMPTION OF NOTES.................................................74
Section 10.01. Redemption...........................................74
Section 10.02. Form of Redemption Notice............................76
Section 10.03. Notes Payable on Optional Redemption.................76
ARTICLE XI MISCELLANEOUS......................................................77
Section 11.01. Compliance Certificates and Opinions.................77
Section 11.02. Form of Documents Delivered to Indenture
Trustee..............................................77
Section 11.03. Acts of Noteholders..................................78
iii
<PAGE>
Section 11.04. Notices, etc., to Indenture Trustee, the
Note Insurer and Issuer..............................79
Section 11.05. Notices and Reports to Noteholders; Waiver
of Notices...........................................80
Section 11.06. Rules by Indenture Trustee...........................81
Section 11.07. Conflict With Trust Indenture Act....................81
Section 11.08. Effect of Headings and Table of Contents.............81
Section 11.09. Successors and Assigns...............................81
Section 11.10. Separability.........................................81
Section 11.11. Benefits of Indenture................................81
Section 11.12. Legal Holidays.......................................81
Section 11.13. Governing Law........................................81
Section 11.14. Counterparts.........................................82
Section 11.15. Recording of Indenture...............................82
Section 11.16. Issuer Obligation....................................82
Section 11.17. No Petition..........................................82
Section 11.18. Inspection...........................................83
Section 11.19. Usury................................................83
Section 11.20. Third Party Beneficiary..............................83
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
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)
Section 315
- ----------
* This Cross-Reference Table is not part of the Indenture.
<PAGE>
(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 June 1, 1998 (as amended or supplemented from
time to time as permitted hereby, this "Indenture"), is between MORTGAGE LENDERS
NETWORK HOME EQUITY LOAN TRUST 1998-2, 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 1998-2 (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 Cut-off Date for each Mortgage Loan, all payments
of interest accruing on each Mortgage Loan after the 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 Accounts, 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
Accounts, 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 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.
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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 each Class of Notes and any Payment Date,
the sum of the related Monthly Servicing Fee, the related Indenture Trustee's
Fee and the related 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.
"Agent": Any Note Registrar, Paying Agent, Authenticating Agent or
Custodian.
"Aggregate Principal Balance": With respect to a Mortgage Loan Group and
any Payment Date, the aggregate of the Principal Balances of the Mortgage Loans
in such Group as of the related Determination Date (or other specified date).
With respect to the Mortgage Loan
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Pool and 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 a Mortgage Loan Group and any Payment
Date, the sum of the amounts described in clauses (a) through (g) below, less
(i) the Administrative Fee Amount for such Group in respect of such Payment
Date, (ii) Monthly Advances and Servicing Advances for such Group previously
made that are reimbursable to the Servicer (other than those included in
liquidation expenses for any Liquidated Mortgage Loan in such Group 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 the related 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 in such Group and due during the related Due Period and all
other interest payments on or in respect of such 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
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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 in such Group 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 such Mortgage Loans;
(c) the aggregate of any Trust Insurance Proceeds for such Group
collected by the Servicer during the related Collection Period;
(d) the aggregate of any Net Liquidation Proceeds for such Group
collected by the Servicer during the related Collection Period;
(e) the aggregate of the Purchase Prices received in respect of any
Mortgage Loans in such Group that are required or permitted to be
repurchased, released, removed or substituted by the 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 for such Group made by the
Servicer for such Payment Date; and
(g) the aggregate of amounts deposited in the related Note Account
during such Collection Period in connection with redemption of the Notes
in the related Class 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).
"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.
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"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.
"Class": The Class A-1 Notes and the Class A-2 Notes.
"Class A-1 Notes": The Mortgage Lenders Network Home Equity Loan Trust
1998-2 Asset Backed Notes, Series 1998-2, Class A-1.
"Class A-2 Notes": The Mortgage Lenders Network Home Equity Loan Trust
1998-2 Asset Backed Notes, Series 1998-2, Class A-2.
"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": June 17, 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.
"Collection Account": The segregated trust account established by the
Servicer and maintained pursuant to Section 2.02(b) of the Servicing Agreement.
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"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 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 1998-2, Series 1998-2, with a copy to the Indenture Trustee at 11000
Broken Land Parkway, Columbia, Maryland 21044, Attention: Mortgage Lenders
Network Home Equity Loan Trust 1998-2, Series 1998-2.
"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": June 1, 1998.
"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 Seller pursuant to the Mortgage Loan Sale
Agreement.
"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 with respect to a Mortgage
Loan Group, the product of the Delinquency Percentage for such Payment Date and
the Aggregate Principal Balance of the Mortgage Loans in such Group as of the
Determination Date relating to such Payment Date.
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"Delinquency Percentage": For any Payment Date, and a Mortgage Loan Group,
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 in such Group 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 in such Group as of the related Determination Date.
"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 Accounts, 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 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 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 each Class of Notes and any Payment Date,
the amount, if any, by which Available Funds in the related Group for such
Payment Date exceed the sum of (i) any amounts payable to the Note Insurer for
Insured Payments with respect to such Class paid
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on prior Payment Dates and not yet reimbursed and for any unpaid Note Insurer
Premiums with respect to such Class for prior Payment Dates (in each case with
interest thereon at the "Late Payment Rate" (as defined in the Insurance
Agreement)), (ii) the related Note Interest for the related Payment Date, and
(iii) the related 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 July 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 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 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.
"Group" or "Mortgage Loan Group": Group I or Group II, as the case may be.
"Group I": The group of Mortgage Loans pledged to the Indenture Trustee
and assigned to Group I, as reflected on the Mortgage Loan Schedule.
"Group II": The group of Mortgage Loans pledged to the Indenture Trustee
and assigned to Group II, as reflected on the Mortgage Loan Schedule.
"Highest Lawful Rate": As defined in Section 11.19.
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"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": With respect to each Class of Notes, the
Indenture Trustee's monthly fee, equal to 1/12th of 0.02% of the Aggregate
Principal Balance of the Mortgage Loans in the related Group 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 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 June 17, 1998,
among the Note Insurer, the Issuer, the Servicer, the Seller, the Depositor, and
the Indenture Trustee.
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"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 each Class of Notes and 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 for a Class of Notes is (a) for
any Payment Date, the sum of (i) the related Note Interest for such Payment Date
minus the related Available Funds for such Payment Date and (ii) the then
existing related Overcollateralization Deficit, if any (after application of the
related Available Funds for such Payment Date to reduce the related Note Balance
on such Payment Date) and (b) any shortfall in the amount required to pay a
Preference Amount with respect to such Class 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 1998-2, 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 June 17, 1998.
"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 June 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.
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"MBIA Insurance Policy": The financial guaranty insurance policy (No.
26722), dated June 17, 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 each Group and 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 in such Group and due during the related Due Period and all other
amounts collected, received or otherwise recovered in respect of principal on
such 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 related 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 in such Group pursuant to this Indenture, reduced by (b) the
amount of any Overcollateralization Surplus with respect to such Group and
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
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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 June 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 Pool": The pool of Mortgage Loans, consisting of the
Mortgage Loans in Group I and the Mortgage Loans in Group II.
"Mortgage Loan Sale Agreement": That certain agreement, dated as of June
1, 1998, between the Seller and the Depositor pursuant to which the Mortgage
Loans will be acquired from the 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 Mortgage Loan Schedule shall break out the Mortgage Loans according to
Mortgage Loan Group. The Issuer shall cause the initial Mortgage Loan Schedule
to be delivered by the Seller to the Indenture Trustee in both physical and
computer-readable form.
"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": With respect to each Class of Notes, 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 1998-2
Home Equity Loan Backed Notes, Series 1998-2, Class A-1, Note Account," or
"Norwest Bank Minnesota, National Association, as Indenture Trustee for Mortgage
Lenders Network Home Equity Loan Trust 1998-2 Home Equity Loan Backed Notes,
Series 1998-2, Class A-2, Note Account," as the case may be, on behalf of the
Noteholders and the Note Insurer.
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"Note Balance": With respect to all of the Notes of each Class, the
aggregate of the Current Note Balances of all Notes Outstanding of such Class 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 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 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 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 June 17,
1998, from the Note Insurer to the 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 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
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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, with respect to each Class of Notes, the premium due to the Note
Insurer on each Payment Date, which amount shall be equal to the product of the
Note Insurer Premium Rate and the related 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 July 27, 1998 and on each Payment Date thereafter, the Premium
Percentage specified in paragraph l(b) thereof.
"Note Interest": As to a Class of Notes and any Payment Date, the amount
of interest payable to Holders of such Notes on such Payment Date, which amount
shall be equal to interest at 1/12th of the related Note Interest Rate on the
related Note Balance as of the preceding Payment Date (after giving effect to
the payment, if any, in reduction of principal made on such 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": For the Class A-1 Notes, with respect to each
Interest Period prior to the Initial Redemption Date, 6.605% per annum, and for
each Interest Period thereafter, 7.105% per annum. For the Class A-2 Notes, with
respect to each Interest Period prior to the Initial Redemption Date, 6.585% per
annum, and for each Interest Period thereafter 7.085% per annum.
"Note Register": As defined in Section 2.06.
"Note Registrar": As defined in Section 2.06.
"Notes": The Class A-1 Notes and the Class A-2 Notes.
"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.
"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 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.
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"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 $93,325,000 for the Class A-1 Notes and $60,000,000 for
the Class A-2 Notes.
"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;
(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 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
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,
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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": For each Class of Notes, as to any Payment
Date, the amount, if any, by which (x) the Aggregate Principal Balance of the
Mortgage Loans in the related Group as of the end of the related Due Period
exceeds (y) the related Note Balance for such Payment Date, after taking into
account 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 related Note Balance on such Payment
Date. If the Aggregate Principal Balance of the Mortgage Loans in the related
Group is less than the related Note Balance for such Payment Date, determined as
provided above, the Overcollateralization Amount for such Class and Payment Date
shall be zero.
"Overcollateralization Deficit": For each Class of Notes, as to any
Payment Date, the amount, if any, by which the related Note Balance on such
Payment Date (after taking into account any payments to be paid on such Payment
Date in reduction of the related Note Balance) exceeds the Aggregate Principal
Balance of the Mortgage Loans in the related Group as of the end of the related
Due Period. If the Aggregate Principal Balance of the Mortgage Loans in the
related Group as determined pursuant to the preceding sentence is greater than
the related Note Balance for such Payment Date determined as provided above, the
Overcollateralization Deficit for such Class and Payment Date shall be zero.
"Overcollateralization Surplus": For each Class of Notes, as to any
Payment Date, the amount, if any, by which (x) the related Overcollateralization
Amount on such Payment Date exceeds (y) the related 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
July 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
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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 of each Class
allocable to (x) Monthly Principal (separately setting forth Principal
Prepayments) and (y) any Excess Cash Payment;
(ii) the amount of such payment to Noteholders of each Class
allocable to Note Interest;
(iii) the Note Balance for each Class, after giving effect to the
payment of Monthly Principal and any Excess Cash Payment applied to reduce
such Note Balance on such Payment Date;
(iv) the Aggregate Principal Balance of the Mortgage Loans in each
Group as of the end of the related Due Period;
(v) the amount of Monthly Advances made with respect to each Class
and such Payment Date and the aggregate amount of unreimbursed Monthly
Advances and Servicing Advances with respect to each Class, if any;
(vi) the number and aggregate of the Principal Balances of Mortgage
Loans in each Group (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;
(vii) the number and aggregate of the Principal Balances of the
Mortgage Loans in each Group in foreclosure or subject to other similar
proceedings, and the number and aggregate of the Principal Balance of
Mortgage Loans by Group, 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;
(viii) the aggregate of the Principal Balances of the Mortgage Loans
in each Group repurchased by the Seller or purchased by the Servicer,
separately setting forth the aggregate of the Principal Balances of
Mortgage Loans in each Group delinquent for three consecutive monthly
installments purchased by the Servicer at its option pursuant to the
Servicing Agreement;
(ix) the amount of any Insured Payments for each Class and such
Payment Date;
(x) the aggregate amount of the Monthly Servicing Fee for each Class
paid to or retained by the Servicer for the related Collection Period;
(xi) the Overcollateralization Amount, the then applicable Required
Overcollateralization Amount, the Overcollateralization Surplus, if any,
and the Overcollateralization Deficit, if any, with respect to each Class
and such Payment Date;
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(xii) the aggregate Principal Balance of the three largest
outstanding Mortgage Loans in each Group as of the related Determination
Date;
(xiii) the aggregate amount of Realized Losses for each Class
incurred during the related Collection Period and the cumulative amount of
Realized Losses for each Class 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.
"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
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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;
(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
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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 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 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
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 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 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 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.
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"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 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.
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"Remittable Funds": As defined in the Servicing Agreement.
"REO Property": As defined in the Servicing Agreement.
"Required Overcollateralization Amount" means, with respect to each Class
of Notes:
(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
of such Class in the amount of one-half of the Aggregate Principal Balance
of the Mortgage Loans in the related Group as of the Cut-off Date has been
received by the Noteholders, the greater of: (i) for Group I, 3.85% of the
Aggregate Principal Balance of the Mortgage Loans in Group I as of the
Cut-off Date and for Group II, 3.75% of the Aggregate Principal Balance of
the Mortgage Loans in Group II as of the Cut-off Date and (ii) 65% of the
Delinquency Amount with respect to Group I and 70% of the Delinquency
Amount with respect to Group II.
(b) for any Payment Date occurring after the end of the period
described in clause (a) above, the greatest of (i) for Group I, 7.7% of
the Aggregate Principal Balance of the Mortgage Loans in Group I as of the
Determination Date relating to such Payment Date and for Group II, 7.5% of
the Aggregate Principal Balance of the Mortgage Loans in Group II as of
the Determination Date relating to such Payment Date, (ii) 65% of the
Delinquency Amount with respect to Group I and 70% of the Delinquency
Amount with respect to Group II, (iii) 0.
(c) 75% of the Aggregate Principal Balance of the Mortgage Loans in
such Group as of the Cut-off Date, and (iv) three times the Principal
Balance of the largest Mortgage Loan in such Group then outstanding.
(d) provided, however, for any Payment Date occurring after the end
of the period described in clause (a) above, if the related Delinquency
Percentage exceeds 9.5% of the Aggregate Principal Balance of the Mortgage
Loans in such Group as of the related Determination Date, the Required
Overcollateralization Amount for such Class 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 each Class of Notes and any
Payment Date, the related Note Interest for such Payment Date plus the amount of
any related 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
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the board of directors, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any trust officer or assistant trust officer, the
controller, any assistant controller or any other officer of the 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.
"Seller": Mortgage Lenders Network USA, Inc., a Delaware corporation.
"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 June 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.
"Transition Expenses": As defined in the Servicing Agreement.
"Trust Agreement": That certain Deposit Trust Agreement, dated as of June
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.
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"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
1998-2" of the Issuer.
The aggregate principal amount of Notes that may be authenticated and
delivered under the Indenture is limited to $93,325,000 Class A-1 Notes and
$60,000,000 Class A-2 Notes, except for the Notes authenticated and delivered
upon registration of transfer of, or in exchange
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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 two classes, each having an Original Note
Balance, Note Interest Rate for the initial Interest Period and Final Maturity
Date as follows:
Original Note Initial Note Interest Final
Designation Balance Rate Maturity Date
- ----------- ------- ---- -------------
Class A-1 $93,325,000 6.605% July 2029
Class A-2 $60,000,000 6.585% July 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 related 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.
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.
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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 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.
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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 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
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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 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 related Note Account on such
Payment Date; and
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(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.
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.
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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.
(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.
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(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;
(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.
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
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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:
(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
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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.
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 related 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 related 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
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due (to the extent funds are then available for such purpose in the related 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 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.
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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 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.
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Section 3.05. Protection of Trust Estate.
(a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien of this Indenture or carry out
more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the 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. [Reserved]
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.
(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
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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;
(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
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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 June 30, 1999, and each June 30 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 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 either
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.
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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 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
(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
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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.
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):
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(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 of both Classes,
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 of both Classes,
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 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
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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 of
both Classes, 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 or the Holders of Notes representing more than 50% of
the Note Balance of the Outstanding Notes of both Classes, 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.
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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.
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.
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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, 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 each
Class of Notes pursuant to this Article or otherwise
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and any other monies that may then be held or thereafter received by the
Indenture Trustee as security for such Class of 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 Class of Notes, upon presentation and surrender thereof:
(i) first, to the Indenture Trustee, any unpaid Indenture Trustee's
Fees with respect to such Class then due and any other amounts payable and
due to the Indenture Trustee with respect to such Class 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 with respect to such Class then due
and to reimburse the Servicer for related Monthly Advances previously made
by, and not previously reimbursed or retained by, the Servicer and, upon
the final liquidation of the related Mortgage Loan or the final
liquidation of the Trust Estate, Servicing Advances with respect to such
Class 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 of such Class 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 of such Class, up to the amount of their respective Current Note
Balances, ratably, without preference or priority of any kind;
(v) fifth, 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 for such Class 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 for such Class 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 for such Class 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;
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(2) the Holders of Notes representing not less than 25% of the Note
Balance of the Outstanding Notes of both Classes 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;
(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 of both Classes; 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 of
both Classes, 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,
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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 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 of both Classes 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.
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Section 5.14. Waiver of Past Defaults.
The Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes of both Classes 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
(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.
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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 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 of both Classes 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
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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 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.
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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 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.
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(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.
(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.
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(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 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
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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;
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,
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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 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.
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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 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.
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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.
(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
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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.
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 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
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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;
(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 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 Seller and any other
necessary party (or signatures purporting to be that of the 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
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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 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 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.
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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.
(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
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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 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
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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 or Event of Default under this Indenture and to proceed thereafter as
provided in Article V.
Section 8.02. Note Accounts.
(a) The Issuer hereby directs the Indenture Trustee to establish for each
Class of Notes, at the Corporate Trust Office, one or more separate trust
accounts that shall collectively be the "Note Account" for such Class on or
before the Closing Date. The Indenture Trustee shall promptly deposit in the
related Note Account (i) all Remittable Funds for the related Group received by
it from the Servicer pursuant to the Servicing Agreement, (ii) any other funds
from any deposits for such Group to be made by the Servicer pursuant to the
Servicing Agreement, (iii) any amount for such Group required to be deposited in
the Note Account pursuant to Section 8.01, (iv) all amounts for such Group
received pursuant to Section 8.03, (v) any amount for such Group required to be
deposited pursuant to Section 8.16 and (vi) all other amounts for such Group
received for deposit in the related Note Account, including the payment of any
Purchase Price for a Mortgage Loan in such Group received by the Indenture
Trustee. All amounts that are deposited from time to time in a 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 a 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 Accounts 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 Accounts shall be for the benefit of the Servicer and on each Payment
Date, any such amounts may be released from the Note Accounts and paid to the
Servicer as part of its compensation for acting as Servicer. Any loss resulting
from such investment of moneys deposited in a Note Account shall be reimbursed
immediately as incurred to the related 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 Accounts.
(c) On each Payment Date, the Indenture Trustee shall withdraw amounts on
deposit in each Note Account and pay on a pari passu basis the Note Insurer
Premium for the related Group, the Indenture Trustee Fee for such Group,
Transition Expenses for such Group, if any not
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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 for such Group then due and to reimburse the Servicer for Monthly Advances
and Servicing Advances for such Group 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
collected by the Indenture Trustee are being applied in accordance with Section
5.07, Available Funds on deposit in each Note Account on any Payment Date or
Redemption Date shall be withdrawn from such 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 of the related Class, the aggregate amount
necessary to reimburse the Note Insurer for any unreimbursed Insured
Payments for the related Group 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 such Group and 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 of the
related Class have received the Required Payment Amount with respect to
such Group and Payment Date;
(ii) second, to the Noteholders of the related Class, the Note
Interest for such Class and Payment Date;
(iii) third, to the Noteholders of the related Class, the Monthly
Principal for such Class and Payment Date in reduction of the related Note
Balance until such Note Balance is reduced to zero;
(iv) fourth, to the Noteholders of the related Class, in reduction
of the related Note Balance, the amount, if any, equal to the lesser of
(A) Excess Cash with respect to such Group and Payment Date, and (B) the
lesser of (1) the amount necessary for the related Overcollateralization
Amount to equal the related Required Overcollateralization Amount on such
Payment Date (after giving effect to application of the related Monthly
Principal for such Payment Date) and (2) the amount necessary to reduce
the related Note Balance to zero (the "Excess Cash Payment"); and
(v) fifth, to the Note Insurer, any amounts due and owing with
respect to the related Group 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
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accordance with Section 3.03, set aside from amounts in each 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 a Note Account prior to such
time that represent amounts that are to be used to make payments on the related
Notes on the next succeeding Payment Date, the cash balance, if any, then
remaining in such Note Account shall be withdrawn from such 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.
(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) 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
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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 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 Accounts and Mortgage
Loans.
(a) Each Note Account shall relate solely to the Notes of the related
Class and to the Mortgage Loans in the related Group, Permitted Investments and
other property securing the related Notes. Funds and other property in each Note
Account shall not be commingled with the other Note Account or 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 a 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
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the ownership of all such funds or property and the portions thereof held for
credit to the related Note Account.
(b) If any amounts are needed for payment from a Note Account and
sufficient uninvested funds are not available therein to make such payment, the
Indenture Trustee shall cause to be sold or otherwise converted to cash a
sufficient amount of the investments in such 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 Accounts. 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 Accounts, 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 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 Seller
to either (i) within 60 days after the 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 related 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 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 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 Seller
from the lien of this Indenture.
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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 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
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(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 related 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 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
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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 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.
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.
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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.
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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 of both Classes 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
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(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.
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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 exercised its option to direct
the Servicer to redeem the Notes on such Redemption Date or, if such option is
not exercised by the
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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 each 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 Cut-off
Date, 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 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
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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 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
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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;
(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
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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 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.
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(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
(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 1998-2), 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 1998-2), 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
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(5) the 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
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.
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.
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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.
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
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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.
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
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substantive consolidation of the 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, 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
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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.
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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 1998-2
By: Wilmington Trust Company,
as Owner Trustee
By: /s/ Emmett Hammond
-------------------------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Indenture Trustee
By: /s/ Peter J. Masterman
-------------------------------------------
Name: Peter J. Masterman
Title: Vice President
[Signature Page to Indenture]
<PAGE>
SCHEDULE I MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT A FORM OF NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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 June 1, 1998 Original Note Balance: $__________
First Payment Date: July 27, 1998 CUSIP No.: __________
Denomination: $__________ Note No.: A-__
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1998-2
HOME EQUITY LOAN BACKED NOTES, SERIES 1998-2, CLASS A-__
Mortgage Lenders Network Home Equity Loan Trust 1998-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of $__________ payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $__________ and the denominator of which is $__________
(this Note's "Percentage Interest") by (ii) the aggregate amount, if any,
payable from the related Note Account in respect of principal on the Class A-__
Notes pursuant to the Indenture dated as of June 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 __________ (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 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>
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 Class A-__ 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 related Note Interest for such Payment Date,
together with principal payments in an aggregate amount equal to the related
Monthly Principal plus, until the related Overcollateralization Amount is equal
to the related Required Overcollateralization Amount, Excess Cash, if any, for
the related Group and 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 1998-2, Class A-__, 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. Also issued under the Indenture are the Asset Backed Notes, Series
1998-2, Class A-__. 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 Class A-__ Notes are and will be equally and ratably secured by the
Mortgage Loans in the related Group and the other collateral related thereto
pledged as security therefor as provided in the Indenture.
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
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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 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 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
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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 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
A-4
<PAGE>
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 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
A-5
<PAGE>
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, each Class of 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 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.
A-6
<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: June 17, 1998
MORTGAGE LENDERS NETWORK HOME EQUITY
LOAN TRUST 1998-2
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 Class A-__ Notes designated above and referred to in the
within-mentioned Indenture.
Date: June 17, 1998
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
Authenticating Agent
By:_______________________________________
Authorized Signatory
A-7
<PAGE>
STATEMENT OF INSURANCE
<PAGE>
STATEMENT OF INSURANCE
OBLIGATIONS: $153,325,000 POLICY NUMBER: 26722
Mortgage Lenders Network Home
Equity Trust 1998-2, Asset Backed
Notes, Series 1998-2
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of the Note Guaranty Insurance
Policy (the "Policy"), thereby unconditionally and irrevocably guarantees to any
Owner that an amount equal to each full and complete Insured Payment will be
received by Norwest Bank Minnesota, National Association, or its successors, as
trustee 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 under the
Policy 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
the 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, the 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 under the Policy 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 under the Policy, unless otherwise stated therein,
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 the 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 under the Policy.
As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Indenture dated as of June 1, 1998 between Mortgage
Lenders Network Home Equity Loan Trust 1998-2, 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 a Class of Notes and any Payment
Date, the sum of (a) the related Note Interest for such Payment Date minus
Available Funds for the related Group and (b) the then existing
Overcollateralization Deficit for such Group, if any, after application of such
Available Funds to reduce such Note Balance on such Payment Date.
"Insured Payment" means (a) as of any Payment Date, any Deficiency Amount
and (b) any Preference Amount.
2
<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A attached to the
Policy, 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 payments thereunder.
"Preference Amount" means any amount previously distributed to an Owner on
the Obligations that is recoverable and sought to be recovered as avoidable
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 in the Policy and not otherwise defined therein
shall have the respective meanings set forth in the Agreement as of the date of
execution of the 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 under the Policy 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.
The 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 the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the Policy is
not refundable for any reason, including payment, or provision being made for
payment, prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
3
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________________________, attorney, to transfer said
Note on the books kept for registration thereof, with full power of substitution
in the premises.
Dated: ____________________*/
Signature Guaranteed:
___________________________*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B MBIA INSURANCE POLICY
<PAGE>
EXHIBIT C FORM OF NOTICE OF CLAIM
<PAGE>
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: 26722
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: 26722 (the
"Policy") issued by the Insurer in respect of the $153,325,000 Mortgage Lenders
Network Home Equity Loan Trust 1998-2 Asset Backed Notes, Series 1998-2 (the
"Obligations"), that:
(a) the Indenture Trustee is the trustee under the Indenture dated
as of June 1, 1998, between Mortgage Lenders Network Home Equity Loan
Trust 1998-2, as Insurer 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 $[_____________], consisting of $[______________] with
respect to the Class A-1 Notes and $[_______________] with respect to the
Class A-2 Notes;
(c) the amount due under clause (b) of the definition of Deficiency
Amount for the Applicable Payment Date is $[_______________], consisting
of $[_______________] with respect to the Class A-1 Notes and
$[________________] with respect to the Class A-2 Notes;
(d) the sum of the amounts listed in paragraphs (b) and (c) above a
totals is $[________________] (the "Deficiency Amount");
5
<PAGE>
(e) the amount of previously distributed payments on the Obligations that
is recoverable and sought to be recovered as 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 is
$[______________] (the "Preference Amount");
(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________________________________________
6
[MBIA LOGO]
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $153,325,000 POLICY NUMBER: 26722
Mortgage Lenders Network Home
Equity Trust 1998-2, Asset Backed
Notes, Series 1998-2
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.
1
<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 June 1, 1998 between Mortgage
Lenders Network Home Equity Loan Trust 1998-2, 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 a Class of Notes and any Payment
Date, the sum of (a) the related Note Interest for such Payment Date minus
Available Funds for the related Group and (b) the then existing
Overcollateralization Deficit for such Group, if any, after application of such
Available Funds to reduce such Note Balance on such Payment Date.
"Insured Payment" means (a) as of any Payment Date, any Deficiency Amount
and (b) any Preference Amount.
2
<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.
3
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this 17th day of June 1998.
MBIA INSURANCE CORPORATION
By _______________________________
Title President
Attest:
By __________________________________
Assistant Secretary
4
<PAGE>
EXHIBIT A
TO NOTE GUARANTY INSURANCE
POLICY NUMBER: 26722
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: 26722
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: 26722 (the
"Policy") issued by the Insurer in respect of the $153,325,000 Mortgage Lenders
Network Home Equity Loan Trust 1998-2 Asset Backed Notes, Series 1998-2 (the
"Obligations"), that:
(a) the Indenture Trustee is the trustee under the Indenture dated
as of June 1, 1998, between Mortgage Lenders Network Home Equity Loan
Trust 1998-2, 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 $[___________], consisting of $[_____________] with
respect to the Class A-1 Notes and $[______________] with respect to the
Class A-2 Notes;
(c) the amount due under clause (b) of the definition of Deficiency
Amount for the Applicable Payment Date is $[_____________], consisting of
$[______________] with respect to the Class A-1 Notes and
$[______________] with respect to the Class A-2 Notes;
(d) the sum of the amounts listed in paragraphs (b) and (c) above as
totals is $[__________] (the "Deficiency Amount");
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(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");
(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__________________________________
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CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Prospectus Supplement of
our report dated February 3, 1998 on our audits of the consolidated financial
statements of MBIA Insurance Corporation and Subsidiaries as of December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997. We also consent to the reference to our Firm under the caption "Report of
Experts".
/s/ Coopers & Lybrand L.L.P.
-------------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
June 23, 1998
