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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) May 1, 1999
Prudential Securities Secured Financing Corporation
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(Exact name of registrant as specified in its charter)
Delaware 333-74859 13-3526694
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(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) File Number) Identification No.)
10292
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One New York Plaza (Zip Code)
New York, New York
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (212) 214-7435
No Change
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
This Current Report on Form 8-K is being filed by Prudential
Securities Secured Financing Corporation in connection with its offering of
HomeGold Home Equity Loan Trust 1999-1, HomeGold Home Equity Loan Asset-Backed
Notes, Series 1999-1.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
4.1 Form of Sale and Servicing Agreement
4.2 Form of Indenture
2
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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 HomeGold Home Equity
Loan Trust 1999-1
By: /s/Mary Alice Kohs
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Name: Mary Alice Kohs
Title: Vice President
Date: May 1, 1999
3
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EXHIBIT INDEX
Exhibit No. Description Page No.
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4.1 Form of Sale and Servicing Agreement 5
4.2 Form of Indenture 6
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EXHIBIT 4.1
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DB DRAFT
5/24/99
SALE AND SERVICING AGREEMENT
Dated as of May 1, 1999
by and among
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1,
(Trust)
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
(Depositor)
HOMEGOLD, INC.,
(Originator and Servicer)
FAIRBANKS CAPITAL CORP.,
(Back-up Servicer)
and
FIRST UNION NATIONAL BANK,
(Indenture Trustee)
HomeGold Home Equity Asset Backed Notes,
Series 1999-1
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TABLE OF CONTENTS
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Page
ARTICLE I
DEFINITIONS
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Section 1.01. Defined Terms.........................................................................1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans..........................................................1
Section 2.02. [Reserved]............................................................................2
Section 2.03. Mortgage Files and Documents..........................................................2
Section 2.04. Acceptance by Indenture Trustee.......................................................4
Section 2.05. Repurchase or Substitution of Mortgage Loans..........................................5
Section 2.06. Representations and Warranties of the Depositor.......................................8
Section 2.07. Representations, Warranties and Covenants of the Servicer.............................9
Section 2.08. Representations and Warranties of the Trust..........................................11
Section 2.09. Issuance of Securities...............................................................12
Section 2.10. Satisfaction and Discharge of Warehouse Liens........................................12
ARTICLE III
ADMINISTRATION AND SERVICING OF THE TRUST PROPERTY
Section 3.01. Servicer to Act as Servicer..........................................................13
Section 3.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers..........................14
Section 3.03. Successor Sub-Servicers..............................................................16
Section 3.04. Liability of the Servicer............................................................16
Section 3.05. No Contractual Relationship between Sub-Servicers and Trust, Indenture
Trustee, Noteholders or Insurer......................................................16
Section 3.06. Assumption or Termination of Sub-Servicing Agreements by Indenture
Trustee..............................................................................17
Section 3.07. [Collection of Certain Mortgage Loan Payments........................................17
Section 3.08. Sub-Servicing Accounts...............................................................18
Section 3.09. [Reserved]...........................................................................18
Section 3.10. Collection Accounts..................................................................18
Section 3.11. Withdrawals from the Collection Account..............................................21
Section 3.12. [Reserved]...........................................................................22
Section 3.13. Administrative Duties................................................................22
Section 3.14. Investment of Funds in the Investment Accounts.......................................24
Section 3.15. [intentionally omitted]..............................................................25
Section 3.16. Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
Coverage.............................................................................25
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption Agreements............................27
Section 3.18. Realization Upon Defaulted Mortgage Loans............................................28
Section 3.19. Indenture Trustee to Cooperate; Release of Mortgage Files............................30
Section 3.20. Servicing Compensation...............................................................31
Section 3.21. Reports to the Indenture Trustee; Collection Account Statements......................32
Section 3.22. Statement as to Compliance...........................................................32
Section 3.23. Independent Public Accountants' Servicing Report.....................................33
Section 3.24. Access to Certain Documentation......................................................33
Section 3.25. Title, Management and Disposition of REO Property....................................34
Section 3.26. Obligations of the Servicer in Respect of Prepayment Interest Shortfalls.............36
Section 3.27. [Reserved]...........................................................................36
Section 3.28. Obligations of the Servicer in Respect of Monthly Payments...........................36
Section 3.29. [Reserved]...........................................................................37
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Section 3.30. Obligations Under Indenture..........................................................37
Section 3.31. Records..............................................................................37
Section 3.32. Additional Information to be Furnished to the Trust..................................37
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS; STATEMENTS;
Section 4.01. Payments and Distributions...........................................................37
Section 4.02. Statements to Securityholders........................................................37
Section 4.03. Monthly Advances.....................................................................41
Section 4.04. Determination of Realized Losses.....................................................43
Section 4.05. Compliance with Withholding Requirements.............................................43
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer..........................................43
Section 6.02. Merger or Consolidation of the Depositor or the Servicer.............................43
Section 6.03. Limitation on Liability of the Depositor, the Servicer and Others....................44
Section 6.04. Limitation on Resignation of the Servicer............................................45
Section 6.05. Rights of the Trust, the Depositor and Others in Respect of the Servicer.............47
Section 6.06. Limitation of Liability..............................................................47
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default...........................................................48
Section 7.02. Back-up Servicer to Act; Appointment of Successor Servicer...........................51
Section 7.03. Notification to Noteholders and Trust................................................53
Section 7.04. Waiver of Servicer Events of Default.................................................53
Section 7.05. The Back-up Servicer.................................................................53
ARTICLE VIII
CONCERNING THE INDENTURE TRUSTEE
Section 8.01. Duties, Responsibilities, Etc. of Indenture Trustee..................................54
Section 8.02. Replacement of Indenture Trustee; Successor Indenture Trustee;
Appointment of Co- or Separate Indenture Trustee.....................................55
Section 8.03. Representations and Warranties of the Indenture Trustee..............................55
ARTICLE IX
CERTAIN MATTERS REGARDING THE INSURER
Section 9.01. Rights of the Insurer to Exercise Rights of Class A Noteholders......................56
Section 9.02. Indenture Trustee to Act Solely with Consent of the Insurer..........................57
Section 9.03. Trust Property and Accounts Held for Benefit of the Insurer..........................57
Section 9.04. Notices to the Insurer...............................................................57
Section 9.05. Third-Party Beneficiary..............................................................57
Section 9.06. Termination of the Servicer..........................................................57
ARTICLE X
TERMINATION; SALE AND PURCHASE OF MORTGAGE LOANS
Section 10.01. Termination Upon Early Redemption of the Notes or Liquidation of All
Mortgage Loans; Right of Servicer and Insurer to Purchase Mortgage Loans.............58
Section 10.02. Sale and Purchase of Mortgage Loans..................................................58
Section 10.03. [Reserved]...........................................................................60
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ARTICLE XI
[RESERVED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
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Section 12.01. Amendment............................................................................60
Section 12.02. Recordation of Agreement; Counterparts...............................................62
Section 12.03. [Reserved]...........................................................................62
Section 12.04. Governing Law........................................................................62
Section 12.05. Notices..............................................................................62
Section 12.06. Severability of Provisions...........................................................63
Section 12.07. Notice to Rating Agencies and Insurer................................................63
Section 12.08. Article and Section References.......................................................64
Section 12.09. Confirmation of Intent...............................................................64
</TABLE>
Exhibit A Glossary of Defined Terms
Exhibit B [Reserved]
Exhibit C-1 Form of Indenture Trustee's Initial Certification
Exhibit C-2 Form of Indenture Trustee's Final Certification
Exhibit D Form of Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Schedule 1 Mortgage Loan Schedule
(iii)
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This Sale and Servicing Agreement, dated as of May 1, 1999, among HOMEGOLD HOME
EQUITY LOAN TRUST 1999-1 (the "Trust"), PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor, HOMEGOLD, INC., as Servicer, FAIRBANKS CAPITAL CORP.,
as Back-up Servicer and FIRST UNION NATIONAL BANK, as Indenture Trustee.
PRELIMINARY STATEMENT:
The Depositor desires to transfer, assign, set over and otherwise
convey to the Trust, and the Trust desires to purchase and acquire from the
Depositor, certain mortgage loans acquired or to be acquired by the Depositor
and certain other related property.
The Trust proposes to issue Notes secured by such mortgage loans
pursuant to an indenture entered into with the Indenture Trustee.
The Servicer is willing to service all such mortgage loans.
Fairbanks Capital Corp. is willing to serve in the capacity as
Back-up Servicer hereunder.
In consideration of the mutual agreements herein contained, the
Trust, the Depositor, the Servicer, the Back-up Servicer and the Indenture
Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
For purposes of this Agreement, all capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed thereto
in Exhibit A hereto. Unless otherwise specified, all calculations described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans.
In consideration of the Trust's delivery of the Certificate
issuable pursuant to Section 4.2 of the Trust Agreement to or upon the written
order of the Depositor, the Depositor, concurrently with the execution and
delivery hereof, does hereby transfer, assign, set over and otherwise convey to
the Trust, subject to the Warehouse Liens thereon, without recourse (except as
provided herein) all the right,
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title and interest of the Depositor, including any security interest therein for
the benefit of the Depositor, in and to the Mortgage Loans, the rights of the
Depositor under the Unaffiliated Seller's Agreement, the Purchase Agreement and
Assignment, and all other assets included or to be included in the Trust
Property. Such assignment includes all interest and principal received by the
Depositor, the Unaffiliated Seller, or the Servicer on or after the Cut-off Date
with respect to the Mortgage Loans. The Trust shall treat the conveyance of the
Mortgage Loans pursuant to this Section 2.01 as a tax free capital contribution.
Section 2.02. [Reserved]
Section 2.03. Mortgage Files and Documents.
(a) In connection with each transfer and assignment contemplated
by Section 2.01 hereof, the Depositor will cause the Originator to
deliver to, and deposit with, the Indenture Trustee the following
documents or instruments with respect to each Mortgage Loan (a
"Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed in substantially
the following form: "Pay to the order of First Union National
Bank, as Indenture Trustee for the registered holders of HomeGold
Home Equity Loan Asset Backed Notes, Series 1999-1, without
recourse," with all prior and intervening endorsements showing a
complete chain of endorsement from the originator to the Person
so endorsing to the Indenture Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon or, if such Mortgage or power of
attorney has been submitted for recording but has not been
returned form the applicable public recording office or is not
otherwise available, a copy of such Mortgage or power of
attorney, as the case may be, certified by the Servicer to be a
true and complete copy of the original submitted for recording
with the recorded original to be delivered by the Servicer to the
Indenture Trustee promptly after receipt thereof;
(iii) an original Assignment of the Mortgage executed
substantially in the following form: "First Union National Bank,
as Indenture Trustee for the registered holders of HomeGold Home
Equity Loan Asset Backed Notes, Series 1999-1";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Indenture
Trustee as contemplated by the immediately preceding clause (iii)
or, if any such Assignment has been submitted for recording but
has not been returned
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from the applicable public recording office or is not otherwise
available, a copy of such Assignment certified by the Servicer
to be a true and complete copy of the original submitted for
recording with the recorded original to be delivered by the
Servicer to the Indenture Trustee promptly after receipt thereof;
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) except with respect to Mortgage Loans originated in a
program which required no title insurance, the original or a copy
of the lender's title insurance policy, together with all
endorsements or riders that were issued with or subsequent to the
issuance of such policy, insuring the priority of the Mortgage as
a first or second lien on the Mortgaged Property represented
therein as a fee interest vested in the Mortgagor, or in the
event such original or copy of title policy is unavailable, a
written commitment or uniform binder or preliminary report of
title issued by the title insurance or escrow company.
(b) The Depositor shall cause the Originator, no later than 30
days following the Originator's receipt of original recording
information and in any event within one year following the Closing
Date, to submit or cause to be submitted for recording, at no expense
to the Trust, the Indenture Trustee or the Insurer, in the appropriate
public office for real property records, each Assignment referred to
in Sections 2.03(a)(iii) and (iv) above. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein,
the Depositor shall promptly prepare or cause to be prepared a
substitute Assignment or cure or cause to be cured such defect, as the
case may be, and thereafter cause each such Assignment to be duly
recorded.
(c) If any original Mortgage Note referred to in Section
2.03(a)(i) cannot be located, the obligations of the Depositor to
cause the Originator to deliver such documents shall be deemed to be
satisfied upon delivery to the Indenture Trustee of a photocopy of the
original of such Mortgage Note, with a Lost Note Affidavit to follow
within one Business Day. If any of the documents referred to in
Section 2.03(a)(ii), (iii) or (iv) above has as of the Closing Date
been submitted for recording but either (x) has not been returned from
the applicable public recording office or (y) such public recording
office has retained the original of such document, the obligations of
the Depositor to cause the Originator to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Indenture Trustee
of a copy of each such document certified by the Originator in the
case of (x) above or the applicable public recording office in the
case of (y) above to be a true and complete copy of the original that
was submitted for recording and (2) if such copy is certified by the
Originator, delivery to the Indenture Trustee promptly upon receipt
thereof of either the original or a copy of such document certified by
the applicable public recording office to be a true and complete copy
of the original. Notice shall be provided to
3
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the Indenture Trustee, the Insurer and the Rating Agencies by the
Originator if delivery pursuant to clause (2) above will be made more
than 180 days after the Closing Date. If the original or copy of
lender's title insurance policy was not delivered pursuant to Section
2.03(a)(vi) above (if required thereunder), the Depositor shall cause
the Originator to deliver to the Indenture Trustee, promptly after
receipt thereof, the original or a copy of the lender's title
insurance policy. The Depositor shall cause the Originator to deliver
to the Indenture Trustee promptly upon receipt thereof any other
original documents constituting a part of a Mortgage File received
with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any
Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Indenture Trustee are and shall be held by or
on behalf of the Trust, the Originator, the Depositor or the Servicer,
as the case may be, in trust for the benefit of the Indenture Trustee
on behalf of the Noteholders and the Insurer. In the event that any
such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be
delivered promptly to the Indenture Trustee. Any such original
document delivered to or held by the Trust, the Depositor or the
Originator that is not required pursuant to the terms of this Section
to be a part of a Mortgage File, shall be delivered promptly to the
Servicer.
(e) The Depositor herewith delivers to the Indenture Trustee for
the benefit of the Noteholders and the Insurer an executed copy of the
Unaffiliated Seller's Agreement. In addition to the foregoing, the
Depositor shall cause the Insurer to deliver the Policy to the
Indenture Trustee for the benefit of the Noteholders.
Section 2.04. Acceptance by Indenture Trustee.
(a) The Indenture Trustee acknowledges receipt of the Policy and,
subject to the provisions of Section 2.03 and subject to the review
described in the next paragraph below and any exceptions noted on the
exception report described in the next paragraph below, the documents
referred to in Section 2.03 (other than such documents described in
Section 2.03(a)(v)) above and all other assets included in the
definition of "Trust Property" (to the extent of amounts deposited
into the Collection Account and the Redemption Account) and declares
that it holds and will hold such documents and the other documents
delivered and to be delivered to it constituting a Mortgage File, and
that it holds or will hold all such assets and such other assets
included in the definition of "Trust Property" in trust for the
exclusive use and benefit of all present and future Noteholders and
the Insurer in accordance with the provisions of this Agreement and
the Indenture.
(b) The Indenture Trustee agrees, for the benefit of the
Noteholders and the Insurer, to review each Mortgage File relating to
the Mortgage Loans and
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within 30 days after the Closing Date, and to certify in substantially
the form attached hereto as Exhibit C-1 that, as to each Mortgage Loan
(other than any Mortgage Loan which has been certified as having been
paid in full or any Mortgage Loan specifically identified in the
exception report annexed thereto as not being covered by such
certification), (i) all documents constituting part of such Mortgage
File required to be delivered to it pursuant to this Agreement are in
its possession, (ii) such documents have been reviewed by it and
appear regular on their face and relate to such Mortgage Loan, (iii)
based on its examination and only as to the foregoing, the information
set forth in the Mortgage Loan Schedule that corresponds to items (1)
through (3), (6), (9)(A), (10), (13), (16) and (23) of the definition
of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting
such review, the Indenture Trustee is under no duty or obligation (i)
to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they 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 (ii) to determine whether any Mortgage
File should include any of the documents specified in clause (v) of
Section 2.03(a).
(c) Prior to the first anniversary date of this Agreement the
Indenture Trustee shall deliver to the Trust, the Depositor, the
Servicer and the Insurer a final certification in the form annexed
hereto as Exhibit C-2 evidencing the completeness of the Mortgage
Files, with any applicable exceptions noted thereon.
(d) If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to
above, the Indenture Trustee finds any document or documents
constituting a part of a Mortgage File to be missing or defective in
any material respect, at the conclusion of its review the Indenture
Trustee shall so notify the Trust, the Depositor, the Unaffiliated
Seller, the Servicer and the Insurer. In addition, upon the discovery
by the Trust, the Depositor, the Servicer or the Indenture Trustee of
a breach of any of the representations and warranties made by the
Unaffiliated Seller in the Unaffiliated Seller's Agreement, or by the
Originator in the Purchase Agreement and Assignment in respect of any
Mortgage Loan which materially adversely affects such Mortgage Loan or
the interests of the Noteholders or the Insurer in such Mortgage Loan,
the party discovering such breach shall give prompt written notice to
the other parties and the Insurer.
Section 2.05. Repurchase or Substitution of Mortgage Loans.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage
File or of the breach by the Unaffiliated Seller of any
representation, warranty or covenant under the Unaffiliated Seller's
Agreement, by the Originator in the Purchase Agreement and Assignment
in respect of any Mortgage Loan which materially
5
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adversely affects the value of such Mortgage Loan or the interest
therein of the Noteholders or the Insurer, the party discovering such
defect, missing document or breach shall promptly notify the Trust,
the Originator, the Unaffiliated Seller, the Servicer, the Depositor
and the Insurer of such defect, missing document or breach and request
that the Unaffiliated Seller, and the Originator deliver such missing
document or cure such defect or breach within 60 days from the date
the Unaffiliated Seller, and the Originator were notified of such
missing document, defect or breach, and if the Unaffiliated Seller, or
the Originator does not deliver such missing document or cure such
defect or breach in all material respects during such period, the
Indenture Trustee shall enforce the Unaffiliated Seller's obligation
under the Unaffiliated Seller's Agreement, and the Originator's
obligation under the Purchase Agreement and Assignment (i) in
connection with any such breach that could not reasonably have been
cured within such 60-day period, if the Unaffiliated Seller, or the
Originator shall have commenced to cure such breach within such 60-day
period, to proceed thereafter diligently and expeditiously to cure the
same within the period provided under the Unaffiliated Seller's
Agreement, or the Purchase Agreement and Assignment and (ii) in
connection with any such breach (subject to clause (i) above) or in
connection with any missing document defect, to repurchase such
Mortgage Loan from the Trust Property at the Purchase Price within 60
days after the date on which it was notified (subject to Section
2.05(e)) of such missing document, defect or breach, if and to the
extent that the Unaffiliated Seller is obligated to do so under the
Unaffiliated Seller's Agreement, and the Originator is obligated to do
so under the Purchase Agreement and Assignment. The Purchase Price for
the repurchased Mortgage Loan shall be deposited in the Collection
Account and the Indenture Trustee, upon receipt of written
certification from the Servicer of such deposit, shall release the
related Mortgage File to the Unaffiliated Seller or the Originator, as
the case may be, and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the
Unaffiliated Seller or the Originator shall furnish to it and as shall
be necessary to vest in the Unaffiliated Seller or the Originator, as
the case may be, any Mortgage Loan released pursuant hereto and the
Indenture Trustee shall have no further responsibility with regard to
such Mortgage File. In lieu of repurchasing any such Mortgage Loan as
provided above, if so provided in the Purchase Agreement and
Assignment, the Originator may cause such Mortgage Loan to be removed
from the Trust Property (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans in the manner and subject to the limitations set forth
in Section 2.05(d). It is understood and agreed that the obligation of
the Unaffiliated Seller and the Originator to cure or to repurchase
(or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to
which such a breach has occurred and is continuing shall constitute
the sole remedy respecting such omission, defect or breach available
to the Indenture Trustee on behalf of the Noteholders and the Insurer.
(b) [Reserved]
6
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(c) [Reserved]
(d) As to any Deleted Mortgage Loan for which the Originator
substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Originator delivering to the
Indenture Trustee, for such Qualified Substitute Mortgage Loan or
Loans, the Mortgage Note, the Mortgage, the Assignment to the
Indenture Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.03,
together with an Officers' Certificate providing that each such
Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below),
if any, in connection with such substitution. The Indenture Trustee
shall acknowledge receipt for such Qualified Substitute Mortgage Loan
or Loans and, within ten Business Days thereafter, review such
documents as specified in Section 2.04 and deliver to the Depositor,
the Servicer and the Insurer, with respect to such Qualified
Substitute Mortgage Loan or Loans, a certification substantially in
the form attached hereto as Exhibit C-1, with any applicable
exceptions noted thereon. Within one year of the date of substitution,
the Indenture Trustee shall deliver to the Depositor, the Servicer and
the Insurer a certification substantially in form of Exhibit C-2
hereto with respect to such Qualified Substitute Mortgage Loan or
Loans, with any applicable exceptions noted thereon. Monthly Payments
due with respect to Qualified Substitute Mortgage Loans in the month
of substitution are part of the Trust and will be retained by the
Trust. For the month of substitution, payments and distributions
hereunder and under the Indenture will reflect the collections and
recoveries in respect of such Deleted Mortgage Loan in the Collection
Period preceding the month of substitution and the Originator shall
thereafter be entitled to retain all amounts from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage
Loan and shall thereafter be entitled all amounts subsequently
received in respect of such Deleted Mortgage Loan. The Servicer shall
amend the Mortgage Loan Schedule to reflect the removal of such
Deleted Mortgage Loan from the terms of this Agreement and the
substitution of the Qualified Substitute Mortgage Loan or Loans and
shall deliver a copy of such amended Mortgage Loan Schedule to the
Indenture Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and
shall be subject in all respects to the terms of this Agreement and,
in the case of a substitution effected by the Originator, the Purchase
Agreement and Assignment, including, in the case of a substitution
effected by the Originator all applicable representations and
warranties thereof included in the Purchase Agreement and Assignment
as of the date of substitution.
For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate, as to each such Qualified Substitute Mortgage Loan, of
the Stated Principal Balance thereof as of the related Cut-off Date, together
with one month's interest on such
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principal balance at the applicable Net Mortgage Rate. On the date of such
substitution, the Originator will deliver or cause to be delivered to the
Servicer for deposit in the Collection Account an amount equal to the
Substitution Shortfall Amount, if any, and the Indenture Trustee, upon receipt
of the related Qualified Substitute Mortgage Loan or Loans and certification by
the Servicer of such deposit, shall release to the Originator the related
Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Originator shall
deliver to it and as shall be necessary to vest therein any Deleted Mortgage
Loan released pursuant hereto.
Section 2.06. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trust and
the Indenture Trustee for the benefit of the Noteholders and the
Insurer that as of the Closing Date the assignment of the Depositor's
rights, but none of its obligations, under the Unaffiliated Seller's
Agreement is valid, enforceable and effective to permit the Indenture
Trustee to enforce the obligations of the Unaffiliated Seller
thereunder.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.06 shall survive delivery of
the Mortgage Files to the Indenture Trustee and shall inure to the
benefit of the Trust, the Noteholders and the Insurer notwithstanding
any restrictive or qualified endorsement or assignment. Upon discovery
by any of the Trust, the Depositor, the Servicer or the Indenture
Trustee of a breach of any of such representations and warranties
which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Noteholders and the Insurer, the party
discovering such breach shall give prompt written notice to the other
parties hereto, the Originator and the Insurer and in no event later
than two Business Days from the date of such discovery.
(c) The Depositor is duly organized, validly existing and in good
standing as a corporation under the laws of the state of its
incorporation.
(d) The Depositor has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and
perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Depositor has duly authorized the
execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming
due authorization, execution and delivery hereof by the Trust, the
Servicer and the Indenture Trustee, constitutes a legal, valid and
binding obligation of the Depositor, enforceable against it in
accordance with its terms except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity.
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(e) The execution and delivery of this Agreement by the Depositor
and the performance of and compliance with the terms of this Agreement
will not (a) violate the Depositor's charter or by-laws or any law,
rule, regulation, order, judgment, award, administrative
interpretation, injunction, writ, decree or the like affecting the
Depositor or by which the Depositor is bound or (b) result in a breach
of or constitute a default under any indenture or other material
agreement to which the Depositor is a party or by which the Depositor
is bound, which in the case of either clause (a) or (b) will have a
material adverse effect on the Depositor's ability to perform its
obligations under this Agreement.
(f) There are no actions or proceedings against, investigations
known to it of, the Depositor before any court, administrative or
other tribunal (A) that might prohibit its entering into this
Agreement, (B) seeking to prevent the consummation of the transactions
contemplated by this Agreement or (C) that might prohibit or
materially and adversely affect the performance by the Depositor of
its obligations under, or validity or enforceability of, this
Agreement.
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, this Agreement or the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations or orders, if any, that have been obtained prior to the
Closing Date.
Section 2.07. Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the
Indenture Trustee, for the benefit of each of the Indenture Trustee, the
Noteholders, the Insurer and to the Depositor that as of the Closing Date or as
of such date specifically provided herein:
(i) The Servicer is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is and will remain duly licensed under and in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of the
Mortgage Loan in accordance with the terms of this Agreement;
(ii) The Servicer has the full power and authority to
conduct its business as presently conducted by it and to execute,
deliver and perform, and to enter into and consummate, all
transactions contemplated by this Agreement. The Servicer has
duly authorized the execution, delivery and performance of this
Agreement, has duly executed and delivered this Agreement, and
this Agreement, assuming
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due authorization, execution and delivery hereof by the Trust,
the Depositor and the Indenture Trustee, constitutes a legal,
valid and binding obligation of the Servicer, enforceable against
it in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity;
(iii) The execution and delivery of this Agreement by the
Servicer and the performance of and compliance with the terms of
this Agreement will not (a) violate the Servicer's charter or
by-laws or any law, rule, regulation, order, judgment, award,
administrative interpretation, injunction, writ, decree or the
like affecting the Servicer or by which the Servicer is bound or
(b) result in a breach of or constitute a default under any
indenture or other material agreement to which the Servicer is a
party or by which the Servicer is bound, which in the case of
either clause (a) or (b) will have a material adverse effect on
the Servicer's ability to perform its obligations under this
Agreement;
(iv) [reserved];
(v) The Servicer does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant of it contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Servicer will
deliver possession of a complete Mortgage File, except for such
documents as have been delivered to the Indenture Trustee;
(vii) There are no actions or proceedings against,
investigations known to it of, the Servicer before any court,
administrative or other tribunal (A) that might prohibit its
entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement
or (C) that might prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or validity
or enforceability of, this Agreement; and
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the
consummation of the transactions contemplated by this Agreement,
except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.07 shall survive delivery of the
Mortgage Files to the Indenture Trustee and shall inure to the benefit of the
Trust, the Indenture Trustee,
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the Depositor, the Noteholders and the Insurer. Upon discovery by any of the
Trust, the Depositor, the Servicer or the Indenture Trustee of a breach of any
of the foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Noteholders and the Insurer, the party discovering such breach shall give prompt
written notice (but in no event later than two Business Days following such
discovery) to the parties hereto, the Originator and the Insurer.
Section 2.08. Representations and Warranties of the Trust.
The Trust hereby represents, warrants and covenants to the
Indenture Trustee, for the benefit of each of the Indenture Trustee, the
Noteholders, the Servicer, the Insurer and to the Depositor that as of the
Closing Date or as of such date specifically provided herein:
(a) The Trust is duly organized, validly existing and in good
standing as a Delaware Business Trust under the laws of the State of
Delaware.
(b) The Trust has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and
perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Trust has duly authorized the
execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming
due authorization, execution and delivery hereof by the Depositor, the
Servicer and the Indenture Trustee, constitutes a legal, valid and
binding obligation of the Trust, enforceable against it in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity.
(c) The execution and delivery of this Agreement by the Trust and
the performance of and compliance with the terms of this Agreement
will not (a) violate the Certificate of Trust, Trust Agreement or
other constituent documents of the Trust or any law, rule, regulation,
order, judgment, award, administrative interpretation, injunction,
writ, decree or the like affecting the Trust or by which the Trust is
bound or (b) result in a breach of or constitute a default under any
indenture or other material agreement to which the Trust is a party or
by which the Trust is bound, which in the case of either clause (a) or
(b) will have a material adverse effect on the Trust's ability to
perform its obligations under this Agreement.
(d) There are no actions or proceedings against, investigations
known to it of, the Trust before any court, administrative or other
tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the consummation of the transactions contemplated
by this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Trust of its obligations
under, or validity or enforceability of, this Agreement.
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(e) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Trust of, or compliance by the Trust with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or
orders, if any, that have been obtained prior to the Closing Date.
It is understood and agreed that the representations and
warranties set forth in this Section 2.08 shall survive delivery of the Mortgage
Files to the Indenture Trustee and shall inure to the benefit of the Noteholders
and the Insurer notwithstanding any restrictive or qualified endorsement or
assignment. Upon discovery by any of the Depositor, the Servicer or the
Indenture Trustee of a breach of any of such representations and warranties
which materially and adversely affects the value of any Mortgage Loan or the
interests therein of the Noteholders and the Insurer, the party discovering such
breach shall give prompt written notice to the other parties hereto, the
Originator and the Insurer and in no event later than two Business Days from the
date of such discovery.
Section 2.09. Issuance of Securities.
(a) The Trust acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the
provisions of Sections 2.02, 2.03 and 2.04, together with the
assignment to it of all other assets included in the Trust Property,
receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery, the Trust and Indenture Trustee, pursuant to
the written request of the Trust, are executing, authenticating and
delivering the Notes to or upon the order of the Trust, in accordance
with the terms of the Indenture.
(b) In consideration of the conveyance to it by the Depositor of
the Mortgage Loans as contemplated in Section 2.01, subject to the
provisions of sections 2.03 and 2.04, the Owner Trustee is executing,
authenticating and delivering on behalf of the Trust the Certificate
issuable pursuant to Section 4.2 of the Trust Agreement to or upon the
written order of the Depositor.
Section 2.10. Satisfaction and Discharge of Warehouse Liens.
(a) The Trust agrees to satisfy and discharge, effective on the
Closing Date, all Warehouse Liens with respect to the Mortgage Loans.
(b) [Reserved]
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST PROPERTY
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on
behalf of the Indenture Trustee and in the best interests of and for the benefit
of the Securityholders and the Insurer (as determined by the Servicer in its
reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and loan servicers administering similar
mortgage loans but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or
any Affiliate of the Servicer or any Sub-Servicer may have with
the related Mortgagor;
(ii) the ownership of any Security by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make Monthly Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable. The
Servicer shall promptly notify the Back-up Servicer in writing of any event,
circumstance or occurrence which materially adversely affects the ability of the
Servicer to Service the Mortgage Loans or to otherwise perform and carry out its
duties, responsibilities and obligations under and in accordance with this
Agreement. Without limiting the generality of the foregoing, the Servicer in its
own name or in the name of a Sub-Servicer is hereby authorized and empowered
when the Servicer believes it reasonably necessary in its best judgment in order
to comply with its servicing duties hereunder, to execute and deliver, on behalf
of the Indenture Trustee and the Noteholders or any of them, and upon notice to
the Indenture Trustee, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Mortgage Loans and the
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Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Indenture Trustee, the Noteholders and the Insurer. The Servicer shall service
and administer the Mortgage Loans in accordance with applicable state and
federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. The Servicer shall also comply in the performance of
this Agreement with all reasonable rules and requirements of each insurer under
any standard hazard insurance policy. Subject to Section 3.19, the Indenture
Trustee shall execute, at the written request of the Servicer, and furnish the
Servicer and any Sub-Servicer any special or limited powers of attorney and
other documents necessary or appropriate to enable the Servicer or any
Sub-Servicer to carry out their servicing and administrative duties hereunder
and the Indenture Trustee shall not be liable for the actions of the Servicer or
any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph, the
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11. Any cost incurred by the Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating the Stated
Principal Balance of a Mortgage Loan or payments to Noteholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit.
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that the Servicer shall have obtained the consent of the
Insurer and provided such agreements would not result in a withdrawal
or a downgrading by any Rating Agency of the rating or any shadow
rating on the Notes) with Sub-Servicers, for the servicing and
administration of the Mortgage Loans.
(b) Each Sub-Servicer shall be (i) authorized to transact
business in the state or states where the related Mortgaged Properties
it is to service are situated, if and to the extent required by
applicable law to enable the Sub-Servicer to perform its obligations
hereunder and under the Sub-Servicing Agreement, (ii) an institution
approved as a mortgage loan originator by the Federal Housing
Administration or an institution the deposit accounts in which are
insured by the FDIC, and (iii) a FHLMC or FNMA approved mortgage
servicer. Each Sub-Servicing Agreement must impose on the Sub-Servicer
requirements
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conforming to the provisions set forth in Section 3.08 and provide for
servicing of the Mortgage Loans consistent with the terms of this
Agreement. The Servicer will examine each Sub-Servicing Agreement and
will be familiar with the terms thereof. The terms of any
Sub-Servicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or
enter into different forms of Sub-Servicing Agreements; provided,
however, that any such amendments or different forms shall be
consistent with and not violate the provisions of this Agreement, and
that no such amendment or different form shall be made or entered into
which could be reasonably expected to be materially adverse to the
interests of the Noteholders, without the consent of the Insurer. Any
variation without the consent of the Insurer from the provisions set
forth in Section 3.08 relating to insurance or priority requirements
of Sub-Servicing Accounts, or credits and charges to the Sub-Servicing
Accounts or the timing and amount of remittances by the Sub-Servicers
to the Servicer, are conclusively deemed to be inconsistent with this
Agreement and therefore prohibited. The Servicer shall deliver to the
Indenture Trustee, the Back-up Servicer and the Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof,
promptly upon the Servicer's execution and delivery of such
instruments.
(c) As part of its servicing activities hereunder, the Servicer,
for the benefit of the Indenture Trustee, the Noteholders and the
Insurer, shall enforce the obligations of each Sub-Servicer under the
related Sub-Servicing Agreement, of the Unaffiliated Seller under the
Unaffiliated Seller's Agreement, and of the Originator under the
Purchase Agreement and Assignment, including, without limitation, any
obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan
on account of missing or defective documentation or on account of a
breach of a representation, warranty or covenant, as described in
Section 2.05(a). Such enforcement, including, without limitation, the
legal prosecution of claims, termination of Sub-Servicing Agreements,
and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Servicer, in
its good faith business judgment, would require were it the owner of
the related Mortgage Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only
(i) from a general recovery resulting from such enforcement, to the
extent, if any, that such recovery exceeds all amounts due in respect
of the related Mortgage Loans, or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the Unaffiliated Seller's
Agreement against the Unaffiliated Seller shall be effected by the
Servicer and the Originator in accordance with the foregoing
provisions of this paragraph. Enforcement of the Purchase Agreement
and Assignment against the Originator shall be effected by the
Indenture Trustee in accordance with the provisions of this paragraph.
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Section 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement but only with the prior consent of the Insurer. In the
event of termination of any Sub-Servicer, all servicing obligations of such
Sub-Servicer shall be assumed simultaneously by the Servicer without any act or
deed on the part of such Sub-Servicer or the Servicer, and the Servicer either
shall service directly the related Mortgage Loans or shall enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 3.02. The Sub-Servicer shall give written notice to the Back-up Servicer
and the Insurer of the termination of any Sub-Servicer.
Any Sub-Servicing Agreement shall include the provision that (i)
such agreement may be immediately terminated by the Back-up Servicer or
Indenture Trustee without fee, in accordance with the terms of this Agreement,
in the event that the Servicer shall, for any reason, no longer be the Servicer
(including termination due to a Servicer Event of Default) or (ii) clearly and
unambiguously states that any termination fee is the sole responsibility of the
Servicer and none of the Trust, the Back-up Servicer, the Indenture Trustee, the
Securityholders or the Insurer has any liability therefor, regardless of the
circumstances surrounding such termination.
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee, the Noteholders and the Insurer for the servicing and
administering of the Mortgage Loans in accordance with the provisions of Section
3.01 without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer by such Sub-Servicer and nothing contained
in this Agreement shall be deemed to limit or modify such indemnification.
Section 3.05. No Contractual Relationship between Sub-Servicers
and Trust, Indenture Trustee, Noteholders or Insurer.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and none of the Trust, the Back-up Servicer, the Indenture
Trustee, the Securityholders or the Insurer shall be deemed to be a party
thereto or to have any claims, rights, obligations, duties or liabilities with
respect to the Sub-Servicer except as set forth in Section 3.06. The Servicer
shall be solely liable for all fees owed by it to any Sub-S
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Servicer, irrespective of whether the Servicer's compensation pursuant to this
Agreement is sufficient pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing
Agreements by Indenture Trustee.
In the event the original Servicer shall for any reason no longer
be the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Indenture Trustee or its designee shall thereupon assume all of
the rights and obligations of the Servicer under each Sub-Servicing Agreement
that the Servicer may have entered into, unless the Indenture Trustee (at the
direction of the Insurer) elects to terminate any Sub-Servicing Agreement in
accordance with its terms as provided in Section 3.03. Upon such assumption, the
Back-up Servicer, its designee or the successor servicer for the Back-up
Servicer appointed pursuant to Section 7.02 shall be deemed, subject to Section
3.03, to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to each Sub-Servicing Agreement to the same
extent as if each Sub-Servicing Agreement had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under any Sub-Servicing Agreement.
The Servicer at its expense shall, upon request of the Indenture
Trustee or the Back-up Servicer, deliver to the assuming party all documents and
records relating to each Sub-Servicing Agreement and the Mortgage Loans then
being serviced and an accounting of amounts collected and held by or on behalf
of it, and otherwise use its best efforts to effect the orderly and efficient
transfer of the Sub-Servicing Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it would follow with respect to mortgage
loans comparable to the Mortgage Loans and held for its own account. Consistent
with the foregoing, the Servicer may in its discretion (i) waive any late
payment charge or, if applicable, penalty interest, (ii) extend the due dates
for the Monthly Payments due on a Mortgage Note for a period of not greater than
90 days, or (iii) if the Servicer provides prior written notice to the Insurer
to which the Insurer does not object within two Business Days, extend the due
dates for Monthly Payments due on a Mortgage Loan for a period of not greater
than 180 days; provided, that any extension pursuant to clause (ii) or clause
(iii) above shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder; and provided, further, that no more than
two such extensions shall be granted with respect to any single Mortgage Loan.
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Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the first
Business Day thereafter. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on the Mortgage Loans when the Sub-Servicer
receives such payments.
Section 3.09. [Reserved].
Section 3.10. Collection Accounts.
(a) On behalf of the Indenture Trustee, the Servicer shall
establish and maintain one or more accounts (such account or accounts,
the "Collection Account"), held in trust for the benefit of the
Indenture Trustee, the Noteholders and the Insurer. On behalf of the
Indenture Trustee, the Servicer shall deposit or cause to be deposited
in the clearing account in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan
servicing activities on a daily basis, and in no event more than one
Business Day after the Servicer's receipt thereof, and shall
thereafter deposit in the Collection Account, in no event more than
one Business Day after the deposit of such payments into such clearing
account, the following payments and collections received or made by it
on or subsequent to the Cut-off Date:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans in each Group;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan in each Group;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property and amounts paid by the Servicer in connection
with a purchase of Mortgage Loans and REO Properties in each
Group pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to
Section 3.14 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account with respect to the Mortgage Loans in
each Group;
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(v) any amounts required to be deposited by the
Servicer pursuant to the second paragraph of Section 3.16(a)
in respect of any blanket policy deductibles with respect to
the Mortgage Loans in each Group; and
(vi) any Purchase Price or Substitution Shortfall
Amount delivered to the Servicer.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment or late
payment charges or assumption fees need not be deposited by the Servicer in the
Collection Account. In the event the Servicer shall deposit in the Collection
Account any amount not required to be deposited therein, it may at any time
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding.
(b) The Indenture Trustee shall establish and maintain the
Distribution Account in accordance with the provisions of Section 8.7
of the Indenture. The Servicer shall deliver to the Indenture Trustee
in immediately available funds for deposit in the Distribution Account
on or before 3:00 p.m. New York time (i) on the Servicer Remittance
Date, that portion of the Available Distribution Amount for the
related Payment Date then on deposit in the Collection Account, and
(ii) on each Business Day as of the commencement of which the balance
on deposit in the Collection Account exceeds $75,000 following any
withdrawals pursuant to the next succeeding sentence, the amount of
such excess, but only if the Collection Account constitutes an
Eligible Account solely pursuant to clause (ii) of the definition of
"Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any
Business Day and the Collection Account constitutes an Eligible
Account solely pursuant to clause (ii) of the definition of "Eligible
Account," the Servicer shall, on or before 3:00 p.m. New York time on
such Business Day, withdraw from the Collection Account any and all
amounts payable or reimbursable to the Depositor, the Servicer, the
Indenture Trustee, the Unaffiliated Seller or any Sub-Servicer
pursuant to Section 3.11 and shall pay such amounts to the Persons
entitled thereto.
(c) Funds in the Collection Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section
3.14. The Servicer shall give notice to the Indenture Trustee and the
Insurer of the location of the Collection Account maintained by it
when established and prior to any change thereof. The Indenture
Trustee shall give notice to the Servicer, the Trust, the Depositor
and the Insurer of the location of the Distribution Account when
established and prior to any change thereof.
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(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Indenture Trustee for deposit in the
Distribution Account. In the event the Servicer shall deliver to the
Indenture Trustee for deposit in the Distribution Account any amount
not required to be deposited therein, it may at any time request that
the Indenture Trustee withdraw such amount from the Distribution
Account and remit to it any such amount, any provision herein to the
contrary notwithstanding. In addition, the Servicer shall deliver to
the Indenture Trustee from time to time for deposit the amounts set
forth in clauses (i) through (v) below, and the Indenture Trustee
shall deposit such amounts in the Distribution Account:
(i) any Monthly Advances for each Group, as required
pursuant to Section 4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.25(d) or (f) in connection with any REO Property
in each Group;
(iii) any amounts to be paid in connection with a
purchase of Mortgage Loans and REO Properties in each Group
pursuant to Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.26 in connection with any Prepayment Interest
Shortfalls; and
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such
matters.
(e) Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or
other source, the Indenture Trustee shall deposit such funds in the
Distribution Account, subject to withdrawal thereof pursuant to
Section 7.02(b) or as otherwise permitted hereunder. In addition, the
Servicer shall deposit in the Distribution Account any amounts
required to be deposited pursuant to Section 3.14 in connection with
losses realized on Permitted Investments with respect to funds held in
the Distribution Account.
(f) Notwithstanding any contrary provision of this Agreement
(including the provisions of this Section 3.10), (i) the Servicer
shall be deemed to be in compliance with the provisions of this
Section 3.10 if amounts in any clearing account referred to in Section
3.10(a) which the Servicer would otherwise be required by this Section
3.10 to deposit or cause to be deposited into the Collection Account
are instead deposited or caused to be deposited into the Distribution
Account provided that such deposit into the Distribution Account is
made within the time period that such amount would otherwise have been
required to be deposited into the Collection Account (i.e., within one
Business Day of the Servicer's receipt thereof), (ii) amounts
otherwise payable or distributable from the Collection Account may be
paid or distributed from the
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Distribution Account to the extent of any funds deposited into the
Distribution Account rather than the Collection Account pursuant to
clause (i) (as certified by the Servicer), and (iii) the provisions of
this Agreement (including references herein to the Collection Account
and the Distribution Account) shall be interpreted and construed to
give effect to the foregoing.
Section 3.11. Withdrawals from the Collection Account.
The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:
(i) to remit to the Indenture Trustee for deposit in the
Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted
pursuant to the first sentence of Section 3.10(d);
(ii) subject to Section 3.18(d), to reimburse the Servicer
for Monthly Advances, but only to the extent of amounts received
which represent Late Collections (net of the related Servicing
Fees) of Monthly Payments on Mortgage Loans with respect to which
such Monthly Advances were made in accordance with the provisions
of Section 4.03;
(iii) subject to Section 3.18(d), to pay the Servicer or any
Sub-Servicer any unpaid Servicing Fees and reimburse any
unreimbursed Servicing Advances with respect to each Mortgage
Loan, but only to the extent of any Liquidation Proceeds and
Insurance Proceeds received with respect to such Mortgage Loan;
(iv) to pay to the Servicer as servicing compensation (in
addition to the Servicing Fee) on the Servicer Remittance Date
any interest or investment income earned on funds deposited in
the Collection Account;
(v) to pay to the Servicer, the Depositor or the
Unaffiliated Seller, as the case may be, with respect to each
Mortgage Loan that has previously been purchased or replaced
pursuant to Section 2.05 all amounts received thereon not
included in the Purchase Price or the Substitution Shortfall
Amount;
(vi) from proceeds on the Collection Account with respect to
the Mortgage Loans in the related Group to reimburse the Servicer
for any Monthly Advance or Servicing Advance previously made
which the Servicer has determined to be a Nonrecoverable Monthly
Advance in accordance with the provisions of Section 4.03;
(vii) from proceeds on the Collection Account with respect
to the Mortgage Loans in the related Group to reimburse the
Servicer or the Depositor for expenses incurred by or
reimbursable to the Servicer or the Depositor, as the case may
be, pursuant to Section 6.03;
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(viii) from proceeds on the Collection Account with respect
to the Mortgage Loans in the related Group to reimburse the
Servicer or the Indenture Trustee, as the case may be, for
expenses reasonably incurred in respect of the breach or defect
giving rise to the purchase obligation under Section 2.05 or
Section 2.06 of this Agreement that were included in the Purchase
Price of the Mortgage Loan, including any expenses arising out of
the enforcement of the purchase obligation;
(ix) from proceeds on the Collection Account with respect to
the Mortgage Loans in the related Group to pay, or to reimburse
the Servicer for advances in respect of, expenses incurred in
connection with any Mortgage Loan pursuant to Section 3.18(b);
and
(x) to clear and terminate the Collection Account upon
termination of this Agreement pursuant to Section 10.01(a).
The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The
Servicer shall provide written notification to the Indenture Trustee, on or
prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclauses (vi) and (vii)
above.
Section 3.12. [Reserved].
Section 3.13. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall
perform all its duties and the duties of the Trust under the
Indenture. In addition, the Servicer shall consult with the Owner
Trustee as the Servicer deems appropriate regarding the duties of
the Trust under the Indenture. The Servicer shall monitor the
performance of the Trust and shall advise the Owner Trustee when
action is necessary to comply with the Trust's duties under the
Indenture. The Servicer shall prepare for execution by the Trust
or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates
and opinions as it shall be the duty of the Trust to prepare,
file or deliver pursuant to the Indenture. In furtherance of the
foregoing, the Servicer shall take all necessary action that is
the duty of the Trust to take pursuant to the Indenture
including, without limitation, pursuant to Sections 3.4, 3.5,
3.6, 3.7, 3.9, 3.16, 3.19, 7.1, 7.3, and of the Indenture.
(b) Duties with Respect to the Trust.
(i) In addition to the duties of the Servicer set forth
in this Agreement or any of the Basic Documents, the
Servicer shall perform such calculations and shall prepare
for execution by the Trust or the Owner Trustee or shall
cause the preparation by other appropriate
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Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the
duty of the Trust or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Basic
Documents or under state and federal tax and securities laws
shall take all appropriate action that it is the duty of the
Trust to take pursuant to this Agreement or any of the
Basic Documents. In accordance with the directions of the
Trust or the Owner Trustee, the Servicer shall administer,
perform or supervise the performance of such other
activities in connection with the Collateral (including the
Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Trust or
the Owner Trustee and are reasonably within the capability
of the Servicer.
(ii) Notwithstanding anything in this Agreement or the
Basic Documents to the contrary, the Servicer shall be
responsible for performance of the duties of the Trust set
forth in Article VIII of the Trust Agreement with respect
to, among other things, accounting and reports to the
Certificateholder (as defined in the Trust Agreement).
(iii) The Servicer shall perform the duties of the
Servicer specified in Section 14.2 of the Trust Agreement
required to be performed in connection with the resignation
or removal of the Owner Trustee, and any other duties
expressly required to be performed by the Servicer under
this Agreement or any of the Basic Documents.
(iv) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Servicer may
enter into transactions with or otherwise deal with any of
its Affiliates; provided, however, that the terms of any
such transactions or dealings shall be in accordance with
any directions received from the Trust and shall be, in the
Servicer's opinion, no less favorable to the Trust in any
material respect.
(c) Tax Matters. The Servicer shall prepare and file, on
behalf of the Trust, all tax returns, tax elections, financial
statements, and such annual or other reports of the Trust as are
necessary for the preparation of tax reports as provided in
Article VIII of the Trust Agreement. All tax returns will be
signed by the Owner Trustee on behalf of the Trust.
(d) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the
Servicer shall not take any action pursuant to this Article III
unless within a reasonable time before the taking of such action,
the Servicer shall have notified the Owner Trustee and the
Trustee of the proposed action and the Owner Trustee and, with
respect to items (A), (B), (C) and (D) below, the Trustee shall
not have withheld consent or provided an alternative direction.
For the purpose of the preceding sentence, "non-ministerial
matters" shall include:
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(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the Trust
and the compromise of any action, claim or lawsuit brought
by or against the Trust (other than in connection with the
collection of the Mortgage Loans);
(C) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(D) the appointment of successor Note Registrars, Note
Paying Agents and successor Trustees pursuant to the
Indenture or the appointment of successor Servicers or the
consent to the assignment by the Note Registrar, Note Paying
Agent or Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
Section 3.14. Investment of Funds in the Investment Accounts.
(a) The Servicer may direct any depository institution
maintaining the Collection Account, the Expense Account, the
Distribution Account and the Servicing Accounts (each, for purposes of
this Section 3.14, an "Investment Account"), to invest the funds in
such Investment Account in one or more Permitted Investments bearing
interest or sold at a discount, and maturing, unless payable on
demand, (i) no later than the Business Day immediately preceding the
next Payment Date, if a Person other than the Indenture Trustee is the
obligor thereon, and (ii) no later than the next Payment Date, if the
Indenture Trustee is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name
of the Indenture Trustee (in its capacity as such) or in the name of a
nominee of the Indenture Trustee. The Indenture Trustee on behalf of
the Noteholders shall be entitled to sole possession over each such
investment and the income thereon, and any certificate or other
instrument evidencing any such investment shall be delivered directly
to the Indenture Trustee or its agent, together with any document of
transfer necessary to transfer title to such investment to the
Indenture Trustee or its nominee. In the event amounts on deposit in
an Investment Account are at any time invested in a Permitted
Investment payable on demand, the Indenture Trustee shall at the
direction of the Servicer:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the
last day such Permitted Investment may otherwise mature
hereunder in an amount equal to the lesser of (1) all
amounts then payable
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thereunder and (2) the amount required to be withdrawn
on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by a Responsible Officer of the
Indenture Trustee that such Permitted Investment would
not constitute a Permitted Investment in respect of
funds thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the
Distribution Account and the Servicing Accounts held by or on behalf
of the Servicer or the Indenture Trustee, shall be for the benefit of
the Servicer and shall in the case of the Servicer Accounts and the
Collection Account be subject to its withdrawal in accordance with
Section 3.09 and Section 3.11, respectively. The Servicer shall
deposit in the Collection Account, the Expense Account or the
Distribution Account, as applicable, the amount of any loss incurred
in respect of any such Permitted Investment made with funds in such
accounts immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required
under any Permitted Investment, the Indenture Trustee may and, subject
to Section 6.1 of the Indenture and Section 6.2(g) of the Indenture,
upon the request of the Insurer, shall take such action as may be
appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate proceedings.
Section 3.15. [intentionally omitted]
Section 3.16. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser
of the current principal balance of such Mortgage Loan and the amount
necessary to fully compensate for any damage or loss to the
improvements which are a part of such property on a replacement cost
basis, in each case in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained
in the related hazard insurance policy. The Servicer shall also cause
to be maintained fire and hazard insurance with extended coverage on
each REO Property in an amount which is at least equal to the lesser
of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the outstanding principal balance of
the related Mortgage Loan at the time it became an REO Property, plus
accrued interest at the Mortgage Rate and related
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Servicing Advances. The Servicer will comply in the performance of
this Agreement with all reasonable rules and requirements of each
insurer under any such hazard policies. Any amounts to be collected by
the Servicer under any such policies (other than amounts to be applied
to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with
the procedures that the Servicer would follow in servicing loans held
for its own account, subject to the terms and conditions of the
related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if
received in respect of a Mortgage Loan, or in the REO Account, subject
to withdrawal pursuant to Section 3.25, if received in respect of an
REO Property. Any cost incurred by the Servicer in maintaining any
such insurance shall not, for the purpose of calculating distributions
to Noteholders and the Insurer, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any
Mortgagor other than pursuant to such applicable laws and regulations
as shall at any time be in force and as shall require such additional
insurance. If the Mortgaged Property or REO Property is at any time in
an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Servicer will
cause to be maintained a flood insurance policy in respect thereof.
Such flood insurance shall be in an amount equal to the lesser of (i)
the unpaid principal balance of the related Mortgage Loan and (ii) the
maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in
such program).
In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its obligations as set
forth in the first two sentences of this Section 3.16, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.16, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Indenture Trustee, the Noteholders and the
Insurer, claims under any such blanket policy in a timely fashion in accordance
with the terms of such policy.
(b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and
omissions for failure in the performance of the Servicer's obligations
under this Agreement, which policy or policies shall be in such form
and amount that would meet the requirements of FNMA or FHLMC if it
were the purchaser of the Mortgage Loans. The
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Servicer shall also maintain a fidelity bond in the form and amount
that would meet the requirements of FNMA or FHLMC, unless the Servicer
has obtained a waiver of such requirements from FNMA or FHLMC. The
Servicer shall be deemed to have complied with this provision if an
Affiliate of the Servicer has such errors and omissions and fidelity
bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. Any
such errors and omissions policy and fidelity bond shall by its terms
not be cancelable without thirty days' prior written notice to the
Indenture Trustee. The Servicer shall also cause each Sub-Servicer to
maintain a policy of insurance covering errors and omissions and a
fidelity bond which would meet such requirements.
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption
Agreements.
The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, or if any of the other conditions set
forth in the proviso to the preceding sentence apply, the Servicer will enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer is
also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the underwriting criteria of the Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate and the amount of the
Monthly Payment) may be amended or modified, except as otherwise required
pursuant to the terms thereof. The Servicer shall notify the Indenture Trustee
that any such substitution or assumption agreement has been completed by
forwarding to the Indenture Trustee the executed original of such
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substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.17, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
Section 3.18. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with the
servicing standard set forth in Section 3.01, to foreclose upon or
otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to
which no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.07. The Servicer shall be
responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated
in Sections 3.11 and 3.25. The foregoing is subject to the provision
that, in any case in which Mortgaged Property shall have suffered
damage from an Uninsured Cause, the Servicer shall not be required to
expend its own funds toward the restoration of such property unless
it shall determine in its discretion that such restoration will
increase the proceeds of liquidation of the related Mortgage Loan
after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section 3.18
or any other provision of this Agreement, with respect to any Mortgage
Loan as to which the Servicer has received actual notice of, or has
actual knowledge of, the presence of any toxic or hazardous substance
on the related Mortgaged Property, the Servicer shall not, on behalf
of the Trust, the Indenture Trustee, the Insurer or otherwise, either
(i) obtain title to such Mortgaged Property as a result of or in lieu
of foreclosure or otherwise, or (ii) otherwise acquire possession of,
or take any other action with respect to, such Mortgaged Property, if,
as a result of any such action, the Trust, the Indenture Trustee, the
Noteholders or the Insurer would be considered to hold title to, to be
a "mortgagee-in-possession" of, or to be an "owner" or "operator" of
such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a
prudent report prepared by a Person who regularly conducts
environmental audits using customary industry standards, that:
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(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best
economic interest of the Indenture Trustee, the Noteholders
and the Insurer to take such actions as are necessary to
bring the Mortgaged Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any
hazardous substances, hazardous materials, hazardous wastes
or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Indenture Trustee, the
Noteholders and the Insurer to take such actions with
respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section 3.18 shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11(ix), such right of reimbursement being prior to the rights of Noteholders
to receive any amount in the Collection Account received in respect of the
affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the
best economic interest of the Indenture Trustee, Noteholders and the Insurer to
take such actions as are necessary to bring any such Mortgaged Property into
compliance with applicable environmental laws, or to take such action with
respect to the containment, cleanup or remediation of hazardous substances,
hazardous materials, hazardous wastes, or petroleum-based materials affecting
any such Mortgaged Property, then the Servicer shall take such action as it
deems to be in the best economic interest of the Indenture Trustee, Noteholders
and the Insurer. The cost of any such compliance, containment, cleanup or
remediation shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11 (ix), such right of reimbursement being prior to the rights of Noteholders
to receive any amount in the Collection Account received in respect of the
affected Mortgage Loan or other Mortgage Loans.
(c) The Servicer may at its option purchase from the Trust any
Mortgage Loan that is 90 days or more delinquent, which the Servicer
determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing
to the Indenture Trustee and the Insurer prior to purchase), at a
price equal to the Purchase Price. The Purchase Price for any Mortgage
Loan purchased hereunder shall be deposited in the Collection Account,
and the Indenture Trustee, upon receipt of written certification from
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the Servicer of such deposit, shall release or cause to be released to
the Servicer the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without
recourse, as the Servicer shall furnish and as shall be necessary to
vest in the Servicer title to any Mortgage Loan released pursuant
hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial
collection of Insurance Proceeds or Liquidation Proceeds, in respect
of any Mortgage Loan, will be applied in the following order of
priority: first, to reimburse the Servicer or any Sub-Servicer for any
related unreimbursed Servicing Advances and Monthly Advances, pursuant
to Section 3.11(ii) or (iii); second, to accrued and unpaid interest
on the Mortgage Loan, to the date of the Final Recovery Determination,
or to the Due Date prior to the Payment Date on which such amounts are
to be distributed if not in connection with a Final Recovery
Determination; and third, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery allocated to interest is less than
the full amount of accrued and unpaid interest due on such Mortgage
Loan, the amount of such recovery will be allocated by the Servicer as
follows: first, to unpaid Servicing Fees; and second, to the balance
of the interest then due and owing. The portion of the recovery so
allocated to unpaid Servicing Fees shall be reimbursed to the Servicer
or any Sub-Servicer pursuant to Section 3.11(iii). The portion of the
recovery allocated to interest (net of unpaid Servicing Fees) and the
portion of the recovery allocated to principal of the Mortgage Loan
shall be applied as follows: first, to reimburse the Servicer for any
related unreimbursed Monthly Advances in accordance with Section 3.11
(ii), and second, as part of the amounts to be transferred to the
Distribution Account in accordance with Section 3.10(b).
Section 3.19. Indenture Trustee to Cooperate; Release of Mortgage
Files.
Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will immediately notify the
Indenture Trustee and the Insurer by a certification in the form of Exhibit E-2
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Mortgage File. Upon receipt of such certification and request, the Indenture
Trustee shall promptly release the related Mortgage File to the Servicer. No
expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.
Subject to the following sentence from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, including,
for this purpose,
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collection under any insurance policy relating to the Mortgage Loans, the
Indenture Trustee shall, upon request of the Servicer and delivery to the
Indenture Trustee of a Request for Release in the form of Exhibit E-1, release
the related Mortgage File to the Servicer, and the Indenture Trustee shall, at
the direction of the Servicer, execute such documents as shall be necessary to
the prosecution of any such proceedings. Such Request for Release shall obligate
the Servicer to return each and every document previously requested from the
Mortgage File to the Indenture Trustee when the need therefor by the Servicer no
longer exists, unless the Mortgage Loan has been liquidated and the Liquidation
Proceeds no longer exist, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Mortgage File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or nonjudicially, and
the Servicer has delivered to the Indenture Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to which such
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Indenture
Trustee shall execute and deliver to the Servicer, with copies to the Insurer to
be delivered by the Servicer, any court pleadings, requests for trustee's sale
or other documents necessary to the foreclosure or trustee's sale in respect of
a Mortgaged Property or to any legal action brought to obtain judgment against
any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the Mortgage
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Indenture Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale.
Section 3.20. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the
Servicer shall be entitled to the Servicing Fee with respect to each Mortgage
Loan payable in each Group solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.26. In addition, the Servicer shall be
entitled to recover unpaid related Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.25. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement;
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provided, however, that the Servicer may pay any fee to a Sub-Servicer out of
the Servicing Fee.
Additional servicing compensation in the form of late payment
charges or otherwise shall be retained by the Servicer (subject to Section 3.26)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw from
the Collection Account, and pursuant to Section 3.25(b) to withdraw from any REO
Account, as additional servicing compensation, interest or other income earned
on deposits therein, subject to Section 3.14 and Section 3.26, and shall also be
entitled to interest or other income earned on other Investment Accounts
pursuant to the Indenture. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder (including
premiums for the insurance required by Section 3.16, to the extent such premiums
are not paid by the related Mortgagors or by a Sub-Servicer, servicing
compensation of each Sub-Servicer, and to the extent provided in Section 6.7 of
the Indenture, the fees and expenses of the Indenture Trustee) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
Section 3.21. Reports to the Indenture Trustee; Collection
Account Statements.
Not later than fifteen days after each Payment Date, the Servicer
shall forward to the Trust, the Indenture Trustee, the Insurer and the Depositor
a statement prepared by the Servicer setting forth the status of the Collection
Account as of the close of business on such Payment Date with respect to the
Mortgage Loans in Group I or Group II, and showing, for the period covered by
such statement, the aggregate amount of deposits into and withdrawals from the
Collection Account of each category of deposit specified in Section 3.10(a) and
each category of withdrawal specified in Section 3.11. Such statement may be in
the form of the then current FNMA Monthly Accounting Report for its Guaranteed
Mortgage Pass-Through Program with appropriate additions and changes, and shall
also include information as to the aggregate of the outstanding principal
balances of all of the Mortgage Loans in Group I and Group II as of the last day
of the calendar month immediately preceding such Payment Date. Copies of such
statement shall be provided by the Indenture Trustee to any Securityholder and
to any Person identified to the Indenture Trustee as a prospective transferee of
a Security, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Indenture Trustee.
Section 3.22. Statement as to Compliance.
The Servicer will deliver to the Trust, the Indenture Trustee,
the Insurer and the Depositor not later than 90 days following the end of the
fiscal year of the Servicer, which as of the Closing Date ends on the last day
in December, an Officers' Certificate stating, as to each signatory thereof,
that (i) a review of the activities of the Servicer during the preceding year
and of performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this
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Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Copies of any such report shall be
provided by the Indenture Trustee to any Securityholder and to any Person
identified to the Indenture Trustee as a prospective transferee of a Security,
upon request at the expense of the requesting party, provided such report is
delivered by the Servicer to the Indenture Trustee.
Section 3.23. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of
the Servicer, the Servicer, at its expense, shall cause a nationally recognized
firm of independent certified public accountants to furnish to the Servicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Servicer which includes an assertion
that the Servicer has complied with certain minimum residential mortgage loan
servicing standards, identified in the Uniform Single Audit Program for Mortgage
Bankers established by the Mortgage Bankers Association of America, with respect
to the servicing of residential mortgage loans during the most recently
completed fiscal year and (ii) on the basis of an examination conducted by such
firm in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. In rendering its report such firm may rely, as to matters
relating to the direct servicing of residential mortgage loans by Sub-Servicers,
upon comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the same
standards (rendered within one year of such report) with respect to those
Sub-Servicers. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Trust, the Indenture Trustee, the Insurer
and each Rating Agency. Copies of such report shall be provided by the Indenture
Trustee to any Securityholder upon request at the Servicer's expense, provided
that such report is delivered by the Servicer to the Indenture Trustee and such
report does not prohibit such delivery.
Section 3.24. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift Supervision,
the FDIC, and any other federal or state banking or insurance regulatory
authority that may exercise authority over any Securityholder, access to the
documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Securityholder, the Insurer, the
Trust, the Indenture Trustee and to any Person identified to the Servicer as a
prospective transferee of a Security, upon reasonable request during normal
business hours at the offices of the Servicer designated by it at the expense of
the Person requesting such access.
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Section 3.25. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Indenture Trustee, or its nominee, on behalf
of the Noteholders, the Certificateholder and the Insurer.
(b) The Servicer shall segregate and hold all funds collected and
received in connection with the operation of any REO Property separate
and apart from its own funds and general assets and shall establish
and maintain with respect to REO Properties an account held in trust
for the Indenture Trustee for the benefit of the Noteholders and the
Insurer (the "REO Account"), which shall be an Eligible Account. The
Servicer shall be permitted to allow the Collection Account to serve
as the REO Account, subject to separate ledgers for each REO Property.
The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement,
to do any and all things in connection with any REO Property as are
consistent with the manner in which the Servicer manages and operates
similar property owned by the Servicer or any of its Affiliates, on
such terms and for such period as the Servicer deems to be in the best
interests of the Noteholders and the Insurer. In connection therewith,
the Servicer shall deposit, or cause to be deposited, on a daily basis
in the REO Account all revenues received by it with respect to an REO
Property and shall withdraw therefrom funds necessary for the proper
operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect of
such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain such REO
Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
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(iv) the terms and conditions of any such contract shall not
be inconsistent herewith;
(v) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay all
costs and expenses incurred in connection with the operation and
management of such REO Property, including those listed above and
remit all related revenues (net of such costs and expenses) to
the Servicer soon as practicable, but in no event later than
thirty days following the receipt thereof by such Independent
Contractor;
(vi) none of the provisions of this Section 3.25(c) relating
to any such contract or to actions taken through any such
Independent Contractor shall be deemed to relieve the Servicer of
any of its duties and obligations to the Indenture Trustee on
behalf of the Noteholders and the Insurer with respect to the
operation and management of any such REO Property; and
(vii) the Servicer shall be obligated with respect thereto
to the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of
such REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.20 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.25(c)(iii).
(d) In addition to the withdrawals permitted under Section
3.25(c), the Servicer may from time to time make withdrawals from the
REO Account for any REO Property: (i) to pay itself or any
Sub-Servicer unpaid Servicing Fees in respect of the related Mortgage
Loan; and (ii) to reimburse itself or any Sub-Servicer for
unreimbursed Servicing Advances and Monthly Advances made in respect
of such REO Property or the related Mortgage Loan. On the Servicer
Remittance Date, the Servicer shall withdraw from each REO Account
maintained by it and deposit into the Distribution Account in
accordance with Section 3.10(d)(ii), for payment on the related
Payment Date in accordance with Section 8.3 of the Indenture, the
income from the related REO Property received during the prior
calendar month, net of any withdrawals made pursuant to Section
3.25(c) or this Section 3.25(d).
(e) Subject to the time constraints set forth in Section 3.25(a),
each REO Disposition shall be carried out by the Servicer at such
price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall
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be normal and usual in its general servicing activities and as are in
accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related
Mortgage Loan and net of any payment or reimbursement to the Servicer
or any Sub-Servicer as provided above, shall be deposited in the
Distribution Account in accordance with Section 3.10(d)(ii) on the
Servicer Remittance Date in the month following the receipt thereof
for payment on the related Payment Date in accordance with Section 8.3
of the Indenture.
(g) The Servicer shall file information returns with respect to
the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged
Property as required by Sections 6050H, 6050J and 6050P of the Code,
respectively. Such reports shall be in form and substance sufficient
meet the reporting requirements imposed by such Sections 6050H, 6050J
and 6050P of the Code.
Section 3.26. Obligations of the Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for deposit
into the Distribution Account on or before 3:00 p.m. New York time on the
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Payment Date
resulting solely from Principal Prepayments during the related Collection Period
and (ii) the total amount of its Servicing Fee for the most recently ended
calendar month.
Section 3.27. [Reserved].
Section 3.28. Obligations of the Servicer in Respect of Monthly
Payments.
In the event that a shortfall in any collection on or liability
with respect to any Mortgage Loan results from or is attributable to adjustments
to Monthly Payments or Stated Principal Balances that were made by the Servicer
in a manner not consistent with the terms of the related Mortgage Note and this
Agreement, the Servicer, upon discovery or receipt of notice thereof,
immediately shall deliver to the Indenture Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Indenture Trustee, the Insurer, the
Depositor and any successor servicer in respect of any such liability. Such
indemnities shall survive the termination or discharge of this Agreement.
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Section 3.29. [Reserved].
Section 3.30. Obligations Under Indenture.
The Servicer agrees to perform the obligations stated in the
Indenture to be performed by the Servicer, including, without limitation, (i)
provision of the notice of the amounts, if any, that the Insurer has paid in
respect of the Notes pursuant to Section 2.6(d) of the Indenture, (ii) payment
of the expenses and fees referred to in Sections 5.13, 6.7, 6.8 and 6.10(e) of
the Indenture, and (iii) advising the Indenture Trustee with respect to the
manner of surrender of Notes as contemplated in Section 8.3(f) of the Indenture.
Section 3.31. Records.
The Servicer shall maintain appropriate books of account and
records relating to services performed under this Agreement, which books of
account and records shall be accessible for inspection by the Trust at any time
during normal business hours.
Section 3.32. Additional Information to be Furnished to the
Trust.
The Servicer shall furnish to the Trust from time to time such
additional information regarding the Collateral as the Trust shall reasonably
request.
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS; STATEMENTS;
MONTHLY ADVANCES; REALIZED LOSSES; WITHHOLDING
Section 4.01. Payments and Distributions.
The Securityholders shall have the right to receive payments and
distributions in respect of the Securities as set forth in the Indenture and the
Trust Agreement.
Section 4.02. Statements to Securityholders.
On each Servicer Remittance Date, the Servicer shall deliver to
the Trust, the Back-up Servicer, the Indenture Trustee, the Insurer and the
Rating Agencies by telecopy (or by such other means as the Servicer and the
Trust, the Indenture Trustee, the Insurer or the Rating Agencies, as the case
may be, may agree from time to time) a report prepared by the Servicer with
respect to each Group of Mortgage Loans as to the distributions to be made on
the related Payment Date and shall forward to the Indenture Trustee and the
Back-up Servicer by overnight mail a computer readable magnetic tape or diskette
of such report. Both reports (each a "Remittance Report") shall contain the
following information:
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1. the amount of the payment to be made on such Payment Date to
the Holders of each Class of Class A Notes allocable to
principal;
2. the amount of the payment to be made on such Payment Date to
the Holders of each Class of Class A Notes allocable to
interest;
3. the aggregate amount of servicing compensation received by
the Servicer during the related Collection Period and such
other customary information within the knowledge of the
Indenture Trustee as the Indenture Trustee deems necessary
or desirable, or which a Securityholder reasonably requests,
to enable Securityholders to prepare their tax returns;
4. the Scheduled Payments for each Group for such Payment Date
and the respective provisions thereof allocable to principal
and interest;
5. the Available Distribution Amount for each Group for such
Payment Date;
6. the amount, if any, by which the Scheduled Payments for each
Group for such Payment Date exceeds the Available
Distribution Amount for the related Class expected to be on
deposit in the Distribution Account on such Payment Date;
7. the amount of Monthly Advances for each Group to be made by
the Servicer in respect of the related Payment Date, the
aggregate amount of Monthly Advances for each Group
outstanding after giving effect to such Monthly Advances,
and the aggregate amount of Nonrecoverable Monthly Advances
for each Group in respect of such Payment Date;
8. with respect to any reimbursement to be made to the Insurer
on such Payment Date pursuant to Sections 8.3(a)(iii) and
(v) of the Indenture, the amount, if any, allocable to
principal and the amount allocable to interest;
9. Cumulative Insurance Payments for each Group after giving
effect to the distributions to be made on such Payment Date;
10. the Delinquency Percentage for each Group for the related
Collection Period;
11. the Cumulative Loss Percentage for each Group for such
Payment Date;
12. the amount of any Insurance Payment to be made to each Class
of Class A Noteholders on such Payment Date, the amount of
any
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reimbursement payment to be made to the Insurer on such
Payment Date pursuant to Section 8.3(a)(iii) of the
Indenture and the amount of Cumulative Insurance Payments
after giving effect to any such Insurance Payment to such
Class A Noteholders or any such reimbursement payment to the
Insurer;
13. the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties in each Group at the close of
business on such Payment Date;
14. the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average Mortgage
Rate of the Mortgage Loans in each Group as of the related
Due Date;
15. the number and aggregate unpaid principal balance of
Mortgage Loans in each Group (a) 30 days past due, (b) 60
days past due, (c) 90 or more days past due and (d) as to
which foreclosure proceedings have been commenced;
16. with respect to any Mortgage Loan that became an REO
Property in each Group during the preceding calendar month,
the loan number of such Mortgage Loan, the unpaid principal
balance and the Stated Principal Balance of such Mortgage
Loan as of the date it became an REO Property;
17. the book value of any REO Property in each Group as of the
close of business on the last Business Day of the calendar
month preceding the Payment Date;
18. the aggregate amount of Principal Prepayments for each Group
made during the related Collection Period;
19. the aggregate amount of Realized Losses for each Group
incurred during the related Collection Period;
20. the aggregate amount of extraordinary expenses withdrawn
from the Collection Account or the Distribution Account for
such Payment Date;
21. the Note Principal Balance for each Class after giving
effect to the distributions to be made on such Payment Date;
22. the Note Factor for each Class of Notes applicable to such
Payment Date;
23. the Interest Distribution Amount in respect of each Class of
Class A Notes for such Payment Date and the respective
portions thereof, if any, paid under the Policy or (in the
event of a
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Deficiency Event) remaining unpaid following the
distributions to be made in respect of such Notes on such
Payment Date;
24. the aggregate amount of any Prepayment Interest Shortfalls
for each Class for such Payment Date, to the extent not
covered by payments by the Servicer pursuant to Section
3.26;
25. the aggregate amount of Relief Act Interest Shortfalls for
each Class for such Payment Date;
26. the Required Overcollateralization Amount for each Class for
such Payment Date;
27. the Subordination Overcollateralization Amount for each
Class, if any, for such Payment Date;
28. the Subordination Overcollateralization Amount for each
Class, if any, for such Payment Date; and
29. the amount of the distribution to be made on such Payment
Date to the Holder of the Certificate.
[No later than the (10) Business Days after each Servicer
Remittance Date, the Back-up Servicer shall review the information contained in
the Remittance Reports to the extent that such information relates to the [ ].
On the eleventh Business Day after each Servicer Remittance Date, the Back-up
Servicer shall notify the Servicer and the Insurer of any material
inconsistencies relating to the [ ]. The Back-up Servicer shall only review the
information provided by the Servicer in the Remittance Reports and its
obligation to report any inconsistencies shall be limited to those apparent from
the Back-up Servicer's review thereof and those relating to the [ ].
At the request of the Insurer, the Back-up Servicer and the
Servicer shall attempt to reconcile such material inconsistencies and/or to
furnish any such omitted information. Unless the Servicer reasonably believes
that the Back-up Servicer's determinations are correct, the Servicer shall have
no obligation to amend the Remittance Report to reflect the Back-up Servicer's
computations or to include the omitted information; provided notice of such
determination shall be given to the Insurer and the Back-up Servicer by the
Servicer. The Back-up Servicer shall in no event be liable to the Servicer with
respect to any failure of the Back-up Servicer to discover or detect any errors,
inconsistencies, or omissions by the Servicer with respect to the Remittance
Reports except as specifically set forth in this Section 4.02.]
In the case of information furnished pursuant to clauses (1)
through (3) above, the amounts shall be expressed as a dollar amount per Single
Security.
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Indenture Trustee, and the Indenture
Trustee shall
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forward to each Person who at any time during the calendar year was a Holder of
a Note (a) a statement containing the information set forth in clauses (1)
through (3) above, aggregated for such calendar year or applicable portion
thereof during which such person was a Noteholder and (b) such information
contained in the Remittance Reports as required to enable the Holders of the
Notes to prepare their tax returns. Such obligation of the Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Servicer pursuant to any requirements of
the Code as from time to time are in force.
On each Payment Date, the Indenture Trustee shall forward to the
Trust, the Depositor, the Holder of the Certificate, the Insurer and the
Servicer, a copy of the reports forwarded to the Class A Noteholders on such
Payment Date and, if different from the amounts stated in the Remittance Report,
a statement setting forth the amounts, if any, actually distributed with respect
to the Certificate on such Payment Date.
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Indenture Trustee, and the Indenture
Trustee shall forward to each Person who at any time during the calendar year
was a Holder of the Certificate a statement setting forth the amount, if any,
actually distributed with respect to the Certificate, as appropriate, aggregated
for such calendar year or applicable portion thereof during which such Person
was a Certificateholder.
Upon request, the Servicer shall furnish to the Indenture
Trustee, and the Indenture Trustee shall forward to each Securityholder, during
the term of this Agreement, such periodic, special, or other reports or
information, whether or not provided for herein, as shall be reasonable with
respect to the Securityholder, or otherwise with respect to the purposes of this
Agreement, all such reports or information to be provided at the expense of the
Securityholder in accordance with such reasonable and explicit instructions and
directions as the Securityholder may provide. For purposes of this Section 4.02,
the Indenture Trustee's duties are limited to the extent that the Indenture
Trustee receives timely reports as required from the Servicer.
Section 4.03. Monthly Advances.
(a) [Reserved]
(b) The amount of Monthly Advances for each Group to be made by
the Servicer for any Payment Date shall equal, subject to Section
4.03(d), the sum of (i) the aggregate amount of Monthly Payments
allocable to interest (with each interest portion thereof net of the
related Servicing Fee), due during the related Collection Period in
respect of the Mortgage Loans, which Monthly Payments were delinquent
as of the close of business on the related Determination Date and (ii)
with respect to each REO Property, which REO Property was acquired
during or prior to the related Collection Period and as to which REO
Property an REO Disposition did not occur during the related
Collection Period, an amount equal to the excess, if any, of the REO
Imputed Interest on such REO Property
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for the most recently ended calendar month, over the net income from
such REO Property transferred to the Distribution Account pursuant to
Section 3.25 for distribution on such Payment Date. For purposes of
the preceding sentence, the Monthly Payment on each Balloon Mortgage
Loan with a delinquent Balloon Payment is equal to the assumed monthly
interest payment that would have been due on the related Due Date
based on the original principal amortization schedule for such Balloon
Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer Remittance
Date, the Servicer shall remit in immediately available funds to the Indenture
Trustee for deposit in the Distribution Account an amount equal to the aggregate
amount of Monthly Advances, if any, to be made in respect of the Mortgage Loans
and REO Properties for the related Group and Payment Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of the Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Servicer in discharge of any such Monthly Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of Monthly Advances to
be made by the Servicer with respect to the Mortgage Loans and REO Properties.
Any amounts held for future distribution and so used shall be appropriately
reflected in the Servicer's records and replaced by the Servicer by deposit in
the Collection Account on or before any future Servicer Remittance Date to the
extent that the Available Distribution Amount for the related Payment Date
(determined without regard to Monthly Advances to be made on the Servicer
Remittance Date) shall be less than the total amount that would be distributed
to Securityholders pursuant to Section 8.3 of the Indenture on such Payment Date
if such amounts held for future distributions had not been so used to make
Monthly Advances. The Indenture Trustee will provide notice to the Servicer and
the Insurer by telecopy by the close of business on any Servicer Remittance Date
in the event that the amount remitted by the Servicer to the Indenture Trustee
on such date is less than the Monthly Advances required to be made by the
Servicer for the related Payment Date.
(c) The obligation of the Servicer to make such Monthly Advances
is mandatory, notwithstanding any other provision of this Agreement
but subject to (d) below, and, with respect to any Mortgage Loan or
REO Property, shall continue until a Final Recovery Determination in
connection therewith or the removal thereof from the Trust Property
pursuant to any applicable provision of this Agreement, except as
otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no Monthly
Advance or Servicing Advance shall be required to be made hereunder by
the Servicer if such Monthly Advance or Servicing Advance would, if
made, constitute a Nonrecoverable Monthly Advance or Servicing
Advance. The determination by the Servicer that it has made a
Nonrecoverable Monthly Advance or that any proposed Monthly Advance,
if made, would constitute a Nonrecoverable Monthly Advance, shall be
evidenced by an Officers' Certificate of the Servicer delivered to the
Depositor, the Indenture Trustee and the Insurer.
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Section 4.04. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall determine as
to each Mortgage Loan and REO Property, the total amount of Realized Losses, if
any, incurred in connection with any Final Recovery Determinations made during
the related Collection Period. Prior to each Determination Date, the Servicer
shall also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Collection Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Collection Period. Such information shall be
evidenced by an Officer's Certificate delivered to the Trust, the Indenture
Trustee and the Insurer by the Servicer prior to the Determination Date
immediately following the end of the Collection Period during which any such
Realized Loss was incurred.
Section 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Indenture Trustee shall comply with all federal withholding requirements
respecting payments to Noteholders of interest or original issue discount that
the Indenture Trustee reasonably believes are applicable under the Code. The
consent of Noteholders shall not be required for such withholding. In the event
the Indenture Trustee does withhold any amount from interest or original issue
discount payments or advances thereof to any Noteholder pursuant to federal
withholding requirements, the Indenture Trustee shall indicate the amount
withheld to such Noteholders.
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer.
The Depositor and the Servicer each shall be liable in accordance
herewith only to the extent of the obligations specifically imposed by this
Agreement on and undertaken hereunder by the Depositor and the Servicer,
respectively herein.
Section 6.02. Merger or Consolidation of the Depositor or the
Servicer.
Subject to the following paragraph, each of the Trust, the
Depositor and the Servicer will keep in full effect its existence, rights and
franchises as a trust or corporation, as the case may be, under the laws of the
jurisdiction of its incorporation.
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The Depositor and the Servicer each will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Securities or any of the Mortgage Loans
and to perform its respective duties under this Agreement.
The Depositor or the Servicer may be merged or consolidated with
or into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Depositor or the Servicer shall be a party, or any Person succeeding
to the business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
(i) the successor or surviving Person to the Servicer shall be qualified to
service mortgage loans on behalf of FNMA or FHLMC, (ii) that the Rating Agencies
ratings and shadow ratings of the Class A Notes in effect immediately prior to
such merger or consolidation will not be qualified, reduced or withdrawn as a
result thereof (as evidenced by a letter to such effect from the Rating
Agencies) and (iii) in the case of the Servicer, the Insurer delivers its
written consent to such successor.
Section 6.03. Limitation on Liability of the Depositor, the
Servicer and Others.
None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust or the Noteholders for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Servicer or any such person against any
breach of warranties, representations or covenants made herein, or against any
specific liability imposed on the Servicer pursuant hereto, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the case of the Depositor, and willful misfeasance,
bad faith or negligence in the case of the Servicer, in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
The Depositor, the Servicer and any director, officer, employee or agent of the
Depositor or the Servicer may rely in good faith on any document of any kind
which, prima facie, is properly executed and submitted by any Person respecting
any matters arising hereunder. The Depositor, the Servicer and any director,
officer, employee or agent of the Depositor or the Servicer shall be indemnified
and held harmless by the Trust (to the extent of the Trust Property only)
against any loss, liability or expense incurred in connection with any legal
action relating to this Agreement or the Notes, other than any loss, liability
or expense relating to any specific Mortgage Loan or Mortgage Loans (except as
any such loss, liability or expense shall be otherwise reimbursable pursuant to
this Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the
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Servicer shall be under any obligation to appear in, prosecute or defend any
legal action unless such action is related to its respective duties under this
Agreement and, in its opinion, does not involve it in any expense or liability;
provided, however, that each of the Depositor and the Servicer may in its
discretion undertake any such action which it may deem necessary or desirable
with respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Noteholders hereunder. In such event, unless the
Depositor or the Servicer acts without the consent of the Insurer prior to an
Insurer Default or without the consent of Holders of Notes entitled to at least
51% of the Voting Rights after an Insurer Default, the legal expenses and costs
of such action and any liability resulting therefrom (except any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or gross
negligence in the case of the Depositor, and willful misfeasance, bad faith or
negligence in the case of the Servicer, in the performance of duties hereunder
or by reason of reckless disregard of obligations and duties hereunder) shall be
expenses, costs and liabilities of the Trust Property, and the Depositor and the
Servicer shall be entitled to be reimbursed therefor from the Collection Account
as and to the extent provided in Section 3.11, any such right of reimbursement
being prior to the rights of the Noteholders to receive any amount in the
Collection Account.
Section 6.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Indenture Trustee and the Back-up Servicer. No resignation
of the Servicer shall become effective until the Back-up Servicer or other
successor servicer shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
If, at the time the Servicer is removed or resigned there is no
Back-up Servicer or the Back-up Servicer is unable to act as successor servicer
and the Indenture Trustee does not appoint a different successor servicer, then
the Indenture Trustee shall become the successor servicer.
Upon removal or resignation of the Servicer, the Servicer also
shall promptly (and in any event no later than 10 Business Days subsequent to
such removal
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or resignation) deliver or cause to be delivered to the Back-up Servicer all the
books and records (including, without limitation, records kept in electronic
form) that the Servicer has maintained for the Mortgage Loans, including all tax
bills, assessment notices, insurance premium notices and all other documents as
well as all original documents then in the Servicer's possession. The Servicer
may retain copies of any such books and records.
Any collections received by the Servicer after removal or
resignation shall be endorsed by it and remitted directly and immediately to the
Back-up Servicer. The Servicer shall be entitled to receive the Servicing Fee
through the day on which it is terminated as Servicer (which may be pro rated
for a partial month).
To the extent that the Servicer, at the time of its removal or
resignation, has therefore expended any amounts as Servicing Advances with
respect to any Mortgage Loan, which Servicing Advances remain unreimbursed as of
such date ("Unrecovered Advances") the Servicer shall thereafter be entitled to
receive from the Back-up Servicer, monthly, such information as may be generated
by the Back-up Servicer as may be reasonably necessary to enable the Servicer to
monitor the recovery of, and collection efforts undertaken with respect to, the
Unrecovered Advances, which information will include details of collection
activities, payment records and trial balances. To the extent that the Back-up
Servicer or other successor servicer receives any amounts which relate to
reimbursement for Unrecovered Advances made by the prior Servicer, such amounts
shall be remitted to the prior Servicer on the related Payment Date. To the
extent that the Servicer, based upon the information supplied by the Back-up
Servicer, believes that any discrepancies exist between actual Unrecovered
Advances received by the Back-up Servicer and the amounts forwarded to the
Servicer as recovered Unrecovered Advances, the Servicer and the Back-up
Servicer shall attempt in good faith to reconcile such discrepancies.
The Back-up Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any succession to become the
successor servicer. The Servicer agrees to cooperate reasonably with the Back-up
Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide to the Back-up
Servicer all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Back-up Servicer all amounts which then have been or should have been
deposited in the Collection Account, or which are thereafter received with
respect to the Mortgage Loans. The Back-up Servicer shall not be held liable by
reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer.
The Servicer which is being removed or is resigning shall give
notice to the Mortgagors of the transfer of the servicing to the Back-up
Servicer. Said notice shall be a joint notice of servicing transfer in the form
required by applicable law.
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Section 6.05. Rights of the Trust, the Depositor and Others in
Respect of the Servicer.
The Servicer shall afford the Trust, the Depositor, the Indenture
Trustee and the Insurer, upon reasonable notice, during normal business hours,
access to all records maintained by the Servicer in respect of its rights and
obligations hereunder and access to officers of the Servicer responsible for
such obligations. Upon request, the Servicer shall furnish to the Trust, the
Depositor, the Indenture Trustee and the Insurer its most recent financial
statements and such other information relating to its capacity to perform its
obligations under this Agreement it possesses. To the extent such information is
not otherwise available to the public, the Trust, the Depositor, the Indenture
Trustee and the Insurer shall not disseminate any information obtained pursuant
to the preceding two sentences without the Servicer's written consent, except as
required pursuant to this Agreement or to the extent that it is appropriate to
do so (i) in working with legal counsel, auditors, taxing authorities or other
governmental agencies or (ii) pursuant to any law, rule, regulation, order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over the Trust, the Depositor, the Indenture Trustee, the
Insurer or the Trust Property, and in either case, the Trust, the Depositor, the
Insurer or the Indenture Trustee, as the case may be, shall use its best efforts
to assure the confidentiality of any such disseminated non-public information.
The Depositor may, but is not obligated to, enforce the obligations of the
Servicer under this Agreement and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Servicer under this
Agreement or exercise the rights of the Servicer under this Agreement; provided
that the Servicer shall not be relieved of any of its obligations under this
Agreement by virtue of such performance by the Depositor or its designee. The
Depositor shall not have any responsibility or liability for any action or
failure to act by the Servicer and is not obligated to supervise the performance
of the Servicer under this Agreement or otherwise.
Section 6.06. Limitation of Liability.
It is expressly understood and agreed by the parties hereto that
(a) this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as trustee of HomeGold Home Equity Loan
Trust 1999-1 under the Trust Agreement dated as of May 1, 1999, with Emergent
Residual Holding Corp., in the exercise of the powers and authority conferred
and vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Trust, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties hereto and by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach
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or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or the other Basic Documents.
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any one
of the following events:
(i) any failure by the Servicer to remit to the Indenture
Trustee for payment to Noteholders any payment (other than a
Monthly Advance required to be made from its own funds on any
Servicer Remittance Date pursuant to Section 4.03) required to be
made under the terms of the Indenture or this Agreement which
continues unremedied for the later of (x) a period of one
Business Day after the date upon which written notice of such
failure, requiring the same to be remedied, shall have been given
to the Servicer by the Trust, the Depositor, the Insurer or the
Indenture Trustee (in which case notice shall be provided by
telecopy), or to the Servicer, the Trust, the Depositor, the
Insurer and the Indenture Trustee by the Holders of both Classes
of Notes entitled to at least 25% of the Voting Rights or (y)
five days; or
(ii) any failure (other than a failure identified in clause
(vi) below) on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements on the part of the Servicer contained in the Indenture
or this Agreement which continues unremedied for a period of 30
days (or 10 days in the case of a failure to maintain any
insurance policy on any of the Mortgage Loans or Mortgaged
Properties) after the earlier of (I) the date on which written
notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trust, the Depositor, the
Insurer or the Indenture Trustee, or to the Servicer, the
Depositor, the Insurer and the Indenture Trustee by the Holders
of both Classes of Notes entitled to at least 25% of the Voting
Rights and (II) actual knowledge of such failure by a Servicing
Officer of the Servicer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy,
insolvency or similar law or the appointment of a conservator or
receiver or liquidate in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceeding, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order
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shall have remained in force undischarged or unstayed for a
period of 90 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidate in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to it or of or relating to all
or substantially all of its property; or
(v) the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute,
make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or
(vi) any failure of the Servicer to make any Monthly Advance
on any Servicer Remittance Date required to be made from its own
funds pursuant to Section 4.03 or failure to make any payment
required pursuant to Section 3.26 which continues unremedied
until 3:00 p.m. New York time on the Business Day immediately
following the Servicer Remittance Date; or
(vii) any breach of a representation or warranty of the
Servicer relating to such Servicer's authority to enter into, and
its ability to perform its obligations under, this Agreement; or
(viii) the occurrence of a Performance Test Violation (as
defined in the Insurance Agreement).
Subject to Article IX, if a Servicer Event of Default described
in clauses (i) through (v) and (vii) and (viii) of this Section shall occur,
then, and in each and every such case, so long as such Servicer Event of Default
shall not have been remedied, the Trust, the Depositor, the Insurer or the
Indenture Trustee may, and at the written direction of the Holders of both
Classes of Notes entitled to at least 25% of Voting Rights (with the consent of
the Insurer to the extent there is no Insurer Default), the Indenture Trustee
shall, by notice in writing to the Servicer and the Back-up Servicer (and to the
Trust, the Depositor and the Insurer if given by the Indenture Trustee or to the
Indenture Trustee if given by the Trust, the Depositor or the Insurer),
terminate all of the rights and obligations of the Servicer in its capacity as
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. If a Servicer Event of Default
described in clause (vi) hereof shall occur, the Indenture Trustee shall, by
notice in writing to the Servicer, the Back-up Servicer, the Insurer, the Trust
and the Depositor, terminate all of the rights and obligations of the Servicer
in its capacity as Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof. On or after the receipt by the Servicer and the
Back-up Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Securities (other than as a
Holder of any Security) or the Mortgage Loans or the Policy or otherwise, shall
pass to and be
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vested in the Back-up Servicer pursuant to and under this Section, and, without
limitation, the Back-up Servicer, is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the Servicer, any and all documents and other instruments and to do
or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Servicer agrees promptly (and in any event no later than ten
Business Days subsequent to such notice) to provide the Back-up Servicer with
all documents and records requested by it to enable it to assume the Servicer's
functions under this Agreement, and to cooperate with the Back-up Servicer in
effecting the termination of the Servicer's responsibilities and rights under
this Agreement, including, without limitation, the transfer within one Business
Day to the Indenture Trustee for administration by it of all cash amounts which
at the time shall be or should have been credited by the Servicer to the
Collection Account held by or on behalf of the Servicer, the Distribution
Account, the Policy Payments Account or any REO Account or Servicing Account
held by or on behalf of the Servicer or thereafter be received with respect to
the Mortgage Loans or any REO Property serviced by the Servicer (provided,
however, that the Servicer shall continue to be entitled to receive all amounts
accrued or owing to it under this Agreement on or prior to the date of such
termination, whether in respect of Monthly Advances or otherwise, and shall
continue to be entitled to the benefits of Section 6.03 notwithstanding any such
termination). For purposes of this Section 7.01, the Indenture Trustee shall not
be deemed to have knowledge of a Servicer Event of Default unless a Responsible
Officer of the Indenture Trustee assigned to and working in the Indenture
Trustee's Corporate Trust Office has actual knowledge thereof or unless written
notice of any event which is in fact such a Servicer Event of Default is
received by the Indenture Trustee and such notice references the Notes, the
Trust Property or this Agreement.
In the event that the Back-up Servicer becomes the Successor
Servicer, the parties hereby agree that there shall no longer be the requirement
to have a Back-up Servicer.
The Servicer hereby covenants and agrees to act as the Servicer
under this Agreement for an initial term, commencing on the Closing Date and
ending on [ ], which term shall be extendable by the Insurer for successive
terms of three calendar months thereafter, until the termination of the
Servicer's obligations and responsibilities pursuant to Article X. Each such
notice of extension (a "Servicer Extension Notice") shall be delivered by the
Insurer to the Trust, the Indenture Trustee and the Servicer. The Servicer
hereby agrees that, upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound for the duration of the term covered by such
Servicer Extension Notice to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. The Indenture Trustee
agrees that if as of the fifteenth (15th) day prior to the last day of any term
of the Servicer the Indenture Trustee shall not have received any Servicer
Extension Notice from the Insurer, the Indenture Trustee will within five (5)
days thereafter, give written notice of such non-receipt to the Trust, the
Back-up Servicer, the Insurer and the Servicer. The failure of the Insurer to
deliver a Servicer Extension Notice by the end of a calendar
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term shall result in the termination of the Servicer and the Back-up Servicer
shall become the Successor Servicer. The foregoing provisions of this paragraph
shall not apply to the Indenture Trustee in the event the Indenture Trustee
succeeds to the rights and obligations of the Servicer and the Indenture Trustee
shall continue in such capacity until the earlier of the termination of this
Agreement pursuant to Article X or the appointment of a successor servicer.
Section 7.02. Back-up Servicer to Act; Appointment of Successor
Servicer.
(a) On and after the time the Servicer receives a notice of
termination or the Servicer's term is not extended pursuant to Section
7.01, the Back-up Servicer shall be the successor in all respects to
the Servicer in its capacity as Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to
all the responsibilities, duties and liabilities relating thereto and
arising thereafter placed on the Servicer (except for any
representations or warranties of the Servicer under this Agreement and
its obligation to deposit amounts in respect of losses pursuant to
Section 3.14) by the terms and provisions hereof including, without
limitation, the Servicer's obligations to make Monthly Advances
pursuant to Section 4.03; provided, however, that if the Back-up
Servicer is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Indenture
Trustee shall not be obligated to make Monthly Advances pursuant to
Section 4.03 or to make payments in respect of Prepayment Interest
Shortfalls pursuant to Section 3.26; and provided, further, that any
failure to perform such duties or responsibilities caused by the
Servicer's failure to provide information required by Section 7.01
shall not be considered a default by the Back-up Servicer as successor
to the Servicer hereunder. As compensation therefor, the Back-up
Servicer shall be entitled to the Servicing Fees and all funds
relating to the Mortgage Loans to which the Servicer would have been
entitled if it had continued to act hereunder. Notwithstanding the
above, if the Back-up Servicer is unable to so act or if it is
prohibited by law from making advances regarding delinquent mortgage
loans or if the Insurer or if the Holders of both Classes of Notes
entitled to at least 51% of the Voting Rights so request in writing to
the Indenture Trustee, the Indenture Trustee may promptly appoint,
with the consent of the Insurer, or petition a court of competent
jurisdiction to appoint, an established mortgage loan servicing
institution acceptable to each Rating Agency and the Insurer and
having a net worth of not less than $15,000,000 and which is a FNMA
and FHLMC approved Seller/Servicer, as the successor to the Servicer
under this Agreement in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer under this
Agreement. No appointment of a successor to the Servicer under this
Agreement shall be effective until the assumption by the successor of
all of the Servicer's responsibilities, duties and liabilities
hereunder. In connection with such appointment and assumption
described herein, the Indenture Trustee may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans
as it and such successor shall agree; provided, however, that no
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such compensation shall be in excess of that permitted the Servicer as
such hereunder. The Depositor, the Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Servicer under this Agreement, the
Indenture Trustee shall act in such capacity as hereinabove provided.
(b) If the Servicer fails to remit to the Indenture Trustee for
payment to the Noteholders any payment required to be made under the
terms of the Indenture or this Agreement (for purposes of this Section
7.02(b), a "Remittance") because the Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of such
Remittance is prohibited by Section 362 of the federal Bankruptcy
Code, the Indenture Trustee shall upon notice of such prohibition,
regardless of whether it has received a notice of termination under
Section 7.01, advance the amount of such Remittance by depositing such
amount in the Distribution Account on the related Payment Date. The
Indenture Trustee shall be obligated to make such advance only if (i)
such advance, in the good faith judgment of the Indenture Trustee, can
reasonably be expected to be ultimately recoverable from funds which
are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such
Remittance absent such prohibition (the "Stayed Funds") and (ii) the
Indenture Trustee is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the
Indenture Trustee or the deposit thereof in the Distribution Account
by the Servicer, a trustee in bankruptcy or a federal bankruptcy
court, the Indenture Trustee may recover the amount so advanced,
without interest, by withdrawing such amount from the Distribution
Account; provided, however, that nothing in this Agreement shall be
deemed to affect the Indenture Trustee's rights to recover from the
Servicer's own funds interest at the prime rate (as set forth in the
Wall Street Journal) as of the date of such advance on the amount of
any such advance. If the Indenture Trustee at any time makes an
advance under this subsection which it later determines in its good
faith judgment will not be ultimately recoverable from the Stayed
Funds with respect to which such advance was made, the Indenture
Trustee shall be entitled to reimburse itself for such advance,
without interest, by withdrawing from the Distribution Account, out of
amounts on deposit therein, an amount equal to the portion of such
advance attributable to the Stayed Funds. The Servicer shall pay the
Indenture Trustee, from the Servicer's own funds, interest on any
advance made by the Indenture Trustee pursuant to this paragraph at a
rate equal to the prime rate (as set forth in the Wall Street Journal)
as of the date of such advance.
(c) The Servicer, the Back-up Servicer, the Indenture Trustee and
such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
The Back-up Servicer (or the Indenture Trustee, shall be reimbursed
for Transition Costs, if any, incurred in connection with the
assumption of responsibilities of the successor Servicer, upon receipt
of documentation of such costs and expenses. The Back-up
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Servicer shall have no claim against the Servicer, the Indenture
Trustee, the Insurer, the Owner Trustee, the Depositor, any
Noteholder, the Trust or any other Party to the Related Documents for
any costs and expenses incurred in effecting such succession in excess
of the amount specified in the definition of "Transition Costs."
Section 7.03. Notification to Noteholders and Trust.
(a) Upon any termination of the Servicer pursuant to Section 7.01
above or any appointment of a successor to the Servicer pursuant to
Section 7.02 above, the Indenture Trustee shall give prompt written
notice thereof to the Trust and to all Noteholders at their respective
addresses appearing in the Note Register.
(b) Not later than the later of 60 days after the occurrence of
any event, which constitutes or which, with notice or lapse of time or
both, would constitute a Servicer Event of Default or five days after
a Responsible Officer of the Indenture Trustee becomes aware of the
occurrence of such an event, the Indenture Trustee shall transmit by
mail to the Trust and all Holders of Notes notice of each such
occurrence, unless such default or Servicer Event of Default shall
have been cured or waived.
Section 7.04. Waiver of Servicer Events of Default.
The Holders of Notes evidencing at least 66% of the aggregate
Note Principal Balance of all Classes of Notes affected by any default or
Servicer Event of Default hereunder, with the written consent of the Insurer,
may waive such default or Servicer Event of Default; provided, however, that a
default or Servicer Event of Default under clause (i) or (vi) of Section 7.01
may be waived only by all of the Holders of the Notes with the written consent
of the Insurer. Upon any such waiver of a default or Servicer Event of Default,
such default or Servicer Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose hereunder. No such waiver shall
extend to any subsequent or other default or Servicer Event of Default or impair
any right consequent thereon except to the extent expressly so waived.
Section 7.05. The Back-up Servicer.
(a) Prior to assuming any of the Servicer's rights and
obligations hereunder the Back-up Servicer shall only be responsible to perform
those duties specifically imposed upon it by the provisions hereof. Such duties
generally relate to the following procedures which would permit the Back-up
Servicer to assume some or all of the Servicer's rights and obligations
hereunder with reasonable dispatch, following notice.
The Back-up Servicer, prior to assuming any of the Servicer's
duties hereunder may not resign hereunder unless it arranges for a successor
Back-up Servicer reasonably acceptable to each Rating Agency, and the Insurer
with not less than 60 day's notice delivered to the Servicer, the Indenture
Trustee and the Depositor. Prior to
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its becoming successor servicer, the Back-up Servicer shall have only those
duties and obligations imposed by it under this Agreement, and shall have no
obligations or duties under any agreement to which it is not a party, including
but not limited to the various agreements named herein. In its capacity as
successor servicer and as Back-up Servicer, Fairbanks Capital shall in no event
be liable for any obligations of the Unaffiliated Seller or the Servicer to any
party, whether hereunder or under any other agreement, which are not related to
servicing functions, including, without limitation, any repurchase obligations.
The Back-up Servicer agrees to indemnify the Trust, the Indenture
Trustee, the Depositor, each Noteholder, the Servicer and the Unaffiliated
Seller, and any of their respective directors, officers, employees or agents
from, and hold them harmless against, any and all costs, expenses (including
reasonable attorney fees and disbursements), losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, or was imposed upon the Trust, the Indenture Trustee,
the Depositor, the Noteholder, the Servicer, or the Unaffiliated Seller and
their respective directors, officers, employees and agents through the Back-up
Servicer's acts or omissions in violation of this Agreement, except to the
extent such indemnified party's own bad faith, willful misconduct or gross
negligence contributes to the cost, loss, claim, damage or liability.
The Back-up Servicer (including the Back-up Servicer in its
capacity as successor servicer) in addition agrees to indemnify the Servicer
against any losses, claims or damages whenever imposed or suffered resulting
from the performance or non-performance by the Back-up Servicer of its duties
hereunder from the date on which it becomes the successor servicer, other than
any loss, claim or damage resulting from the Servicer's negligence, misconduct,
bad faith or failure to comply with this Agreement.
The Servicer shall have no liability, direct or indirect, to any
party, for the acts or omissions of the Back-up Servicer, whenever such acts or
omissions occur whenever such liability is imposed.
ARTICLE VIII
CONCERNING THE INDENTURE TRUSTEE
Section 8.01. Duties, Responsibilities, Etc. of Indenture
Trustee.
The duties, rights, responsibilities and privileges of the
Indenture Trustee shall be as set forth herein, in the Indenture and in the
other Basic Documents to which the Indenture Trustee is a party and no implied
covenants or obligations on the part of the Indenture Trustee shall be read into
this Agreement, the Indenture or any of the Basic Documents. Without limitation
of the foregoing, it is acknowledged and agreed that the provisions of Sections
6.1 through 6.7 and 6.11 through 6.21 of the Indenture shall apply as if set
forth in full herein.
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Section 8.02. Replacement of Indenture Trustee; Successor
Indenture Trustee; Appointment of Co- or Separate Indenture Trustee.
Any successor Indenture Trustee pursuant to Section 6.8 or 6.9 of
the Indenture shall succeed to all the rights, duties, responsibilities of the
Indenture Trustee pursuant to this Agreement and any co-trustee or separate
trustee appointed pursuant to Section 6.10 of the Indenture may, with the
consent of the Insurer, act as co-trustee or separate trustee hereunder.
Section 8.03. Representations and Warranties of the Indenture
Trustee.
The Indenture Trustee hereby represents and warrants to the
Servicer, the Depositor and the Insurer, as of the Closing Date, that:
(i) The Indenture Trustee is a national banking association
duly organized, validly existing and in good standing under the
laws of the United States.
(ii) The execution and delivery of this Agreement by the
Indenture Trustee, and the performance and compliance with the
terms of this Agreement by the Indenture Trustee, will not
violate the Indenture Trustee's charter or bylaws or constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the breach
of, any material agreement or other instrument to which it is a
party or which is applicable to it or any of its assets.
(iii) The Indenture Trustee has the full power and authority
to enter into and consummate all transactions contemplated by
this Agreement, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and
delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution
and delivery by the Servicer and the Depositor, constitutes a
valid, legal and binding obligation of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with the
terms hereof, subject to (A) applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other laws affecting
the enforcement of creditors' rights generally, and (B) general
principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law.
(v) The Indenture Trustee is not in violation of, and its
execution and delivery of this Agreement and its performance and
compliance with the terms of this Agreement will not constitute a
violation of, any law, any order or decree of any court or
arbiter, or any order, regulation or demand of any federal, state
or local governmental or regulatory authority, which violation,
in the Indenture Trustee's good faith and reasonable judgment, is
likely to affect materially and adversely either
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the ability of the Indenture Trustee to perform its obligations
under this Agreement or the financial condition of the Indenture
Trustee.
(vi) No litigation is pending or, to the best of the
Indenture Trustee's knowledge, threatened against the Indenture
Trustee which would prohibit the Indenture Trustee from entering
into this Agreement or, in the Indenture Trustee's good faith
reasonable judgment, is likely to materially and adversely affect
either the ability of the Indenture Trustee to perform its
obligations under this Agreement or the financial condition of
the Indenture Trustee.
ARTICLE IX
CERTAIN MATTERS REGARDING THE INSURER
Section 9.01. Rights of the Insurer to Exercise Rights of Class A
Noteholders.
Each of the Trust, the Depositor, the Servicer and the Indenture
Trustee, and by accepting a Note, each Noteholder, agrees that unless an Insurer
Default has occurred and is continuing, the Insurer shall have the right to
exercise all rights of the Noteholders under this Agreement, the Indenture and
the Basic Documents (including all Voting Rights) (except as provided in clause
(i) of the second paragraph of Section 12.01) without any further consent of the
Noteholders, including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so;
(b) the right to require the Unaffiliated Seller or the
Originator to repurchase, or substitute for, Mortgage Loans pursuant
to Section 2.05;
(c) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as Servicer pursuant to Section
7.01;
(d) the right to direct the actions of the Indenture Trustee
during the continuance of a Servicer Event of Default pursuant to
Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Servicer
Event of Defaults pursuant to Section 7.04; and
(f) the right to remove the Indenture Trustee pursuant to Section
6.8 of the Indenture.
So long as no Insurer Default should have occurred and be
continuing, the consent of the Insurer to any action or matter shall be deemed
to also constitute the consent of the requisite percentage of Noteholders
required by this Agreement or the Indenture in respect of such action or matter.
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In addition, each Noteholder agrees that, unless an Insurer
Default has occurred and is continuing, the rights specifically set forth above
may be exercised by the Noteholders only with the prior written consent of the
Insurer.
Section 9.02. Indenture Trustee to Act Solely with Consent of the
Insurer.
Unless an Insurer Default has occurred and is continuing, the
Indenture Trustee shall not agree to any amendment pursuant to Section 12.01 or
terminate the Servicer pursuant to Section 7.01, in each case without the prior
written consent of the Insurer (which consent shall not be unreasonably
withheld).
Section 9.03. Trust Property and Accounts Held for Benefit of the
Insurer.
The Servicer hereby acknowledges and agrees that it shall service
and administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account and any REO Account, for the benefit of the Trust, the
Noteholders and for the benefit of the Insurer, and all references in this
Agreement (including, without limitation, in Sections 3.01 and 3.10) to the
benefit of or actions on behalf of the Trust, the Noteholders shall be deemed to
include the Insurer. Unless an Insurer Default has occurred and is continuing,
the Servicer shall not terminate any Sub-Servicing Agreements without cause
without the prior consent of the Insurer. Unless an Insurer Default has occurred
and is continuing, neither the Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Insurer. The
Indenture Trustee and the Servicer shall provide such information as may be
reasonably requested by, and shall otherwise cooperate with all reasonable
requests of the Insurer with respect to the Mortgage Loans or the Notes;
provided that such information is within the control of or reasonably accessible
to such party without undue expense.
Section 9.04. Notices to the Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Noteholders shall also be sent to the Insurer.
Section 9.05. Third-Party Beneficiary.
The Insurer shall be a third-party beneficiary of this Agreement,
entitled to enforce the provisions hereof as if a party hereto, provided,
however, that notwithstanding the foregoing, for so long as an Insurer Default
has occurred and is continuing, the Noteholders shall succeed to the Insurer's
rights hereunder.
Section 9.06. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the
Insurer may terminate or refuse to renew the term of the Servicer at such time
as permitted
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under any separate agreements between them so long as no Insurer Default has
occurred and is continuing.
ARTICLE X
TERMINATION; SALE AND PURCHASE OF MORTGAGE LOANS
Section 10.01. Termination Upon Early Redemption of the Notes or
Liquidation of All Mortgage Loans; Right of Servicer and Insurer to Purchase
Mortgage Loans.
(a) The respective obligations and responsibilities under this
Agreement of the Trust, the Depositor, the Servicer and the Indenture
Trustee (other than the obligations to the Indenture Trustee pursuant
to Section 6.7 of the Indenture and of the Servicer to provide for and
the Indenture Trustee to make payments to Noteholders as contemplated
herein and in the Indenture) shall terminate upon the earlier to occur
of (i) satisfaction and discharge of the indebtedness evidenced by the
Notes pursuant to the Indenture; and (ii) the later of the final
payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or REO Property remaining in the Trust
Property; provided, however, that in no event shall the Trust or any
trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St.
James, living on the date hereof.
(b) [Reserved]
Section 10.02. Sale and Purchase of Mortgage Loans.
(a) Any redemption of a Class of Notes pursuant to Article X of
the Indenture may be funded through the sale of some or all of the
Mortgage Loans and REO Properties remaining in the Trust at a price
equal to not less than (A) the total outstanding balance of the
related Class plus any sums due to the Insurer or (B) the greater of
(x) the aggregate Purchase Price of all such Mortgage Loans in the
related Group, plus the appraised value of each such REO Property in
the related Group, if any, to be sold, such appraisal to be conducted
by an appraiser mutually agreed upon by the Trust, the purchaser and
the Indenture Trustee in their reasonable discretion (and approved by
the Insurer in its reasonable discretion) and (y) the aggregate fair
market value of all of the assets to be sold (as determined by the
Trust, the purchaser, the Insurer (to the extent the Insurer is not
the purchaser) and the Indenture Trustee) as of the close of business
on the third Business Day next preceding the date upon which notice of
any such Note Redemption is furnished to Noteholders.
(b) Within sixty (60) days of receipt of the direction from the
Insurer to redeem such Class of the Notes, the Insurer may purchase
from the Trust some or all of the Mortgage Loans and REO Property in
the related Group included in
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the Trust Property, as determined by the Insurer, for a purchase price
equal to the greater of (i) the price thereof determined in accordance
with Section 10.02(a) and (ii) the Redemption Price, such price to be
delivered to the Indenture Trustee for deposit into the Distribution
Account in immediately available funds at the time of such purchase.
(c) The Insurer shall have the right to purchase all of the
Mortgage Loans and each REO Property in the related Group remaining in
the Trust at the price specified in Section 10.02(a) if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property
in such Group remaining in the Trust at the time of such election is
equal to or less than 5% of the Original Pool Balance for such Group,
provided that such purchase will not subject the Trust to tax. In the
event of a purchase of all of the Mortgage Loans and REO Property in
such Group remaining in the Trust by the Insurer pursuant to this
Section 10.02(c), the Insurer shall deliver to the Indenture Trustee
for deposit in the Distribution Account an amount in immediately
available funds equal to the purchase price at the time of such
purchase.
(d) The Servicer shall have the right to purchase all of the
Mortgage Loans and REO Property in such Group remaining in the Trust
at the greater of (i) the price specified in Section 10.02(a) and (ii)
the Redemption Price, if the aggregate stated Principal Balance of the
Mortgage Loans and each REO Property remaining in such Group in the
Trust at the time of such election is equal to a less than 10% of the
Original Pool Balance for such Group provided that the purchase price
paid by the Servicer is equal to the greater of (i) or (ii) above on
an after-tax basis. In the event of a purchase of all of the Mortgage
Loans and REO Property in such Group remaining in the Trust by the
Servicer pursuant to this Section 10.02(d), the Servicer shall deliver
to the Indenture Trustee for deposit into the Distribution Account an
amount in immediately available funds equal to the purchase price at
the time of such purchase.
(e) Prior to any proposed sale of any Mortgage Loans as REO
Property in a Group pursuant to Section 10.02(a), 10.02(b) or
10.02(c), the Trust shall give not less than ten business days notice
thereof to the Servicer, specifying the proposed purchase price and
date for the closing of such sale and offering to sell such Mortgage
Loans and/or REO Property to the Servicer at such price on such date.
The Servicer shall have ten days from its receipt of such notice to
accept or reject such offer. The failure to respond in writing within
such ten day period shall constitute rejection of such offer. If the
Servicer accepts such offer, the Trust shall sell, and the Servicer
shall purchase, on the date specified in the notice from the Trust
referred to above, such Mortgage Loans and/or REO Property described
in such notice on the date and at the price specified in such notice.
Upon any such purchase by the Servicer, the Servicer shall deliver to
the Indenture Trustee for deposit in the Distribution Account such
purchase price in immediately available funds.
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(f) Upon certification to the Indenture Trustee by a Servicing
Officer (a copy of which certification shall be delivered to the
Insurer) of the deposit into the Distribution Account of the purchase
price of any Mortgage Loans and REO Properties sold pursuant to
Section 10.01(a), 10.01(c), 10.01(d) or 10.01(e), the Indenture
Trustee shall promptly release to the purchaser thereof the Mortgage
Files for such Mortgage Loans, and execute all assignments,
endorsements and other instruments necessary to effectuate such
transfer, subject to the requirements of Section 2.8 of the Indenture.
Section 10.03. [Reserved]
ARTICLE XI
[RESERVED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the Trust, the
Depositor, the Servicer and the Indenture Trustee without the consent of any of
the Noteholders, (i) to cure any ambiguity, to correct any defect or to give
effect to the expectations of Securityholders, (ii) to correct, modify or
supplement any provisions herein, to modify, eliminate or add to any of its
provisions to such extent as shall be necessary to avoid or lessen the risk of
the imposition of any tax on the Trust pursuant to the Code that would be a
claim against the Trust Property, provided that the Indenture Trustee and the
Insurer have received an Opinion of Counsel to the effect that such action is
necessary or desirable to avoid or minimize the risk of the imposition of any
such tax and such action will not, as evidenced by such Opinion of Counsel,
adversely affect in any material respect the interests of any Securityholder,
(iii) to change the timing and/or nature of deposits in the Collection Account,
provided that such change will not, as evidenced by an Opinion of Counsel
delivered to the Indenture Trustee and the Insurer, adversely affect in any
material respect the interests of any Noteholder and that such change will not
adversely affect the then current rating or shadow rating assigned to any Class
A Notes, as evidenced by a letter from each Rating Agency to such effect, (iv)
to add to, modify or eliminate any provisions therein restricting transfers of
certain Securities, which are inserted in response to Code provisions, or (v) to
make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement, provided that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Indenture Trustee and the Insurer, adversely affect in
any material respect the interests of any Noteholder; provided, further, that if
the Person requesting such amendment delivers to the Indenture Trustee and the
Insurer written confirmation from each Rating Agency that such amendment will
not cause such Rating Agency to
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revise or withdraw its then current rating or shadow rating each Class of the
Class A Notes, such amendment will be deemed to not adversely affect in any
material respect the interests of the Noteholders and no such Opinion of Counsel
shall be required.
This Agreement may also be amended from time to time by the
Trust, the Depositor, the Servicer and the Indenture Trustee with the consent of
the Insurer and the Noteholders of both Classes of Notes holding Notes
evidencing at least 66% of the aggregate Note Principal Balance of both Classes
of the Notes for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of both Classes Notes; provided, however,
that no such amendment shall (i) reduce in any manner the amount of, or delay
the timing of, payments received on Mortgage Loans or payments which are
required to be deposited into the Collection Account or remitted to the
Indenture Trustee for deposit into the Distribution Account, (ii) adversely
affect in any material respect the interests of the Holders of any Class of
Notes in a manner, other than as described in (i), without the consent of the
Holders of both Classes of Notes evidencing at least 66% of the Note Principal
Balance of both Classes of the Notes, or (iii) modify the consents required by
the immediately preceding clauses (i) and (ii) without the consent of the
Insurer and the Holders of all Notes then outstanding. Notwithstanding the
foregoing, this Agreement may be amended by the Trust, the Depositor, the
Servicer, where applicable, and the Indenture Trustee provided that such action
is approved by Holders of Notes evidencing 100% of the Note Principal Balance of
each Class that, as evidenced by an Opinion of Counsel, is adversely affected in
any material respect by such action. For purposes of giving any such consent
(other than a consent to an action which would adversely affect in any material
respect the interests of the Noteholders, while the Servicer or any affiliate
thereof is the holder of a Class of Notes evidencing not less than 66% of the
Note Principal Balance of such Notes of the relevant Class or Classes), any such
Notes registered in the name of the Servicer or any affiliate thereof shall be
deemed not to be outstanding.
Any such amendment pursuant to the first paragraph of this
Section 12.01 shall not be deemed to adversely affect in any material respect
the interests of any Noteholder if such change is required by the Insurer, so
long as no Insurer Default has occurred and is continuing, and the Servicer
receives written confirmation from each Rating Agency that such amendment will
not cause such Rating Agency to reduce the then current rating or any shadow
rating of the affected Notes.
Promptly after the execution of any such amendment with the
consent of Holders the Indenture Trustee shall furnish a copy of such amendment
to the Trust and each Noteholder, the Rating Agencies and the Insurer.
It shall not be necessary for the consent of Noteholders under
this Section 12.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Indenture Trustee may prescribe.
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The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Indenture
Trustee.
The Indenture Trustee may, but shall not be obligated to enter
into any amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the expense of the Trust, but only upon direction of
the Indenture Trustee accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Noteholders.
For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. [Reserved]
SECTION 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Trust, c/o Wilmington Trust Company, as Owner Trustee, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, (b) in the case of the Depositor, One
New York Plaza, New York, New York 10292, Attention: Asset-Backed Finance Group
(phone number (212) 778-1000), or such other address or telecopy number as may
hereafter be furnished to the Servicer, the Insurer and the Indenture Trustee in
writing by the Depositor, (c) in the case of the Servicer, 3901 Pelham Road,
Greenville, South Carolina 29615, Attention: Laird Minor
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(telecopy number: (864) 289-6098, or such other address or telecopy number as
may hereafter be furnished to the Indenture Trustee and the Depositor in writing
by the Servicer, (d) in the case of the Indenture Trustee, First Union National
Bank, 230 South Tryon Street, 9th Floor, Charlotte, North Carolina 28288-1179,
Attention: Corporate Trust Department (telecopy number 704-383-7316), or such
other address or telecopy number as may hereafter be furnished to the Servicer
and the Depositor in writing by the Indenture Trustee, (e) in the case of the
Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, NY 10022,
Attention: Surveillance Department Re: HomeGold Home Equity Loan Trust 1999-1
(telecopy number 212-888-5278) or such other address or telecopy number as may
hereafter be furnished to the Indenture Trustee, the Depositor and the Servicer
in writing by the Insurer, and (f) in the case of the Back-up Servicer,
Fairbanks Capital Corp. [ ], Attention: [ ] (telecopy number [ ]) or such other
address or telecopy number as may hereafter be furnished to the Indenture
Trustee, the Depositor, the Servicer, and the Insurer in writing by the Back-up
Servicer. Any party hereto may change the address, telephone number or
telecopier number by notice to the other parties hereto in accordance with the
terms hereof. In each case in which a notice or other communication to the
Insurer refers to a Servicer Event of Default or a claim under the Policy or
with respect to which failure on the part of the Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED." Any notice required or permitted to be given to a Noteholder
shall be given in the manner provided in Section 12.5 of the Indenture. Any
notice so given to a Noteholder within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice. A copy of any notice required to be telecopied
hereunder also shall be mailed to the appropriate party in the manner set forth
above.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Notes or the rights of the Holders thereof.
Section 12.07. Notice to Rating Agencies and Insurer.
The Indenture Trustee shall use its best efforts promptly to
provide notice to the Rating Agencies and the Insurer with respect to each of
the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Servicer Event of Default that has not
been cured or waived;
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3. The resignation or termination of the Servicer or the
Indenture Trustee;
4. The repurchase or substitution of Mortgage Loans pursuant to
or as contemplated by Section 2.05;
5. The final payment to the Holders of any Notes;
6. Any change in the location of the Collection Account;
7. Any event that would result in the inability of the
Indenture Trustee to make advances regarding delinquent
Mortgage Loans; and
8. Any Insurer Default that has not been cured.
In addition, the Indenture Trustee shall promptly furnish to each
Rating Agency and the Insurer copies of each report to Noteholders described in
Section 4.02 and the Servicer shall promptly furnish to each Rating Agency
copies of the following:
1. Each annual statement as to compliance described in Section
3.22; and
2. Each annual independent public accountants' servicing report
described in Section 3.23.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
and to Standard & Poor's Ratings Services, 25 Broadway, New York, New York
10004, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
Section 12.08. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans and the other assets constituting the Trust
Property by the Depositor to the Trust as contemplated by this Agreement be, and
be treated for all purposes as, a sale by the Depositor to the Trust of the
Mortgage Loans and the other assets constituting the Trust Property. However, in
the event that, notwithstanding the intent of the parties, the Mortgage Loans
and the other assets constituting the Trust Property are held to continue to be
property of the Depositor then (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the
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Uniform Commercial Code; (b) the transfer of the Mortgage Loans and the other
assets constituting the Trust Property provided for herein shall be deemed to be
a grant by the Depositor to the Trust of a security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans and the other
assets constituting the Trust Property and all amounts payable on the Mortgage
Loans in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property; (c) the possession by the Trust of Mortgage Loans and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (d) notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trust for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Trust pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created hereby. The Servicer and the Depositor shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans and the other assets constituting the Trust Property, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and would be maintained as such throughout the
term of this Agreement.
65
<PAGE>
IN WITNESS WHEREOF, the Trust, the Depositor, the Servicer and
the Indenture Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized, in each case as of the day and
year first above written.
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By:
-----------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor
By:
-----------------------------------------
Name:
Title:
HOMEGOLD, INC., as Servicer
By:
-----------------------------------------
Name: Laird Minor
Title: Executive Vice President
FAIRBANKS CAPITAL CORP., as Back-up Servicer
By:
-----------------------------------------
Name:
Title:
[Sale and Servicing Agreement]
<PAGE>
FIRST UNION NATIONAL BANK, solely in its capacity as Indenture Trustee and not
in its individual capacity
By:
-------------------------------------------
Name: Pablo de la Canal
Title: Assistant Vice President
[Signature Page for Sale and Servicing Agreement]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of May, 1999, before me, a notary public in and
for said State, personally appeared ___________, known to me to be a __________
of Wilmington Trust Company, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of May, 1999, before me, a notary
public in and for said State, personally appeared [ ], known to
me to be a Vice President of Prudential Securities Secured Financing
Corporation, one of the corporations that executed the within instrument, and
also known to me to be the person who executed it on behalf of said corporation,
and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of May, 1999, before me, a notary public in and
for said State, personally appeared Laird Minor, known to me to be a Executive
Vice President of HomeGold, Inc., one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of May, 1999, before me, a notary public in
and for said State, personally appeared Pablo de la Canal, known to me to be an
officer of First Union National Bank, a national banking association that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said banking association, and acknowledged to me that
such banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of March, 1999, before me, a notary public
in and for said State, personally appeared [ ], known to me to be an
officer of Fairbanks Capital Corp. a [ ] corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said banking association, and acknowledged to me that such banking association
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
<PAGE>
EXHIBIT A
GLOSSARY OF DEFINED TERMS
[See Separate Document]
A-1
<PAGE>
EXHIBIT B
[RESERVED]
B-1
<PAGE>
EXHIBIT C-1
FORM OF INDENTURE TRUSTEE'S INITIAL CERTIFICATION
__________, 1999
HomeGold Home Equity Loan Trust 1999-1
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Office
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
HomeGold, Inc.
3901 Pelham Road
Greenville, SC 29615
Re: Sale and Servicing Agreement, dated as of May 1, 1999, among
HomeGold Home Equity Loan Trust 1999-1, Prudential Securities
Secured Financing Corporation, Fairbanks Capital Corp., HomeGold,
Inc. and First Union National Bank (the "Agreement")
----------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.04 of the Agreement, we certify that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in the exception
report annexed hereto as not being covered by this certification), (i) the
Mortgage Note included in each Mortgage File required to be delivered to us
pursuant to the Agreement is in our possession and (ii) such Mortgage Note has
been reviewed by us and appears regular on its face and relates to such Mortgage
Loan.
Attached is the Indenture Trustee's preliminary exceptions in
accordance with Section 2.04 of the Agreement. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
The Indenture Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in
C-1-1
<PAGE>
the Agreement. The Indenture Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability due authorization,
recordability or genuineness of any of the documents contained in the Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan.
FIRST UNION NATIONAL BANK,
solely in its capacity as Indenture Trustee
and not in its individual capacity
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
C-1-2
<PAGE>
EXHIBIT C-2
FORM OF INDENTURE TRUSTEE'S FINAL CERTIFICATION
_________, 1999
HomeGold Home Equity Loan Trust 1999-1
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Office
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
HomeGold, Inc.
3901 Pelham Road
Greenville, SC 29615
Re: Sale and Servicing Agreement, dated as of May 1, 1999, among
HomeGold Home Equity Loan Trust 1999-1, Prudential Securities
Secured Financing Corporation, Fairbanks Capital Corp., HomeGold,
Inc., and First Union National Bank (the "Agreement")
-----------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.04 of the Agreement, the
undersigned, as Indenture Trustee, hereby certifies that as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on the attachment hereto), it or a Custodian on its behalf has
received:
(a) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost;
(b) an original recorded Assignment of the Mortgage to the
Indenture Trustee together with the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment
from the originator, or a certified copy of such Assignments in those
instances where the public recording retains the original or where
original has been lost; and
C-2-1
<PAGE>
(c) the original lender's title insurance policy.
The Indenture Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the Agreement. The Indenture Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any of
the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
FIRST UNION NATIONAL BANK,
solely in its capacity as Indenture Trustee
and not in its individual capacity
By:
-------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
C-2-2
<PAGE>
EXHIBIT D
FORM OF UNAFFILIATED SELLER'S AGREEMENT
D-1
<PAGE>
Exhibit E-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Indenture Trustee/Custodian
Name: First Union National Bank
Address: 230 S. Tryon Street, Charlotte, NC 28288
Indenture Trustee/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: One New York Plaza, New York 10292
Trust
Name: HomeGold Home Equity Loan Trust 1999-1
Address: c/o Wilmington Trust Company, Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Office
Securities: HomeGold Home Equity Loan Asset Backed Notes,
Series 1999-1.
E-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has
received from First Union National Bank, as Indenture Trustee for the Holders of
HomeGold Home Equity Loan Asset Backed Notes, Series 1999-1, the documents
referred to below (the "Documents"). All capitalized terms not otherwise in this
Request for Release shall have the meanings given them in the Sale and Servicing
Agreement, dated as of May 1, 1999, among the Indenture Trustee, the Trust, the
Depositor, the Back-up Servicer and the Servicer (the "Sale and Servicing
Agreement").
(a) Promissory Note dated __________, 19__, in the original principal sum
of $________, made by ______________, payable to, or endorsed to the
order of, the Indenture Trustee.
(b) Mortgage recorded on ____________________ as instrument no. __________
in the County Recorder's Office of the County of _______________, State
of _______________ in book/reel/docket _________________ of official
records at page/image ______________.
(c) Deed of Trust recorded on _______________ as instrument no. ___________
in the County Recorder's Office of the County of _______________, State
of ________________ in book/reel/docket ________________ of official
records at page/image _____________.
(d) Assignment of Mortgage or Deed of Trust to the Indenture Trustee,
recorded on ______ as instrument no. _______ in the County Recorder's
Office of the County of ______________, State of ______________ in
book/reel/docket __________ of official records at page/image
-----------.
(e) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
(f) __________________________________________
(g) __________________________________________
(h) __________________________________________
(i) __________________________________________
The undersigned Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Indenture Trustee, solely for
the purposes provided in the Agreement and the Indenture.
(2) The Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other impositions nor shall
the Servicer assert or seek to assert any claims or rights of setoff to
or against the Documents or any proceeds thereof.
E-1-2
<PAGE>
(3) The Servicer shall return each and every Document
previously requested from the Mortgage File to the Indenture Trustee
when the need therefor no longer exists, unless the Mortgage Loan
relating to the Documents has been liquidated and the proceeds thereof
have been remitted to the Collection Account and except as expressly
provided in the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Servicer shall at all times be earmarked for the account of the
Indenture Trustee, and the Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the
Servicer's possession, custody or control.
Dated:
HOMEGOLD, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
E-1-3
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICER'S CERTIFICATE AND TRUST RECEIPT
HOMEGOLD HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 1999-1
____________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE,
AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE SALE AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________ BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE SALE AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
E-2
<PAGE>
Schedule 1
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
Class A Home Equity Loan Asset Backed Notes, Series 1999-1
---------------
INDENTURE
Dated as of May 1, 1999
---------------
FIRST UNION NATIONAL BANK
Indenture Trustee
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions and Incorporation by Reference..............................................................2
SECTION 1.1. Definitions....................................................................................2
SECTION 1.2. Incorporation by Reference of the Trust Indenture Act..........................................2
SECTION 1.3. Rules of Construction..........................................................................3
SECTION 1.4. Conflict with TIA..............................................................................3
ARTICLE II The Notes..............................................................................................3
SECTION 2.1. Form...........................................................................................3
SECTION 2.2. Execution, Authentication and Delivery.........................................................4
SECTION 2.3. Registration; Registration of Transfer and Exchange............................................4
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes.....................................................5
SECTION 2.5. Persons Deemed Owners..........................................................................6
SECTION 2.6. Payment of Principal and Interest..............................................................7
SECTION 2.7. Cancellation...................................................................................7
SECTION 2.8. Release of Collateral..........................................................................7
SECTION 2.9. Book-Entry Notes...............................................................................8
SECTION 2.10. Notices to Depository.........................................................................8
SECTION 2.11. Definitive Notes..............................................................................8
ARTICLE III Covenants.............................................................................................9
SECTION 3.1. Payment of Principal and Interest..............................................................9
SECTION 3.2. Maintenance of Office or Agency................................................................9
SECTION 3.3. Money for Payments to Be Held in Trust.........................................................9
SECTION 3.4. Existence.....................................................................................10
SECTION 3.5. Protection of Trust Property..................................................................11
SECTION 3.6. Opinions as to Trust Property.................................................................11
SECTION 3.7. Performance of Obligations; Servicing of Mortgage Loans.......................................12
SECTION 3.8. Negative Covenants............................................................................13
SECTION 3.9. Annual Statement as to Compliance.............................................................13
SECTION 3.10. Issuer May Not Consolidate...................................................................14
SECTION 3.11. No Other Business............................................................................14
SECTION 3.12. No Borrowing; Use of Proceeds................................................................14
SECTION 3.13. Servicer's Obligations.......................................................................14
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities............................................14
SECTION 3.15. Capital Expenditures.........................................................................14
SECTION 3.16. Compliance with Laws.........................................................................14
SECTION 3.17. Restricted Payments..........................................................................14
SECTION 3.18. Notice of Events of Default and Servicer Events of Default...................................15
SECTION 3.19. Further Instruments and Acts.................................................................15
SECTION 3.20. Amendments of Sale and Servicing Agreement and Trust Agreement...............................15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 3.21. Income Tax Characterization..................................................................15
SECTION 3.22. [Reserved]...................................................................................15
ARTICLE IV Satisfaction and Discharge............................................................................15
SECTION 4.1. Satisfaction and Discharge of Indenture.......................................................15
SECTION 4.2. Application of Trust Money....................................................................16
SECTION 4.3. Repayment of Monies Held by Note Paying Agent.................................................16
ARTICLE V Remedies...............................................................................................17
SECTION 5.1. Events of Default.............................................................................17
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment............................................17
SECTION 5.3. Remedies......................................................................................18
SECTION 5.4. Indenture Trustee Shall File Proofs of Claim..................................................19
SECTION 5.5. Indenture Trustee May Enforce Claims Without Possession of Notes..............................20
SECTION 5.6. Application of Money Collected................................................................20
SECTION 5.7. Limitation on Rights of Noteholders...........................................................20
SECTION 5.8. Unconditional Rights of Noteholders to Receive Principal and Interest.........................21
SECTION 5.9. Restoration of Rights and Remedies............................................................21
SECTION 5.10. Rights and Remedies Cumulative...............................................................21
SECTION 5.11. Delay or Omission Not a Waiver...............................................................22
SECTION 5.12. Control by Insurer or Noteholders............................................................22
SECTION 5.13. Undertaking for Costs........................................................................22
SECTION 5.14. Waiver of Stay or Extension Laws.............................................................23
SECTION 5.15. Action on Notes..............................................................................23
SECTION 5.16. Performance and Enforcement of Certain Obligations...........................................23
SECTION 5.17. Subrogation..................................................................................23
SECTION 5.18. Preference Claims............................................................................24
SECTION 5.19. Sale of Trust Estate.........................................................................24
SECTION 5.20. Waiver of Past Defaults......................................................................25
ARTICLE VI The Indenture Trustee.................................................................................26
SECTION 6.1. Duties of Indenture Trustee...................................................................26
SECTION 6.2. Rights of Indenture Trustee...................................................................28
SECTION 6.3. Individual Rights of Indenture Trustee........................................................29
SECTION 6.4. Indenture Trustee's Disclaimer................................................................29
SECTION 6.5. Notice of Defaults............................................................................29
SECTION 6.6. Reports by Indenture Trustee to Holders.......................................................29
SECTION 6.7. Compensation and Indemnity....................................................................29
SECTION 6.8. Replacement of Indenture Trustee..............................................................30
SECTION 6.9. Successor Indenture Trustee by Merger.........................................................32
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee............................32
SECTION 6.11. Eligibility..................................................................................33
SECTION 6.12. Preferential Collection of Claims Against Issuer.............................................33
SECTION 6.13. Appointment and Powers.......................................................................33
SECTION 6.14. Performance of Duties........................................................................34
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.15. Limitation on Liability......................................................................34
SECTION 6.16. Reliance Upon Documents......................................................................34
SECTION 6.17. Representations and Warranties of the Indenture Trustee......................................34
SECTION 6.18. Waiver of Setoffs............................................................................35
SECTION 6.19. Suits for Enforcement........................................................................35
SECTION 6.20. Mortgagor Claims.............................................................................36
SECTION 6.21. Certain Available Information................................................................36
ARTICLE VII Noteholders' Lists and Reports.......................................................................37
SECTION 7.1. Issuer to Furnish to Indenture Trustee Names and Addresses of Noteholders.....................37
SECTION 7.2. Preservation of Information; Communications to Noteholders....................................37
SECTION 7.3. Reports by Issuer.............................................................................37
SECTION 7.4. Reports by Indenture Trustee..................................................................38
ARTICLE VIII Accounts; Investment of Moneys; Collection and Application of Moneys; Reports.......................38
SECTION 8.1. Collection of Money...........................................................................38
SECTION 8.2. Release of Trust Property.....................................................................38
SECTION 8.3. Payments......................................................................................39
SECTION 8.4. Compliance with Withholding Requirements......................................................43
SECTION 8.5. Statements to Noteholders.....................................................................43
SECTION 8.6. Rights of Noteholders.........................................................................43
SECTION 8.7. Distribution Account..........................................................................44
SECTION 8.8. [Reserved]....................................................................................44
SECTION 8.9. [Reserved]....................................................................................44
SECTION 8.10. Expense Account..............................................................................44
SECTION 8.11. Reserve Account..............................................................................45
SECTION 8.12. Investment of Funds..........................................................................46
ARTICLE IX Supplemental Indentures...............................................................................47
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders........................................47
SECTION 9.2. Supplemental Indentures with Consent of Insurer or Noteholders................................48
SECTION 9.3. Execution of Supplemental Indentures..........................................................49
SECTION 9.4. Effect of Supplemental Indenture..............................................................50
SECTION 9.5. Conformity With Trust Indenture Act...........................................................50
SECTION 9.6. Reference in Notes to Supplemental Indentures.................................................50
ARTICLE X Redemption of Notes....................................................................................50
SECTION 10.1. Redemption...................................................................................50
SECTION 10.2. Notice.......................................................................................51
SECTION 10.3. Presentation and Surrender of Notes and Payment..............................................51
ARTICLE XI Certain Matters Regarding the Insurer.................................................................51
SECTION 11.1. Rights of the Insurer to Exercise Rights of Class A Noteholders..............................51
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 11.2. Indenture Trustee to Act Solely with Consent of the Insurer..................................51
SECTION 11.3. Trust Property and Accounts Held for Benefit of the Insurer..................................52
SECTION 11.4. Claims Upon the Policy; Policy Payments Account..............................................52
SECTION 11.5. Notices to the Insurer.......................................................................53
SECTION 11.6. Third-Party Beneficiary......................................................................53
SECTION 11.7. Indenture Trustee to Hold the Policy.........................................................53
ARTICLE XII Miscellaneous........................................................................................53
SECTION 12.1. Compliance Certificates and Opinions, etc....................................................53
SECTION 12.2. Form of Documents Delivered to Indenture Trustee.............................................54
SECTION 12.3. Acts of Noteholders..........................................................................55
SECTION 12.4. Notices, etc. to Indenture Trustee, Issuer, Insurer and Rating Agencies......................55
SECTION 12.5. Notices to Noteholders; Waiver...............................................................56
SECTION 12.6. Alternate Payment and Notice Provisions......................................................56
SECTION 12.7. Conflict with Trust Indenture Act............................................................57
SECTION 12.8. Effect of Headings and Table of Contents.....................................................57
SECTION 12.9. Successors and Assigns.......................................................................57
SECTION 12.10. Separability................................................................................57
SECTION 12.11. Benefits of Indenture.......................................................................57
SECTION 12.12. Legal Holidays..............................................................................57
SECTION 12.13. GOVERNING LAW...............................................................................57
SECTION 12.14. Counterparts................................................................................58
SECTION 12.15. Recording of Indenture......................................................................58
SECTION 12.16. Trust Obligation............................................................................58
SECTION 12.17. No Petition.................................................................................58
SECTION 12.18. Inspection..................................................................................58
SECTION 12.19. Limitation of Liability.....................................................................59
</TABLE>
EXHIBIT A -- Glossary of Defined Terms
EXHIBIT B -- Form of Class A Note
EXHIBIT C -- Form of Financial Guaranty Insurance Policy
iv
<PAGE>
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
Reconciliation and Tie between the Indenture
dated as of March 1, 1999 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
Section 310 (a) (1) Section 6.11
(a) (2) Section 6.11
(a) (3) Section 6.10
(a) (4) Not Applicable
(b) Section 6.11
(c) Not Applicable
311 (a) Section 6.12
(b) Section 6.12
312 (a) Section 7.1
(b) Section 7.2(b)
(c) Section 7.2(c)
313 (a) Section 7.4
(b) (1) Section 7.4
(b) (2) Section 7.4
(c) Section 7.3, ss. 7.4
(d) Section 7.4
314 (a) Section 3.9, ss. 7.3
(b) Section 3.6
(c) (1) Section 2.8, Section 8.2(c), Section 12.1
(c) (2) Section 12.1
(c) (3) Section 12.1
(d) Section 2.8, Section 8.2(c), Section 12.1
(e) Section 12.1
(f) Not Applicable
315 (a) Section 6.1, Section 6.14, Section 6.16
(b) Section 6.5
(c) Section 6.1
(d) Section 6.1
(e) Section 5.13
316 (a) (last sentence) Section 1.1
(a) (1) (A) Section 5.12
(a) (1) (B) Section 5.20
(a) (2) Not Applicable
317 (a) (1) Section 5.3
(a) (2) Section 5.4, Section 5.5
(b) Section 3.3
318 (a) Section 1.4, Section 12.7
(c) Section 12.7
v
<PAGE>
INDENTURE dated as of May 1, 1999, between HOMEGOLD HOME
EQUITY LOAN TRUST 1999-1, a Delaware business trust (the "Issuer"), and FIRST
UNION NATIONAL BANK, a national banking association, as trustee (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other
party, the Insurer and for the equal and ratable benefit of the Holders of the
Issuer's Class A Home Equity Loan Asset Backed Notes, Series 1999-1
(collectively, the "Notes"):
As security for the payment and performance by the Issuer of
its obligations under this Indenture and the Notes, the Issuer has agreed to
assign the Collateral (as defined below) to the Indenture Trustee on behalf of
the Noteholders and the Insurer.
Financial Security Assurance, Inc. (the "Insurer") has
issued and delivered a financial guaranty insurance policy, dated the Closing
Date (the "Policy"), pursuant to which the Insurer guarantees the Scheduled
Payments (as defined below).
As an inducement to the Insurer to issue and deliver the
Policy, the Issuer and the Insurer have executed and delivered the Insurance
and Indemnity Agreement, dated as of May1, 1999 (as amended from time to time,
the "Insurance Agreement"), among the Insurer, the Issuer, HomeGold, Inc.,
HomeGold Financial, Inc., Emergent Mortgage Holdings Corporation, and
Prudential Securities Secured Financing Corporation.
As an additional inducement to the Insurer to issue the
Policy, and as security for the performance by the Issuer of its respective
obligations hereunder and the other Basic Documents to the Insurer and the
Indenture Trustee, the Issuer has agreed to grant and assign the Collateral
(as defined below) to the Indenture Trustee for the benefit of the Issuer
Secured Parties, as their respective interests may appear.
<PAGE>
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, for the benefit of the Issuer Secured Parties all of the
Issuer's right, title and interest in and to (i) the Mortgage Loans, (ii) any
Qualified Substitute Mortgage Loans acquired by the Issuer subsequent to the
Closing Date pursuant to the Sale and Servicing Agreement, (iii) the Mortgage
Files delivered or to be delivered to the Indenture Trustee pursuant to the
Sale and Servicing Agreement, (iv) all interest and principal received by the
Issuer on or in respect of the Mortgage Loans and the Qualified Substitute
Mortgage Loans pursuant to the Sale and Servicing Agreement due after the
applicable Cut-off Date and all other proceeds received in respect of such
Mortgage Loans, (v) the Depositor's rights under the Unaffiliated Seller's
Agreement, and the Purchase Agreement and Assignment (including any security
interest created thereby) assigned to the Issuer pursuant to the Sale and
Servicing Agreement, (vi) the Sale and Servicing Agreement, (vii) any and all
other property, assets, rights and interests included or to be included in the
Trust Property, (viii) all cash, instruments or other property held or
required to be deposited in the Collection Account, the Distribution Account,
the Reserve Account and the Expense Account, including all investments made
with funds in such accounts (but not including any income on funds deposited
in, or investments made with funds deposited in, such accounts, which income
shall belong to and be for the account of the Servicer), and (ix) 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 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 (the
foregoing "Collateral").
The foregoing Grant is made in trust to the Indenture
Trustee, for the benefit first, of the Holders of the Notes, and second, for
the benefit of the Insurer. The Indenture Trustee hereby acknowledges such
Grant, accepts the trusts under this Indenture in accordance with the
provisions of this Indenture and agrees to perform its duties required in this
Indenture to the best of its ability to the end that the interests of such
parties, recognizing the priorities of their respective interests, may be
adequately and effectively protected.
In connection with the Grant set forth above, the Issuer
does hereby deliver to, and deposit with the Indenture Trustee, the Mortgage
Files.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto in Exhibit A
hereto.
SECTION 1.2. Incorporation by Reference of the Trust
Indenture Act. Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by
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reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined
by the TIA, or defined by Commission rule have the meaning assigned to them by
such definitions.
SECTION 1.3. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in
the plural include the singular.
SECTION 1.4. Conflict with TIA. If any provision hereof
limits, qualifies or conflicts with a provision of the TIA that is required
under the TIA to be part of and govern this Indenture, the latter provision
shall control and all provisions required by the TIA are hereby incorporated
by reference. If any provision of this Indenture modifies or excludes any
provision of the TIA that may be so modified or excluded, such provisions of
the TIA shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
ARTICLE II
The Notes
SECTION 2.1. Form. The Class A Notes, in each case together
with the Indenture Trustee's certificate of authentication, shall be in
substantially the form set forth in Exhibits B-1 and B-2, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their
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execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
Each Note shall be dated the date of its authentication. The
terms of the Notes set forth in Exhibits B-1 and B-2 are part of the terms of
this Indenture.
SECTION 2.2. Execution, Authentication and Delivery.
The Notes shall be executed on behalf of the Issuer by any of its Authorized
Officers. The signature of any such Authorized Officer on the Notes may be
original or facsimile.
Notes bearing the original or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Notes or
did not hold such offices at the date of such Notes.
The Indenture Trustee shall authenticate and deliver Class A
Notes for original issue in an aggregate principal amount of $53,964,000. The
Class A Notes outstanding at any time may not exceed such amount except as
provided in Section 2.4.
Each Note shall be dated the date of its authentication. The
Notes shall be issuable as registered Notes in the minimum denomination of
$1,000 and in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears
attached to such Note a certificate of authentication substantially in the
form provided for herein executed by the Indenture Trustee by the manual
signature of one of its authorized signatories, and such certificate attached
to any Note shall be conclusive evidence, and the only evidence, that such
Note has been duly authenticated and delivered hereunder. Subject to Section
2.9 and Section 2.11, the Notes shall be Book-Entry Notes.
SECTION 2.3. 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 shall be "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar.
If a Person other than the Indenture Trustee is appointed by
the Issuer as Note Registrar, the Issuer will give the Indenture Trustee
prompt written notice of the appointment of such Note Registrar and of the
location, and any change in the location, of the Note Register, and the
Indenture Trustee shall have the right to inspect the Note Register at all
reasonable times and to obtain copies thereof. The Indenture Trustee shall
have the right to rely upon a certificate executed on behalf of the Note
Registrar by an Authorized Officer thereof as to the names and addresses of
the Holders of the Notes and the principal amounts and number of such Notes.
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Upon surrender for registration or transfer of any Note at
the office or agency of the Issuer to be maintained as provided in Section
3.2, and if the requirements of Section 8-401(a) of the UCC are met, the
Issuer shall execute and cause the Indenture Trustee to authenticate one or
more new Notes, in any authorized denominations, of the same class and a like
aggregate principal amount. A Noteholder may also obtain from the Indenture
Trustee, in the name of the designated transferee or transferees one or more
new Notes, in any authorized denominations, of the same Class and a like
aggregate principal amount. Such requirements shall not be deemed to create a
duty on the part of the Indenture Trustee to monitor the compliance by the
Issuer with Section 8-401 of the UCC.
At the option of the Holder, Notes may be exchanged for
other Notes in any authorized denominations, of the same Class and a like
aggregate principal amount, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, and
if the requirements of Section 8-401(a) of the UCC are met, the Issuer shall
execute and upon its request the Indenture Trustee shall authenticate the
Notes which the Noteholder making the exchange is entitled to receive. Such
requirements shall not be deemed to create a duty on the part the Indenture
Trustee to monitor the compliance by the Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be (i) duly endorsed by, or be accompanied by a
written instrument of transfer in the form attached to Exhibits B-1 and B-2,
duly executed by, the Holder thereof 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 all in accordance
with the Exchange Act, and (ii) accompanied by such other documents as the
Note Registrar may require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Note Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.4 not involving
any transfer.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of ERISA that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended, or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity to purchase
the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes will be
covered by a U.S. Department of Labor Class Exemption.
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes.
If (i) 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 (ii) there is delivered to the
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Indenture Trustee and the Insurer such security or indemnity as may be required
by it to hold the Issuer, the Indenture Trustee and the Insurer harmless, then,
in the absence of notice to the Issuer, the Note Registrar or the Indenture
Trustee that such Note has been acquired by a bona fide purchaser or protected
purchaser (within the meaning of Section 8-302 of the UCC), and provided that
the requirements of Section 8-405 of the UCC are met, the Issuer shall execute
and upon its request the Indenture Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note (such requirement shall not be deemed to create a duty in the
Indenture Trustee to monitor the compliance by the Issuer with Section 8-405);
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within seven days shall be due and payable,
or shall have been called for redemption, the Issuer may, instead of issuing a
replacement Note, direct the Indenture Trustee, in writing, to pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a protected purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Issuer, the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a
protected purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer, the Insurer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this
Section, the Issuer may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other reasonable expenses (including the
fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not
the mutilated, 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 2.5. Persons Deemed Owners. Prior to due presentment
for registration of transfer of any Note, the Issuer, the Indenture Trustee
and the Insurer and any agent of the Issuer, the Indenture Trustee and the
Insurer may treat the Person in whose name any Note is registered (as of the
Record Date) as the owner of such Note for the purpose of receiving payments
of principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Insurer, the Indenture Trustee nor any agent of the Issuer, the Insurer or the
Indenture Trustee shall be affected by notice to the contrary.
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SECTION 2.6. Payment of Principal and Interest. (a) The
unpaid principal of the Notes of each Class shall accrue interest as provided
herein, which (except for Shortfall Interest Deferred Amounts or Accrued
Shortfall Interest Carry Forward Amounts, which shall be due and payable only
to the extent funds are available therefor as provided herein) shall be due
and payable on each Payment Date prior to the Final Payment Date thereof and
(without regard to the availability of funds for the payment of Shortfall
Interest Deferred Amounts or Accrued Shortfall Interest Carry Forward Amounts)
on such Final Payment Date. The unpaid principal of the Notes of each Class
shall be due and payable (to the extent of funds available therefor as
provided herein) on each Payment Date as provided in Section 8.3 and
(regardless of the availability of sufficient funds therefor) on the Final
Payment Date for such Class. Payment of interest and principal on any Note
shall be made as provided in Section 8.3(d).
(b) [Intentionally Omitted.]
(c) [Intentionally Omitted.]
(d) Promptly following the date on which all principal of
and interest on the Notes has been paid in full and the Notes have been
surrendered to the Indenture Trustee, the Indenture Trustee shall, upon
written notice from the Servicer of the amounts, if any, that the Insurer has
paid in respect of the Notes under the Policy or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the Insurer to the extent
not previously cancelled or destroyed.
SECTION 2.7. Cancellation. Subject to Section 2.6(d), all
Notes surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other than the Indenture
Trustee, be delivered to the Indenture Trustee and shall be promptly canceled
by the Indenture Trustee. Subject to Section 2.6(d), the Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes 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 Indenture Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as
expressly permitted by this Indenture. Subject to Section 2.6(d), all canceled
Notes may be held or disposed of by the Indenture Trustee in accordance with
its standard retention or disposal policy as in effect at the time unless the
Issuer shall direct by an Issuer Order that they be destroyed or returned to
it; provided that such Issuer Order is timely and the Notes have not been
previously disposed of by the Indenture Trustee.
SECTION 2.8. Release of Collateral. The Indenture Trustee
shall (i) release any portion of the Trust Property relating to a Class from
the lien created by this Indenture in accordance with the provisions of
Section 10.02(b) of the Sale and Servicing Agreement and (ii) on or after the
Termination Date with respect to such Class, release any remaining portion of
the Trust Property relating to such Class from the lien created by this
Indenture, in each case upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1)
meeting the applicable requirements of Section 10.02.
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SECTION 2.9. Book-Entry Notes. The Notes, upon original
issuance, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to the Depository or its nominee by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the Depository, and no Note
Owner will receive a Definitive Note representing such Note Owner's interest
in such Note, except as provided in Section 2.11. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note
Owners pursuant to Section 2.11:
(i) the provisions of this Section shall be in full
force and effect;
(ii) the Note Registrar and the Indenture Trustee shall
be entitled to deal with the Depository for all purposes of
this Indenture (including the payment of principal of and
interest on the Notes and the giving of instructions or
directions hereunder) as the sole Holder of the Notes, and
shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the
provisions of this Section shall control;
(iv) the rights of Note Owners shall be exercised only
through the Depository and shall be limited to those
established by law and agreements between such Note Owners and
the Depository and/or the Depository Participants. Unless and
until Definitive Notes are issued pursuant to Section 2.11, the
initial Depository will make book-entry transfers among the
Depository Participants and receive and transmit payments of
principal of and interest on the Notes to such Depository
Participants;
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of
Notes evidencing a specified percentage of the Outstanding
Amount of the Notes, the Depository shall be deemed to
represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or
Depository Participants owning or representing, respectively,
such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture
Trustee; and
(vi) Note Owners may receive copies of any reports sent
to Noteholders pursuant to this Indenture, upon written
request, together with a certification that they are Note
Owners and payment of reproduction and postage expenses
associated with the distribution of such reports, from the
Indenture Trustee at the Corporate Trust Office.
SECTION 2.10. Notices to Depository. Whenever a notice or
other communication to the Noteholders is required under this Indenture,
unless and until Definitive Notes shall have been issued to Note Owners
pursuant to Section 2.11, the Indenture Trustee shall give all such notices
and communications specified herein to be given to Holders of the Notes to the
Depository, and shall have no obligation to the Note Owners.
SECTION 2.11. Definitive Notes. If (i) the Depositor or the
Depository advises the Indenture Trustee in writing that the Depository is no
longer willing or able to properly discharge its responsibilities with respect
to the Notes, and the Servicer is unable to locate a qualified successor, (ii)
the Depositor at its option advises the Indenture Trustee in writing that it
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elects to terminate the book-entry system through the Depository or (iii)
after the occurrence of a Servicer Event of Default or Event of Default,
Holders of Notes evidencing not less than 51% of the Outstanding Amount of the
Notes advise the Indenture Trustee through the Depository in writing that the
continuation of a book entry system through the Depository is no longer in the
best interests of the Note Owners, then the Indenture Trustee shall notify all
Depository Participants and Note Owners of the occurrence of any such event
and of the availability of Definitive Notes to Note Owners requesting the
same. Upon surrender to the Indenture Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Depository, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate Definitive Notes in accordance with the instructions of the
Depository. None of the Issuer, the Note Registrar or 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 the issuance of Definitive Notes, the Indenture Trustee shall recognize
the Holders of the Definitive Notes as Noteholders.
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer
will duly and punctually pay the principal of and interest on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting
the foregoing, the Issuer will cause to be delivered to the Indenture Trustee
all amounts on deposit in the Collection Account when and as required by the
Sale and Servicing Agreement. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer
will maintain in Charlotte, North Carolina, an office or agency where Notes
may be surrendered for registration, transfer or exchange of the Notes, and
where notices and demands to or upon the Issuer in respect of the Notes and
this Indenture may be served. The Issuer hereby initially appoints the
Indenture Trustee to serve as its agent for the foregoing purposes. The Issuer
will give prompt written notice to the Indenture Trustee of the location, and
of any change in the location, of any such office or agency. If at any time
the Issuer shall fail to maintain any such office or agency or shall fail to
furnish the Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust Office, and
the Issuer hereby appoints the Indenture Trustee as its agent to receive all
such surrenders, notices and demands.
SECTION 3.3. Money for Payments to Be Held in Trust. The
Issuer will cause each Note Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee and the Insurer an instrument in
which such Note Paying Agent shall agree with the Indenture Trustee (and if
the Indenture Trustee acts as Note Paying Agent, it hereby so agrees), subject
to the provisions of this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid
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to such Persons or otherwise disposed of as herein provided and pay such sums to
such Persons as herein provided;
(ii) give the Indenture Trustee and the Insurer written
notice of any default by the Issuer (or any other obligor upon the Notes) of
which it has actual knowledge in the making of any payment required to be made
with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith pay to
the Indenture Trustee all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards required to be
met by a Note Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Note Paying Agent to pay to the Indenture Trustee all
sums held in trust by such Note Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held
by such Note Paying Agent; and upon such a payment by any Note Paying Agent to
the Indenture Trustee, such Note Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to the escheat of
funds, any money held by the Indenture Trustee or any Note Paying Agent in
trust for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request, 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 Note Paying Agent with respect to such trust money shall thereupon cease.
SECTION 3.4. Existence. The Issuer will keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States
of America, in which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Trust Property, the Notes, and each
other instrument or agreement included in the Trust Property.
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SECTION 3.5. Protection of Trust Property. The Issuer
intends the security interest granted pursuant to this Indenture in favor of
the Issuer Secured Parties to be prior to all other liens in respect of the
Trust Property, and the Issuer shall take all actions necessary to discharge
and release the Warehouse Liens upon the acquisition by the Trust of the
related Mortgage Loans and thereafter to obtain and maintain, in favor of the
Indenture Trustee, for the benefit of the Issuer Secured Parties, a first lien
on and a first priority, perfected security interest in the Trust Property.
The Issuer will from time to time prepare (or shall cause to be prepared),
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) Grant more effectively all or any portion of the
Trust Property;
(ii) maintain or preserve the lien and security interest
(and the priority thereof) in favor of the Indenture Trustee for the benefit
of the Issuer Secured Parties created by 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 Collateral;
(v) preserve and defend title to the Trust Property and
the rights of the Indenture Trustee in such Trust Property against the claims
of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon
the Trust Property when due.
The Issuer hereby designates the Indenture Trustee its agent
and attorney-in-fact to execute any financing statement, continuation
statement or other instrument required by the Indenture Trustee pursuant to
this Section; provided that, such designation shall not be deemed to create a
duty in the Indenture Trustee or the Indenture Trustee to monitor the
compliance of the Issuer with respect to its duties under this Section 3.5 or
the adequacy of any financing statement, continuation statement or other
instrument prepared by the Issuer.
SECTION 3.6. Opinions as to Trust Property. (a) On the
Closing Date, the Issuer shall furnish to the Indenture Trustee and the
Insurer an Opinion of Counsel stating that, in the opinion of such counsel,
such actions have been taken with respect to the recording and filing of this
Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the first priority lien and security interest in favor of the
Indenture Trustee, for the benefit of the Issuer Secured Parties, created by
this Indenture.
(b) Within 90 days after the beginning of each calendar
year, beginning with the first calendar year beginning more than six months
after the Closing Date, the Issuer shall furnish to the Indenture Trustee and
the Insurer, an Opinion of Counsel either stating that, in the opinion of such
counsel, such actions have been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite
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documents and with respect to the execution and filing of any financing
statements and continuation statements as are necessary to maintain the lien and
security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel, no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture.
SECTION 3.7. Performance of Obligations; Servicing of
Mortgage Loans. (a) The Issuer will 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 material covenants or obligations under any
instrument or agreement included in the Trust Property or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as ordered by any bankruptcy or other court or as expressly provided or
permitted in this Indenture, the Basic Documents or such other instrument or
agreement.
(b) The Issuer may contract with other Persons acceptable to
the Insurer to assist it in performing its duties under this Indenture, and
any performance of such duties by a Person identified to the Indenture Trustee
and the Insurer in an Officer's Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer to assist the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of
its obligations and agreements contained in this Indenture, the Basic
Documents and in the instruments and agreements included in the Trust
Property, including, but not limited, to preparing (or causing to be prepared)
and filing (or causing to be filed) all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture
and the Sale and Servicing Agreement in accordance with and within the time
periods provided for herein and therein. Except as otherwise expressly
provided therein, the Issuer shall not waive, amend, modify, supplement or
terminate any Basic Document or any provision thereof without the consent of
the Indenture Trustee and the Insurer (or, if an Insurer Default has occurred
and is continuing, and such waiver, amendment, modification, supplement or
termination would adversely affect the interests of the Noteholders, then of
the Holders of a majority of the Outstanding Amount of the Notes). The
Indenture Trustee may determine whether or not any Notes would be adversely
affected by any such waiver, amendment, modification, supplement or
termination upon receipt of written confirmation from the Rating Agencies that
such action would not adversely affect the then current ratings on the Notes.
(d) If a Responsible Officer of the Owner Trustee shall
have actual knowledge of the occurrence of a Servicer Event of Default under
the Sale and Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee, the Insurer and the Rating Agencies thereof in accordance
with Section 12.4, and shall specify in such notice the action, if any, being
taken or to be taken by the Issuer or other Persons.
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(e) The Issuer agrees that it will not waive timely
performance or observance by the Servicer or the Unaffiliated Seller of their
respective duties under the Basic Documents (x) without the prior consent of
the Insurer or (y) if the effect thereof would adversely affect the Holders of
the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as permitted by this Indenture or the Basic
Documents, sell, transfer, exchange or otherwise dispose of any of
the properties or assets of the Issuer, including those included in
the Trust Property, without the consent of the Insurer;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Noteholder by reason
of the payment of the taxes levied or assessed upon any part of the
Trust Property; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the
Indenture Trustee created by this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect
to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance (other than the
lien of this Indenture) to be created on or extend to or otherwise
arise upon or burden the Trust Property or any part thereof or any
interest therein or the proceeds thereof (other than (i) tax liens,
mechanics' liens and other liens that arise by operation of law, in
each case on a Mortgaged Property and arising solely as a result of
an action or omission of the related Mortgagor and (ii) the
Warehouse Liens provided that such Warehouse Liens are discharged
and released as provided in Section 3.12), (C) permit the lien of
this Indenture not to constitute a valid first priority (other than
with respect to any such tax, mechanics' or other lien or such
Warehouse Liens) security interest in the Trust Property or (D)
amend, modify or fail to comply with the provisions of the Basic
Documents without the prior written consent of the Insurer.
SECTION 3.9. Annual Statement as to Compliance. The Issuer
will deliver to the Indenture Trustee and the Insurer, within 90 days after
the end of each fiscal year of the Issuer (commencing with the fiscal year
ended December 31, 1999), and otherwise in compliance with the requirements of
TIA Section 314(a)(4) an Officer's Certificate stating, as to the Authorized
Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during
such year and of performance under this Indenture has been made
under such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions
and covenants under this Indenture throughout
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such year, or, if there has been a default in the compliance of any
such condition or covenant, specifying each such default known to such
Authorized Officer and the nature and status thereof.
SECTION 3.10. Issuer May Not Consolidate. The Issuer may not
consolidate or merge with or into any other Person.
SECTION 3.11. No Other Business. The Issuer shall not engage
in any business other than as contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.12. No Borrowing; Use of Proceeds. The Issuer
shall not issue, incur, assume, guarantee or otherwise become liable, directly
or indirectly, for any Indebtedness except for (i) the Notes, (ii) obligations
owing from time to time to the Insurer under the Insurance Agreement and (iii)
any other Indebtedness permitted by or arising under the Basic Documents. The
proceeds of the Notes shall be used exclusively to repay the Warehouse Loans
and obtain the release and discharge of the Warehouse Liens, to make any other
payments required by the terms of any of the Basic Documents and to pay the
Issuer's organizational, transactional and start-up expenses.
SECTION 3.13. Servicer's Obligations. The Issuer shall cause
the Servicer to comply with its obligations under the Sale and Servicing
Agreement.
SECTION 3.14. Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by the Sale and Servicing Agreement, this
Indenture or the Basic Documents, the Issuer shall not make any loan or
advance or credit to, or guarantee (directly or indirectly or by an instrument
having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise
become continently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire
(or agree continently to do so) any stock, obligations, assets or securities
of, or any other interest in, or make any capital contribution to, any other
Person.
SECTION 3.15. Capital Expenditures. Except as and to the
extent authorized by the Basic Documents, the Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personally).
SECTION 3.16. Compliance with Laws. The Issuer shall comply
with the requirements of all applicable laws, the noncompliance with which
would, individually or in the aggregate, materially and adversely affect the
ability of the Issuer to perform its obligations under the Notes, this
Indenture or any Basic Document.
SECTION 3.17. 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
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cause to be made, distributions to the Servicer, the Owner Trustee, the
Indenture Trustee, the Insurer and the Noteholders as permitted or contemplated
by, and to the extent funds are available for such purpose under, the Sale and
Servicing Agreement, this Indenture or the Trust Agreement.
SECTION 3.18. Notice of Events of Default and Servicer
Events of Default. Upon a Responsible Officer of the Owner Trustee having
actual knowledge thereof, the Issuer agrees to give the Indenture Trustee, the
Insurer and the Rating Agencies prompt written notice of each Event of Default
hereunder or Servicer Event of Default under the Sale and Servicing Agreement.
SECTION 3.19. Further Instruments and Acts. Upon request of
the Indenture Trustee or the 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.
SECTION 3.20. Amendments of Sale and Servicing Agreement and
Trust Agreement. The Issuer shall not agree to any amendment to Section 12.01
of the Sale and Servicing Agreement or Section 16.1 of the Trust Agreement to
eliminate the requirements thereunder that the Indenture Trustee, the Insurer
or the Holders of the Notes, as the case may be, consent to amendments thereto
as provided therein.
SECTION 3.21. Income Tax Characterization. For purposes of
federal income, state and local income and franchise and any other income
taxes, the Issuer will treat the Notes as indebtedness of the Issuer and
hereby instructs the Indenture Trustee to treat the Notes as indebtedness of
the Issuer for federal and state tax reporting purposes.
SECTION 3.22. [Reserved].
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. Upon
payment in full of the Notes and all amounts due to the Insurer under the
Insurance Agreement, this Indenture shall cease to be of further effect with
respect to the Notes except as to (i) the rights, obligations and immunities
of the Indenture Trustee hereunder (including the rights of the Indenture
Trustee under Section 6.7 and the obligations of the Indenture Trustee under
Section 4.2) and (ii) the rights of Noteholders as beneficiaries hereof with
respect to the property so deposited with the Indenture Trustee payable to all
or any of them, and the Indenture Trustee, on demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
(A) either
(1) 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 2.4 and (ii)
Notes for which money in payment of which has theretofore been
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deposited in trust or segregated and held in trust and thereafter
repaid to the Issuer or discharged from such trust, as provided in
Section 3.3) have been delivered to the Indenture Trustee for
cancellation and the Policy has terminated and been returned to the
Insurer for cancellation and all amounts owing to the Insurer have
been paid in full; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable,
(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 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,
and in the case of (i), (ii) or (iii) above
(B) the Issuer, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct obligations of
or obligations guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Indenture Trustee for cancellation when due
on the Final Maturity Date or the Redemption Date (if Notes shall have been
called for redemption pursuant to Section 10.1), as the case may be;
(C) the Issuer has paid or caused to be paid all Insurer
Issuer Secured Obligations and all Indenture Trustee Issuer Secured
Obligations; and
(D) the Issuer has delivered to the Indenture Trustee and the
Insurer an Officer's Certificate, an Opinion of Counsel and if required by the
TIA, the Indenture Trustee or the Insurer an Independent Certificate from a
firm of certified public accountants, each meeting the applicable requirements
of Section 12.1 and each stating that all conditions precedent herein provided
relating to the satisfaction and discharge of this Indenture have been
complied with.
SECTION 4.2. Application of Trust Money. All monies
deposited with the Indenture Trustee pursuant to Section 4.1 hereof 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 Note
Paying Agent, as the Indenture Trustee may determine, to the Holders of the
particular Notes for the payment or redemption of which such monies have been
deposited with the Indenture Trustee, of all sums due and to become due
thereon for principal and interest.
SECTION 4.3. Repayment of Monies Held by Note Paying Agent.
In connection with the satisfaction and discharge of this Indenture with
respect to the Notes, all monies then held by any Note Paying Agent other than
the Indenture Trustee under the provisions of this Indenture with respect to
such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee
to be held and applied according to Section 3.3 and thereupon such Note Paying
Agent shall be released from all further liability with respect to such
monies.
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ARTICLE V
Remedies
SECTION 5.1. Events of Default. "Event of Default" with
respect to each Class of Notes issued hereunder, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be affected 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):
(a) (i) default in the payment of any interest on or in
respect of any Note of such Class when due and payable (as provided in Section
2.6(a)), which default shall continue for a period of five days, or (ii) the
failure to apply funds which are available for payment in accordance with the
priority of distribution set forth in Article VIII hereof, which failure shall
continue for a period of five days, or (iii) default in the payment of
principal due on any such Class of Notes, on the Final Distribution Date
thereof; or
(b) with respect to the related Class of Notes the occurrence
and continuance of an Insurer Default; or
(c) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Issuer in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or (ii) a decree or order
adjudging the Issuer a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment, or composition of or
in respect of the Issuer under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator,
or other similar official of the Issuer 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 60 consecutive days; or
(d) the commencement by the Issuer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Issuer in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing by it of a petition
or answer or consent seeking reorganization or relief under any applicable
federal or state law, or the consent by it to the filing of such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or similar official of the Issuer
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the Issuer's failure to pay its
debts generally as they become due, or the taking of corporate action by the
Issuer in furtherance of any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment. (a) If an Event of Default occurs and is continuing, then and in
every such case, the Insurer may (or, if an
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Insurer Default has occurred and is continuing, the Indenture Trustee may, and
if so directed by the Holders of Notes evidencing to at least 66-2/3% of the
Outstanding Amount of the related Class of Notes shall) declare the unpaid
principal amount of all such Notes to be due and payable immediately, by a
notice in writing to the Issuer, the Servicer and the Insurer, and upon any such
declaration such principal amount shall become immediately due and payable
together with all accrued and unpaid interest thereon, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Issuer.
(b) At any time after such a declaration of acceleration of
the related Class of 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 Insurer may (or, if an Insurer
Default has occurred and is continuing, the Indenture Trustee may, and, if so
directed by the Holders of Notes evidencing at least 66-2/3% of the
Outstanding Amount of the related Class of Notes, shall), by written notice to
the Issuer, Servicer, Insurer and the Indenture Trustee, rescind and annul
such declaration and its consequences, if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all overdue amounts payable on or in respect of
the related Notes (other than amounts due solely as a result of the
acceleration),
(B) to the extent that payment of interest on such
amount is lawful, interest on such overdue amounts at the applicable
Note Interest Rate;
(C) all unpaid amounts referred to in Section 6.7 and
clauses (iii) and (v) of Section 8.3(a);
(D) 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
(ii) all Events of Default, other than the nonpayment of
amounts payable on or in respect of the related Notes which have
become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 5.20.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 5.3. Remedies. (a) If an Event of Default occurs
and is continuing of which a Responsible Officer has actual knowledge, the
Indenture Trustee shall give notice to each Noteholder of the related Class of
Notes as set forth in Section 6.5.
(b) Following any acceleration of the related Class of Notes,
the Indenture Trustee shall, subject to Section 5.3(d), have all of the
rights, powers and remedies with respect to the Trust Property as are
available to secured parties under the Uniform Commercial Code or
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other applicable law. Such rights, powers and remedies may be exercised by the
Indenture Trustee in its own name as trustee of an express trust.
(c) If an Event of Default specified in Section 5.1(a) occurs
and is continuing, the Indenture Trustee is authorized to recover judgment in
its own name and as trustee of an express trust against the Issuer for the
whole amount of principal and interest remaining of the related Class Notes of
not paid when due and payable.
(d) In exercising its rights and obligations under this
Section 5.3, the Indenture Trustee may sell the Trust Property subject to the
provisions of Section 5.19. Neither the Indenture Trustee nor any Noteholder
of the related Class of Notes shall have any rights against the Issuer other
than to enforce the Grant hereunder and to sell the Trust Property.
SECTION 5.4. Indenture Trustee Shall File Proofs of Claim.
(a) In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition, or other
judicial proceeding relative to the Issuer, the Servicer, the Unaffiliated
Seller, the Insurer or any other obligor upon or in respect of the Notes or
the other obligations secured hereby or relating to the property of the
Issuer, the Servicer, the Unaffiliated Seller, the Insurer or of such other
obligor or their creditors, the Indenture Trustee (irrespective of whether the
principal of the such Class of 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, the Servicer, the
Unaffiliated Seller, or the Insurer for the payment of overdue principal or
interest or any such other obligation) shall by intervention in such
proceeding or otherwise:
(i) file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of such Notes and
any other obligation secured hereby and to file such other papers or
documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel) and of the Noteholders of
the Related Class allowed in such judicial 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 custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder of the related Class 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 of the related Class to
pay to the Indenture Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee,
its agents and counsel, and any other amounts due the Indenture Trustee under
Section 6.7.
(b) 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 of the related Class any plan of reorganization, arrangement,
adjustment or composition affecting such Notes or the
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rights of any holder thereof or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder of the related Class in any such
proceeding.
SECTION 5.5. 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 shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel, be for the ratable benefit of the
Holders of the related Class of Notes in respect of which such judgment has
been recovered.
SECTION 5.6. Application of Money Collected. Any money
collected by the Indenture Trustee pursuant to this Article (including all
collections from, and proceeds of the sale or liquidation of, the Trust
Property), and any moneys that may then be held or thereafter received by the
Indenture Trustee shall be applied in the following order, at the date or
dates fixed by the Indenture Trustee and, in case of the distribution of the
entire amount due on account of principal or interest, upon presentation of
the related Class of Notes and surrender thereof:
first, to the payment of all costs and expenses of
collection incurred by the Indenture Trustee and the Noteholders of
the related Class (including the reasonable fees and expenses of any
counsel to the Indenture Trustee and the Noteholders of the related
Class) and all amounts due and unpaid to the Indenture Trustee
pursuant to Section 6.7; and
second, in the same order as specified in Section 8.3.
SECTION 5.7. Limitation on Rights of Noteholders. (a) No
Holder of any Note shall have any right to institute any Proceeding with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(i) such Holder has previously given written
notice to the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of Notes evidencing not less than 25%
of the Outstanding Amount of the related Class of Notes have made
written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the
Indenture Trustee indemnity reasonably satisfactory to it against
the costs, expenses and liabilities to be incurred in complying with
such request;
(iv) the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to
institute such Proceedings;
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(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of a majority of the Outstanding Amount of the related
Class of Notes; and
(vi) an Insurer Default shall have occurred and be
continuing;
it being understood and intended that no Holders of a Class of Notes shall
have any right in any manner whatsoever 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.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of a
Class of Notes, each representing less than a majority of the Outstanding
Amount of the related Class of Notes, the Indenture Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
(b) The death or incapacity of any Noteholder shall not
operate to terminate this Indenture, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
Proceeding in any court for a partition or winding up of the Issuer, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(c) No Noteholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the
operation and management of the Issuer, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of any
of the Notes, be construed so as to constitute the Noteholders from time to
time as partners or members of an association; nor shall any Noteholder be
under any liability to any third person by reason of any action taken by the
parties to this Indenture pursuant to any provision hereof.
SECTION 5.8. Unconditional Rights of Noteholders to
Receive Principal and Interest. Notwithstanding any other provisions in this
Indenture, the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such
Note on or after the respective due dates thereof expressed in such Note or in
this Indenture (or, in the case of redemption, on or after the Redemption
Date) 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 5.9. Restoration of Rights and Remedies. If 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, then and in every such case the Issuer, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the
Noteholders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Noteholders is intended to be
exclusive of any other right or
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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 5.11. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee, any Holder of any Note or the Insurer to
exercise any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Default or Event of Default or an acquiescence therein. Every right and remedy
given by this Article V or by law to the Indenture Trustee, to the Noteholders
or the Insurer may be exercised from time to time, and as often as may be
deemed expedient, by the Indenture Trustee , the Noteholders or the Insurer,
as the case may be.
SECTION 5.12. Control by Insurer or Noteholders. The Insurer
(or, if an Insurer Default has occurred and is continuing, the Holders of
Notes evidencing a majority of the Outstanding Amount of a Class of Notes)
shall have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Indenture Trustee with respect to
such Notes or exercising any trust or power conferred on the Indenture
Trustee; provided that
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) 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 6.1, the Indenture Trustee need
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to
such action.
SECTION 5.13. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against 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 (a) any
suit instituted by the Indenture Trustee or the Insurer, (b) any suit
instituted by any Noteholder, or group of Noteholders, in each case holding in
the aggregate more than 10% of the Outstanding Amount of the related Class of
Notes or (c) any suit instituted by any Noteholder of such Class for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates thereof expressed in such Note and in this Indenture
(or, in the case of redemption, on or after the Redemption Date).
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SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance
of this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right
to seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Property or upon any of the assets of the Issuer.
SECTION 5.16. Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Indenture Trustee or
the Insurer to do so, and at the Servicer's expense, the Issuer agrees to take
all such lawful action as the Indenture Trustee or the Insurer may request to
compel or secure the performance and observance by the Unaffiliated Seller and
the Servicer, as applicable, of each of their obligations to the Issuer under
or in connection with the Sale and Servicing Agreement in accordance with the
terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Sale and Servicing Agreement to the extent and in the manner directed by the
Indenture Trustee or the Insurer, including the transmission of notices of
default on the part of the Unaffiliated Seller or the Servicer thereunder and
the institution of legal or administrative actions or proceedings to compel or
secure performance by the Unaffiliated Seller or the Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing,
the Indenture Trustee may, and, at the written direction of the Insurer (or,
if an Insurer Default has occurred and is continuing, the Holders of a Class
of Notes evidencing at least 66-2/3% of the Outstanding Amount of the related
Class of Notes), shall, exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Unaffiliated Seller or the Servicer under or
in connection with the Sale and Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Unaffiliated Seller or the Servicer of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Sale and Servicing Agreement, and any right of
the Issuer to take such action shall be suspended.
SECTION 5.17. Subrogation. The Indenture Trustee shall
receive as attorney-in-fact of each Noteholder any amount received from the
Insurer under the Policy. Any and all amounts disbursed by the Indenture
Trustee from claims made under the Policy shall not be considered payment by
the Issuer with respect to such Notes, and shall not discharge the obligations
of the Issuer with respect thereto. The Insurer shall, to the extent it makes
any payment with respect to the Notes, become subrogated to the rights of the
recipient of such
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payments to the extent of such payments. Subject to and conditioned upon any
payment with respect to the Notes by or on behalf of the Insurer, the Indenture
Trustee shall assign to the Insurer all rights to the payment of interest or
principal with respect to the Notes which are then due for payment to the extent
of all such payments made by the Insurer, and the Insurer may exercise any
option, vote right, power or the like with respect to the Notes to the extent
that it has made payment pursuant to the Policy.
SECTION 5.18. Preference Claims. The Indenture Trustee shall
promptly notify the Insurer of any proceeding or the institution of any
action, of which a Responsible Officer has actual knowledge, seeking the
avoidance as a preferential transfer under applicable bankruptcy, insolvency,
receivership or similar law (a "Preference Claim") of any distribution made
with respect to a Class of Notes. Each Class A Noteholder, by its purchase of
Class A Notes, the Servicer and the Indenture Trustee hereby agree that the
Insurer (so long as no Insurer Default has occurred and is continuing) may at
any time during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedes or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Insurer shall be subrogated to the rights of the Servicer, the
Indenture Trustee and each Class A Noteholder in the conduct of any such
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
SECTION 5.19. Sale of Trust Estate. (a) The power to effect
any sale of any portion of the Trust Property pursuant to this Section 5.19
shall not be exhausted by any one or more sales as to any portion of the Trust
Property remaining unsold, but shall continue unimpaired until the entire
Trust Property shall have been sold or all amounts payable on the Notes shall
have been paid. The Indenture Trustee may from time to time, upon directions
in accordance with Section 5.12, postpone any public sale by public
announcement made at the time and place of such sale.
(b) To the extent permitted by applicable law, the Indenture
Trustee shall not in any private sale sell to a third party the Trust
Property, or any portion thereof unless,
(i) until such time as the conditions specified in
Sections 10.01(a)(i) or 10.01(a)(ii) of the Sale and Servicing
Agreement have been satisfied in full, the Insurer (or, if an
Insurer Default has occurred and is continuing, the Holders of Notes
evidencing at least 66-2/3% of the Outstanding Amount of the related
Class of Notes), consent to or direct the Indenture Trustee in
writing to make such sale; or
(ii) the proceeds of such sale would be not less than
the sum of all amounts due to the Indenture Trustee hereunder and
the Insurer under the Insurance Agreement and the entire unpaid
principal amount of the Notes and all interest due or to become due
thereon in accordance with Section 8.3(a) on the Payment Date next
succeeding the date of such sale.
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The foregoing provisions shall not preclude or limit the ability of the
Indenture Trustee to purchase all or any portion of the Trust Property at a
private sale.
(c) In connection with a sale of all or any portion of the
Trust Property:
(i) any one or more Noteholders 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 any Noteholder may, in paying
the purchase money therefor, deliver in lieu of cash any Outstanding
Notes or claims for interest thereon for credit in 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 Noteholders thereof after being appropriately stamped to show
such partial payment;
(ii) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in
any portion of the Trust Property related to the Class of Notes in
connection with a sale thereof;
(iii) 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 Property related
to the Class of Notes in connection with a sale thereof, and to take
all action necessary to effect such sale; and
(iv) 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.
(d) The method, manner, time, place and terms of any sale of
all or any portion of the Trust Property shall be commercially
reasonable.
(e) The provisions of this Section 5.19 shall not be
construed to restrict the ability of the Indenture Trustee to
exercise any rights and powers against the Issuer or the Trust
Property that are vested in the Indenture Trustee by this Indenture,
including, without limitation, the power of the Indenture Trustee to
proceed against the Collateral and to institute judicial proceedings
for the collection of any deficiency remaining thereafter or the
ability of the Servicer to exercise any rights or powers or to
perform its obligations under the Sale and Servicing Agreement.
SECTION 5.20. Waiver of Past Defaults. Prior to the time a
judgment or decree for payment of the money due has been obtained by the
Indenture Trustee, the Insurer (or, if an Insurer Default has occurred and is
continuing, the Holders of Notes evidencing at least a majority of the
Outstanding Amount of the related Class of Notes) may on behalf of the Holders
of all the Notes waive any past Default or Event of Default and its
consequences, except a Default or Event of Default:
(a) In the payment of the principal of or interest on any
Note when due and payable, or
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(b) In respect of a covenant or provision hereof that under
Section 9.2 cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected. In the case of any such waiver, the Issuer,
the Indenture Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto. Upon such waiver, such Default or Event of Default
shall cease to exist, and any Event of Default arising from any such Default
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 Event of
Default or impair any right consequent thereon.
ARTICLE VI
The Indenture Trustee
SECTION 6.1. Duties of Indenture Trustee. (a) If an Event
of Default has occurred and is continuing, the Indenture Trustee shall
exercise the rights and powers vested in it by this Indenture and the Basic
Documents and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs; provided, however, that if the Indenture Trustee is
acting as Servicer, it shall use the same degree of care and skill as is
required of the Servicer under the Sale and Servicing Agreement.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and the Basic Documents and no implied covenants or
obligations shall be read into this Indenture or the Basic Documents
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture and the Basic
Documents; however, the Indenture Trustee shall examine the
certificates and opinions to determine whether or not they conform
on their face to the requirements of this Indenture and the Basic
Documents.
(c) The Indenture Trustee may not be relieved from liability
for its own gross negligent action, its own gross negligent failure to act or
its own misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) 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;
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(iii) 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 from Holders of Notes
evidencing a majority of the Outstanding Amount of the Notes (or
such greater percentage as may be required by the terms hereof),
with the consent of the Insurer if no Insurer Default shall have
occurred and be continuing, relating to the time, method and place
of conducting any Proceeding for any remedy available to the
Indenture Trustee, or exercising any trust or power conferred upon
the Indenture Trustee, under this Indenture; and
(iv) the Indenture Trustee shall not be charged with
knowledge of any failure by the Servicer to comply with the
obligations of the Servicer under the Sale and Servicing Agreement
unless a Responsible Officer obtains actual knowledge of such
failure or occurrence or the Indenture Trustee receives written
notice of such failure or occurrence from the Servicer, the Insurer
or the Holders of Notes entitled to a majority of the Voting Rights.
(d) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(e) No provision of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur 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 to believe
that repayment of such funds or indemnity reasonably satisfactory to it
against such risk or liability is not reasonably assured to it.
(f) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Indenture
Trustee shall be subject to the provisions of this Section and to the
provisions of the TIA.
(g) The Indenture Trustee shall, upon three Business Day's
prior written notice to the Indenture Trustee, permit any representative of
the Insurer, during the Indenture Trustee's normal business hours, to examine
all books of account, records, reports and other papers of the Indenture
Trustee relating to the Notes, to make copies and extracts therefrom and to
discuss the Indenture Trustee's affairs and actions, as such affairs and
actions relate to the Indenture Trustee's duties with respect to the Notes,
with the Indenture Trustee's officers and employees responsible for carrying
out the Indenture Trustee's duties with respect to the Notes.
(h) The Indenture Trustee is hereby authorized to execute and
shall execute the Sale and Servicing Agreement and shall perform its duties
and satisfy its obligations thereunder. Every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Indenture Trustee shall apply to the Indenture Trustee's execution of
the Sale and Servicing Agreement and the performance of its duties and
satisfaction of its obligations thereunder.
(i) The Indenture Trustee shall, and hereby agrees that it
will, hold the Policy in trust, and will hold any proceeds of any claim on the
Policy in trust solely for the use and benefit of the Noteholders.
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(j) In no event shall the Indenture Trustee, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Business Trust Statute, common law, or the Trust
Agreement.
SECTION 6.2. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document reasonably 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 the
document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may require an Officer's Certificate or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Indenture Trustee shall be under no obligation to
institute, conduct or defend any litigation under this Indenture or in
relation to this Indenture, at the request, order or direction of any of the
Holders of Notes, pursuant to the provisions of this Indenture, unless such
Holders of Notes shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby; provided, however, that the Indenture Trustee
shall, upon the occurrence of an Event of Default (that has not been cured or
waived), exercise the rights and powers vested in it by this Indenture or the
Sale and Servicing Agreement with reasonable care and skill.
(g) Prior to the occurrence of an Event of Default, the
Indenture Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by the Insurer (or, if
an Insurer Default has occurred and is continuing, by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount of the related Class of
Notes); provided, however, that if the payment within a reasonable time to the
Indenture Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the Indenture
Trustee, not reasonably assured to the Indenture Trustee by the security
afforded to it by the terms of this
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Indenture, the Indenture Trustee may require indemnity reasonably satisfactory
to it against such cost, expense or liability as a condition to so proceeding;
the reasonable expense of every such examination shall be paid by the Person
making such request, or, if paid by the Indenture Trustee shall be reimbursed by
the Person making such request upon demand.
(h) The Indenture Trustee shall not be accountable, shall
have no liability and makes no representation as to any acts or omissions
hereunder or under the Sale and Servicing Agreement of the Servicer until such
time as the Indenture Trustee may be required to act as Servicer.
(i) The Indenture Trustee shall not be personally liable for
any loss resulting from the investment of funds held in any Investment Account
at the direction of the Servicer pursuant to Section 8.11.
SECTION 6.3. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any Note
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections
6.11 and 6.12.
SECTION 6.4. Indenture Trustee's Disclaimer. The Indenture
Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or any of the Basic Documents, the
Trust Property or the Notes, it shall not be accountable for the Issuer's use
of the proceeds from the Notes, and it shall not be responsible for any
statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.5. Notice of Defaults. If a Servicer Event of
Default or an Event of Default occurs and is continuing and if it is either
known by, or written notice of the existence thereof has been delivered to, a
Responsible Officer, the Indenture Trustee shall mail to each Noteholder of
such event within 90 days after such knowledge or notice occurs. Except in the
case of a Default in payment of principal of or interest on any Note when due
and payable, the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. Upon
written request, the Note Paying Agent or the Servicer shall on behalf of the
Issuer deliver to each Noteholder such information as may be reasonably
required to enable such Holder to prepare its Federal and state income tax
returns required by law.
SECTION 6.7. Compensation and Indemnity. (a) The Indenture
Trustee shall withdraw from the Distribution Account on each Payment Date and
pay to itself the Indenture Trustee's Fee and, to the extent that the funds
therein are at any time insufficient for such purpose, the Servicer shall pay
such fees. Any such amount so withdrawn from the Distribution Account shall
reduce the Available Distribution Amount for each Group pro rata based upon
the relative proportions of the aggregate Stated Principal Balances of the
Mortgage Loans and any
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REO Properties in each Group as of the preceding Payment Date (or, in the case
of the initial Payment Date as of the Cut-Off Date to the total aggregate Stated
Principal Balance of Mortgage Loans and the REO Properties in both Groups as of
such date. The Indenture Trustee and any director, officer, employee or agent of
the Indenture Trustee shall be indemnified by the Issuer from the Trust Property
and held harmless against any loss, liability or expense (not including
expenses, disbursements and advances incurred or made by the Indenture Trustee,
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Indenture Trustee's performance in
accordance with the provisions of this Agreement) incurred by the Indenture
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under this Agreement, other than any loss, liability
or expense (i) resulting from the Servicer's actions or omissions in connection
with the Sale and Servicing Agreement and the Mortgage Loans (but only to the
extent the Indenture Trustee is actually indemnified by the Servicer pursuant to
the Sale and Servicing Agreement), or (ii) any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Indenture Trustee's duties hereunder or by reason of reckless
disregard of the Indenture Trustee's obligations and duties hereunder.
(b) The Issuer's payment obligations to the Indenture
Trustee pursuant to this Section shall survive the discharge of this
Indenture. Notwithstanding anything else set forth in this Indenture or the
Basic Documents, the Indenture Trustee agrees that the obligations of the
Issuer (but not the Servicer) to the Indenture Trustee hereunder and under the
Basic Documents shall be recourse to the Trust Property only and specifically
shall not be recourse to the assets of the Issuer or any Securityholder. In
addition, the Indenture Trustee agrees that its recourse to the Issuer, the
Trust Property and amounts held in any of the Trust Accounts shall be limited
to the right to receive the distributions referred to in Section 8.3 hereof.
SECTION 6.8. Replacement of Indenture Trustee. The Indenture
Trustee may resign at any time by so notifying the Issuer, the Servicer, the
Unaffiliated Seller and the Insurer by written notice. Upon receiving such
notice of resignation, the Issuer shall promptly appoint a successor Indenture
Trustee (approved in writing by the Insurer, so long as such approval is not
unreasonably withheld) by written instrument, in duplicate, one copy of such
instrument shall be delivered to the resigning Indenture Trustee (who shall
deliver a copy to the Servicer) and one copy to the successor Trustee. The
Insurer (or, if an Insurer Default has occurred and is continuing, the Issuer)
may remove the Indenture Trustee, if:
(i) the Indenture Trustee fails to comply with
Section 6.11;
(ii) a court having jurisdiction in the premises in
respect of the Indenture Trustee in an involuntary case or
proceeding under federal or state banking or bankruptcy laws, as now
or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, shall have entered a
decree or order granting relief or appointing a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator
(or similar official) for the Indenture Trustee or for any
substantial part of the Indenture Trustee's property, or ordering
the winding-up or liquidation of the Indenture Trustee's affairs;
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(iii) an involuntary case under the federal bankruptcy
laws, as now or hereafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law is commenced
with respect to the Indenture Trustee and such case is not dismissed
within 60 days;
(iv) the Indenture Trustee commences a voluntary case
under any federal or state banking or bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or consents to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or other
similar official) for the Indenture Trustee or for any substantial
part of the Indenture Trustee's property, or makes any assignment
for the benefit of creditors or fails generally to pay its debts as
such debts become due or takes any corporate action in furtherance
of any of the foregoing; or
(v) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a
vacancy exists in the office of Indenture Trustee for any reason (the
Indenture Trustee in such event being referred to herein as the retiring
Indenture Trustee), the Issuer shall promptly appoint a successor Indenture
Trustee (approved in writing by the Insurer, so long as such approval is not
unreasonably withheld). If the Issuer fails to appoint such a successor
Indenture Trustee, the Insurer may appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the
Insurer and to the Issuer. Thereupon the resignation or removal of the
retiring Indenture Trustee shall become effective, and the successor Indenture
Trustee shall have all the rights, powers and duties of the retiring Indenture
Trustee under this Indenture. The successor Indenture Trustee shall mail a
notice of its succession to Noteholders. The retiring Indenture Trustee shall
promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
If a successor Indenture Trustee does not take office within
30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Insurer (or, if an Insurer Default has
occurred and is continuing, the Issuer or the Holders of Notes evidencing a
majority of the Outstanding Amount of the Notes) may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee
acceptable to the Insurer.
If the Indenture Trustee fails to comply with Section 6.11,
the Insurer (or, if an Insurer Default has occurred and is continuing, the
Issuer or the Holders of Notes evidencing a majority of the Outstanding Amount
of the Notes), may petition any court of competent jurisdiction for the
removal of the Indenture Trustee and the appointment of a successor Indenture
Trustee acceptable to the Insurer.
Any resignation or removal of the Indenture Trustee and
appointment of a successor Indenture Trustee pursuant to any of the provisions
of this Section shall not become effective until acceptance of appointment by
the successor Indenture Trustee pursuant to Section 6.8 and payment of all
fees and expenses owed to the outgoing Indenture Trustee.
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Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Issuer's and the Servicer's indemnity
obligations under Section 6.7 shall continue for the benefit of the retiring
Indenture Trustee and the Servicer shall pay any amounts owing to the
Indenture Trustee.
SECTION 6.9. Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall (subject to replacement as provided
in Section 6.8) be the successor Indenture Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the
trusts created by this Indenture any of the Notes shall have been
authenticated but not delivered, any such successor to the Indenture Trustee
may adopt the certificate of authentication of any predecessor trustee, and
deliver such Notes so authenticated; and in case at that time any of the Notes
shall not have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Indenture Trustee shall
have.
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee. (a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal requirement of
any jurisdiction in which any part of the Trust may at the time be located,
the Indenture Trustee with the consent of the Insurer shall have the power and
may execute and deliver all instruments to appoint one or more Persons to act
as a co-trustee or co-trustees, or separate trustee or separate trustees, of
all or any part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to the Trust, or
any part hereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Indenture Trustee may
consider necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee
under Section 6.11 and no notice to Noteholders of the appointment of any
co-trustee or separate trustee shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be conferred
or imposed upon and exercised or performed by the Indenture Trustee
and such separate trustee or co-trustee jointly (it being understood
that such separate trustee or co-trustee is not authorized to act
separately without the Indenture Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed the Indenture Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
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(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder,
including acts or omissions of predecessor or successor trustees;
and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article VI. Each separate trustee
and co-trustee, upon its acceptance of the trusts conferred, shall be vested
with the estates or property specified in its instrument of appointment,
either jointly with the Indenture Trustee or separately, as may be provided
therein, subject to all the provisions of this Indenture, specifically
including every provision of this Indenture relating to the conduct of,
affecting the liability of, or affording protection to, the Indenture Trustee.
Every such instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf and in its name. If any
separate trustee or co-trustee shall die, dissolve, become insolvent, become
incapable of acting, resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Indenture
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
(e) The Servicer shall be responsible for the fees of any
co-trustee or separate trustee appointed hereunder.
SECTION 6.11. Eligibility. The Indenture Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. The
Indenture Trustee shall provide copies of such reports to the Insurer upon
request. The Indenture Trustee shall comply with TIA Section 310(b), including
the optional provision permitted by the second sentence of TIA Section
310(b)(9); provided, however, that there shall be excluded from the operation
of TIA Section 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against
Issuer. The Indenture Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). An Indenture Trustee
who has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms
and conditions hereof, each of the Issuer Secured Parties hereby appoints
First Union National Bank as the Indenture Trustee with respect to the
Collateral, and First Union National Bank hereby accepts such appointment and
agrees to act as Indenture Trustee with respect to the Trust Property for the
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Issuer Secured Parties, to maintain custody and possession of such Trust
Property (except as otherwise provided hereunder or under the Sale and
Servicing Agreement) and to perform the other duties of the Indenture Trustee
in accordance with the provisions of this Indenture and the other Basic
Documents. Each Issuer Secured Party hereby authorizes the Indenture Trustee
to take such action on its behalf, and to exercise such rights, remedies,
powers and privileges hereunder, as the Insurer (or, if an Insurer Default has
occurred and is continuing, Holders of Notes evidencing a majority (or such
greater percentage as may be required by the terms hereof) of the Outstanding
Amount of the Notes) may direct and as are specifically authorized to be
exercised by the Indenture Trustee by the terms hereof, together with such
actions, rights, remedies, powers and privileges as are reasonably incidental
thereto. The Indenture Trustee shall act upon and in compliance with the
written instructions of the Insurer (or, if an Insurer Default has occurred
and is continuing, Holders of Notes evidencing a majority (or such greater
percentage as may be required by the terms hereof) of the Outstanding Amount
of the related Class of Notes) delivered pursuant to this Indenture promptly
following receipt of such written instructions; provided that the Indenture
Trustee shall not act in accordance with any instructions (i) which are not
authorized by, or in violation of the provisions of, this Indenture or (ii)
for which the Indenture Trustee has not received reasonable indemnity. Receipt
of such instructions shall not be a condition to the exercise by the Indenture
Trustee of its express duties hereunder, except where this Indenture provides
that the Indenture Trustee is permitted to act only following and in
accordance with such instructions.
SECTION 6.14. Performance of Duties. The Indenture Trustee
shall have no duties or responsibilities except those expressly set forth in
this Indenture and the other Basic Documents to which the Indenture Trustee is
a party or as directed by the Controlling Party in accordance with this
Indenture. The Indenture Trustee shall not be required to take any
discretionary actions hereunder except at the written direction of the Insurer
(or, if an Insurer Default has occurred and is continuing, Holders of Notes
evidencing a majority (or such greater percentage as may be required by the
terms hereof) of the Outstanding Amount of the related Class of Notes) and
with indemnification as provided herein.
SECTION 6.15. Limitation on Liability. Neither the Indenture
Trustee nor any of its directors, officers, employees and agents shall be
liable for any action taken or omitted to be taken by it or them hereunder, or
in connection herewith, except that the Indenture Trustee shall be liable for
its gross negligence, bad faith or willful misconduct; nor shall the Indenture
Trustee be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Issuer of this Indenture or any of the Trust
Property (or any part thereof).
SECTION 6.16. Reliance Upon Documents. In the absence of
negligence, bad faith or willful misconduct on its part, the Indenture Trustee
shall be entitled to rely on any communication, instrument, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such
document or instrument.
SECTION 6.17. Representations and Warranties of the
Indenture Trustee. The Indenture Trustee represents and warrants to the Issuer
and to each Issuer Secured Party as follows:
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(a) The Indenture Trustee is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States.
(b) The execution and delivery of this Indenture by the
Indenture Trustee, and the performance and compliance with the terms of this
Indenture by the Indenture Trustee, will not violate the Indenture Trustee's
charter or bylaws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in the
breach of, any material agreement or other instrument to which it is a party
or which is applicable to it or any of its assets.
(c) The Indenture Trustee has the full power and authority to
enter into and consummate all transactions contemplated by this Indenture, has
duly authorized the execution, delivery and performance of this Indenture, and
has duly executed and delivered this Indenture.
(d) This Indenture, assuming due authorization, execution and
delivery by the Issuer, constitutes a valid, legal and binding obligation of
the Indenture Trustee, enforceable against the Indenture Trustee in accordance
with the terms hereof, subject to (A) applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally, and (B) general principles of
equity, regardless of whether such enforcement is considered in a proceeding
in equity or at law.
(e) The Indenture Trustee is not in violation of, and its
execution and delivery of this Indenture and its performance and compliance
with the terms of this Indenture will not constitute a violation of, any law,
any order or decree of any court or arbiter, or any order, regulation or
demand of any federal, state or local governmental or regulatory authority,
which violation, in the Indenture Trustee's good faith and reasonable
judgment, is likely to affect materially and adversely either the ability of
the Indenture Trustee to perform its obligations under this Indenture or the
financial condition of the Indenture Trustee.
(f) No litigation is pending or, to the best of the
Indenture Trustee's knowledge, threatened against the Indenture Trustee which
would prohibit the Indenture Trustee from entering into this Indenture or, in
the Indenture Trustee's good faith reasonable judgment, is likely to
materially and adversely affect either the ability of the Indenture Trustee to
perform its obligations under this Indenture or the financial condition of the
Indenture Trustee.
SECTION 6.18. Waiver of Setoffs. The Indenture Trustee hereby
expressly waives any and all rights of setoff that the Indenture Trustee may
otherwise at any time have under applicable law with respect to any Trust
Account and agrees that amounts in the Trust Accounts shall at all times be
held and applied solely in accordance with the provisions hereof.
SECTION 6.19. Suits for Enforcement. In case a Servicer
Event of Default or other default by the Servicer under the Sale and Servicing
Agreement shall occur and be continuing, the Indenture Trustee (with the
consent of the Insurer if no Insurer Default has occurred and is continuing)
may proceed to protect and enforce its rights and the rights of the
Noteholders under this Indenture by a suit, action or proceeding in equity or
at law or otherwise, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any
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other legal, equitable or other remedy, as the Indenture Trustee, being advised
by counsel, shall deem most effectual to protect and enforce any of the rights
of the Indenture Trustee and the Noteholders.
SECTION 6.20. Mortgagor Claims. In connection with any
offset defenses, or affirmative claim for recovery, asserted in legal actions
brought by Mortgagors under one or more Mortgage Loans based upon provisions
therein or upon other rights or remedies arising from any requirements of law
applicable to the Mortgage Loans:
(a) The Indenture Trustee is the holder of Mortgage Loans
only as trustee on behalf of the holders of the Notes, and not as a principal
or in any individual or personal capacity.
(b) The Indenture Trustee shall not be personally liable
for, or obligated to pay Mortgagors, any affirmative claims asserted thereby,
or responsible to holders of the Notes for any offset defense amounts applied
against Mortgage Loan payments for the related Group, pursuant to such legal
actions.
(c) The Indenture Trustee will pay, solely from available
Trust money, affirmative claims for recovery by Mortgagors only pursuant to
final judicial orders or judgments, or judicially approved settlement
agreements, resulting from such legal actions.
(d) The Indenture Trustee will comply with judicial orders
and judgments which require its actions or cooperation in connection with
Mortgagors' legal actions to recover affirmative claims against holders of the
Notes.
(e) The Indenture Trustee will cooperate with and assist the
Servicer, the Unaffiliated Seller, or holders of the Notes in their defense of
legal actions by Mortgagors to recover affirmative claims if such cooperation
and assistance is not contrary to the interests of the Indenture Trustee as a
party to such legal actions and if the Indenture Trustee is satisfactorily
indemnified for all liability, costs and expenses arising therefrom.
(f) The Issuer hereby agrees to indemnify, hold harmless and
defend the Indenture Trustee from and against any and all liability, loss,
costs and expenses of the Indenture Trustee resulting from any affirmative
claims for recovery asserted or collected by mortgagors under the Mortgage
Loans.
SECTION 6.21. Certain Available Information. The Indenture
Trustee shall maintain its Corporate Trust Office and make available free of
charge during normal business hours for review by any Holder of a Note or any
Person identified to the Indenture Trustee as a prospective transferee of a
Note, originals or copies of the following items: (A) this Indenture and any
supplements hereto entered into pursuant to Article IX, (B) the Sale and
Servicing Agreement and any amendments thereto entered into pursuant to
Section 12.01 of the Sale and Servicing Agreement, (C) all monthly statements
required to be delivered to Noteholders of the relevant Class pursuant to
Section 4.02 of the Sale and Servicing Agreement since the Closing Date, and
all other notices, reports, statements and written communications delivered to
the Noteholders of the relevant Class pursuant to this Indenture or the Sale
and Servicing Agreement since the Closing Date (to the extent the Indenture
Trustee is in receipt thereof), (D) any and all
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Officer's Certificates delivered to the Indenture Trustee by the Servicer since
the Closing Date to evidence the Servicer's determination that any Monthly
Advance or Servicing Advance, was, or if made, would be a Nonrecoverable Monthly
Advance, and (E) any and all Officer's Certificates delivered to the Indenture
Trustee by the Servicer since the Closing Date pursuant to Section 4.04 of the
Sale and Servicing Agreement. Copies and mailing of any and all of the foregoing
items will be available from the Indenture Trustee upon request at the expense
of the Person requesting the same.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer to Furnish to Indenture Trustee Names and
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
the Indenture Trustee or the Insurer (a) not more than five days after the
earlier of (i) each Record Date and (ii) three months after the last Record
Date, a list, in such form as the Indenture Trustee or the Insurer may
reasonably require, of the names and addresses of the Holders as of such
Record Date, (b) at such other times as the Indenture Trustee or the Insurer
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. The Indenture Trustee or, if the Indenture Trustee is not the
Note Registrar, the Issuer shall furnish to the Insurer or the Issuer in
writing upon their written request and at such other times as the Insurer or
the Issuer may request a copy of the list.
SECTION 7.2. 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 contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Holders received by the Indenture Trustee
in its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 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 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after
the Issuer or Depositor is required to file the same with the
Commission, copies of the annual reports and copies of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer or Depositor may be required to
file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act;
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(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer or Depositor with the conditions
and covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer or Depositor pursuant to
clauses (i) and (ii) of this Section 7.3(a) as may be required by rules
and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal
year of the Issuer shall end on December 31 of each year.
SECTION 7.4. Reports by Indenture Trustee. If required by TIA
Section 313(a), within 60 days after each [August 31], beginning with [August
31, 2000], the Indenture Trustee shall mail to each Noteholder as required by
TIA Section 313(c) and the Insurer a brief report dated as of such date that
complies with TIA Section 313(a). The Indenture Trustee also shall comply with
TIA Section 313(b).
A copy of each report at the time of its mailing to
Noteholders shall be filed by the Indenture Trustee with the Commission and
each stock exchange, if any, on which the Notes are listed. The Issuer shall
notify the Indenture Trustee and the Insurer if and when the Notes are listed
on any stock exchange.
ARTICLE VIII
Accounts; Investment of Moneys;
Collection and Application of Moneys; Reports
SECTION 8.1. Collection of Money. 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 apply all such money received by it as
provided in this Indenture. Except as otherwise expressly provided in this
Indenture or in the Sale and Servicing Agreement, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Trust Property, the Indenture Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.
SECTION 8.2. Release of Trust Property. (a) Subject to Section
8.9 and the payment of its fees and expenses pursuant to Section 6.7, the
Indenture Trustee may, and when required by the Issuer and the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, in a manner and under circumstances that are not inconsistent
with the provisions of this Indenture or the Sale and Servicing Agreement. No
party
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relying upon an instrument executed by the Indenture Trustee as provided in this
Article VIII shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any monies. The Indenture Trustee may require as a condition to
any such release, an Opinion of Counsel, 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
and such action will not materially and adversely impair the security for the
Notes or the rights of the Noteholders or the Insurer in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Property. 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
release.
(b) The Indenture Trustee shall, at such time as there are no
Notes outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
and to the Insurer pursuant to the Insurance Agreement have been paid, release
any remaining portion of the Trust Property that secured the Notes from the lien
of this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts.
(c) The Indenture Trustee shall release property from the lien
of this Indenture pursuant to this Section 8.2 only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA Sections
314(c) and 314(d)(1) meeting the applicable requirements of Section 12.1.
SECTION 8.3. Payments. (a) On each Payment Date, after
withdrawing amounts owed pursuant to Section 6.7 and Section 8.7(c) and amounts
owed to the Owner Trustee under Section 12.1 of the Trust Agreement, the
Indenture Trustee or the Note Paying Agent, as the case may be, shall, based
solely on information contained in the Remittance Report for such Payment Date,
withdraw from the Distribution Account an amount equal to the Available
Distribution Amount for each Class and pay to the following Persons the
following amounts, in the following order of priority:
(i) first, to the payment of the Accrued Note Interest
and the Accrued Shortfall Interest Carry Forward Amount for that Class
of Notes;
(ii) second, to the payment of the Base Principal
Distribution Amount for that Class of Notes;
(iii) third, the remaining amount of the Available
Distribution Amount for that Class, as the "Net Monthly Excess
Cashflow" for that Class and Payment Date, for application in the
following order of the priority:
(aa) first, to the Holders of the other
Class of Notes, to the extent of any shortfall in the
payment of the full amount of other Class' Interest
Distribution Amount;
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(bb) second, to the Holders of the related
Class of Notes, as a payment of such Class' allocable
portion of the Overcollateralization Deficit, if any;
(cc) third, to the Holders of the other
Class of Notes, as a payment of such Class' allocable
portion of the Overcollateralization Deficit, if any;
(dd) fourth, to the Insurer, in an amount
equal to any Cumulative Insurance Payments (as defined
below) previously made with respect to the related Class of
Notes;
(ee) fifth, to the Insurer, to the extent
of any shortfall in the full amount of the payment of any
Cumulative Insurance Payments previously made with respect
to the other Class of Notes;
(ff) sixth, to the Insurer, any remaining
amounts due to the Insurer with respect to the related Class
of Notes under the terms of the Insurance Agreement;
(gg) seventh, to the Insurer, to the
extent of any shortfall in the full amount of the payment of
any remaining amounts due to the Insurer with respect to the
other Class under the terms of the Insurance Agreement;
(hh) eighth, to the holders of the
related Class of Notes, an amount equal to the
Overcollateralization Increase Amount;
(ii) ninth, to the Reserve Account, to the
extent that, after taking into account all applications
described in the preceding clauses, the other class would
have any remaining Overcollaterialization Increase Amount;
(jj) tenth, to the Holders of the other
Class of Notes, to the extent of any shortfall in the
payment of the full amount of the other Class' Accrued
Shortfall Interest Carry-Forward Amount; and
(kk) eleventh, to the Trust for
distribution to the Certificateholder or as otherwise provided
in this Indenture.
Funds distributed to the Certificateholder pursuant to clause (iii)(jj) above
shall be free and clear of the lien of this Indenture.
Distributions in respect of the Certificate shall be made
(i) by wire transfer of immediately available funds to the account of the
Certificateholder at a bank or other entity having appropriate facilities
therefor, provided that the Certificateholder shall have notified the
Indenture Trustee in writing at least five Business Days prior to the relevant
Record Date, and (ii) if the Certificateholder shall have failed to give the
notification referred to in clause (i), by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The
Indenture Trustee may deduct a reasonable wire transfer fee from any payment
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made by wire transfer. The final distribution on the Certificate will be made
in like manner, but only upon presentment and surrender of the Certificate to
the Certificate Registrar.
Prior to the final distribution hereunder with respect to
the Certificate, the Indenture Trustee shall mail to the Certificateholder a
notice to the effect that the Indenture Trustee expects that the final
distribution with respect to the Certificate will be made on a specific date
but only upon presentation and surrender of the Certificate at the office of
the Certificate Registrar therein specified.
(b) In addition to making the payments required pursuant to
Section 8.3(a), on each Payment Date for which there exists a Deficiency Amount
for a Class of Notes, the Indenture Trustee shall withdraw from the Distribution
Account any amount therein that was transferred from the Policy Payments Account
to the Distribution Account pursuant to Section 11.4 and pay to the Holders of
that Class (i) an amount equal to any amount required to be paid pursuant to
Section 8.3(a)(i) for such Payment Date remaining unpaid after giving effect to
all payments made pursuant to Section 8.3(a) for such Payment Date, (ii) an
amount equal to any Remaining Overcollateralization Deficit for such Class on
such Payment Date after giving effect to all distributions made pursuant to
Section 8.3(a) for such Payment Date and (iii) without duplication, any other
amount constituting a Deficiency Amount for such Class.
(c) All payments made with respect to the Notes on each
Payment Date shall be allocated, pro rata among the outstanding Notes, and on
their respective Note Principal Balances.
(d) Payments in respect of the Notes on each Payment Date will
be made to the Holders of record on the related Record Date (except as otherwise
provided in Section 8.3(f) and Article X respecting the final distribution on
the Notes), based on the aggregate Note Principal Balance evidenced by their
respective Notes. So long as the Book-Entry Notes are registered in the name of
the Depository or its nominee, the Indenture Trustee shall make all payments on
such Notes by wire transfers of immediately available funds to the Depository or
its nominee. In the case of Notes issued in fully registered, certificated form,
payments shall be made by wire transfer of immediately available funds to the
account of any such Holder at a bank or other entity having appropriate
facilities therefor, if such Holder shall have so notified the Indenture Trustee
in writing at least five Business Days prior to the Record Date immediately
prior to such Payment Date and is the registered owner of Notes having an
initial aggregate Note Principal Balance in excess of $5,000,000, or otherwise
by check mailed by first class mail to the address of such Holder appearing in
the Note Register. The Indenture Trustee may deduct a reasonable wire transfer
fee from any payment made by wire transfer. The final payment on each Note will
be made in like manner, but only upon presentment and surrender of such Note at
the Corporate Trust Office or such other location specified in the notice to
Noteholders of such final distribution. Payments to the Insurer on any Payment
Date will be made by wire transfer of immediately available funds to the account
designated by the Insurer. Funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.3.
Each payment with respect to a Book-Entry Note shall be paid
to the Depository, as Holder thereof, and the Depository shall be responsible
for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such payment to the
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Note Owners 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
Note Owners that it represents. None of the Indenture Trustee, the Note
Registrar, the Depositor or the Servicer shall have any responsibility
therefor except as otherwise provided by this Agreement or applicable law.
(e) The rights of the Noteholders to receive payments in
respect of the Notes, and all interests of the Noteholders in such
distributions, shall be as set forth in this Indenture. Neither the Holders of
the Notes nor the Issuer, Insurer, Indenture Trustee, Unaffiliated Seller or
Servicer shall in any way be responsible or liable to the Holders of any other
Notes in respect of amounts properly previously paid on the Notes.
(f) Whenever the Indenture Trustee expects that the Final
Payment Date with respect to the Notes will occur on the next Payment Date, the
Indenture Trustee shall mail to each Holder on the such Class of Notes and to
the Insurer a notice to the effect that:
(i) the Indenture Trustee expects that the final payment
with respect to the Notes will be made on such Payment Date but only
upon presentation and surrender of such Notes at the office of the
Indenture Trustee therein specified;
(ii) no interest shall accrue on such Notes from and after
the end of the related Interest Accrual Period.
Such notice shall be given by the Indenture Trustee (a) in
the event such notice is given in connection with a redemption of the Notes
pursuant to Article X, not earlier than the 10th day and not later than the
15th day of the month next preceding the Redemption Date or (b) otherwise,
during the month of such Final Payment Date on or before the Determination
Date in respect of such Final Payment Date.
Any funds not paid to any Holder or Holders of Notes on the
related Final Payment Date because of the failure of such Holder or Holders to
tender their Notes shall, on such date, be set aside and held in trust and
credited to the account of the appropriate non-tendering Holder or Holders. If
any Note as to which notice has been given pursuant to this Section 8.3(f)
shall not have been surrendered for cancellation within six months after the
time specified in such notice, the Indenture Trustee shall mail a second
notice to the remaining non-tendering Noteholders to surrender their Notes for
cancellation in order to receive the final distribution with respect thereto.
If within one year after the second notice all such Notes shall not have been
surrendered for cancellation, the Indenture Trustee shall, directly or through
an agent, contact the remaining non-tendering Noteholders concerning surrender
of their Notes in the manner reasonably specified to the Indenture Trustee by
the Servicer in writing. The costs and expenses of maintaining the funds in
trust and of contacting such Noteholders shall be paid out of the assets so
held in trust for such Noteholders. If in one year after the second notice any
such Notes shall not have been surrendered for cancellation, the Servicer
shall pay to the Insurer any amount of such funds that were paid by the
Insurer under the Policy but shall continue to hold any remaining funds for
the benefit of the non-tendering Noteholders, and such Noteholders shall
thereafter look solely to the Servicer for payment thereof, and all liability
of the Insurer with respect to such Trust Properties shall thereupon cease. No
interest shall accrue or be
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payable to any Noteholder on any amount held in trust by the Servicer as a
result of such Noteholder's failure to surrender its Note(s) for final payment
thereof in accordance with this Section 8.3(f).
(g) [Reserved]
SECTION 8.4. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Indenture Trustee
shall comply with all federal withholding requirements respecting payments to
Noteholders of interest or original issue discount that the Indenture Trustee
reasonably believes are applicable under the Code. The consent of Noteholders
shall not be required for such withholding. In the event the Indenture Trustee
does withhold any amount from interest or original issue discount payments or
advances thereof to any Noteholder pursuant to federal withholding requirements,
the Indenture Trustee shall indicate the amount withheld to such Noteholders.
SECTION 8.5. Statements to Noteholders. Concurrently with each
payment to Noteholders on any Payment Date, the Indenture Trustee shall forward
to each Noteholder, the Servicer, the Insurer and each Rating Agency the
statement prepared by the Servicer pursuant to Section 4.02 of the Sale and
Servicing Agreement with respect to such payment.
To the extent that there are inconsistencies between the
telecopy of the Remittance Report and the hard copy thereof and information
set forth in the computer tape or other media provided by the Servicer under
the Sale and Servicing Agreement, the Indenture Trustee shall be entitled to
rely upon the telecopy.
Within a reasonable period of time after the end of each
calendar year, the Indenture Trustee shall forward to each Person who at any
time during the calendar year was a Holder of Notes (a) the statement
furnished to the Indenture Trustee by the Servicer pursuant to Section 4.02 of
the Sale and Servicing Agreement containing the information set forth in
clauses (1) through (3) of Section 4.02 of the Sale and Servicing Agreement,
aggregated for such calendar year or applicable portion thereof during which
such person was a Noteholder and (b) such information contained in the
Remittance Reports as required to enable the Holders of the Notes to prepare
their tax returns.
Upon request, the Indenture Trustee shall forward to each
Noteholder, during the term of this Indenture, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonably requested with respect to the Noteholder, or otherwise with respect
to the purposes of this Indenture, all such reports or information to be
prepared by the Servicer and provided at the expense of the Noteholder in
accordance with such reasonable and explicit instructions and directions as
the Noteholder may provide. For purposes of this Section 8.5, the Indenture
Trustee's duties are limited to the extent that the Indenture Trustee receives
timely reports as required from the Servicer.
SECTION 8.6. Rights of Noteholders. The Notes shall represent
obligations of the Issuer, secured by the Trust Property, including the Trust
Accounts and the right to receive interest, principal and other amounts at the
times and in the amounts specified in this Indenture.
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SECTION 8.7. Distribution Account. (a) The Indenture Trustee
shall establish and maintain with itself a separate trust account (the
"Distribution Account") entitled "First Union National Bank as Indenture
Trustee, in trust for (A) the registered holders of HomeGold Home Equity Loan
Trust 1999-1 Asset Backed Notes, Series 1999-1, and (B) Financial Security
Assurance Inc., Distribution Account". The Distribution Account shall be an
Eligible Account. Deposits to and withdrawals from the Distribution Account
shall be made as provided herein and in the Sale and Servicing Agreement. Funds
in the Distribution Account shall be invested in Permitted Investments, at the
direction of the Servicer, in accordance with Section 8.12 hereof. The Indenture
Trustee shall give notice to the Issuer, the Servicer and the Insurer of the
location of the Distribution Account when established and prior to any change
thereof.
(b) Promptly upon receipt of any Stayed Funds, whether from
the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Indenture Trustee shall deposit such funds in the Distribution
Account, subject to withdrawal thereof pursuant to Section 7.02(b) of the Sale
and Servicing Agreement or as otherwise permitted thereunder.
(c) The Indenture Trustee shall be entitled to withdraw
amounts from the Distribution Account and to transfer funds to the Expense
Account on the Business Day immediately preceding each Payment Date pursuant to
Section 8.10(b) prior to any payments as required pursuant to Section 8.3.
(d) If, at the close of business on the third Business Day
prior to any Payment Date, the funds on deposit in the Distribution Account are
less than the Scheduled Payment for such Payment Date, the Indenture Trustee
shall give notice by telephone or telecopy of the amount of such deficiency,
confirmed in writing in the form set forth as Exhibit A to the Policy, to the
Insurer and the Fiscal Agent (as defined in the Policy), if any, at or before
10:00 a.m., New York time, on the second Business Day prior to such Payment
Date.
SECTION 8.8. [Reserved]
SECTION 8.9. [Reserved]
SECTION 8.10. Expense Account. (a) The Indenture Trustee shall
establish and maintain with itself a separate trust account (the "Expense
Account") entitled "First Union National Bank as Indenture Trustee, in trust for
(A) the registered holders of HomeGold Home Equity Loan Trust 1999-1 Asset
Backed Notes, Series 1999-1, and (B) Financial Security Assurance Inc., Expense
Account." The Expense Account shall be an Eligible Account, and funds on deposit
therein shall be held separate and apart from, and shall not be commingled with,
any other moneys, including, without limitation, other moneys of the Trustee
held pursuant to this Agreement.
(b) On the Business Day immediately preceding each Payment
Date, the Indenture Trustee shall withdraw from the Distribution Account and
deposit into the Expense Account an amount equal to the product of (i) l/12 of
the Insurer Premium Rate and (ii) the Class A Note Principal Balance after
giving effect to distributions of principal on such Payment Date. Such amount so
withdrawn from the Distribution Account shall reduce the Available Distribution
Amount for each Group pro rata, based upon the relative proportions of the Class
A-
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1 Note Principal Balance and the Class A-2 Note Principal Balance to the total
Class A Note Principal Balance (in such case after giving effect to
distributions of principal on such Payment Date).
(c) The Indenture Trustee shall make withdrawals from the
Expense Account to pay the Insurer Premium on each Payment Date.
(d) Funds in the Expense Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12 hereof. The Indenture Trustee shall give notice to the Issuer, the
Servicer and the Insurer of the location of the Expense Account on the Closing
Date and prior to any change thereof.
(e) Upon payment in full of the principal of and interest on
the Notes and any amounts due the Insurer under the Insurance Agreement, any
amounts remaining in the Expense Account following the payment of all unpaid
Insurer Premiums shall be released to the Servicer as additional servicing
compensation.
SECTION 8.11. Reserve Account. (a) The Indenture Trustee shall
establish and maintain with itself a separate trust account (the "Reserve
Account") entitled "First Union National Bank as Indenture Trustee, in trust for
(A) the registered holders of HomeGold Home Equity Loan Trust 1999-1 Asset
Backed Notes, Series 1999-1, and (B) Financial Security Assurance Inc., Reserve
Account." The Reserve Account shall be an Eligible Account, and funds on deposit
therein shall be held separate and apart from, and shall not be commingled with,
any other moneys, including, without limitation, other moneys of the Trustee
held pursuant to this Agreement.
(b) On each Payment Date, the Indenture Trustee shall withdraw
from the Distribution Account and deposit into the Reserve Account the amounts
if any, described in Section 8.3(a)(iii)(hh) hereof. In addition, in the event
that the Servicer exercises its option to call one Class of Notes, the Servicer
shall deliver to the Trustee, and the Trustee shall deposit to the Reserve
Account, the full amount of the Overcollateralization Deficiency, if any, with
respect to the still-outstanding Class of Notes, calculated as of the date on
which the Servicer exercises such option.
(c) If, on any Payment Date, and after applying the Available
Distribution Amount for each Class as described on Section 8.3 hereof, either
Class has not received the full amount of its Interest Distribution Amount or
its allocable portion of any Overcollateralization Deficit, the Trustee shall
withdraw the amount of any such insufficiency from the Reserve Account and apply
it to the payment of such shortfall; if the aggregate amount of such
insufficiency on a Payment Date exceeds the amount available in the Reserve
Account, the Trustee shall apply such amount as is available in the Reserve
Account as directed by the Insurer.
(d) Funds in the Reserve Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12 hereof. The Indenture Trustee shall give notice to the Issuer, the
Servicer and the Insurer of the location of the Reserve Account on the Closing
Date and prior to any change thereof.
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(i) If, on any Payment Date, and after applying the
Available Distribution Amount for each class, as described in Section
8.3 hereof, and after making any withdrawal from the Reserve Account
pursuant to Clause (c) above, (A) the sum of (x) the
Overcollateralization Amount for both classes of Notes plus (y) the
amount remaining in the Reserve Account exceeds (B) the Specified
Overcollateralization Amount for both classes of Notes for such Payment
Date, the Trustee shall release to the Certificateholders the lesser of
such excess, or the amount then on deposit on the Reserve Account.
(ii) Upon payment in full of the principal of and interest
on the Notes and any amounts due the Insurer under the Insurance
Agreement, any amounts remaining in the Reserve Account following the
payment of all unpaid Insurer Premiums shall be released to the
Certificateholder.
SECTION 8.12. Investment of Funds. (a) The Servicer may direct
the Indenture Trustee to invest funds in the Distribution Account, the Reserve
Account and the Expense Account (each, for purposes of this Section 8.12, an
"Investment Account"), to invest the funds in such Investment Account in one or
more Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the next Payment Date, if a Person other than the Indenture Trustee is
the obligor thereon, and (ii) no later than the next Payment Date, if the
Indenture Trustee is the obligor thereon. All such Permitted Investments shall
be held to maturity, unless payable on demand. Any investment of funds in an
Investment Account shall be made in the name of the Indenture Trustee (in its
capacity as such) or in the name of a nominee of the Indenture Trustee. The
Indenture Trustee shall be entitled to sole possession over each such investment
and the income thereon, and any certificate or other instrument evidencing any
such investment shall be delivered directly to the Indenture Trustee or its
agent, together with any document of transfer necessary to transfer title to
such investment to the Indenture Trustee or its nominee. In the event amounts on
deposit in an Investment Account are at any time invested in a Permitted
Investment payable on demand, the Indenture Trustee shall at the direction of
the Servicer:
(x) consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an
amount equal to the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on
such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer that such Permitted
Investment would not constitute a Permitted Investment in
respect of funds thereafter on deposit in the Investment
Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the Distribution
Account and the Servicing Accounts held by or on behalf of the Servicer or the
Indenture Trustee, shall be for the benefit of the Servicer and shall be subject
to its withdrawal in accordance with Section 3.11 of the Sale and Servicing
Agreement or remitted to the Servicer pursuant to this Section. Pursuant to
Section 3.14(b) of the Sale and Servicing Agreement, the Servicer shall be
obligated to deposit in the Collection Account, the Expense Account or the
Distribution Account, as applicable, the amount
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of any loss incurred in respect of any such Permitted Investment made with funds
in such accounts immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Indenture Trustee may and, subject to Article VI, upon
the request of the Insurer, shall, take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings.
ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders. (a) Without the consent of the Holders of any Notes but with the
consent of the Insurer, as evidenced to the Indenture Trustee, the Issuer and
the Indenture Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of the execution thereof), in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property
at any time subject to the lien of this Indenture, or better to assure,
convey and confirm 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;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes or the Insurer;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
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(vii) 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.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any further
appropriate agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by
an Issuer Order, may, also without the consent of any of the Holders of the
Notes but with the prior written consent of the Insurer and with prior notice to
the Rating Agencies by the Issuer, as evidenced to the Indenture Trustee, 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 such action
shall not, as evidenced by a written confirmation from the Rating Agencies that
such action will not adversely affect the then current ratings on the Notes
without taking into account the Policy, adversely affect in any material respect
the interests of any Noteholder or the Insurer.
SECTION 9.2. Supplemental Indentures with Consent of Insurer
or Noteholders. The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, also may, with prior notice to the Rating Agencies, with the
consent of the Insurer (or, if an Insurer Default has occurred and is
continuing, the Holders of the Notes evidencing a majority of the Outstanding
Amount of both Classes of Notes, by Act of such Holders delivered to the Issuer
and the Indenture Trustee), 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, subject to the express rights of the Insurer under the Basic
Documents, no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the principal amount
thereof, the interest rate thereon or the amounts payable upon any
redemption of the Notes, change the provision of this Indenture
relating to the application of collections on, or the proceeds of the
sale of, the Trust Property to payment of principal of or interest on
the Notes, or change any place of payment where, or the coin or
currency in which, any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(iii) reduce the percentage of the Holders of Notes
entitled to Voting Rights required for any such supplemental indenture,
or for any waiver of compliance with
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certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Holders of Notes
entitled to Voting Rights required to authorize a private sale of Trust
Property as contemplated in Section 5.19(b);
(vi) modify any provision of this Section except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents cannot
be modified or waived without the consent of the Insurer and Holder of
each Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation); or
(viii) permit the creation of any lien (other than the
Warehouse Liens to be discharged and released as provided in Section
3.5 and 3.12) ranking prior to or on a parity with the lien of this
Indenture with respect to any part of the Trust Property or, except as
otherwise permitted or contemplated herein or in any of the Basic
Documents, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note or the Insurer of
the security provided by the lien of this Indenture.
The Indenture Trustee may determine whether or not any Notes
would be adversely affected by any supplemental indenture upon receipt of
written confirmation from the Rating Agencies that such action will not
adversely effect the then current ratings on the Notes without taking into
account the Policy 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 Insurer and the Holders of the Notes to which such
amendment or 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 9.3. Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Indenture Trustee shall
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be entitled to receive, and subject to Sections 6.1 and 6.2, shall be fully
protected in relying upon, an Opinion of Counsel (and, if requested, an
Officer's Certificate) stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity With Trust Indenture Act. Every
amendment of this Indenture and every supplemental indenture executed pursuant
to this Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX 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 or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the 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.
ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption. (a) The Servicer shall have the
option to redeem either Class of Notes, in whole but not in part, at the
Redemption Price, on any Payment Date after which the Note Principal Balance of
the related Class is less than 10% of the Note Principal Balance of such Class
as of the Closing Date. Notice of the exercise of the redemption option pursuant
to this Section 10.01(a) shall be given by the Issuer to the Indenture Trustee
and the Insurer not later than the 5th day of the month immediately preceding
the Redemption Date.
(b) [Reserved].
(c) The Issuer may fund any redemption pursuant to this
Article X through sales of Mortgage Loans in the related Group and other
properties in accordance with Article X of the Sale and Servicing Agreement. The
Issuer is also authorized and shall be permitted to sell
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Mortgage Loans and other properties as provided in Section 10.02 of the Sale and
Servicing Agreement, whether or not in connection with a redemption of the Notes
pursuant to this Article X.
SECTION 10.2. Notice. Notice of any redemption of a Class of
Notes pursuant to this Article X shall be given to Noteholders by the Indenture
Trustee in accordance with Section 8.3(f).
SECTION 10.3. Presentation and Surrender of Notes and Payment.
The provisions of Section 8.3(f) shall apply with respect to the presentation
and surrender of Notes for payment and the consequences of any failure to
present or surrender any Note for payment in connection with a redemption
pursuant to this Article X. Upon presentation and surrender of any Note in
connection with a redemption pursuant to this Article X as contemplated in this
Article X and Section 8.3(f), the Indenture Trustee shall pay to the Noteholder
in respect of such Note the Redemption Price.
ARTICLE XI
Certain Matters Regarding the Insurer
SECTION 11.1. Rights of the Insurer to Exercise Rights of
Class A Noteholders. The Indenture Trustee and, by accepting any Note, each
Class A Noteholder, agrees that unless an Insurer Default has occurred and is
continuing, the Insurer shall have the right to exercise all rights of the Class
A Noteholders under this Indenture and the Sale and Servicing Agreement
(including all Voting Rights) (except as provided in Section 9.2 and except as
otherwise expressly required by the TIA) without any further consent of the
Class A Noteholders, including, without limitation the rights enumerated in
Sections 5.2, 5.12, 5.19, 5.20 and 6.13 of this Indenture and, so long as no
Insurer Default shall have occurred and be continuing, the consent of the
Insurer to any action or matter (except as provided in Section 9.2) shall be
deemed to also constitute the consent of the requisite percentage of Noteholders
required by this Indenture or the Sale and Servicing Agreement in respect of
such action or matter. In addition, each Class A Noteholder agrees that, unless
an Insurer Default has occurred and is continuing, the rights referred to above
may be exercised by the Class A Noteholders only with the prior written consent
of the Insurer.
SECTION 11.2. Indenture Trustee to Act Solely with Consent of
the Insurer. Unless an Insurer Default has occurred and is continuing, the
Indenture Trustee shall not:
(a) agree to any amendment of this Indenture pursuant to
Section 9.1 or 9.2 hereof or of the Sale and Servicing Agreement pursuant to
Section 12.01 thereof;
(b) undertake any litigation pursuant to Section 6.19 of
this Indenture; or
(c) terminate the Servicer pursuant to Section 7.01 of
the Sale and Servicing Agreement,
without the prior written consent of the Insurer which consent shall not be
unreasonably withheld.
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SECTION 11.3. Trust Property and Accounts Held for Benefit of
the Insurer. The Indenture Trustee shall hold the Trust Property and the
Mortgage Files for the benefit of the Noteholders and the Insurer and all
references in this Indenture and in the Notes to the benefit of Holders of the
Notes shall be deemed to include the Insurer unless an Insurer default has
occurred and is continuing. The Indenture Trustee shall cooperate in all
reasonable respects with any reasonable request by the Insurer for action to
preserve or enforce the Insurer's rights or interests under this Indenture and
the Notes.
SECTION 11.4. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to a Payment
Date, the Indenture Trustee determines, based on the Remittance Report, that a
Deficiency Amount for any Payment Date is greater than zero, then the Indenture
Trustee shall give notice to the Insurer by telephone or telecopy of the amount
of such Deficiency Amount. Such notice of such Deficiency Amount shall be
confirmed in writing in the form set forth as Exhibit A to the Policy to the
Insurer and the Fiscal Agent (as defined in the Policy), if any, at or before
10:00 a.m., New York time, on the second Business Day prior to such Payment
Date. Following receipt by the Insurer of such notice in such form, the Insurer
will pay any amount payable under the Policy on the later to occur of (i) 12:00
noon, New York time, on the second Business Day following such receipt and (ii)
12:00 noon, New York time, on the Payment Date to which such deficiency relates,
as provided in Exhibit A to the Policy.
(b) The Indenture Trustee shall establish separate special
purpose trust accounts for the benefit of Holders of each Class of Notes and the
Insurer referred to herein as the "Policy Payments Accounts" over which the
Indenture Trustee shall have exclusive control and sole right of withdrawal. The
Indenture Trustee shall deposit any amount paid under the Policy in the Policy
Payments Accounts and distribute such amount only for purposes of payment to
Holders of Class A Notes of the Scheduled Payment for which a claim was made and
such amount may not be applied to satisfy any costs, expenses or liabilities of
the Servicer, the Indenture Trustee or the Issuer. Amounts paid under the Policy
shall be transferred to the Distribution Account in accordance with the next
succeeding paragraph and disbursed by the Indenture Trustee to Holders of the
applicable Class of Class A Notes in accordance with Section 8.3(b) or Article
X, as applicable. It shall not be necessary for such payments to be made by
checks or wire transfers separate from the checks or wire transfers used to pay
the Scheduled Payment with other funds available to make such payment. However,
the amount of any payment of principal of or interest on the applicable Class of
Class A Notes to be paid from funds transferred from the Policy Payments Account
shall be noted as provided in paragraph (c) below in the Note Register and in
the statement to be furnished to Holders of the applicable Class of Class A
Notes pursuant to Section 8.5. Funds held in the Policy Payments Account shall
not be invested.
On any Payment Date with respect to which a claim has been
made under the Policy, the amount of any funds received by the Indenture
Trustee as a result of any claim under the Policy, to the extent required to
make the Scheduled Payment on such Payment Date, shall be withdrawn from the
Policy Payments Account and deposited in the Distribution Account and applied
by the Indenture Trustee, together with the other funds to be withdrawn from
the Distribution Account pursuant to Section 8.3(b) or Article X, as
applicable, directly to the payment in full of the Scheduled Payment due on
the applicable Class of Class A Notes. Funds received by the Indenture Trustee
as a result of any claim under the Policy shall be deposited by
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the Indenture Trustee in the Policy Payments Account and used solely for payment
to the Holders of the applicable Class of Class A Notes and may not be applied
to satisfy any costs, expenses or liabilities of the Servicer, the Indenture
Trustee or the Issuer. Any funds remaining in the Policy Payments Account on the
first Business Day following a Payment Date shall be remitted to the Insurer,
pursuant to the instructions of the Insurer, by the end of such Business Day.
(c) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Class A
Note from moneys received under the Policy. The Insurer shall have the right to
inspect such records at reasonable times during normal business hours upon one
Business Day's prior notice to the Indenture Trustee.
SECTION 11.5. Notices to the Insurer. All notices, statements,
reports, certificates or opinions required by this Indenture to be sent to any
other party hereto or to any of the Noteholders shall also be sent to the
Insurer.
SECTION 11.6. Third-Party Beneficiary. The Insurer shall be a
third-party beneficiary of this Agreement, entitled to enforce the provisions
hereof as if a party hereto.
SECTION 11.7. Indenture Trustee to Hold the Policy. The
Indenture Trustee will hold the Policy in trust as agent for the Holders of the
Class A Notes for the purpose of making claims thereon and distributing the
proceeds thereof. The Policy, prior to any distributions thereon deposited into
the Policy Payments Account, will not constitute part of the Trust Property.
Each Holder of Class A Notes, by accepting its Class A Notes, appoints the
Indenture Trustee as attorney-in-fact for the purpose of making claims on the
Policy.
ARTICLE XII
Miscellaneous
SECTION 12.1. Compliance Certificates and Opinions, etc. 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 and to the Insurer (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, 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, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate
or opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
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(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each
such signatory such condition or covenant has been complied with.
SECTION 12.2. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his or
her certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Servicer, the Unaffiliated Seller or the Issuer,
stating that the information with respect to such factual matters is in the
possession of the Servicer, the Unaffiliated Seller or the Issuer, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
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.
Whenever in this Indenture, in connection with any
application or certificate or report to the Indenture Trustee, it is provided
that the Issuer shall deliver any document as a condition of the granting of
such application, or as evidence of the Issuer's compliance with any term
hereof, it is intended that the truth and accuracy, at the time of the
granting of such 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 conclusively rely upon the truth and accuracy of any
statement or opinion contained in any such document as provided in Article VI.
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<PAGE>
SECTION 12.3. Acts of Noteholders. (a) Subject to Section
11.1, 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 agents 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 6.1) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any customary manner of the
Indenture Trustee.
(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 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 Note.
SECTION 12.4. Notices, etc. to Indenture Trustee, Issuer,
Insurer and Rating Agencies. 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:
(a) The Indenture Trustee by any Noteholder or by the
Issuer shall be sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed first-class and shall be deemed to have
been duly given upon receipt to the Indenture Trustee at its Corporate Trust
Office and any notice delivered by facsimile shall be addressed to the Corporate
Trust Office, telecopy number (704) 383-7316, or
(b) The Issuer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if personally
delivered, delivered by facsimile or overnight courier or mailed first class,
and shall deemed to have been duly given upon receipt to the Issuer addressed
to: HomeGold Home Equity Loan Trust 1999-1, in care of Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001
Attention: Corporate Trust Administration, or at any other address previously
furnished in writing to the Indenture Trustee by Issuer. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
(c) The Insurer by the Issuer or the Indenture Trustee
shall be sufficient for any purpose hereunder if in writing and mailed by
first-class mail personally delivered or telecopied to the recipient as follows:
55
<PAGE>
To the Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: HomeGold Home Equity Loan Trust 1999-1
Telecopy: (212) 888-5278
Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered, delivered by overnight courier or first class or via
facsimile to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004, Fax No.:
(212) 533-0355 and (ii) in the case of S&P, at the following address: Standard
& Poor's Ratings Group, 26 Broadway (15th Floor), New York, New York 10004,
Attention: Asset Backed Surveillance Department, Fax No.: (212) 412-0224; or
as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 12.5. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address 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. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
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 a 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.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder.
SECTION 12.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably
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<PAGE>
withheld). The Issuer will furnish to the Indenture Trustee a copy of each such
agreement and the Indenture Trustee will cause payments to be made and notices
to be given in accordance with such agreements.
SECTION 12.7. 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 Trust Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose
duties on any person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
SECTION 12.8. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 12.9. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors.
SECTION 12.10. 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 12.11. Benefits of Indenture. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the Insurer and the Noteholders, and any other party
secured hereunder, and any other person with an ownership interest in any part
of the Trust Property, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture (in which case the Indenture Trustee may exercise
such right or power hereunder), but not its duties and obligations under the
Policy, upon delivery of a written notice to the Indenture Trustee.
SECTION 12.12. Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 12.13. GOVERNING LAW. THIS 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 SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
57
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SECTION 12.14. Counterparts. This Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 12.15. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Trust or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 12.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the
Unaffiliated Seller, the Depositor, the Servicer, 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
Unaffiliated Seller, the Depositor, the Servicer, 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 Unaffiliated Seller, the Depositor, the
Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Unaffiliated Seller, the
Depositor, the Servicer, the Owner Trustee or the Indenture Trustee or of any
successor or assign of the Unaffiliated Seller, the Depositor, the Servicer, 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 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
Articles VII and VIII of the Trust Agreement.
SECTION 12.17. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Unaffiliated
Seller, the Depositor, or the Issuer, or join in any institution against the
Unaffiliated Seller, the Depositor, 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.
SECTION 12.18. Inspection. The Issuer agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee or of the Insurer, during the Issuer's normal business hours, to examine
all the 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 certified public accountants, and to discuss the Issuer's affairs,
finances and accounts with the Issuer's officers, employees, and independent
certified public accountants, all at such reasonable times and as often as may
be reasonably requested. The Indenture Trustee
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shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its Obligations hereunder.
SECTION 12.19. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the
Issuer under this Agreement or any related documents.
59
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee
have caused this Indenture to be duly executed by their respective officers,
hereunto duly authorized, all as of the day and year first above written.
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee,
By:
-----------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as
Indenture Trustee,
By:
-----------------------------------------
Name:
Title:
60
<PAGE>
EXHIBIT A
GLOSSARY OF DEFINED TERMS
[See Separate Document]
A-1
<PAGE>
EXHIBIT B-1
[Form of Class A-1 Note]
REGISTERED $18,418,000
No. A-1
CUSIP NO. 43740C AA 6
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.
Series 1999-1, Class A-1 Class A-1 Note Principal
Balance as of the Issue Date:
$18,418,000
Interest Rate: 6.87%
Date of Sale and Servicing Agreement: Denomination: $18,418,000
May 1, 1999
First Payment Date: Servicer:
June 15, 1999 HomeGold, Inc.
Final Maturity Date: July 15, 2029 or, Indenture Trustee:
if earlier, the Redemption Date (as defined)
First Union National Bank
Issue Date: May 27, 1999
CUSIP: 43740C AA 6
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE
MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE
PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN
ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE UNAFFILIATED
SELLER, THE CONTRIBUTOR, THE DEPOSITOR OR ANY OF THEIR AFFILIATES.
NEITHER THIS NOTE NOR THE UNDERLYING
B-1-1
<PAGE>
MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE
UNITED STATES.
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
CLASS A-1 ASSET BACKED NOTES
HomeGold Home Equity Loan Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to
CEDE & CO., or registered assigns, the principal sum of ($18,418,000), such
amount payable on each Payment Date in an amount equal to the result obtained
by multiplying (i) a fraction the numerator of which is the initial Note
Principal Balance hereof and the denominator of which is the initial aggregate
Note Principal Balance of the Class A-1 Notes by (ii) the aggregate amount, if
any, payable on such Payment Date in respect of principal on the Class A-1
Notes pursuant to Section 8.3 of the Indenture; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
Final Maturity Date. The unpaid principal of this Note shall accrue interest
at the rate of [6.87]% per annum, which (except for Shortfall Interest
Deferred Amounts and Accrued Shortfall Interest Deferred Amounts (as defined
in the Indenture), which shall be due and payable only to the extent funds are
available therefor as provided in the Indenture) shall be due and payable on
each Payment Date prior to the Final Payment Date and (without regard to the
availability of funds for the payment of Shortfall Interest Deferred Amounts
and Accrued Shortfall Interest Carry Forward Amounts) on the Final Payment
Date. The Interest Accrual Period for any Payment Date is the calendar month
immediately preceding the month in which such Payment Date occurs. All
calculations of interest on the Class A-1 Notes will be based on a 360-day
year consisting of twelve 30-day months. Payments in respect of principal and
interest will be made of each Payment Date to the Person in whose name this
Note is registered on the last Business Day of the month immediately preceding
the month of such payment as provided in the Indenture.
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.
The Notes are entitled to the benefits of a financial
guaranty insurance policy (the "Policy") issued by Financial Security
Assurance Inc. (the "Insurer"), pursuant to which the Insurer has
unconditionally guaranteed payments of principal and interest (excluding
Shortfall Interest Deferred Amounts and Accrued Shortfall Interest Carry
Forward Amounts), all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal state tax reporting
purposes.
B-1-2
<PAGE>
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee 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.
B-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: May 27, 1999
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:
---------------------------------------
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: May 27, 1999
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as
Indenture Trustee,
By:
---------------------------------------
Authorized Signatory
B-1-4
<PAGE>
FURTHER PROVISIONS
This Class A-1 Note is one of a duly authorized issue of
Notes of the Issuer, designated as its Class A Asset Backed Notes (herein
called the "Class A Notes"), all issued under an Indenture dated as of May 1,
1999 (such Indenture, as supplemented or amended, is herein called the
"Indenture"), between the Issuer and First Union National Bank, as trustee
(the "Indenture Trustee," which term includes any successor Indenture Trustee
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. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as
so supplemented or amended.
The Class A Notes are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A Notes will be payable on each
Payment Date in an amount described above. "Payment Date" means the fifteenth
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing June 15, 1999. The term "Payment Date"
shall be deemed to include the Final Payment Date and, unless the context
otherwise requires, the Final Maturity Date. The Final Maturity Date of the
Class A-1 Notes is July 15, 2029 or, if earlier, the Redemption Date (as
defined below).
As described above, the entire unpaid principal amount of
this Note shall be due and payable on the earlier of the Final Payment Date
and the Redemption Date, if any. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes may be declared, and upon such
declaration shall become, due and payable if an Event of Default shall have
occurred and be continuing, in the manner, with the effect and subject to the
conditions provided in the Indenture.
As provided in the Indenture, the Issuer shall have the
option (with the consent of the Insurer, if the exercise of such option would
result in a draw on the Policy or would result in outstanding amounts due to
the Insurer under the Insurance Agreement) to redeem the Notes, in whole but
not in part, at the Redemption Price (as defined in the Indenture), on any
Payment Date after which the aggregate Class A-1 Note Principal Balance is
$1,841,800 or less.
As described in the Sale and Servicing Agreement, each of
the Insurer and the Servicer shall, subject to certain conditions, have the
right to purchase all of the Mortgage Loans and properties acquired in respect
thereof if the aggregate principal balance of the Mortgage Loans and such
properties is equal to or less than 5% (in the case of the Insurer) or 10% (in
the case of the Servicer) of the aggregate principal balance thereof as of
their respective Cut-off Dates. The Trust may, subject to certain conditions,
also fund any redemption of the Notes as described above through the sale of
Mortgage Loans and related properties. The Sale and Servicing Agreement
provides that the Servicer shall have a right of first refusal in respect of
certain proposed sales of Mortgage Loans and related properties.
B-1-5
<PAGE>
So long as this Note is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Note by wire transfers of immediately available funds to the
Depository or its nominee. Otherwise all payments to the Holder of this Note
under the Indenture will be made or caused to be made by or on behalf of the
Indenture Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified
the Indenture Trustee in writing at least five Business Days prior to the
Record Date immediately prior to such Payment Date and is the registered owner
of Class A-1 Notes the aggregate initial Note Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the Note
Register, provided that the Indenture Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer. Notwithstanding the
above, the final payment on this Note will be made after due notice by the
Indenture Trustee of the pendency of such payment and only upon presentation
and surrender of this Note at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
Payments in respect of the Class A-1 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As
provided in the Sale and Servicing Agreement and the Indenture, withdrawals
from the Collection Account and the Distribution Account may be made from time
to time for purposes other than payments to Noteholders, such purposes
including reimbursement of advances made, or certain expenses incurred, with
respect to the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each
permits, with certain exceptions therein provided, the amendment thereof and
the modification of the rights and obligations of the Depositor, the Servicer,
the Indenture Trustee and the rights of the Noteholders under the Indenture
and the Sale and Servicing Agreement, as the case may be, at any time by the
parties thereto with the consent of the Holders of Notes entitled to at least
66% of the Voting Rights and the Insurer. Any such consent by the Holder of
this Note shall be conclusive and binding on such Holder and upon all future
Holders of this Note and of any Note issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Note. The Indenture and the Sale and Servicing Agreement each
also permit the amendment thereof, in certain limited circumstances, without
the consent of the Holders of any of the Notes. In addition, pursuant to the
Indenture and the Sale and Servicing Agreement, the Insurer, so long as no
Insurer Default shall have occurred and be continuing, shall, except in
limited circumstances, be entitled to exercise all rights of the Noteholders
(including voting rights) under the Indenture and the Sale and Servicing
Agreement without any further consent of the Noteholders and, so long as no
Insurer Default shall have occurred and be continuing, the consent to any
action or other matter of the Insurer shall be deemed to also constitute the
consent thereto of the requisite percentage of Noteholders required by the
Indenture in respect of such action or matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or
B-1-6
<PAGE>
other written instrument of transfer in form satisfactory to the Indenture
Trustee and the Note Registrar 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 Securities
Transfer Agents 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 Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to
certain limitations therein set forth, Notes are exchangeable for new Notes of
the same Class in authorized denominations in the same aggregate principal
amount, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), that is subject to the provisions of Title
I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended, or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity to purchase
the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes will be
covered by a U.S. Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the
Owner Trustee, the Insurer and the Note Registrar and any agent of the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee, the Insurer
or the Note Registrar may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, and none of the Depositor,
the Servicer, the Indenture Trustee, the Owner Trustee, the Insurer, the Note
Registrar nor any such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements
of the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or,
in the case of a Note 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 Unaffiliated Seller, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or
B-1-7
<PAGE>
employee of the Unaffiliated Seller, the Depositor, the Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Unaffiliated Seller, the Depositor, the
Servicer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Unaffiliated Seller, the Depositor, the Servicer, 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 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 Note Owner, by acceptance of a Note or,
in the case of a Note Owner, a beneficial interest in a Note covenants and
agrees that by accepting the benefits of the Indenture that such Noteholder
will not at any time institute against the Unaffiliated Seller, the Depositor,
or the Issuer or join in any institution against the Unaffiliated Seller, the
Depositor, 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, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer 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 neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any
successor to the Issuer under the Indenture.
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.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest
in the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
B-1-8
<PAGE>
the interests of the Issuer in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Basic Documents, in the case of a Default or an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and
enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
B-1-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties under
Uniform Gifts to Minors Act
JT TEN - as joint tenants with
rights of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto ________________________________________________
______________________________________ (Please print or typewrite name, address
including postal zip code, and Taxpayer Identification Number of
assignee)______________________________________________________________________
______________ the within Note on the books kept for registration thereof, with
full power of substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the
following address: _____________________________________________________________
__________________________________________________________________________
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
B-1-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
______________________________________________________ for the account of _____,
account number __________________________or, if mailed by check, to ____________
_______________________________Applicable statements should be mailed to _______
________________________________________________________________________________
This information is provided by _______________, as its agent.
B-1-11
<PAGE>
EXHIBIT B-2
[Form of Class A-2 Note]
REGISTERED $35,546,000
No. A-2
CUSIP NO. 43740C AB 4
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.
Series 1999-1, Class A-2 Class A-2 Note Principal Balance
as of the Issue Date: $35,546,000
Interest Rate: 6.82%
Date of Sale and Servicing Agreement: Denomination: $35,546,000
May 1, 1999
First Payment Date: Servicer:
June 15, 1999 HomeGold, Inc.
Final Maturity Date: August 15, 2029 or, Indenture Trustee:
if earlier, the Redemption Date (as defined)
First Union National Bank
Issue Date: May 27, 1999
CUSIP: 43740C AB 4
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE
MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE
PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN
ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE UNAFFILIATED
SELLER, THE CONTRIBUTOR, THE DEPOSITOR OR ANY OF THEIR AFFILIATES.
NEITHER THIS NOTE NOR THE UNDERLYING
B-1-1
<PAGE>
MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE
UNITED STATES.
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
CLASS A-2 ASSET BACKED NOTES
HomeGold Home Equity Loan Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to
CEDE & CO., or registered assigns, the principal sum of ($53,964,000), such
amount payable on each Payment Date in an amount equal to the result obtained
by multiplying (i) a fraction the numerator of which is the initial Note
Principal Balance hereof and the denominator of which is the initial aggregate
Note Principal Balance of the Class A-2 Notes by (ii) the aggregate amount, if
any, payable on such Payment Date in respect of principal on the Class A-2
Notes pursuant to Section 8.3 of the Indenture; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
Final Maturity Date. The unpaid principal of this Note shall accrue interest
at the rate of 6.82% per annum, which (except for Shortfall Interest Deferred
Amounts and Accrued Shortfall Interest Deferred Amounts (as defined in the
Indenture), which shall be due and payable only to the extent funds are
available therefor as provided in the Indenture) shall be due and payable on
each Payment Date prior to the Final Payment Date and (without regard to the
availability of funds for the payment of Shortfall Interest Deferred Amounts
and Accrued Shortfall Interest Carry Forward Amounts) on the Final Payment
Date. The Interest Accrual Period for any Payment Date is the calendar month
immediately preceding the month in which such Payment Date occurs. All
calculations of interest on the Class A-2 Notes will be based on a 360-day
year consisting of twelve 30-day months. Payments in respect of principal and
interest will be made of each Payment Date to the Person in whose name this
Note is registered on the last Business Day of the month immediately preceding
the month of such payment as provided in the Indenture.
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.
The Notes are entitled to the benefits of a financial
guaranty insurance policy (the "Policy") issued by Financial Security
Assurance Inc. (the "Insurer"), pursuant to which the Insurer has
unconditionally guaranteed payments of principal and interest (excluding
Shortfall Interest Deferred Amounts and Accrued Shortfall Interest Carry
Forward Amounts), all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal state tax reporting
purposes.
B-1-2
<PAGE>
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee 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.
B-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: May 27, 1999
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:
---------------------------------------
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: May 27, 1999
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as
Indenture Trustee,
By:
---------------------------------------
Authorized Signatory
B-1-4
<PAGE>
FURTHER PROVISIONS
This Class A-2 Note is one of a duly authorized issue of
Notes of the Issuer, designated as its Class A Asset Backed Notes (herein
called the "Class A Notes"), all issued under an Indenture dated as of May 1,
1999 (such Indenture, as supplemented or amended, is herein called the
"Indenture"), between the Issuer and First Union National Bank, as trustee
(the "Indenture Trustee," which term includes any successor Indenture Trustee
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. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as
so supplemented or amended.
The Class A Notes are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A Notes will be payable on each
Payment Date in an amount described above. "Payment Date" means the fifteenth
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing June 15, 1999. The term "Payment Date"
shall be deemed to include the Final Payment Date and, unless the context
otherwise requires, the Final Maturity Date. The Final Maturity Date of the
Class A-2 Notes is August 15, 2029 or, if earlier, the Redemption Date (as
defined below).
As described above, the entire unpaid principal amount of
this Note shall be due and payable on the earlier of the Final Payment Date
and the Redemption Date, if any. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes may be declared, and upon such
declaration shall become, due and payable if an Event of Default shall have
occurred and be continuing, in the manner, with the effect and subject to the
conditions provided in the Indenture.
As provided in the Indenture, the Issuer shall have the
option (with the consent of the Insurer, if the exercise of such option would
result in a draw on the Policy or would result in outstanding amounts due to
the Insurer under the Insurance Agreement) to redeem the Notes, in whole but
not in part, at the Redemption Price (as defined in the Indenture), on any
Payment Date after which the aggregate Class A-2 Note Principal Balance is
$1,841,800 or less.
As described in the Sale and Servicing Agreement, each of
the Insurer and the Servicer shall, subject to certain conditions, have the
right to purchase all of the Mortgage Loans and properties acquired in respect
thereof if the aggregate principal balance of the Mortgage Loans and such
properties is equal to or less than 5% (in the case of the Insurer) or 10% (in
the case of the Servicer) of the aggregate principal balance thereof as of
their respective Cut-off Dates. The Trust may, subject to certain conditions,
also fund any redemption of the Notes as described above through the sale of
Mortgage Loans and related properties. The Sale and Servicing Agreement
provides that the Servicer shall have a right of first refusal in respect of
certain proposed sales of Mortgage Loans and related properties.
B-1-5
<PAGE>
So long as this Note is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Note by wire transfers of immediately available funds to the
Depository or its nominee. Otherwise all payments to the Holder of this Note
under the Indenture will be made or caused to be made by or on behalf of the
Indenture Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified
the Indenture Trustee in writing at least five Business Days prior to the
Record Date immediately prior to such Payment Date and is the registered owner
of Class A-2 Notes the aggregate initial Note Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the Note
Register, provided that the Indenture Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer. Notwithstanding the
above, the final payment on this Note will be made after due notice by the
Indenture Trustee of the pendency of such payment and only upon presentation
and surrender of this Note at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
Payments in respect of the Class A-2 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As
provided in the Sale and Servicing Agreement and the Indenture, withdrawals
from the Collection Account and the Distribution Account may be made from time
to time for purposes other than payments to Noteholders, such purposes
including reimbursement of advances made, or certain expenses incurred, with
respect to the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each
permits, with certain exceptions therein provided, the amendment thereof and
the modification of the rights and obligations of the Depositor, the Servicer,
the Indenture Trustee and the rights of the Noteholders under the Indenture
and the Sale and Servicing Agreement, as the case may be, at any time by the
parties thereto with the consent of the Holders of Notes entitled to at least
66% of the Voting Rights and the Insurer. Any such consent by the Holder of
this Note shall be conclusive and binding on such Holder and upon all future
Holders of this Note and of any Note issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Note. The Indenture and the Sale and Servicing Agreement each
also permit the amendment thereof, in certain limited circumstances, without
the consent of the Holders of any of the Notes. In addition, pursuant to the
Indenture and the Sale and Servicing Agreement, the Insurer, so long as no
Insurer Default shall have occurred and be continuing, shall, except in
limited circumstances, be entitled to exercise all rights of the Noteholders
(including voting rights) under the Indenture and the Sale and Servicing
Agreement without any further consent of the Noteholders and, so long as no
Insurer Default shall have occurred and be continuing, the consent to any
action or other matter of the Insurer shall be deemed to also constitute the
consent thereto of the requisite percentage of Noteholders required by the
Indenture in respect of such action or matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or
B-1-6
<PAGE>
other written instrument of transfer in form satisfactory to the Indenture
Trustee and the Note Registrar 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 Securities
Transfer Agents 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 Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to
certain limitations therein set forth, Notes are exchangeable for new Notes of
the same Class in authorized denominations in the same aggregate principal
amount, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), that is subject to the provisions of Title
I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended, or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity to purchase
the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes will be
covered by a U.S. Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the
Owner Trustee, the Insurer and the Note Registrar and any agent of the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee, the Insurer
or the Note Registrar may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, and none of the Depositor,
the Servicer, the Indenture Trustee, the Owner Trustee, the Insurer, the Note
Registrar nor any such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements
of the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or,
in the case of a Note 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 Unaffiliated Seller, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or
B-1-7
<PAGE>
employee of the Unaffiliated Seller, the Depositor, the Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Unaffiliated Seller, the Depositor, the
Servicer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Unaffiliated Seller, the Depositor, the Servicer, 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 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 Note Owner, by acceptance of a Note or,
in the case of a Note Owner, a beneficial interest in a Note covenants and
agrees that by accepting the benefits of the Indenture that such Noteholder
will not at any time institute against the Unaffiliated Seller, the Depositor,
or the Issuer or join in any institution against the Unaffiliated Seller, the
Depositor, 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, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer 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 neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any
successor to the Issuer under the Indenture.
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.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest
in the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
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the interests of the Issuer in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Basic Documents, in the case of a Default or an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and
enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
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<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties under
Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
__________________________(Please print or typewrite name, address including
postal zip code, and Taxpayer Identification Number of assignee) _______________
__________________________________________________________________________ the
within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address: _______________________________________________________________________
_______________________________________________________________________
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
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PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds ____________________________________________________
___________________________________________________to for the account of _____,
account number __________________ or, if mailed by check, to ___________________
________________________ Applicable statements should be mailed to ____________
________________________________________________________________________________
This information is provided by ______, as its agent.
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<PAGE>
EXHIBIT C
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
C-1
